Applying Agreed-Upon Procedures:

Fiscal Year 2010 Highway Trust Fund Excise Taxes

GAO-11-121R: Published: Nov 4, 2010. Publicly Released: Nov 4, 2010.

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We have performed the procedures described in this letter, which we agreed to perform and with which the Inspector General of the U.S. Department of Transportation concurred, solely to assist the Inspector General's office in ascertaining whether the net excise tax revenue distributed to the Highway Trust Fund (HTF) for the fiscal year ended September 30, 2010, is supported by the underlying records. As agreed with the Inspector Generals' office, we evaluated fiscal year 2010 activity affecting excise tax distributions to the HTF. We conducted the engagement in accordance with U.S. generally accepted government auditing standards, which incorporate certain financial audit and attestation standards established by the American Institute of Certified Public Accountants. The Inspector General is responsible for the adequacy of these agreed-upon procedures to meet your objectives, and we make no representation in that respect. The procedures we agreed to perform were related to (1) transactions that represent the underlying basis of amounts distributed from the general fund to the HTF during fiscal year 2010, (2) the Internal Revenue Service's (IRS) quarterly HTF excise tax receipt certifications prepared during fiscal year 2010, (3) the U.S. Department of the Treasury's Financial Management Service adjustments to HTF excise tax distributions during fiscal year 2010, (4) the U.S. Department of the Treasury's Office of Tax Analysis's (OTA) estimates of excise tax amounts to be distributed to the HTF for the fourth quarter of fiscal year 2010, (5) adjustments to the HTF for tax on kerosene used in aviation during fiscal year 2010, and (6) the amount of net excise taxes distributed to the HTF during fiscal year 2010.

The total tax liability amount related to the 30 returns from the quarter ended June 30, 2009, was approximately $9.1 billion or 72 percent of the total recorded tax liability amount of $12.7 billion for all excise tax returns for the quarter. Of these 30 returns, 21 contained primarily HTF-related tax liabilities and 9 contained primarily Airport and Airway Trust Fund (AATF)-related tax liabilities. The total tax liability amount related to the 30 returns from the quarter ended September 30, 2009, was approximately $9.2 billion or 71 percent of the total recorded tax liability amount of $12.9 billion for all excise tax returns for the quarter. Of these 30 returns, 21 contained primarily HTF-related tax liabilities and 9 contained primarily AATF-related tax liabilities. Excise tax collections from IRS's master file materially agreed with IRS's Collection Certification System for the first two quarters of fiscal year 2010. Excise tax collections from IRS's master file materially agreed with IRS's general ledger for the first 9 months of fiscal year 2010. For all 78 returns, assessment and receipt information from IRS's master file agreed with the information in IRS's Collection Certification System. The Collection Certification System properly summarized the prorated collections for all of the selected abstracts. Prorated collections from the audit files for the selected abstracts agreed with the corresponding amounts in the "Report of Excise Tax Collection." The U.S. Department of the Treasury's Financial Management Service (FMS) adjustment amounts for all four quarters were mathematically correct. OTA prepared a tax rate table to capture information concerning tax rates, tax basis, accounts, and deposit rules in effect during the quarter. OTA used the rate table in preparing the five semimonthly estimates that affect fiscal year 2010 distributions to the HTF. There was evidence that another OTA economist reviewed the transfer forms and supporting schedules affecting distributions from the general fund to the HTF for the quarter ended September 30, 2010. The totals on the transfer forms affecting distributions to the HTF for the quarter ended September 30, 2010, were mathematically correct. Adjustments to the HTF for tax on kerosene used in aviation were made during fiscal year 2010 and were mathematically correct. Based on a compilation of IRS's quarterly certifications, OTA's estimations, and adjustments, the amount of net excise taxes that should have been distributed to the HTF in fiscal year 2010 was $34,975,135,480.

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