Internal Audit Report
Enterprise Holdings, LLC
DBA/Enterprise Rent-A-Car
Lease and Concession Compliance Audit
November 1, 2007 through October 31, 2010
Issue Date: September 07, 2011
Report No. 2011-18
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Internal Audit
Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car)
November 1, 2007 – October 31, 2010
Table of Contents
Transmittal Letter .............................................................................................................. 3
Executive Summary .......................................................................................................... 4
Background ....................................................................................................................... 5
Audit Objective .................................................................................................................. 5
Audit Scope and Methodology ......................................................................................... 6
Conclusion ......................................................................................................................... 7
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Internal Audit
Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car)
November 1, 2007 – October 31, 2010
Transmittal Letter
We have completed an audit of the Lease and Concession Agreement, as amended, between
the Port of Seattle and Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car). The purpose of
the audit was to determine whether:
1) Reported concession was complete, properly calculated, and remitted timely to the Port.
2) Port and the lessee complied with provisions of the Lease and Concession Agreement, as
amended.
3) Customer Facility Charges (CFC) were properly collected and remitted timely to the Port.
We examined information related to a three-year period from November 1, 2007, through
October 31, 2010.
We conducted the audit using due professional care. We planned and performed the audit to
obtain reasonable assurance as to compliance with significant provisions of the agreement,
including complete and timely reporting of concessionable revenues.
Enterprise Holdings, LLC materially complied with the terms of the Lease and Concession
agreement, as amended.
We extend our appreciation to the management and staff of Aviation Business Development,
and Accounting & Financial Reporting for their assistance and cooperation during the audit.
Joyce Kirangi, CPA
Director, Internal Audit
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Internal Audit
Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car)
November 1, 2007 – October 31, 2010
Executive Summary
Audit Scope and Objective The purpose of the audit was to determine the following:
1) Reported concession was complete, properly calculated, and remitted timely to the Port.
2) Port and the lessee complied with provisions of the Lease and Concession Agreement, as
amended.
3) Customer Facility Charges (CFC) were properly collected and remitted timely to the Port.
We examined the books and records of Enterprise Rent-A-Car for a three-year period from
November 1, 2007 through October 31, 2010. Aviation Business Development, in conjunction
with Accounting and Financial Reporting (AFR), has the primary responsibility for administering
and monitoring the agreement to ensure compliance with agreed-upon terms.
Agreement Terms The terms of the agreement provide for a Minimum Annual Guarantee
(MAG) of 80% of the total amount paid to the Port in the previous agreement year. Additionally,
the agreement requires a Percentage Fee equal to ten percent (10%) of gross revenues,
provided the fee is higher than the monthly MAG payment.
The following are the only agreed-upon deductions allowed in the agreement:
a. Any tax imposed or collected on behalf of a taxing authority
b. Any amounts received as insurance proceeds or for damage to vehicles or other
property, or for loss, conversion or abandonment of such vehicles
c. The wholesale transfer of salvage vehicles
d. All non-revenue rentals to employees
e. Fees paid to other governmental agencies (excluding the Port), relating to transactions
at the Airport
The MAG is payable in advance, on or before the first day of each month, without notice from
the Port. The percentage fee, if applicable, is due on or before the 20
th
of the following month.
For untimely payments, the agreement provides for a one-time late fee of 5% of the overdue
amount and interest to be accrued at the rate of 18% per annum from the due date until paid.
Audit Result Summary Enterprise Rent-A-Car materially complied with the terms of the
Lease and Concession agreement, as amended. However, the audit disclosed minor instances
of gross revenue deductions thereby reducing concession fee slightly.
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Internal Audit
Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car)
November 1, 2007 – October 31, 2010
Background
Enterprise Rent-A-Car (ERAC), a wholly-owned subsidiary of Enterprise Holdings, LLC, rents
vehicles to consumers under the Enterprise brand. The company also operates Alamo and
National Rent-A-Car. Currently, ERAC has two locations at/around the airport that could be
subject to concession as defined in the agreement. ERAC has a counter at the Airport and
another off-airport location within a three (3) mile radius of the Airport’s boundary.
The terms of the agreement provide for a Minimum Annual Guarantee (MAG) of 80% of the
total amount paid or payable to the Port in the previous agreement year. Additionally, the
agreement requires a Percentage Fee of 10% of gross revenues to the extent the fee is higher
than the monthly MAG.
The MAG is payable in advance, on or before the first day of each month, without notice from
the Port, and without setoff or deduction. The Percentage Fee, if applicable, is due on or before
the 20
th
of the following month.
For untimely payments, the agreement provides for a one-time late fee of 5% of the overdue
amount and interest to be accrued at the rate of 18% per annum from the due date until paid.
Below are the financial highlights for the last three fiscal years:
Fiscal
Year
Reported
Gross Revenue
Paid
Concession
2007-2008
$18,888,053
$1,888,807
2008-2009
19,881,323
1,988,131
2009-2010
21,672,584
2,167,258
Total
$60,441,960
$6,044,196
Source: PROPWorks and PeopleSoft
Audit Objective
The purpose of the audit was to determine the following:
1) Reported concession was complete, properly calculated, and remitted timely to the Port.
2) Port and the lessee complied with provisions of the Lease and Concession Agreement, as
amended.
3) Customer Facility Charges (CFC) were properly collected and remitted timely to the Port.
The scope of the audit covered the period of November 1, 2007, through October 31, 2010.
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Internal Audit
Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car)
November 1, 2007 – October 31, 2010
Audit Scope and Methodology
We conducted the audit to determine whether the parties were in compliance with the lease
agreement terms including, but not limited to, proper concession and CFC payments. The audit
approach was risk-based from planning to test sampling. We applied additional detailed audit
procedures to areas with the highest likelihood of significant negative impact as follows:
• Timely Payment
• CPA certified Annual Report
•
Insurance liability
•
Concessionable revenue
•
Surety Bond/Security Deposit
•
Customer Facility Charge (CFC)
a. Timely Payment
We reviewed payment records to determine whether the lessee complied with the required
due date.
b. Insurance Liability
To determine compliance with insurance requirements, we reconciled insurance
requirements to the coverage reflected in the certificate of insurance in force for the audit
period.
c. Surety Bond/Security Deposit
We reviewed surety requirements as stipulated in the agreement. We agreed the
requirement to Surety Bond to determine compliance.
d. CPA Certified Annual Report
We reviewed audit reports for the audit period to determine compliance with the timely and
complete submission of the report.
e. Concession Revenue
To determine whether the lessee completely reported all concessionable revenues, we
selected a risk-based sample of 766 closed rental transactions. Each transaction was
analyzed, recalculated, and agreed to the rental agreement to determine whether the
lessee:
• Completely captured all concession items
• Properly and accurately calculated concession items
Further, we analyzed and agreed the reported monthly concession revenue for the audit
period to the lessee’s accounting records (general ledger and detailed revenue) to ensure
complete reporting to the Port of Seattle.
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Internal Audit
Enterprise Holdings, LLC (DBA/Enterprise Rent-A-Car)
November 1, 2007 – October 31, 2010
f. Customer Facility Charge
We reviewed each rental agreement in the risk-based sample of 766 closed rental
transactions to ensure proper charging, timely collection, and complete remittance of CFC to
the Port as required in the agreement.
Conclusion
Enterprise Rent-A-Car materially complied with the terms of the Lease and Concession
agreement, as amended. However, the audit disclosed minor instances of gross revenue
deductions thereby reducing concession fee slightly.
