INTERNAL AUDIT REPORT
LIMITED CONTRACT COMPLIANCE
CMC INVESTMENTS, INC. DBA DOLLAR RENT-A-CAR
JUNE 2014 – MAY 2017
ISSUE DATE: MAY 30, 2018
REPORT NO. 2018-04
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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TABLE OF CONTENTS
EXECUTIVE SUMMARY .......................................................................................................................................... 3
BACKGROUND ....................................................................................................................................................... 4
AUDIT SCOPE AND METHODOLOGY ...................................................................................................................... 5
SCHEDULE OF FINDINGS AND RECOMMENDATIONS .......................................................................................... 6
APPENDIX A: RISK RATINGS.................................................................................................................................. 8
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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EXECUTIVE SUMMARY
Internal Audit (IA) completed a rental car concession agreement audit of CMC Investments, Inc. d/b/a
Dollar Rent A Car, Inc. (Concessionaire), for the period June 1, 2014 through May 31, 2017. The audit
objective was to determine whether the Concessionaire complied with significant financial provisions of
the concession agreement, including whether reported gross revenues and the Customer Facility
Charges (CFC) paid to the Port were complete and reasonable.
We concluded that the Percentage Fees paid to the Port materially complied with the terms of the Rental
Car Lease and Concession Agreement. However, we determined that the Concessionaire underreported
certain gross revenue items and over-reported the CFC:
1) The Concessionaire did not report $343,326 in incidental gross revenues to the Port, resulting in
$34,333 in Percentage Fees owed to the Port.
2) The CFC was over-reported to the Port, by $19,596 for the audit period. This was primarily due to a
mistake by Concessionaire in November 2015, which resulted in an overpayment of that month’s
CFC to the Port.
These two items resulted in an underpayment to the Port of approximately $14,737 for the three-year
period ended May 31, 2017. These issues are discussed in more detail beginning on page six of this
report.
We extend our appreciation to management and staff of the Aviation Commercial Management
Department, the Concessionaire, and the Accounting and Financial Reporting Department for their
assistance and cooperation during the audit.
Glenn Fernandes, CPA
Director, Internal Audit
RESPONSIBLE MANAGEMENT TEAM
Lance Lyttle, Managing Director Aviation
Jim Schone, Director AV Commercial Management
James Jennings, Sr. Manager, AV Properties Group
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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CMC Investments, Inc. is a private company categorized under Automobile Renting and Leasing, in
Mercer Island, WA. The company was established in 1987, and operates under the name Dollar-Rent-A
Car at Seattle Tacoma International Airport and Portland International Airport.
The terms of the agreement provide for a Minimum Annual Guarantee (MAG) of the higher of: (1) 85% of
the total amount paid to the Port in the previous agreement year, or (2) the Initial MAG bid by the
Concessionaire of $1,333,399. Additionally, the agreement requires a Percentage Fee equal to 10% of
Concessionaire’s gross revenues, provided 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.
The Percentage Fee, if applicable, is due on or before the 20
th
of the following month.
The agreement states that the Concessionaire must collect a Customer Facility Charge (CFC) of $6 per
rental day.
The table below reflects total gross revenue, concession fees, and CFC fees:
REPORTED GROSS REVENUE AND CONCESSION CALCULATION
CUSTOMER
FACILITY CHARGE
AGREEMENT
YEAR
REPORTED GROSS
REVENUES
CONCESSION FEES
REPORTED CFC FEES
2014 - 2015
$16,093,271
$1,609,327
$1,943,754
2015 - 2016
16,071,679
1,607,168
2,042,244
2016 - 2017
16,555,626
1,655,563
2,207,856
TOTAL
$48,720,576
$4,872,058
$6,193,854
Data Source: PeopleSoft Financials and Propworks
BACKGROUND
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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We conducted this audit in accordance with Generally Accepted Government Auditing Standards and the
International Standards for the Professional Practice of Internal Auditing. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit objectives.
The period audited was June 1, 2014 – May 31, 2017. After identifying significant provisions in the
Agreement, we performed the following audit procedures:
Insurance & Security Deposit
• Identified the insurance requirements in the agreement.
• Verified the insurance certificates, as required in the agreement, were provided to the Port for
the audit period.
• Tested three years of insurance coverage and endorsements as required.
• Identified the Security requirement in the agreement.
• Verified and tested three years of Security amounts as required
Customer Facility Charge (CFC)
• Calculated a number of transaction (i.e., rental) days and CFC from the Concessionaire’s
system reports.
• Reconciled the reported amount to those certified by Concessionaire’s Controller.
• Reconciled the calculated numbers to what the Concessionaire reported for the audit period.
• Tested a risk-based sample of 113 closed rental agreements to determine whether the CFC
calculation was based on the correct checkout and return date, and was accurate.
Revenue completeness and reasonableness
• Reviewed the Concessionaire’s chart of accounts, to determine whether unusual revenue
accounts were included in the determination of Gross Revenue reported to the Port.
• Reconciled the reported revenues to:
o The Daily Business Report (DBR) GL by revenue item. Additionally, the revenue items
were reviewed to determine whether all items subject to the Percentage Fee were
included in the reported Gross Revenue.
o The Certified Audit Statement of Gross Revenues, independently verified by a CPA.
• Tested a risk-based sample of 16 closed rental agreements in the audit period to determine
whether:
o All revenue items on the face of the rental agreement agreed to the amount posted to the
DBR.
o Disallowed commercial discounts/rebates reduced reported Gross Revenues.
• Analyzed Port records to determine whether payments were received in a timely manner and
were complete.
AUDIT SCOPE AND METHODOLOGY
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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SCHEDULE OF FINDINGS AND RECOMMENDATIONS
The Concessionaire did not report $343,326 in incidental Gross Revenues to the Port, resulting in
$34,333 in Percentage Fees owed to the Port.
This is a repeat finding from a previous audit, which the Concessionaire acknowledges and has agreed to
incorporate into their monthly gross revenue reporting to the Port. The amounts cited in the table below
summarize the underreported gross revenues.
Data Source: CMC Investments’ DBR records, PROPworks & PeopleSoft Financials
Our analysis of the Concessionaire’s financial records and ensuing detail transaction testing, determined
that Gross Revenues from the following account line items were not reported to the Port:
• Admin. Fees
• Pickup Fees
• Roadside Services Fees
• Lost/Found Handling Fees
• Cleaning Fees
• Lost Key Charges
Recommendations:
1. Seek and recover approximately $34,333 in underpaid Percentage Fees.
2. Assess the applicability of the one-time late charge and any accrued interest.
3. Communicate with the Concessionaire to assure Gross Revenues are accurately reported and that the
associated Percentage Fees are collected.
Management Response/Action Plan
Aviation Commercial Management will seek to recover the underpaid Percentage Fees, together with any
applicable late fees and interest charges. Aviation Commercial Management will also communicate both
verbally and in writing that the revenues identified above, are not permitted exclusions from revenue
according to the Agreement. Therefore, effectively immediately, those revenue items are required to be
included in their monthly reports of gross revenues provided to the Port.
Lastly, Aviation Commercial Management will advise Accounting and Financial Reporting that the
Minimum Annual Guarantee under the Lease for the 2017-2018 Agreement Year should be increased to
$1,417,981.73 to account for these under-reported Gross Revenues in the 2016-2017 Agreement Year.
Reported Gross
Revenue
Audited
Gross Revenue
Under
Reported
2015
16,093,271
16,196,832
$ 103,561
2016
16,071,679
16,184,932
113,253
2017
16,555,626
16,682,138
126,512
Concession Revenue Underreported
343,326
Concession Fees Underpaid $34,333
1) RATING: MEDIUM
DUE DATE: 9/30/2018
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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The CFC was over-reported to the Port, by approximately $19,596 for the audit period. This was primarily
due to a mistake by the Concessionaire in November 2015, which resulted in an overpayment of that
month’s CFC to the Port.
When we reviewed monthly transaction totals against CFC payment history, we also determined that the
Concessionaire inconsistently collected the CFC from customers in other months.
The lease agreement under Section 6.2.1 stipulates:
“Concessionaire shall collect a daily CFC on all vehicle rental transactions originating at the Consolidated
Rental Car Facility… Each Concessionaire must collect the CFC at the time of the first payment is made
under a Rental Car Contract, and must remit the full amount of the CFC to the Port regardless of whether
or not the full amount of such CFC is actually collected by the Concessionaire from the person who
rented the Automobile under such Rental Car Contract.”
The Concessionaire acknowledged the amounts cited in the table below, which summarizes the over-
reported CFC. Additionally, the Concessionaire developed enhancements to their internal controls to
prevent their sales representatives from modifying the CFC.
Audited CFC Reported CFC
Under
Reported
2015
$1,944,336
$1,943,754
$ 582
2016
2,020,482
2,042,244
(21,762)
2017
2,209,440
2,207,856
1,584
Total Due to the Concessionaire.
$ (19,596)
Data Source: CMC Investments’ Rental Agreement report & PeopleSoft Financials
Recommendations
1. Refund the Concessionaire $19,596 for the CFC overpayment.
Management Response/Action Plan
Aviation Commercial Management will refund the overpaid CFC’s.
2) RATING: MEDIUM
DUE DATE: 9/30/2018
CMC Investments, Inc.
d/b/a Dollar Rent A Car
June 01, 2014 – May 31, 2017
INTERNAL AUDIT
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APPENDIX A: RISK RATINGS
Findings identified during the course of the audit are assigned a risk rating, as outlined in the table below.
The risk rating is based on the financial, operational, compliance or reputational impact the issue identified
has on the Port. Items deemed “Low Risk” will be considered “Exit Items” and will not be brought to the
final report.
Rating Financial Internal Controls Compliance Public
Port
Commission/
Management
HIGH
Large financial
impact
Remiss in
responsibilities of
being a custodian
of public trust
Missing, or
inadequate key
internal controls
Noncompliance
with applicable
Federal, State, and
Local Laws, or Port
Policies
High
probability for
external audit
issues and/or
negative
public
perception
Important
Requires
immediate
attention
MEDIUM
Moderate
financial impact
Partial controls
Not adequate to
identify
noncompliance or
misappropriation
timely
Inconsistent
compliance with
Federal, State, and
Local Laws, or Port
Policies
Potential for
external audit
issues and/or
negative
public
perception
Relatively
important
May or may not
require immediate
attention
LOW/
Exit Items
Low financial
impact
Internal controls in
place but not
consistently efficient
or effective
Implementing/enhan
cing controls could
prevent future
problems
Generally complies
with Federal, State
and Local Laws or
Port Policies, but
some minor
discrepancies exist
Low
probability for
external audit
issues and/or
negative
public
perception
Lower significance
May not require
immediate
attention