INTERNAL AUDIT REPORT
Limited Contract Compliance Audit
E-Z Rent A Car, Incorporated
June 1, 2016 – May 31, 2019
Issue Date: June 22, 2020
Report No. 2020-06
INTERNAL AUDIT
E-Z Rent A Car, LLC
June 2016 – May 2019
2
TABLE OF CONTENTS
Executive Summary ................................................................................................................................................ 3
Background ............................................................................................................................................................. 4
Schedule of Findings and Recommendations ....................................................................................................... 6
Appendix A: Risk Ratings ....................................................................................................................................... 7
E-Z Rent A Car, LLC
June 2016 – May 2019
3
Executive Summary
Internal Audit (IA) completed an audit of the Consolidated Rental Car Facility Lease Agreement
(Agreement) between E-Z Rent a Car, Incorporated (E-Z) and the Port of Seattle (Port).
The Period audited was June 1, 2016 through May 31, 2019. The audit was performed to determine
whether E-Z complied with significant provisions of the Agreement, including whether reported gross
revenues and percentage fees were complete and accurate.
On Tuesday, May 26, 2020, E-Z filed for chapter 11 bankruptcy protection in U.S. Bankruptcy Court in
Wilmington, Delaware. Chapter 11 allows for “reorganization” of a company’s obligations and debts as
overseen by the court.
Our audit identified the following medium rated issue:
(Medium) - Internal Audit identified $8,904 in under reported customer facility charges (CFC) and
approximately $7,297 in under reported revenue. As a result, $16,201 is due to the Port.
The issue is discussed in more detail on page six.
We extend our appreciation to management and staff of the Aviation Commercial Management
Department and the Accounting and Financial Reporting Department for their assistance and
cooperation during the audit.
Glenn Fernandes, CPA
Director, Internal Audit
RESPONSIBLE MANAGEMENT TEAM
Jim Schone, Director, Aviation Business Development
Geoffrey Foster, Aviation Property Manager 2
E-Z Rent A Car, LLC
June 2016 – May 2019
4
Background
The Port of Seattle (Port) entered into a Consolidated Rental Car Facility Lease Agreement (Agreement)
with E-Z Rent A Car, Incorporated in June of 2010.
The terms of the Agreement provide for a Minimum Annual Guarantee (MAG) equal to 85% of the total
amount paid to the Port for the previous Agreement Year. Additionally, the Agreement requires a
Percentage Fee equal to 10% of 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. The Percentage Fee, if applicable,
is due on or before the 20
th
of the following month.
The Agreement states that the Operator must bill a daily Customer Facility Charge (CFC) of $6 on all
vehicle rental transactions, and remit the full amount to the Port, regardless of whether or not the full
amount is actually collected. The first transaction day provides for a twenty five (25) hour period and
each successive day provides for a twenty four (24) hour period.
The table below reflects the Gross Revenues, Percentage Fees, and CFC fees:
Agreement Year
Gross Revenue
Percentage Fees
CFC Fees
June 2016 – May 2017
4,763,858
476,386
649,974
June 2017 – May 2018
3,992,229
399,223
613,536
June 2018 – May 2019
4,286,887
428,689
630,060
Total
$13,042,975
$1,304,298
$1,893,570
Source: E-Z Rent a Car Monthly Revenue Reports, Peoplesoft Financials, AFR YE documents
E-Z Rent A Car, LLC
June 2016 – May 2019
5
Audit Scope and Methodology
We conducted the engagement 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 conduct an engagement to obtain sufficient and appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our engagement objectives. We believe
that the evidence obtained provides a reasonable basis for our conclusions based on our engagement
objectives.
The period audited was June 2016 through May 2019 and included the following procedures:
Revenue Completeness and Accuracy
• Traced concession payments to Port records to verify payments were received by Agreement
dates.
• Agreed revenue reported to the Port, to the Operator’s monthly revenue reports, charge sheets,
and to independently audited schedules.
Customer Facility Charge
• Using Tableau, tested 100% of transactions, by re-calculating the checkout and return dates to
assess the accuracy of CFC’s charged and remitted.
• Agreed Operator’s audited CFC counts to daily transaction records.
Rent Surety Adequacy
• Compared the Surety posted, to the Provisions of the Agreement, Port Procedures (RE-2 Section
E.1.c(2)), and the Revised Code of Washington RCW 53.08.085.
E-Z Rent A Car, LLC
June 2016 – May 2019
6
Schedule of Findings and Recommendations
Internal Audit identified $8,904 in under reported customer facility charges (CFC) and
approximately $7,297 in under reported revenue. As a result, $16,201 is due to the Port.
Customer Facility Charge
The Agreement requires the Operator to bill a daily CFC of $6 on all vehicle rental transactions, and
remit the full amount to the Port, regardless of whether or not the full amount is actually collected. The
first transaction day provides for a twenty five (25) hour period and each successive day provides for a
twenty four (24) hour period.
Using data from the operator, we recalculated the CFC by comparing the check out date and time to
the check in date and time. Based on this analysis for the 3-year period under review, we identified
1,484 days or $8,904 of CFC’s not collected from the customer, and not remitted to the Port.
Revenue Completeness
Section 4.2 of the Agreement requires a Percentage Fee equal to 10% of 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. The Percentage Fee, if applicable, is due on or before the 20
th
of the following month.
We performed a reconciliation of accounts between E-Z’s general ledger and the revenue reports
submitted to the Port. The reconciliation identified under reported revenue totaling $48,791.14. The
Percentage Fee due to the Port is 10% or $4,879.11.
Excluded General Ledger Accounts
A review of E-Z’s chart of accounts identified accounts which should have been included in the
monthly reporting of revenue to the Port. The total value of the excluded accounts for the three-year
period was $24,174.61. The Percentage Fee due to the Port is 10% or $2,417.46.
Table below reflects the excluded accounts:
Account Code
4165
4307
4310
4782
4780
Recommendation:
In conjunction with the Port’s Legal Department, file a claim, with the appropriate venue, to recover
$16,201 in under reported revenue.
Management Response/Action Plan:
Aviation Commercial Management agrees with the audit findings and will work with Port Legal to seek
reimbursement through the bankruptcy process, including relevant late fees and interest charges, to the
extent they are recoverable, whether through the bankruptcy process or through the applicable lease
security instrument. Aviation Commercial Management staff appreciates the Internal Audit staff for their
work during the audit process.
DUE DATE: 10/01/2020
1) Rating: Medium
E-Z Rent A Car, LLC
June 2016 – May 2019
7
Appendix A: Risk Ratings
Findings identified during the audit are assigned a risk rating, as outlined in the table below. Only one
of the criteria needs to be met for a finding to be rated High, Medium, or Low. Findings rated Low will be
evaluated and may or may not be reflected in the final report.
Rating
Financial
Stewardship
Internal
Controls
Compliance Public
Commission/
Management
High Significant
Missing or not
followed
Non-compliance
with Laws, Port
Policies,
Contracts
High probability
for external audit
issues and / or
negative public
perception
Requires
immediate
attention
Medium Moderate
Partial controls
Not functioning
effectively
Partial
compliance with
Laws, Port
Policies
Contracts
Potential for
external audit
issues and / or
negative public
perception
Requires
attention
Low Minimal
Functioning as
intended but
could be
enhanced to
improve
efficiency
Mostly complies
with Laws, Port
Policies,
Contracts
Low probability
for external audit
issues and/or
negative public
perception
Does not
require
immediate
attention