INTERNAL AUDIT REPORT
Limited Contract Compliance Audit
Avis Budget Car Rental LLC
June 2018 – May 2021
Issue Date: August 22, 2022
Report No. 2022-10
Avis Budget Car Rental LLC
June 2018 – May 2021
2
TABLE OF CONTENTS
Executive Summary ................................................................................................................................................ 3
Background ............................................................................................................................................................. 4
Audit Scope and Methodology ............................................................................................................................... 5
Schedule of Findings and Recommendations ....................................................................................................... 6
Appendix A: Risk Ratings ......................................................................................................................................... 7
Avis Budget Car Rental LLC
June 2018 – May 2021
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Executive Summary
Internal Audit (IA) completed an audit of the Consolidated Rental Car Facility Lease Agreement
(Agreement) between Avis Budget Car Rental LLC (Avis) and the Port of Seattle (Port). The period
audited was June 1, 2018, through May 31, 2021. The audit was performed to determine whether Avis
reported Concession Fees were complete, properly calculated, and remitted timely to the Port. We also
assessed whether Avis complied with significant contract provisions, and whether the Customer Facility
Charge (CFC) was properly collected and remitted.
We concluded that Avis generally complied with the terms of the Agreement and that the reported
concession fees were accurate, complete, and remitted timely to the Port. However, we identified the
following low-rated issue briefly described below:
(Low) – Internal Audit identified approximately $2,645 of CFCs not billed to the customer and
subsequently not remitted to the Port. The Agreement requires the Operator to bill a daily CFC on vehicle
rental transactions, and to remit the full amount to the Port, regardless of whether or not the full amount
is actually collected.
This 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
Jeffrey Brown, Aviation Interim Chief Development Officer
Geoffrey Foster, Aviation Property Manager, Aviation Business Development
Dawn Hunter, Director, Aviation Commercial Management
Lance Lyttle, Managing Director, Aviation
Jeff Wolf, Senior Manager, Aviation Business Development
Avis Budget Car Rental LLC
June 2018 – May 2021
4
Background
Avis Budget Car Rental LLC, a subsidiary of Avis Budget Group, operates the Avis, Budget, Payless
and Zipcar vehicle rental brands throughout North and South America, Europe, Africa, the Middle East,
and Asia. The Port of Seattle (Port) entered into a Consolidated Rental Car Facility Lease Agreement
(Agreement) with Avis Budget Car Rental LLC (Avis) in June 2008.
In a memo to Port Commission, dated March 29, 2020, a proposal was made from the Executive Director
(ED) and Seattle-Tacoma International Airport (SEA) leadership to offer relief measures to airport
tenants and concessionaires that had been significantly impacted by the COVID-19 pandemic. The
following was included in the proposal:
1) Rent, Minimum Annual Guarantee (MAG) or similar charges may be deferred and repaid in
full through a payment schedule commencing in 2021.
2) The Port and tenant or concessionaire shall enter into an agreement detailing the
arrangement that includes a payment plan with interest to be paid on deferred amounts and a
waiver of other late fees and finance charges if the payment plan is satisfied.
Following the proposal, Port Commission adopted a Motion (2020-7) directing the ED to take steps to
implement economic relief during the COVID-19 crisis. The Motion authorized the ED to implement
immediate financial relief to Port tenants and concessionaires in a manner that is legally consistent with
advancing the Port’s financial interests and thereby creating ongoing benefit to the residents of King
County.
The terms of the Agreement provide for a 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 percent
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 Charges (CFC) of $6 on
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 twenty four (24) hour periods.
The CFC was revised to $6.50, effective on January 1, 2021. Although outside of the scope of this audit,
the CFC was increased to $7.00, effective on January 1, 2022.
The table below reflects the Gross Revenues, Percentage Fees, and CFC fees:
Agreement Year
Gross Revenues
Percentage Fees
CFC Fees
June 2018 – May 2019
76,021,514
7,602,151
8,658,651
June 2019 – May 2020
66,850,232
6,685,023
7,600,142
June 2020 – May 2021
34,640,146
3,464,014
3,803,590
Total
$177,511,892
$17,751,188
$20,062,383
Source: Concessionaire’s Monthly Revenue Reports, PeopleSoft Financials, AFR YE documents.
Avis Budget Car Rental LLC
June 2018 – May 2021
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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, 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 findings and conclusions based on our
engagement objectives.
The period audited was June 2018 through May 2021 and included the following procedures:
Revenue Completeness and Accuracy
• Traced concession payments to Port records to verify payments were received by Agreement
dates.
• Agreed revenues 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 percent of transactions, by re-calculating the checkout and return
dates to assess the accuracy of CFCs charged and remitted.
• Testing assumed a twenty five (25) hour period for the first transaction day.
Rent Surety and Insurance 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 53.08.085.
• Compared insurance coverage to the provisions of the Agreement.
Avis Budget Car Rental LLC
June 2018 – May 2021
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Schedule of Findings and Recommendations
Internal Audit identified approximately $2,645 of CFCs not billed to the customer and
subsequently not remitted to the Port. The Agreement requires the Operator to bill a daily CFC
on vehicle rental transactions, and to remit the full amount to the Port, regardless of whether or
not the full amount is actually collected.
We also identified approximately $109,835 of CFCs that appeared to be overcharged to the customers.
This represents 17,435 tickets and could reflect that billing processes and systems need to be adjusted
to align to the Agreement requirements.
The Agreement allows for “up to a twenty five (25) hour period (or fraction thereof) for the first
Transaction Day and successive twenty four (24) hour periods (or fraction thereof) for each successive
Transaction Day...” From June 1, 2018 through December 31, 2020, the CFC was $6.00. On January
1, 2021, the CFC daily rate increased to $6.50. According to the Agreement, the Operator must collect
CFC at the time the first payment is made for a qualifying vehicle rental transaction, and must remit the
full amount of the CFC to the Port, regardless of whether or not the full amount is collected.
Using data from the Operator, we recalculated the CFC by comparing the check-out date and time to
the check-in date and time.
Recommendations:
We recommend collecting $2,645.60 plus any accrued interest and/or penalties.
We also recommend Aviation Commercial Management request an explanation regarding what
caused the overbilling of $109,835.50 to determine whether systems and processes need to be
adjusted.
Management Response/Action Plan:
Aviation Commercial Management staff agrees with the findings and will pursue the collection of under-
reported CFCs. We will continue to work with Avis/Budget and Internal Audit on the potential overbilling
to better understand their methodology for calculating CFCs, including the “up to” provision, which may
significantly lower the final figures. We will also work to have the tenant rectify any identified errors in
their calculation parameters.
DUE DATE: 12/31/2022
1) Rating: Low
Avis Budget Car Rental LLC
June 2018 – May 2021
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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
Moderate
probability for
external audit
issues and / or
negative public
perception
Requires
attention
Low Minimal
Functioning as
intended but
could be
enhanced
Mostly complies
with Laws, Port
Policies,
Contracts
Low probability
for external audit
issues and/or
negative public
perception
Does not
require
immediate
attention
