9.000 – AUTHORITY AND FREQUENCY OF AUDITS

California Vehicle Code (CVC) Section 8057(b) authorizes the Department to audit fleet records of apportioned registrants to ensure the accuracy of the reported distance (mileage), vehicle cost, and weight information.

The Plan Section 1020 authorizes the base jurisdiction to audit the apportioned registration applications and supporting documents of registrants based in that jurisdiction.  The audit shall be to assess the accuracy of distances reported in the application for apportioned registration, and where inaccuracies are found, to adjust the fees accordingly.  An audit conducted by the base jurisdiction shall be conducted on behalf of all Member Jurisdictions, and the base jurisdiction may assess and collect fees based on its audit.

Per Section 1025 of the Plan, Member Jurisdictions shall conduct a number of audits equivalent to an average of three percent per year of the number of fleets whose registration it renews annually.  Nothing in this section precludes a base jurisdiction from conducting more audits than required or from auditing a registrant more than once.

9.005 – JOINT AUDITS

IRP Section 1030, “Joint Audits,” allows audits of any registrant by multiple jurisdictions. Upon completion of the joint audit, the base jurisdiction is responsible for issuing the audit report, collecting and distributing the resulting fee adjustments, and resolving any disagreement with the audit findings.

9.010 – PURPOSE OF AUDITS

Audits are necessary to ensure: (1) The accuracy and integrity of information reported on the apportioned registration applications;
(2) Compliance with provisions of the IRP and jurisdictional statutes; and (3) Proper payment of apportionable fees to all affected Member Jurisdictions.

9.015 – AUDIT STANDARDS

Audits are conducted in a professional manner with the results clearly documented, following the Plan, the IRP Audit Procedures Manual, and Generally Accepted Government Auditing Standards.

9.020 – AUDIT LOCATION

Audits are performed at DMV Headquarters in Sacramento (in-house audits) or at the registrants’ or the designated agents’ business locations where operational records are maintained and made available for examination (field audits), as determined by the Department.

9.025 – AUDIT NOTIFICATION

In accordance with IRP Audit Procedures Manual Section 401(a) and CVC Section 8057(b), the Department will provide a 30-day notice to the registrant prior to conducting the audit.  For just cause, notification requirements may be waived, as provided in IRP Audit Procedures Manual Section 401(c).

For field audits, the auditor will contact the registrant or the registrant’s authorized agent by telephone to arrange an audit.  An audit notification letter is sent to the registrant to confirm the audit commencement date, the registration year(s) to be audited, the location where the audit will take place, the types of records to be examined, and the person(s) conducting the audit.

For in-house audits, the auditor will notify the registrant by telephone.  An audit notification letter is also sent to the registrant regarding the registration year(s) to be audited, the types of records to be examined, the due date for the submission of records, the address to where records should be sent, and other information regarding the audit.

Audit notification letters are sent by certified mail to the last known mailing address on record with the Department, and are considered received, when delivered. It is the responsibility of the registrant to ensure that the telephone numbers as well as business and mailing addresses are correct and current, and to promptly notify the IRP Operations Section whenever there is an address change.

9.030 – ENTRANCE (OPENING) CONFERENCE

The auditor will hold an entrance conference with the registrant or agent to discuss the registrant’s operations, distance accounting and reporting system, records to be examined, sampling procedures, and the extent and timing of the audit.  For in-house audits, the entrance conference will be held over the telephone.

9.035 – TRAVEL EXPENSES

Pursuant to CVC Section 8057(b), the registrant may be required to reimburse the Department for the auditor’s per diem and actual travel expenses incurred under certain conditions as determined by the Department.

In-house audits involve no travel expenses.  Under the Department’s current administrative policy, the registrant will not be charged for the travel cost for a field audit conducted in California, except when:

• A return trip is required to complete the fieldwork because the required records were unavailable or unauditable.
• The registrant requests the audit to take place at its place of business or another location in lieu of sending the records to the Department’s Headquarters in Sacramento, when it is deemed reasonable and cost effective for the Department to conduct an in-house audit due to the small size of the fleet or other reasons.

California-based registrants shall reimburse the Department for the auditor’s per diem and actual travel expenses for audits conducted outside California.

9.040 – EXIT (CLOSING) CONFERENCE

At the conclusion of the audit, the auditor will hold an exit conference with the registrant to review audit issues and preliminary findings; an overview of the post-audit process, including to whom the final audit report should be addressed; reporting procedures, rights of appeal, and any recommendations for improvement of the registrant’s distance record keeping and reporting system.

9.045 – NOTIFICATION OF AUDIT RESULTS TO REGISTRANTS

Upon completion of an audit, an audit report is issued to the registrant (and the designated agent, if any).  When mailed to the last known mailing address of the registrant as it appears on the Department’s records, the audit report is considered sufficient notification of the audit results whether it is received or not.

9.050 – REGISTRANT’S OPTIONS UPON RECEIPT OF AUDIT REPORT

The registrant shall have 30 days from the issuance of the audit report to:

• Pay the netted assessment in full to the Department.
• Request a reevaluation (reexamination) of the audit results and provide additional documents not previously made available.
• File an appeal to contest the audit results.

Non-receipt of or refusal to accept the audit report will not extend the deadline allowed for payment of the assessment or for requesting a reevaluation or hearing.  

Requests to modify the audit findings must be made within the 30-day statutory deadline, with supporting documentation.  Records received after the 30-day period will not be accepted for reevaluation.

If the registrant submits a timely request for reevaluation of the audit results, and provides additional records to the Department, the Department will notify the registrant of the result of its reevaluation upon completion, including any modifications to the original findings and/or assessment.

The registrant will have 30 days from the date of notice to pay any audit assessment due or to request a hearing.  

Audit appeals must be made to the Audits Branch within the time period specified in the audit report or notification of the reevaluation result, and shall include the areas of disagreement and specific reasons for a hearing.

If the audit resulted in a net assessment, the registrant shall pay the uncontested portion of the audit assessment.  

In the appeal, California as the base jurisdiction, shall act on behalf of all affected jurisdictions. Upon the resolution of an appeal, California will notify all affected Member Jurisdictions of the results.

9.055 – INTEREST AND PENALTIES ON UNDERPAID CALIFORNIA FEES

In accordance with CVC Section 8058, interest is assessed at the rate of 1 percent per month of the underpaid portion of the California fees, commencing on the date the underpaid portion of the fees were originally due and accruing monthly until paid.  This interest will continue to accrue despite any dispute or hearing regarding the underpaid fees.  If the audit is under appeal or reevaluation, the registrant may pay the underpaid portion of the California fees, as determined in the audit, to avoid accumulation of additional interest.

In addition, a penalty of $50 or 10 percent of the underpaid portion, whichever is greater, is assessed on any underpaid California fees.

California does not calculate, bill, or collect penalties, interest, or any other charges for other Member Jurisdictions.  As such, the registrant may receive billings from other Member Jurisdictions for such charges.

9.060 – FAILURE TO MAINTAIN OR PROVIDE ADEQUATE RECORDS FOR AUDIT

In accordance with the Plan Section 1015 “Inadequate Records; Assessment” if the records produced, for the fleet as a whole, for audit are determined to be inadequate to perform an audit, or if, within 30 calendar days of the issuance of a written request by the base jurisdiction, the registrant produces no records, the base jurisdiction shall impose on the registrant an assessment in the amount of 20 percent of the apportionable fees paid by the registrant for the registration of its fleet in the registration year to which the records pertain, including apportionable fees based on estimated distance.

In an instance where the base jurisdiction knows that it is the registrant’s second such offense, the base jurisdiction shall impose an assessment of 50 percent of the apportionable fees paid by the registrant for the registration of its fleet in the registration year to which the records pertain.

When the base jurisdiction knows it is the registrant’s third offense, and on any subsequent offenses of the registrant known to the base jurisdiction, the base jurisdiction shall impose an assessment of 100 percent of the apportionable fees paid by the registrant for the registration of its fleet in the registration year to which the records pertain.

The base jurisdiction shall distribute the amounts of assessment it collects under this Section on a pro rata basis to the other jurisdictions in which the fleet was registered.

9.065 – NETTING OF AUDIT FEE ADJUSTMENTS

In accordance with IRP Section 1050, “Netting Audit Adjustments,” all underpayments and overpayments of fees to affected jurisdictions resulting from the audit are netted. California will collect the net underpayment from the registrant or refund the net overpayment to the registrant.

All affected Member Jurisdictions will be notified of the results of the audit and will have 45 days from the date of the report to appeal or notify California and the registrant of their intent to reexamine records. As a result, the net fee adjustment may change pending acceptance of the audit findings by other Member Jurisdictions.

9.070 – LIEN, SUSPENSION OF OPERATING AUTHORITY, AND SEIZURE OF VEHICLES

Pursuant to CVC Section 8201(a), unpaid fees constitute a lien on all vehicles operated as part of the fleet and on any other fleet vehicles operated by the registrant.  The lien will follow the vehicles regardless of their removal or separation from the fleet.  Liens arising as the result of an audit expire four years from the date the registration fees first become due unless the lien is perfected.  Perfected liens shall expire five years from the date of the perfection.

The audit report also serves as a lien notice to the registrant if the audit results in net underpaid fees.  The lien is perfected upon: (1) the mailing of a lien perfection notice; and (2) the recording of the lien on the Department’s electronic vehicle registration records. Such liens may be perfected in the form of a Vehicle License and Titling (VLT) stop on the vehicle identification number.

Pursuant to CVC Section 8203(a), when a lien is perfected and the opportunity to submit additional documentation or request a hearing has passed, the Department may suspend or cancel the operating privileges of the fleet. When the suspension takes effect, the Department may seize a sufficient number of vehicles to satisfy the lien without further notice to the registrant. Upon full payment of the delinquent fees, interest, and penalties, the recorded lien will be removed from the Department’s vehicle registration database.

If you have any questions regarding liens, payments, collections, suspension, and seizure and sale of vehicles, please contact:

Department of Motor Vehicles
Registration Operations Division
IRP Operations Section
Audit Collections M/S H179
P. O. Box 932320
Sacramento, CA 94232-3200
Telephone Number: (916) 657-8092

If you have any questions regarding the audit, reevaluation, or appeal, please contact:

Department of Motor Vehicles
Audits Branch
IRP Audit Section M/S F157
P. O. Box 932328
Sacramento, CA 94232-3280
Telephone Number: (916) 657-7576