| Take-Home Vehicle Policies and Practices Management Study Report No. 2001-01 Susan Baugh, CGFM, Principal Management Auditor
The management audit of King County’s take-home vehicle policies and practices was initiated at the request of the Metropolitan King County Council and included in the council-adopted 2000 Auditor’s Office work program. The impetus for the audit was a local television station’s investigation of county employees’ use of county vehicles for commuting purposes. The council was interested in determining whether take-home vehicle assignments were consistent with relevant county policies and procedures.
The audit objective was to review the county’s take-home vehicle practices to determine whether take-home vehicle assignments were consistent with relevant county policies and procedures. In addition, Fleet Administration’s management of take-home vehicle assignments and ongoing monitoring and reporting practices were reviewed. The county’s compliance with federal tax requirements for reporting the benefit value of take-home vehicles was also reviewed.
The general audit conclusion was that county agencies did not consistently adhere to council-adopted policies intended to restrict take-home vehicle assignments and to improve accountability in the implementation of take-home vehicle policies. In addition, taxable take-home vehicle benefits were not consistently reported for county employees.
FINDINGS AND RECOMMENDATIONS Despite the council’s efforts to restrict the use of take-home vehicles, take-home vehicle assignments increased countywide by 541 vehicles (167 percent) from 323 vehicles in 1990 to 864 vehicles in 2000. The 167 percent increase in take-home vehicle assignments was largely driven by an expansion of Sheriff’s Office take-home vehicles which increased by 566 cars due to the council adopted car-per-officer program. The audit found that county agencies did not consistently adhere to adopted policies specifying the criteria and reporting requirements for take-home vehicle assignments. In addition, county agency justifications for numerous take-home vehicle assignments were not consistent with code-established criteria. A total of 32 take-home vehicle assignments were discontinued in August 2000 due to inadequate justifications, infrequent requests for emergency call-outs or availability of alternate shift coverage, and clarification of take-home vehicle requirements identified in collective bargaining agreements. Additional clarification of the Sheriff’s Office take-home vehicle assignments may also be required. The Sheriff’s Office has interpreted the car-per-officer program to provide broad authority to assign take-home vehicles for all commissioned personnel. As of July 2000, 671 of the 864 take-home vehicles were assigned to Sheriff’s Office commissioned personnel. Initially, the car-per-officer program was adopted by council motion in 1987 to increase the efficiency and visibility of patrol officers and detectives and, thus, reduce crime in King County neighborhoods. However, 230 police officers reside outside the county’s geographic boundaries and some commissioned officers have desk rather than field assignments. The audit recommended that Fleet Administration, in cooperation with the Executive’s Office, continues to closely monitor take-home vehicle assignments to ensure that all assignments are consistent with the county code. In addition, the Metropolitan King County Council may want to clarify or confirm the intent of the car-per-officer policy.
Finding 2-2. County Agencies Did Not Consistently Adhere to Council-Adopted Policies Intended to Improve Accountability in the Implementation of Take-Home Vehicle Policies. While the council has attempted to improve accountability in the implementation of take-home vehicle policies, county agencies have not consistently adhered to county code provisions related to take-home vehicle authorization and reporting requirements. Fleet Administration was uninformed about more than 200 take-home vehicle assignments even though it was responsible for approving, monitoring, and reporting on take-home vehicles. In addition, Fleet Administration approved some take-home vehicle assignments in county agencies based upon inaccurate information about the purpose and use of the vehicles. One reason why Fleet Administration had difficulty gaining agency compliance with reporting requirements was that neither the code nor the administrative policies for take-home vehicles have an enforcement mechanism. While many agencies voluntarily comply with the take-home vehicle policies, other agencies apparently require greater encouragement. Although the Sheriff’s Office was exempt from the semi-annual reauthorization and reporting requirements contained in the code, Fleet Administration has historically reported the total take-home vehicles for the Sheriff’s Office semi-annually. Fleet Administration, however, reported 455 rather than 671 take-home vehicles for the Sheriff’s Office in July 2000, because Fleet Administration was not aware that the Sheriff’s Office assigned take-home vehicles to commissioned personnel other than patrol officers and detectives. If the council is interested in a complete countywide list of take-home vehicle assignments, the code would need to be revised to also require the Sheriff’s Office to routinely inventory its take-home vehicles and provide updated information to Fleet Administration. The audit recommended that all county agencies comply with the policies and reporting requirements set forth in the King County Code and in Administrative Policies and Procedures. In addition, the County Council may want to consider revising Chapter 3.30 of the King County Code to require the Sheriff’s Office to update its list of take-home vehicle assignments on a semi-annual basis.
Finding 2-3 - Executive’s Office and Fleet Administration Were Developing New Policies to Strengthen Implementation of the Take-Home Vehicle Policies. The Executive’s Office and Fleet Administration were drafting new Administrative Policies and Procedures for Implementation of King County Code Chapter 3.30 Use of County Vehicles to Commute, which would address many of the issues discussed in the audit. These revisions will clearly strengthen the implementation of the take-home vehicle policy. However, county agencies have not consistently complied with the provisions of the existing Administrative Policies and Procedures that were also very clear. Again, the council may want to consider whether an enforcement clause needs to be included in the code to encourage countywide compliance with the take-home vehicle policies. The audit recommended that the County Executive’s Office and Fleet Administration should ensure timely implementation of the revised Administrative Policies and Procedures for take-home vehicles. In addition, the County Council may want to consider including an enforcement provision in the King County Code, Chapter 3.30, to promote consistent, countywide compliance with the take-home vehicle policy.
Finding 3-1 - Taxable Take-Home Vehicle Benefits Were Not Consistently Reported for County Employees. As a Result, King County and Its Employees Owe Additional Federal Taxes and State Retirement Contributions. Fringe benefits, such as the use of a vehicle for commuting purposes or medical benefits, are considered to be a form of pay, so the fair market value of such benefits must be included in the employee’s wages unless specifically excluded by federal tax rules. A careful assessment of individual county employees’ circumstances and the purpose of the take-home vehicles is required prior to determining the actual value of each county employee’s taxable benefit. Based on our preliminary analysis for county take-home vehicle assignments, the "working condition fringe" or "commuting rule" applies to a substantial number of county employees with authorized take-home vehicles. The taxable value of the fringe benefit for those employees is $1.50 per one-way commute or $3.00 per workday. Some county employees did not have valid authorization for their take-home vehicles. Under the existing Internal Revenue Service (IRS) guidelines, the total benefit value of these employer-provided vehicles would be taxable. Such taxable value may be based on the amount that would be paid a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area. For example, the IRS-specified taxable lease value of a $30,000 vehicle, such as a sports utility vehicle, was set at $8,250 in 1999. Both the county and employee would be responsible for paying the payroll taxes and certain retirement benefits based on the $8,250 value for 1999. Alternatively, "cents-per-mile" rule may apply. The fair market value of fuel and parking would also be taxable if a gasoline credit card and a parking space were provided for those employees with unauthorized take-home vehicles. Special exceptions on taxable benefits were identified for the Sheriff’s Office personnel who were assigned a clearly marked police car as a take-home vehicle. However, audit staff determined that many commissioned personnel in the Sheriff’s Office, particularly administrative personnel, were assigned unmarked vehicles as take-home vehicles that may be included in the tax rules. The Sheriff’s Office, in cooperation with the Prosecuting Attorney’s Office, may further review the nature of the vehicle assignments to determine the applicable tax rule(s). All payroll taxes must be computed on the value of the fringe benefits, including federal income, social security, and Medicare taxes. At a minimum, the county is liable for the employer portion of the social security and Medicare taxes, and must include the appropriate benefit value in the wages for many of the county employees with take-home vehicles. While the county has deducted the payroll taxes for a majority of employees with take-home vehicles, the appropriate value of take-home benefits has not been reported for those employees with unauthorized take-home vehicle assignments. It is possible that the county would be liable for both the employee and employer portions of the payroll taxes if the county failed to identify the appropriate taxable event. Additionally, whether the general "statute of limitation" (e.g., three years) would apply to the liabilities for these payroll taxes has not yet been determined. The Department of Finance, in cooperation with the Executive’s Office, Prosecuting Attorney’s Office, and the Sheriff’s Office, developed an employee survey during the fall of 2000 to determine the extent of the tax liability on take-home vehicles. Due to the complexities of the tax statutes and individual employment circumstances, the results of the survey analysis are not expected until later this year (2001). The Auditor’s Office plans to review and analyze the data when they are available and issue a management letter summarizing any pertinent findings and recommendations.
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Updated: 07/28/06
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