Frankly, I'm having as much difficulty understanding Ragsdale's July 10 "Management Response" to the draft audit as I had understanding the draft audit itself. While most of us are now intent on the more recent P-card questions, I'm still plodding through the earlier travel allowance questions.

I'll offer the comments below with a disclaimer, namely that I'm a former accountant (degreed), but not a CPA; that I haven't worked in my field for over seven years; and that taxation was rarely part of my job responsibility. Consequently, I've looked back over my own personal income tax returns, particularly those Schedule A's of Itemized Deductions, in an attempt to follow Ragsdale's response. Here goes, then, WRT Wall's Findings #1 and #2...

It was clear from Wall's draft audit that the manner in which the travel allowances were paid was contrary to the county's established written policy, but does that automatically mean that the executives receiving them were guilty of fraud? Based on Ragsdale's responses, is it possible that Wall's final audit could reveal these methodologies were used?

Dwight Van de Vate and Todd Cook--

Since Walls said that Van de Vate's and Cook's W-2s reflected their travel allowances, and since Ragsdale's response says that "a determination was made to file expenses directly with the tax returns, and not with the County," could it be that these executives were incurring and paying *from their allowances* the gasoline, oil change, tires, and repairs costs on their county-owned vehicles?

If so, does the IRS allow these executives to net their travel expenses paid against their travel allowances received (on Form 2106, possibly, but I don't have one to look at) and claim any unreimbursed expense on their individual tax returns through the Schedule A of Itemized Deductions? Conversely, if an executive's travel allowance was greater than his actual costs incurred, wouldn't Form 2106 then reveal the "overpaid" amount on which the executive owed income tax?

If that's how Form 2106 (which I don't have to look at) is used, it seems an executive would file it even if it revealed that he was "overpaid," because if he didn't, he'd have to pay income tax on the entire amount of his travel allowance (again, Walls said the travel allowance appeared on these W-2s). That is, only Form 2106 appears to allow him to claim any of the out-of-pocket expenses he incurred to operate the county-owned vehicle using his travel allownce.

It would seem, though, that these executives could not use on Form 2106 (which I don't have to look at) the 48.5 cent per mile deduction allowed by the IRS for operating one's own vehicle, since that per mile deduction includes an estimate of auto depreciation per mile, and Van de Vate and Cook could not make such a claim, driving vehicles not their own.

Still, using that 48.5 cents per mile as a benchmark, Van de Vate's annual allowance of $12,000 assumes just 24,732 business miles annually and Cook's annual allowance of $4,290 assumes just 8,845 business miles annually. Since neither volume of business miles seems an unreasonable assumption, maybe the Finance Department relied on that 48.5 cent deduction in establishing the amount of travel allowance afforded these executives?

Of course, even if Form 2106 may be used this way, we still need to know if either Van de Vate or Cook received any travel reimbusrements from the county, over and above the travel allowances afforded them, and neither Walls nor Ragsdale has answered that question.

If Walls' final audit reveals that this was the methodology followed for Van de Vate and Cook, though, and if neither executive received any travel reimbursements from the county, isn't it possible that no fraud against the county occurred?

Ragsdale, Arms, and Werner--

Walls said that Ragsdale's, Arms' and Werner's W-2s did not eflect their travel allowances. Ragsdale's response was that "the Mayor has traditionally been on an accountable plan, documenting expenses that offset income" and that Arms and Werner "were originally set up in this manner," too.

Does Ragsdale mean, then, that these three executives were also incurring and paying *from their allowances* the gasoline, oil change, tires, and repairs costs on their county-owned vehicles (just as Van de Vate and Cook possibly were)?

Does Ragsdale mean, though, that for these three executives, it was the finance department that tracked throughout the year the difference between their travel expenses paid and their travel allowances received, and that the department then reported just the net difference on the W-2s for these executives (as oppossed to Van de Vate and Cook, who possibly performed this computation for themselves in the course of preparing their personal tax returns)?

If so, is it possible that Walls misspoke in his draft audit when he said that travel allowances were not reflected on the W-2s for these three? That is, since Ragsdale's response says that "all payments to employees have been reported to the IRS and appropriate W-2s have been issued," could Walls have been looking for the gross travel allowance amounts, rather than the net amounts the finance department may have been tracking (and which, presumably, wouldn't be reported until year-end)? I do note, however, that Ragsdale doesn't say *when* these amounts were reported to the IRS...

You get my drift, though: If this methodology is the one Ragsdale is describing in his response, it's still possible that Walls' final audit will reveal that W-2s to these three were issued reporting a net amount underpaid or overpaid to them for their out-of-pocket costs of operating their county-owned vehicles.

Knowing that net amount underpaid or overpaid would reveal to us,too, whether Ragsdale's "Road Warrior" travel allowance of $20,000 (which, at 48.5 cents per mile, assumes 41,237 business miles annually) is a reasonable county expense.

And, as in the analysis of Van de Vate's and Cook's travel allowances, we would still need to know if these three latter executives received any reimbursements duplicated in the possbile "tracking" done on their travel allowances before we conclude "double-dipping."

Anyway, that's my best shot at reconciling Walls' Findings #1 and #2 against Ragsdale's response. I don't mind telling you that the attempt leaves me with the distinct feeling I know way too little of what either party means to consider moving on to Finding #3!

What do you now make of the travel allowance question, though???