Compliance with the Sarbanes-Oxley Act of 2002 is mandatory for all publicly traded corporations. Under the federal law, corporations must eliminate all conflicts of interest, establish processes to ensure honest corporate disclosure, and govern with greater accountability. Furthermore, the legislation mandates accuracy of a company’s financial reports, requiring finance departments to better understand the true picture of a company’s inventory and assets, such as with fleet. The Sarbanes-Oxley Act was the legislative reaction to the spate of corporate scandals involving companies such as Enron, Tyco, WorldCom, and Adelphia. The law is named after then-Sen. Paul Sarbanes and then-Rep. Michael Oxley, the bill’s key sponsors.

Impact on Fleet Operations

How a fleet complies with Sarbanes-Oxley (SOX) depends if it constitutes a material part of its company’s financial processes. It is these companies that are most likely to include fleet operations in their SOX compliance audit.

When selling out-of-service company vehicles to employees, companies need to ensure that fleet policy is uniformly applied — without exceptions — and that all buyers are treated uniformly and consistently. However, when the selling prices of used company vehicles are negotiated individually with employees, rather than sold at a fixed price, there may be a perception that not all employees are treated uniformly under fleet policy. This is especially the case if certain employees receive preferential pricing in the purchase of out-of-service fleet vehicles. Although primarily an ethics issue, if a fleet manager is actively involved in individual price negotiations, it is prudent that he or she documents the procedures for this corporate policy. Auditors want to ensure that fleet policy is being enforced uniformly and consistently throughout the organization.

Other SOX Compliance Issues

Another potential fleet compliance issue lies with decentralized fleets, where P&L responsibilities are distributed among different business units and fleet policy is implemented at the local level. This may result in a lack of uniformity in fleet policies. Using the earlier employee sales example, a regional manager may administer the program differently than other managers.

Vendor selection is a third potential compliance issue. When a company selects fleet suppliers, those decisions must be done in a consistent manner, as documented in the corporation’s purchasing guidelines. The process for supplier selection needs to be documented, and the process must be tightly managed to ensure there is no appearance of impropriety.

SOX audits involving fleet operations typically examine the processes in place to validate the accuracy of the fleet billing and to validate that calculations are done consistently and correctly. A proactive fleet manager will review internal processes to ensure they are properly documented and establish a system to conduct periodic audits. Other potential fleet compliance requirements are:

• Documentation on how the lease payment is computed. This includes periodic audits of new-vehicle notices to ensure the vehicle acquisition price and fleet incentives are accurately represented and properly calculated in the lease payment.

• A system to track fleet incentive monies to ensure the amount of monies agreed to were actually received from the manufacturer.

• Internal process documentation for company-vehicle eligibility for new hires to ensure a vehicle isn’t assigned until a specific point in the hiring process. Auditors want to ensure there is a system in place so a vehicle cannot be ordered without proper authorization.

If a fleet manager has good processes in place, he or she will be able to lead the discussion on SOX compliance, showing how fleet transaction accuracy is validated, especially when selling out-of-service vehicles to employees.

Originally posted on Automotive Fleet

About the author
Mike Antich

Mike Antich

Former Editor and Associate Publisher

Mike Antich covered fleet management and remarketing for more than 20 years and was inducted into the Fleet Hall of Fame in 2010 and the Global Fleet of Hal in 2022. He also won the Industry Icon Award, presented jointly by the IARA and NAAA industry associations.

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