Vehicle Procurement Flashcards
Questions
Answers
5.1.1 What are two different types of plans for employee reimbursement? (p.65)
- Monthly Allowance
- Accountable Plan
5.1.2 Why is an Accountable reimbursement plan beneficial to both the employer and employee? (p.65)
Since reimbursements paid under Accountable Plans are excluded from gross income and are not reported on an employee’s W-2, they are usually the most desirable type of program from both the company’s and driver’s standpoints.
5.1.3 What three rules must be followed in order to have an accountable reimbursement plan? (p.65-66)
- The expenses must have a business connection.
- The driver must provide adequate accounting for their expenses within a reasonable period of time (generally, within 120 days
- “Excess Payments” must be returned.
5.1.4 List three examples of accountable plans. (p.66)
• Flat rate
-Company pays a driver $800 to cover their vehicle expenses
-Driver has $600 in substantiated business expense and returns the excess $200
• Cents per mile
-Company pays driver at or under the current IRS Optional Standard Mileage Rate
• Qualifying Fixed and Variable Rate (FAVR) Plans
5.1.5 What are non-accountable reimbursement plans? Give an example. (p.66)
- These are plans that don’t meet one or more of the criteria required to be a tax-free reimbursement
- Most common being “flat rate” vehicle reimbursement programs.
Example of Non-Accountable Plan:
• Flat rate
• Company pays a driver $800 to cover their vehicle expenses
• Driver does not substantiate their expense or return any excess fund
5.1.6 What are the pros and cons of a cents-per-mile reimbursement program? (p.67)
Pros
• Easy to administer
• Tax-free (if under the IRS Optional Standard Mileage Rate)
• Is a government approved rate
Cons
• Is not geographically sensitive
• Does not properly account for mileage (depreciation)
• Under-pays low mileage drivers
• Over-pays high mileage drivers
• Provides an incentive to report miles
• Lags the marketplace by a year
• Not intended as an accurate reimbursement for business use of a personal vehicle
5.1.7 What is the IRS rate and why do many organizations use it? (p.67)
IRS’s Optional Standard Mileage Rate for Business (IRS rate) which is updated each year with a new Revenue Procedure number
It is easy to administer and explain, and takes some of the “randomness” out of the reimbursement program.
5.2.1 Under which circumstances is it preferable to have employees provide their own vehicles? (p.68-69)
• Temporary or intermittent requirements
• Low-mileage drivers
• Lack of infrastructure to support an employer provided pool
• Strong employee preference
5.2.2 In what situations should employee provided vehicles not be considered? (p.69)
• The type of vehicle required is other than those normally owned by employees. For example, the requirement for off-road travel or trans-
portation of heavy or oversized loads would usually preclude the use of employee provided vehicles.
• Seeing employees taking the vehicles they use for business home at night would negatively impact public perception and the image of the
organization.
5.2.3 How can temporary or intermittent vehicle requirements be met? (p.69)
Rental - Loan from POOL - Driver reimbursement
5.2.4 Under what circumstances can employee reimbursement be preferred even when employer provided vehicles are less expensive? (p.69-70)
a. The organization has limited funds available for purchase and does not want to lease vehicles.
b. Public perception may prevent an organization from allowing employees to commute with their employer provided vehicles.
c. Parking space or overnight security restrictions may prevent overnight and partial day storage of the employer’s vehicles. In this case, the employer may opt to eliminate its fleet vehicles and reimburse employees for the business use of theirs.
d. d. Strong employee preference
5.2.6 When might a Fleet Manager consider renting a vehicle? (p.71)
In some cases your fleet may not have the number of vehicles or the right vehicles required to fulfill certain tasks.
5.3.1 What are some of the requirements of vehicle purchasing? (p.72)
Requires a considerable capital outlay
- Ffocus on a variety of administrative tasks: initial licensing and renewals, personal property tax payments, title retention and remarketing of vehicles
5.3.10 How can the Fleet Manager get funding from Federal Agencies? (p.74)
- This type of funding is typically available for purchasing or modifying vehicles to mitigate environmental impact.
- To find these grants, Fleet Managers should monitor the agency websites, network with State Clean Citie Coalitions, and listen to vendors. 3. Vendors can be a good source for where to obtain grant money
5.3.11 How can the Fleet Manager secure funding from the state? (p.74)
- Clean air vehicle grant funding is more prevalent at the state level
- National Association of State Energy Officials (NASEO) releases a directory of State Energy Offices (SEOs) for clarity
5.3.12 How can liens affect Fleet Managers who finance their vehicles? (p.74)
The vehicle may not be sold until The lender is paid off and The lien released
5.3.13 What are some administrative issues that arise from unpaid tickets? (p.74)
Liens - Registration Blocking - Registration Suspension
5.3.2 What are some advantages of vehicle ownership? (p.72)
- Tax relief on depreciation
- Pricing leverage with dealers
- Maximization of resale proceeds.
- Retaining the salvage value is one of the key advantages of ownership.
5.3.3 When might it be preferable to order vehicles from the dealers stock? (p.72)
- Dealerships want to sell their vehicles to customers by making them attractive with add-ons such as heated seats, satellite radios, and unneeded warranty and package options.
5.3.4 What are some advantages and disadvantages to purchasing from dealer stock? (p.72)
Dis: ordering from the dealer can actually be more expensive due to dealer markup
Ad: When it comes down to timing issues however stock will be the best bet
5.3.5 What capital considerations should the Fleet Manager make? (p.72)
- Money is a finite resource and may be better invested in other assets such as hiring staff, advertising, or paying down debt
5.3.6 How does Return on Investment affect the purchase decision for both public and private fleets? (p.73)
If the profit margin is greater than the cost of capital then it makes more sense to use internal funds to generate additional revenue and borrow the money for vehicles
5.3.7 What is the true cost of capital? (p.73)
dependent on how the organization finances its assets (vehicles).
Finance through retained earnings or does the organization finance the fleet through debt
RE: internal capital, investments, rate of return, history, credit worthiness, bond rating, etc.
* The organizations true cost of capital is based on the weighted average of these costs.
