WASHINGTON -- The federal government is starting to make random, unannounced visits to dealerships to audit their compliance with the cash-for-clunkers rules, dealer associations said.
The Transportation Department auditors focus is on possible fraud in the disposal of trade-in vehicles, said National Automobile Dealers Association spokesman Bailey Wood.
The $3 billion cash-for-clunkers program had detailed requirements aimed at ensuring that the engines of trade-ins were destroyed rather than resold.
NADA e-mailed members yesterday advising them of possible spot audits by the federal agency.
Please make sure that all transaction paperwork and trade-in vehicles are in order, the message said.
The Virginia Automobile Dealers Association and the Wisconsin Automobile & Truck Dealers Association sent similar e-mails to members.
We expect that a high percentage of dealers will be audited, the Virginia group said.
Both state groups relied on members reports of unannounced visits from auditors. Chris Snyder, the general counsel for the Wisconsin group, said he had tried unsuccessfully to get guidance from Transportation officials.
Transportation Secretary Ray LaHoods spokespersons did not respond to requests for comment yesterday and today.
The cash-for-clunkers law signed by President Barack Obama in June gave the Transportation Department the authority to audit dealerships.
Fraud has plagued some of the cash-for-clunkers programs in Europe, Transportation spokesman Rae Tyson has said.
Some dealer representatives took issue today with the timing of the audits.
The government seems to be more interested in auditing early on rather than paying early on, said Donald Hall, president of the Virginia Automobile Dealers Association.
Dealers in four states have been reimbursed for only 5.7 percent of their cash-for-clunkers transactions, according to the latest dealer-group surveys in Virginia, North Carolina, Louisiana and Alabama.
The law requires reimbursement within 10 days of the submission of dealer applications, which were filed between July 27 and Aug. 25.
The government expects dealers to have every i dotted and every t crossed, and yet it violates its own law, NADAs Wood said.
The Wisconsin dealers e-mail said auditors will be looking at paperwork such as the salvage certificate, the title of the trade-in, insurance, registration and the vehicle identification numbers for both vehicles.
Auditors will be looking at documents picked up by the auto salvager, the Wisconsin group said.
Auditors also will be physically inspecting the identification numbers of disabled vehicles that havent been picked up yet, trying to start the cars and verifying that the engine disablement sticker was attached to the engine, according to the e-mail.
Both the Virginia and Wisconsin groups advised members to verify the credentials of the auditors.
Dealers are sometimes targets for scam artists, so they should know whos coming in to look at their records, Snyder, the Wisconsin groups general counsel, said in an interview.
Snyder said he tried to reach the Transportation Department for guidance on the audits but never got a return call.
If theyre sending auditors out, what are they trying to hide? he said.