When completing a CTR is it incorrect to include the ATM fee as part of the cash withdraw? The transaction shows all in one (fee and amount in cash) so our vendor that produces our CTR's shows the transaction the same way. We have been told by our auditor that this is incorrect.

Your CTR should only reflect the amount of CASH that was either tendered or received. If you are talking about a withdrawal, then the ATM fee would not be included in the CASH that the individual obtained.