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Audit Meeting on Jan 06, 2009 1:00PM

Minutes for the Port Of Seattle Commission meeting, held on Jan 06, 2009 1:00PM

        Commissioners                                               Tay Yoshitani 
                                                                                              Chief Executive Officer 
                   John Creighton 
                      Chair and President 
                      Bill Bryant                                    P.O. Box 1209 
                     Patricia Davis                           Seattle, Washington 98111 
                   Lloyd Hara                             www. portseattle.org 
                   Gael Tarleton                              206.728.3000 

                      APPROVED MINUTES 
              AUDIT COMMITTEE SPECIAL MEETING JANUARY 6, 2009 
            The Port of Seattle Commission Audit Committee met in a special meeting at 9:00 a.m.,
            Tuesday, January 6, 2009 in the Commission Chambers at Pier 69, 2711 Alaskan Way,
            Seattle, WA. Commissioners Hara and Tarleton were present, as well as citizen committee
            member Steve Miller. Also in attendance was CEO Tay Yoshitani and Joyce Kirangi, Port
            Internal Audit Manager. 
        CALL TO ORDER 
            The committee special meeting was called to order at 9:05 a.m. by Commissioner Lloyd
            Hara. 
           Approval of Minutes 
            Motion for approval of the audit committee minutes of October 7, 2008  Tarleton 
            Motion carried by the following vote: 
            In Favor: Hara, Tarleton (2) 
           Discussion of 2009 Internal Audit Work Plan 
             Presenter: Joyce Kirangi, Internal Audit Manager and Jack Hutchinson, Senior Internal
            Auditor 
            Prior to discussion the 2009 workplan, Ms. Kirangi reviewed accomplishments from 2008,
             including the following: 
               Over $2 million in concessions recovery 
               Additional hiring of 2 audit staff members 
               A number of department operational audits completed 
               Three audits completed of Rental Car companies 
                Audits completed of all in-flight kitchens leases 

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               Completed follow-up audits of recommendations resulting from the State Auditor's
                Office (SAO) performance audit of 2007 
               Completed two employee investigations, resulting in appropriate disciplinary actions 
            Ms. Kirangi commented that it was her understanding that as a long-term goal of the Audit
            Committee, the Internal Audit Department would be increasing their focus on performance
             audits in beginning in 2009. 
             CEO Yoshitani raised a question that in light of the fact that there would be more focus on
            performance rather than compliance audits, whether the makeup of staff might need to be
             different, and might outside experts be required. 
            Commissioner Hara stated that he believed staff should be able to transition from compliance
             audits to performance audits, and noted that in many cases, there are industry-wide
             benchmarks that can be used, and that another area to look at would be the standards that
           have been developed by management. 
             Mr. Yoshitani noted that he felt there is a need for caution as to which performance audits
             will be assigned to internal staff vs. bringing in outside help to perform them in cases where
             the audits are highly specialized. 
            Mr. Miller commented that he felt internal staff might need some bolstering at times with
             outside help, and at the same time it would be important to bolster the capabilities of internal
               staff. He also reiterated that having management attend the Audit Committee meetings to
             discuss their departmental audits was beneficial and could really be included as a part of
            what a performance audit includes. 
            Commissioner Tarleton noted that she felt it could also be helpful for managers to come to
            the Committee explaining how they set performance standards for their department. 
            Ms. Kirangi then expressed that it was also her understanding that the Committee wished to
            establish more of a Port-wide Enterprise Risk Management (ERM) system, and the ERM
            systems would be audited to address efficiency and effectiveness. 
            Ms. Kirangi shared with the Committee that she had been in contact with the State Auditor's
             Office to communicate the need to avoid a duplication of efforts, and the desire to partner
           more with the SAO. She stated that she was hoping to meet with the SAO sometime in
             February or March, and noted that at this point, it was still unknown as to which area the
            SAO would be auditing next. She informed the Committee that earlier in the day she had
            received a phone call from SAO staff who relayed three areas of possible focus, including
             effectiveness and efficiency of how the Port does business in the areas of property purchases,
            property sales, and lease management. 
            Tom Barnard, Research and Policy Analyst advised the Committee that he had received
            information from Rudy Caluza, Director of Accounting and Financial Reporting that the

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            SAO wants to be notified whenever the Port has an entrance or exit interview by Moss
             Adams or other external auditors, in case they would like to attend. 
            Ms. Kirangi reviewed areas of focus for the 2009 Internal Audit workplan as follows, and
            noted that the department would remain flexible, in case areas arose needing to be addressed
             sooner: 
               Central Processing Systems (Port-wide systems) 
              Lease and Concessions 
             Third Party Management 
              Financial Reporting 
               Special Investigations 
              Departmental Internal Controls (beginning of performance audits) 
              Federal Assistance 
               Performance and Operational Effectiveness 
              Enterprise Risk Management 
                Capital Improvement Program (will likely wait until the following year, as this
                 department was so heavily looked at in 2008) 
            Regarding Internal Controls, Mr. Miller stated that sometime during the upcoming year, it
            would be important to address what assurance is given from a financial audit in terms of
            internal control, as well as from accountability or performance audits from the SAO, and then 
            to decide what gaps existed and how the Committee might best advise the Commission in
             terms of sufficiency of internal controls. 
            Ms. Kirangi provided a document to the Committee for review, which provided more of a
            breakdown as to which departments and companies they intended to review during 2009.
            She also clarified that the Police Department had been added to the 2009 workplan, as there
             was not sufficient time to focus that on that department during 2008. 
            Regarding how the choice is made as to which leases and agreements are reviewed, Mr.
             Miller challenged the audit department to rethink the traditional approach of using a cycle
            method, and perhaps try a more analytical approach. 
            Regarding the final McKay report, Ms. Kirangi suggested allowing the legal department to
             finish their analysis before deciding which contractors will need to be audited, therefore
             avoiding the duplication of efforts. 
            Ralph Graves, Managing Director, Capital Development Division, responded in the
            affirmative to Commissioner Tarleton's question as to whether the Central Procurement was
             reviewing language related to audit authority, 
            Mr.Miller commented that he believed included in the audit workplan should be information
             regarding the training plan for staff for 2009, as well as planning for preparation and
             assistance for any performance audits. 

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           Audit Reports on Rental Car Companies 
             Presenter: Ms. Kirangi 
            Ms. Kirangi stated that the three Rental Cars being reported on were Dollar, Advantage, and
             Enterprise, and noted that the audits were purely lease compliance audits, and that there were
             no significant findings to report on any of the three companies as a result of the audits. 
            Ms. Kirangi responded to Mr. Miller's question as to why the reports were so old (2005 and
             2006), stating that due to the nature of auditing, there are occasions when there may be a few
             pieces of information that are not always received in a timely manner in order to finalize the
              reports. 
            In response to Commissioner Hara's question as to whether or not management may be able
            to perform some of the same tasks as the internal audit department, Ms. Kirangi suggested
            that management be asked to respond to the Committee regarding if they felt it was necessary
             to have the assistance of the audit department's expertise. Discussion followed regarding the
             differences in the audits of the smaller rental car companies vs. the larger companies. 
            Ms. Kirangi stated that she believed the Director of the Accounting Department would be
            coming back to the Committee in March to report on what is being done in that department
            regarding Enterprise Risk Management. 
             Mr. Miller reiterated the fact that it would be helpful to know in advance which projects will
            be coming forward to the Committee, and when. 
            Responding to Commissioner Hara's question as to who would be coming to the Committee
            at the February meeting, Mr. Barnard noted that he is currently working on the calendar, and
             would have that information available as quickly as possible. 
             Mr. Miller requested that there be a review of the 'open items' list at each month's meeting. 
            Commissioner Tarleton recommended that the Committee look in the near future at the Audit
            Committee Charter, especially regarding a mission statement, an operations statement, and
             goals. She suggested that Mr. Barnard draft a revised version to the charter for review by the
            Committee, and would like to see it be reviewed annually. 
            Commissioner Hara noted that after review of an amended charter, there would be a report
            provided to the full Commission. 
            Mr. Miller suggested that the role of the public member of the Audit Committee be further
              refined. 
            Commissioner Tarleton stated that she would like to go before the full Commission in March
            regarding any necessary amendments to the Audit Committee. 

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            Commissioner Hara suggested that amendments may be handled administratively rather than
             by resolution and that he would like to see a draft revised document at least seven days in
            advance of the next committee meeting. 
       ADJOURNMENT 
            There being no further business, the meeting was adjourned at 10:37 a.m. 

           Lloyd Hara 














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