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Audit Meeting on Feb 27, 2009 1:00PM

Minutes for the Port Of Seattle Commission meeting, held on Feb 27, 2009 1:00PM

                        Commissioners                                               Tay Yoshitani 
                                                                                              Chief Executive Officer 
                      Bill Bryant 
                      Chair and President 
                   John Creighton                           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 FEBRUARY 27, 2009 
            The Port of Seattle Commission Audit Committee met in a special meeting at 9:00 a.m.,
            Friday, February 27, 2009 in the Commission Chambers at Pier 69, 2711 Alaskan Way,
            Seattle, WA. Commissioners Hara and Creighton were present, as well as citizen committee
            member Steve Miller. Also in attendance were CEO Tay Yoshitani and Joyce Kirangi, Port
            Internal Audit Manager. 
        CALL TO ORDER 
            The committee special meeting was called to order at 9:00 a.m. by Commissioner Lloyd
             Hara.. 
           Approval of Minutes 
           Minutes of the Audit Committee Meetings of November 4, 2008; December 2, 2008; and
           January 6, 2009 were approved by Commissioner Hara. Commissioner Creighton was not a
            member of the Committee at the subject meetings and Citizen member Miller participates as
            a non-voting member of the Committee. 
            Discussion of Recent Internal Audits 
            Presenters: Joyce Kirangi, Internal Audit Manager and Jack Hutchinson, Senior Internal
            Auditor 
            A computer slide presentation was given by Ms. Kirangi, addressing internal lease and
            concession agreement audits which had been completed of the Cruise Terminals of America
            (CTA), Host International, Inc. and Seattle Restaurant Associates (SRA) and the systems
            audit of the Procurement System. Staff provided a summary of the reports which were
             submitted for each of the three audits. 
              CTA Audit Period January, 2004 through December, 2006 

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            Regarding the CTA audit, staff noted that there had been a finding of an inadequate
            management monitoring system, and that management has responded to the findings and
            most were considered as closed. Ms. Kirangi clarified that the findings were not major
              issues. 
            Responding to Commissioner Hara's question as to why the CTA lease was not publicly
             advertised, CEO Yoshitani clarified that since it was a lease, as opposed to a contract, there is
             no statute requiring the Port to do so. 
             In response to Mr. Miller's question of the legal interpretation of the finding regarding
             retroactive employee bonuses, Ms. Kirangi stated that the legal department is looking into the
             question. 
               Host International, Inc. and Seattle Restaurant Associates, Audit period January 2006
                 December 31, 2007 
            Ms. Kirangi stated that there was not any recommendation for any financial recovery
             resulting from this audit. 
               Procurement System  Audit of current practices, 2008 
            Mr. Hutchinson provided background on the procurement system audit, which included
            auditing of Major Construction as well as Small Works contracts. He also identified the
             differences in types of procurements/contracts, and issues related to them. Mr. Hutchinson
            noted that since the Central Procurement Office was new to the Port, this department was
             audited in order to review their new processes, and to see if there are any 'holes' within their
             current practices, with the purpose being to identify risks. 
            Mr. Hutchinson noted issues found within the audit, which included inadequate participation
            in acquisition planning by construction contract services (Major Construction); inadequate
            documentation (Small Works); and within the procurement system, issues related to
            segregation of duties, inadequate documentation, and insufficient procedures to ensure
             legitimate vendor creation. It was stated that the items should be considered as closed. 
            Mr. Graves, Managing Director, Capital Development Division, spoke about current
            legislation which would raise Small Works Contracts from $200,000 to $300,000; however,
             the lowest bidder would still need to be selected. 
            Ms, Kirangi spoke about the extensive training which has been created and is currently
             available to Port staff regarding the new CPO-1 Policy, and the intent to help staff understand
            the need to comply with the new Policy. 
           Follow-up on Recreational Boating Department Audit 
             Presenter: Sharon Briggs, General Manager, Recreational Boating 

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            Ms. Briggs provided a document for review and discussion as a follow-up to the previous
            presentation to the Committee, which addressed outstanding issues. 
             Ms. Briggs noted that at this point, all outstanding items which remained in the fall of 2008,
            have been addressed. Ms. Briggs briefly mentioned the items and actions taken, which
             included: 
              Shilshole Bay Marina 
                  o  Segregation of duties 
                  o  Computer system weakness 
                  o  Guest Moorage Revenue Accountability 
              Bell Harbor Marina 
                  o  Segregation of duties and accountability of funds 
                  o  Computer system weakness / discounts 
               Updates to tariffs 
             Commissioner Hara noted that he would like to see staff return in the future with a progress
            report on the monitoring of changes made. 
           Interim Report on Financial and Grant Regulatory Compliance Audits 
             Presenters: Moss Adams staff members Laurie Tish, Lilian Mramba, Kevin Smythe, Eric
            Corcoron. 
            Ms. Tish commented that today's presentation was to provide results thus far on internal
              controls tests. A letter of presentation was provided by Moss-Adams on the 2008 Interim
            Fieldwork Results. Ms. Tish summarized details within the letter, referencing objectives and
            components of internal control: 
             Objectives 
                o  Effectiveness and efficiency 
                o  Reliability of financial reporting 
                o  Compliance with applicable laws and regulations 
            Components 
                o  Control Environment 
                o  Risk Assessment 
                o  Control Activities 
                o  Information and Communication 
                o  Monitoring 
            Ms. Tish also referenced the Enterprise Risk Management (ERM) framework, designed to
            achieve following objectives and components: 
             Objectives 
                  o  High level goals 
                  o  Effective and efficient use of resources 
                  o  Reliability of reporting 
                  o  Compliance with applicable laws and regulations 
            Components 

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                  o  Objective setting 
                  o  Event identification 
            Moss-Adams staff spoke about their review of the Port's information technology (IT)
            environment and responded to questions regarding whether the systems used by the Port are
             'off the shelf programs' or customized, which raises the question of security. 
            Moss-Adams staff commented on their review of significant accounts and processes, noting
             following accounts and processes as significant to the Port: 
               Administration of federal grants 
               Billings, cash receipts and receivables 
              Signatory Lease and Operating Agreement (SLOA) 
               Procurement, cash disbursements and payables 
             Payroll 
               Capital projects 
              Treasury and investments 
              Debt and related accounts 
               Pollution remediation obligation and contingencies 
              Third party management 
               Financial close and reporting 
            Budget 
            Ms. Mramba responded to Mr. Miller's questions about SLOA and about third party
             management, stating that the SLOA is related to not only leasing systems, but also to the
             budgeting system as well as to financial reporting closing. Regarding third party
            management, Ms. Mramba commented that the controls are mostly related to cash
             transactions between the Port and the third party. 
            Moss-Adams staff noted that compliance testing had been done for the Airport Improvement
            Program and also the TSA federal grants through 3rd quarter of 2008, and commented that
            they would look at Passenger Facility Charge (PFC) grants in March 2009. 
            Ms. Tish stated that Moss-Adams would return with final conclusions at the next Audit
            Committee Meeting, and noted that at this point there were no findings of non-compliance or
            material weaknesses, and commented that a management letter would be issued with final
            conclusions. 
           Review of proposed amendments to Audit Committee Charter 
             Presenter: Tom Barnard, Research and Policy Analyst 
            Mr. Barnard commented on the proposed amended version to the Audit Committee Charter,
           which incorporated comments made by committee members at the previous meeting.
            Discussion followed regarding the revisions proposed. CEO Yoshitani suggested that he
             would like to see one additional revision, that being within the 'Composition' section, first

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            sentence, the words 'at least' (two members of) be deleted, which would add clarification.
            The revised Charter was agreed upon by the Committee, and the motion was made to take to
            the full Commission for approval: 
           Motion to take amended Charter to full Commission for a vote  Creighton 
            Motion carried by the following vote: 
           In Favor: Creighton, Hara (2) 
            Committee member Miller participates as a non-voting member of the committee. 
            It was noted that the next Audit Committee meeting would take place on April 14, 2009. 
       ADJOURNMENT 
            There being no further business, the meeting was adjourned at 11:05 a.m. 

           Commissioner Lloyd Hara 











                Feb 27 SCM Audit Min