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Audit Committee Meeting on Mar 24, 2017 9:00am

Minutes for the Port Of Seattle Commission meeting, held on Mar 24, 2017 9:00am

        Audit Committee Minutes of March 24, 2017 , submitted for review on May 9 , 2017 , and proposed for approval on June 27 , 2017 . APPROVED MINUTES AUDIT COMMITTEE S P ECIAL MEETING MARCH 24, 2017 The Port of Seattle Commission Audit Com mittee met in a special meeting Friday , M arch 24, 2017 , in the Commission Chambers at Pier 69, 2711 Alaskan Way, Seattle, Washington. Committee members present included Commissioner Gregoire , Commissioner Felleman , and Christina Gehrke . Also present were Joyce Kirangi, Internal Audit Department Director ; Dan Chase, Acting Internal Audit Manager ; Margaret Songtantaruk, Senior Internal Auditor, Skip Himes, Director, Marine Maintenance, Stuart Mathews, Director, Aviation Maintenance, Mike McLaughlin, Director, Cruise Operations, Aaron Pritchard, Commission Is sues and Policy Manager ; and Amy Dressler , Assistant Commission Clerk . Call to Order: The committee special meeting was called to order at 9:04 a .m. by Commissioner Gregoire . Approval of Audit Committee Meeting Minutes of October 10, 2016 : The minutes of the Aud it Committee special meeting of October 10, 2016 , were approved. Update – Required Annual Communication and Internal Audit Department Charter The Committee received a presentation from Ms. Kirangi that contained the following information:  The Internal Audit charter accurately reflects the department’s current practices.  The Internal Audit department is independent, reporting directly to the Audit Committee, not Port management .  As part of a quality improvement program, the Internal Audit department is audited by external auditors every three years . To accommodate staff member participation, the committee proceeded to: Update – Reissued Audit Report – Cruise Terminals of America The Committee receiv ed a presentation from Mr. McLaughlin that contained the following information:  Future cruise terminal lease agreements will include a control process for ensuring that risk is set at an acceptable level before they are proposed to the Commission .  A formal process will be performed and documented prior to the beginning of each remaining cruise season of the Cruise Terminals of America lease to evaluate risk to the Port .  These procedures will apply to future cruise terminal operators . Commissioners Tom Albro Commission President Stephanie Bowman John Creighton Fred Felleman Courtney Gregoire P.O. Box 1209 Seattle, Washington 98111 www.portseattle.org 206.787.3000 PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES Page 2 of 4 FRIDAY, MARCH 24, 2017 The committee returned to consideration of – Update – Aviation and Marine Inventory Report Back to Audit Committee The Committee received a presentation from Mr. Himes and Mr . Mathews that contained the following information:  This audit, which reviewed the period from Ja nuary 1, 2015 , through October 31, 2015, was originally exited with the Audit Committee in February 2016 . At that time, the committee requested a future report regarding implementation of recommended measures.  Both maintenance departments have implemented review procedures for inventory, as well as processes for identifying items that can be surplus s ed . Lease and Concession Audit – Pier 86 Grain Terminal : Without objection, a written report was accepted in lieu of a verbal presentation on the Internal Audit Report for the Pier 86 Grain Terminal , covering the period of January 1, 2015 , through August 31, 2016 . The purpose of the audit, as reported, was to d etermine whether the lessee complied with significant lease provisions. The report included no findings of significance and there was no discussion of this agenda item. Lease and Concession Audit – Airport Management Services LLC : Without objection, a w ritten report was accepted in lieu of a verbal presentation on the Internal Audit Report for Airport Management Services LLC covering the period of May 1, 2013 , through April 30, 2016 . The purpose of the audit, as reported, was to determine whether :  Port management controls were effective to ensure compliance with significant terms of the lease agreement, as amended ; and  Airport Management Services complied with the significant terms of the lease agreement, as amended, including gross receipt requirements, rent payment requirements, independent certified gross annual report requirements, letter of credit or security requirements, and insurance requirements . The report included no findings of significance and there was no discussion of this agenda item. Lease and Concession Audit – Clear Channel: This audit of Clear Channel Outdoor Inc. dba Clear Channel Airports , cover ed the period of August 1, 2012 , through July 31, 2015 . The purpose of the audit, as reported, was to determine whether Port management monitoring controls are adequate and effective to ensure :  Clear Channel reported concession fees were complete, properly calculated, and remitted timely to the Port ; and  Clear Channel complied with significant financial terms of the lease and concession ag reement . It was determined that certain gross receipts were underreported, and it was recommended that Port management seek recovery of $7,821 in additional concession fees. Management has agreed to work with the tenant to recover the outstanding rent and interest due to the Port . PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES Page 3 of 4 FRIDAY, MARCH 24, 2017 C omprehensive Operational Audit – Port of Seattle Police Department : The Committee received a presentation from Mr. Chase that included the following information:  This audit covered the period from January 1, 2014, through July 31, 2016 .  The purpose was to determine whether management controls are effective in order to achieve Police Department goals and objectives, in compliance with the appropriate laws and regulations .  After testing was performed, it was determined that there were no reportable findings . 2016 Audit Work Plan Update : The committee received a presentation from Mr. Chase that included the following information:  The 2016 Work Plan is complete with the exception of two Third Party Management Audits, and audits of Aviation Utilities, Airport Janitorial Services, and IT Radio Communication Equipment .  The first Third Party Management Audit is of the Airport and Cascade Clubs . The second is a consolidated audit of the Bell Harbor International Conference Cent er and World Trade Center. Both audits are ongoing .  The audit of Aviation Utilities was not completed due to lack of time ; it is included in the 2017 Work Plan .  The Airport Janitorial audit was started, but a delay was r equested by management because of substantial changes to the way that contract is structured; management would like Internal Audit to focus on a review under the new model.  The IT Radio Equipment audit was not completed due to staffing challenges in the Information and Communications Techn ology department; normally, two audits per year are conducted in this work group. This would have been the third for 2016. Additionally , small equipment accountability and data center audits have been conducted recently, which reduces the risk in the area of this audit. Requests from committee members included noting on the work plan when work is done by an external contractor . Also requested was increase d clarity regarding reasons for non - completion of audits. It is important for the committee to understa nd if there are not enough resources available to complete the work plan, so that additional staffing or budget can be provided when necessary. Ms. Gehrke requested a summary of what has been completed over the past three years. [Clerk’s Note: the 2016 t able for the Internal Audit work plan attached to these minutes represents revisions requested by the Committee during the meeting for accuracy and transparency.] Commissioner Gregoire suggested conducting an audit of the Airport Janitorial program relati vely soon, so that the effectiveness of the new contract model can be evaluated (and changed, if necessary), and because the changes may increase risk. Proposed 201 7 Flexible Work Plan : The committee received a presentation from Ms. Kirangi that included the following information:  The decision - making process regarding Internal Audit’s work plan involves meetings with management, Commissioner input, data analysis, examination of prior audit history, and institutional knowledge .  Risk scoring is based on a scale of impact and likelihood .  A list of suggested audits for 2017 was presented . PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES Page 4 of 4 FRIDAY, MARCH 24, 2017 Committee members emphasized the importance of clarity regarding whether resources necessary to complete the Work Plan are already included in the budget, sug gesting that the estimated cost and number of hours, risk score, whether outside services are being used, and date of last audit for each item be clearly provided in the proposed plan documentation. Ms. Kirangi indicated that this information is documented in the workpapers, and indicated that it can be provided to the Committee. Commissioner Felleman asked whether, because the taxi agreement is on the 2017 Work Plan, Transportation Network Companies (TNCs) should also be examined. Ms. Songtantaruk explain ed that the pilot program is about to expire, after which the agreement will go month - to - month. It is not productive to audit a month - to - month arrangement. Ms. Gehrke suggested auditing the pilot program, and Ms. Kirangi agreed to look at the work plan in order to determine what could be removed to make room to add an audit of the TNC pilot program. The 2017 Internal Audit Flexible Work Plan was approved. Commissioners Gregoire spoke regarding a recent article published by the Puget Sound Business Journal, regarding Interna l Audit Director Joyce Kirangi, expressing appreciation for Ms. Kirangi’s work and stating that her upcoming retirement is not in any way linked to the recently conducted State Auditor’s Office (SAO) audit. Neither Ms. Kirangi nor the Port’s Internal Audit department had any role in the findings of the SAO audit. Commissioner Felleman added that although media coverage of the Port is appreciated, accuracy is important and errors should be corrected. A djournment: There being no fur ther business, the special meeting was adjourned 11:05 a .m. Courtney Gregoire Minutes a pproved : June 27 , 2017