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Audit Meeting on Jun 27, 2017 9:00am

Minutes for the Port Of Seattle Commission meeting, held on Jun 27, 2017 9:00am

                                                                               P.O. Box 1209 
                                                                Seattle, Washington 98111 
                                                                   www.portseattle.org 
                                                                      206.787.3000 
                                         APPROVED MINUTES 
                                AUDIT COMMITTEE SPECIAL MEETING JUNE 27, 2017 
                The Port of Seattle Commission Audit Committee met in a special meeting Tuesday, June 27, 2017, in the 
              Seoul Room at the Conference Center at Seattle-Tacoma International Airport. Committee members
               present included Commissioner Gregoire, Commissioner Felleman, and Christina Gehrke.  Also present
                were Joyce Kirangi, Director, Internal Audit; Craig Watson, General Counsel; Aaron Pritchard, Commission
               Issues and Policy Manager; Laurie Tish, Partner, Moss Adams LLP; Lisa Dionne, Manager, Moss Adams
                LLP; Kathy Lewless, Talent Acquisition Manager, Human Resources; Ritika Marwaha, Internal Auditor; Dan
                Chase, Acting Internal Audit Manager; Margaret Songtantaruk, Senior Internal Auditor; and Amy Dressler,
                Assistant Commission Clerk 
                Call to Order: 
                The committee special meeting was called to order at 9:12 a.m. by Commissioner Gregoire. 
               Approval of Audit Committee Meeting Minutes of March 24, 2017: 
               The minutes of the Audit Committee special meeting of March 24, 2017, were approved. 
                External Audit  Port of Seattle 2016 External Financial Audit 
             The Committee received a presentation from Ms. Tish and Ms. Dionne that contained the following
                 information: 
               Clean audit opinions were issued regarding the financial statements for the Enterprise Fund and
                       the Warehouseman's Pension Trust Fund. 
               There were no findings of noncompliance in the single audit reports; however, two findings were
                         noted as reported by other audit organizations. 
                    No findings of noncompliance were noted regarding: 
                        o  Major Federal Award Programs, the Schedule of Expenditures of Federal Awards, and
                                    related internal controls. 
                        o  The Schedule of Net Revenues available for Revenue Bond Debt Service. 
                        o  Passenger Facility Charge receipts and related internal controls. 
              The Washington State Department of Ecology Agreed Upon Procedures Report was created by
                         auditors to verify the mathematical correctness of a financial assurance memo prepared by Port
                        staff to demonstrate the Port's financial wherewithal to conduct legallyrequired environmental
                         remediation. 

                  Audit Committee Minutes of June 27, 2018, submitted for review on August 16, 2017, and proposed for approval on September 12, 2017.

            PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES             Page 2 of 3 
             TUESDAY, JUNE 27, 2017 
              Commissioners asked for clarification regarding which environmental measures were included in the
              Department of Ecology procedures report. Ms. Tish stated that is meant to verify that there are funds
                 available for federally required measures and does not apply to the Port's stormwater utility. 
               Areas of emphasis included the internal control environment, management estimates, and the
                        Northwest Seaport Alliance (NWSA) joint venture. 
                Required Annual Communications, including a preview of upcoming accounting pronouncements,
                         were delivered. 
               Third Party Management Audit  Bell Harbor International Conference Center/World Trade Center: 
             The Committee received a presentation from Ms. Marwaha and Mr. Chase that included the following
                 information: 
                     The purpose of this audit was to determine whether internal controls were effective to ensure that
                        reported  revenues  and  operating  expenses  were  complete  and  accurate;  expenses  were
                        appropriate and in accordance with the terms and conditions of the agreement, and that related
                         party events were held in accordance with the terms and conditions of the agreement. The audit
                         also examined whether Columbia Hospitality Inc. complied with significant terms of the agreement. 
                   The period examined was January 1, 2015, to December 31, 2016. 
               It was determined that Columbia Hospitality was generally in compliance with key terms of the
                           contract. 
             An opportunity to strengthen monitoring controls was identified; the Port overpaid payroll by
                       approximately $26,300 because of a shared employee. 
             An amendment to the agreement regarding use of Port-owned facilities by Columbia Hospitality
                        Inc. is suggested. Management responded that the agreement will be amended accordingly. 
               Third Party Management Audit  Airport Club at SEA Lounges: 
                The Committee received a presentation from Ms. Songtantaruk that included the following information: 
                    The purpose of this audit was to determine whether management controls were effective to ensure
                          that  airline  revenues  were  complete  and  accurate,  lounge  expenses  were  proper  and  in
                     accordance  with  the  agreement,  and  to  determine  whether Airport  Lounge  Development
                       Corporation complied with the significant terms of the agreement, including City of SeaTac
                       minimum hourly wage rates. 
                    The period of April 1, 2015, to March 31, 2016, was examined. 
                     It was determined that Airport Lounge Development Corporation complied with the significant terms
                        of the agreement. 
                However, it was also determined  that  Port management controls need improvement.
                        Compensation, benefit, and payroll tax were overpaid by $54,139, and insurance was overpaid by
                        $4,222. 
               Limited Operational Audit  Centralized International Support Services Agreement: 
                The Committee received a presentation from Mr. Chase that included the following information: 
                     This agreement is with VIP for baggage services in the FIS area.

            PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES             Page 3 of 3 
             TUESDAY, JUNE 27, 2017 
                    The purpose of this audit was to determine whether management controls are effective, to ensure
                         compliance by VIP with the significant terms of the contract, and to ensure compliance with the City
                       of SeaTac's minimum hourly wage rates. 
                   The period of January 2015 to February 2016 was examined. 
                     The audit determined that VIP complied with the significant terms of the contract. 
               It was found that internal controls were not effective to ensure accuracy of payment. Management
                         reviewed and payed invoices reflecting rates that did not match the terms and rates in the agreement,
                        resulting in an overpayment of $55,000. A repayment has been agreed upon and is in process. 
                It was noted that VIP was not in compliance with the City of SeaTac required minimum hourly wage for a
                portion of the examined period. The importance of ensuring that vendors are in compliance with local laws
              regarding wages was emphasized. Mr. Chase indicated that a contract amendment would be forthcoming
                 regarding further retroactive pay. 
                The meeting was recessed at 11:00 a.m. and reconvened at 11:08 a.m., chaired by Commissioner Gregoire. 
              Additional New Business  Audit Committee Charter Housekeeping Amendment: 
               Mr. Pritchard introduced the proposal, which amends section II(D)(3) to read "Inform the Commission of
                the external auditing firms selected, based on an open competitive process, to review external audits
              conducted on Port of Seattle operations, programs, activities, and business processes." This amendment
                  clarifies a second reference to selecting an external auditing firm, to be consistent with an amendment
               approved by the Commission on June 28, 2016. 
              The Audit Committee voted to recommend adoption of the Audit Committee Charter Housekeeping
            amendment to the full Commission. [Clerk's Note: The Commission considered and adopted the Audit
                Committee charter amendment above at its regular meeting of July 11, 2017, under agenda item 4c.] 
               Introduction of Final Internal Audit Director Candidate for Recommendation to Commission: 
                Ms. Lewless gave an overview of the selection process, and introduced final candidate Glenn Fernandes to
                the Committee. 
               The committee and Mr. Fernandes discussed his qualifications and management approach. 
            The Audit Committee voted to recommend that the full Commission appoint Glenn Fernandes
                Internal Audit Director. [Clerk's Note: The Commission appointed Mr. Fernandes Internal Audit Director at
                 its regular meeting of July 11, 2017, under agenda item 6c.] 
              Adjournment: 
                There being no further business, the special meeting was adjourned 11:32 a.m. 
               Fred Felleman 
               Minutes approved: September 12, 2017.