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Audit Committee Meeting on Sep 12, 2017 9:00am

Minutes for the Port Of Seattle Commission meeting, held on Sep 12, 2017 9:00am

                                                          P.O. Box 1209 
                                            Seattle, Washington 98111 
                                              www.portseattle.org 
                                               206.787.3000 
                            APPROVED MINUTES 
                   AUDIT COMMITTEE SPECIAL MEETING SEPTEMBER 12, 2017 
          The Port of Seattle Commission Audit Committee met in a special meeting Tuesday, September 12, 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 Glenn Fernandes, Director, Internal Audit; Olga Darrington, Partner, Moss Adams; Tyler Reparuk,
         Manager, Moss Adams; Dan Chase, Acting Internal Audit Manager; Aaron Pritchard, Commission Issues
          and Policy Manager; and Amy Dressler, Assistant Commission Clerk. 
           Call to Order: 
           The committee special meeting was called to order at 9:00 a.m. by Commissioner Gregoire. 
          Approval of Audit Committee Meeting Minutes of June 27, 2017: 
          The minutes of the Audit Committee special meeting of June 27, 2017, were approved. 
         External Audit Moss Adams Engagement Service Plan 
          The Committee received a presentation from Ms. Darrington and Mr. Reparuk that contained the following
            information: 
         An introduction to the audit team, including IT specialists and small business participant firm
                Branch Richards. 
         A summary of the audit phases and proposed schedule, which will result in a completed audit in
               May 2018. 
              The services provided, to include: 
                o  An audit and report on the financial statements for the Enterprise Fund and
                   Warehousemen's Pension Fund. 
                o  An audit and report on internal control and compliance with government auditing
                      standards. 
                o  An audit and report on the schedule of Passenger Facility Charge program receipts and 
                      expenditures. 
                o  An audit and report on the schedule of net revenues available for revenue bond debt
                        service. 
                o  Agreed upon procedures and report to the State of Washington Department of Ecology
                        relating to the Terminal 91 facility. 

              Audit Committee Minutes of September 12, 2017, submitted for review December 15, 2017, and proposed for approval on December 19, 2017.

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        TUESDAY, SEPTEMBER 12, 2017 
         A summary of recent and upcoming significant GASB pronouncements; there are no new GASB
                pronouncements affecting the Port for 2017, but some coming in 2018 and 2019. 
            In response to inquiries about the consistency and accuracy of management estimates, Ms. Darrington
           stated that the audit team examines whether appropriate resources are used to develop estimates. 
          Update  Capital Development  International Arrivals Facility: 
        The Committee received a report from Mr. Fernandes addressing concerns raised at recent public
          meetings regarding payments to subcontractors. Internal audit has ex amined processes and made
          recommendations. 
           Update  Eastside for Hire Inc.: 
           The Committee received a report from Mr. Fernandes indicating that an examination of the current contract
           indicates requirements are not being met. A report will be issued highlighting violations. 
          Update  2017 Audit Plan: 
           The Committee received a report from Mr. Fernandes stating that as of the end of July, four of the 23 audits
           in the 2017 work plan had been completed. Mr. Fernandes proposed removing four of the remaining audits,
           which are lower risk, with the likelihood that they will be included in the 2018 work plan. The remainder will
           be substantially completed by the end of 2017. 
        The 2017 Audit Plan was amended to remove four audits (Maritime Maintenance Shops, Aviation
          Commercial Management, Disbursements/Accounts Payable and SeaTac Utilities). 
          Update 2018 Internal Audit Proposed Budget: 
           The Committee received a report from Mr. Fernandes that included the following information: 
         The proposed budget includes the addition of a Certified Information Systems Auditor (CISA) to
                 focus on IT matters. 
         The budget also includes $190,000 to use an external firm with subject matter expertise for two
                 complicated IT audits. 
          The proposed 2018 budget was approved for recommendation to the full commission. 
          Lease and Concession Audit  Bell Street Pier 66 Parking Garage: 
           The Committee received a presentation from Mr. Chase that included the following information: 
             The period examined was July 2014-February 2017. 
         The purpose of the audit was to determine whether management internal controls were effective
                 and whether the lessee, Republic Parking, complied with significant lease provisions. 
         The audit found that internal controls were not always effective; the system for issuance and
                maintenance of garage key cards to Port employees does not accurately reflect the cards issued. 
               Cards will be reissued by employee number during the open enrollment period, and management
                 will have more direct oversight of the list of Port employees eligible to have active parking passes.

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        TUESDAY, SEPTEMBER 12, 2017 
          It was also found that credit card transaction fees were improperly deducted from gross revenue,
                resulting in an underpayment of concession fees amounting to $114,000. The issue was reported
                to the Port by Republic Parking, who repayed the fees. 
          Lease and Concession Audit  ATZ Inc, dba Doug Fox Parking: 
           Without objection, a written report was accepted in lieu of a verbal presentation on the Internal Audit Report
           for ATZ Inc. dba Doug Fox Parking (ATZ), covering the period of October 1, 2013, through June 30, 2016.
           The purpose of the audit, as reported, was to determine: 
                 Port monitoring controls were effective to ensure that reported concession fees were complete,
                  properly calculated, and remitted timely; and 
                 The Port and ATZ complied with the significant terms of the lease. 
           The report included no findings of significance and there was no discussion of this agenda item. 
          Lease and Concession Audit  Dufry North America, LLC: 
           Without objection, a written report was accepted in lieu of a verbal presentation on the Internal Audit Report
           for Dufry North America LLC covering the period of August 1, 2014-July 31, 2016. The purpose of the audit,
           as reported, was to determine: 
                 Port management monitoring controls were effective; and 
                 Dufry North America LLC complied with the significant terms of the lease and concession
                agreement. 
           The report included no findings of significance and there was no discussion of this agenda item. 
          Limited Operational Audit  Promotional Hosting and Trade/Business & Community Development: 
           The Committee received a presentation from Mr. Chase that included the following information: 
             Records for the period of January 2015 through December 2016 were reviewed. 
              The purpose of the audit was to determine whether expenses were reasonable and allowable, and
                management controls were adequate to ensure compliance with laws and policy. 
              It was found that the approval process for expenses was not always effective to ensure compliance
                with state laws and Port policy. Several incidences of inappropriate expenses were found, as well
                as some incidences where approval documentation was not complete or timely. 
              Management response from Rudy Caluza, Director, Accounting and Financial Reporting, indicated
                that current systems do not allow for robust tracking of these expenses, but that a procurement is
                 under way for a Concur electronic workflow system similar to the one used for travel cards. 
          Limited Operational Audit Port Travel Credit Card Program: 
           The Committee received a presentation from Mr. Chase that included the following information: 
             The period of January 2015 through February 2017 was reviewed. 
              The purpose of the audit was to determine whether management internal controls were effective. 
              It was determined that internal controls are generally adequate, but not always effective to ensure
                compliance with state laws and Port policy; 16 percent of transactions were not approved within 30
                 days of the billing statement date.

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        TUESDAY, SEPTEMBER 12, 2017 
          Mr. Caluza provided the management response, stating that solid policies are in place regarding
                card use. Issues will be handled via follow-up with employees with reminders of the 30-day policy,
                 followed by a suspension of the card if expenses aren't reported within 60 days. 
         Adjournment: 
           There being no further business, the special meeting was adjourned 10:45 a.m. 
          Fred Felleman 
          Minutes approved: December 19, 2017