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Audit Meeting on Dec 19, 2017 8:00am

Minutes for the Port Of Seattle Commission meeting, held on Dec 19, 2017 8:00am

                                                                               P.O. Box 1209 
                                                                Seattle, Washington 98111 
                                                                   www.portseattle.org 
                                                                      206.787.3000 
                                         APPROVED MINUTES 
                            AUDIT COMMITTEE SPECIAL MEETING DECEMBER 19, 2017 
                The Port of Seattle Commission Audit Committee met in a special meeting Tuesday, December 19, 2017,
                 at the Conference Center at Seattle-Tacoma International Airport. Committee members  present included
               Commissioner Felleman and Commissioner Gregoire. Public Member Christina Gehrke was absent. Also
               present were Dan Thomas, Chief Financial Officer; Glen Fernandes, Internal Audit Department Director; 
              Joseph Simmons, Audit Manager for Central King County, Office of the Washington State Auditor; Mark
              Rapozo, Assistant Director of Local Audit, Office of the Washington State Auditor; Dan Chase, Internal
                Audit Manager; Scott Watson, Principal, Point B Solutions; Lance Lyttle, Managing Director, Aviation; 
                Aaron Pritchard, Commission Policy Manager; and Amy Dressler, Assistant Commission Clerk. 
                Call to Order: 
                The committee special meeting was called to order at 8:10 a.m. by Commissioner Gregoire. 
               Approval of Audit Committee Meeting Minutes of September 12, 2017: 
               The minutes of the Audit Committee special meeting of September 12, 2017, were approved. 
               External Audit  Washington State Accountability Audit for 2016: 
             The Committee received a presentation from Mr. Simmons and Mr. Rapozo that contained the following
                 information: 
                   Accountability areas examined included self-insurance programs, economic grant programs, state
                        grant agreements, moorage revenue, and personal service contracts. 
                   There were minor recommendations regarding moorage rate policies, which have been addressed
                     by management 
                Regarding personal service contracts, minor changes to procedures and language were
                     recommended. 
                     Follow up was performed regarding the prior year audit finding pertaining to the one-time payment
                        made to certain staff in 2017. The Port's actions regarding this finding included repayment from
                       Executive Leadership Team members and ineligible recipients,  realignment  of the General
                        Counsel's reporting structure,a comprehensive review of compensation policies, and external
                       review by outside legal counsel. It was determined that these corrective actions are satisfactory,
                          and the prior year finding is resolved. 


                  Audit Committee Minutes of December 19, 2017, submitted for review on March 14, 2018, and proposed for approval on March 19, 2018.

            PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES             Page 2 of 5 
             TUESDAY, DECEMBER 19, 2018 
               2018 Internal Audit Work Plan: 
                The committee received a presentation from Mr. Fernandes that included the following information: 
                 Internal Audit proposes to do six Contract Compliance, eight Operational, and three Information
                         Technology audits in 2018. 
                Contract Compliance audits will include several contracts not examined since 2014 or 2015. 
                       Contracts examined this year will cover about 10 percent of concessions revenue; under this
                         structure, each part of the revenue stream will be audited at least once every 10 years. 
                    Operational Audits on the work plan include some carryovers from 2017 (which are expected to be
                     completed in January 2018), Capital Programs, the Northwest Seaport Alliance, and further
                         examination of airport ground transportation programs. 
                 Information Technology audits will be of Aviation Management's  data centers and change
                       management, and the ParkingSoft system. 
                As goals regarding Women and Minority Business Enterprise participation are set, contracts can be audited
                 for compliance with those goals in Operational Audits. Since those goals will be set in 2018, examination of
                 compliance will be part of the 2019 work plan. 
               Information Technology Audit  IT Disaster Recovery Capability: 
                The Committee received a presentation from Mr. Watson that included the following information: 
                 Disaster Recovery focuses on the recovery of critical services after a high impact, low likelihood
                           disaster, such as the loss of an entire facility or regional disaster. 
               It was determined that internal controls are adequate. T echnology designs include operational
                       redundancy for all critical systems and ICT (Information & Communications Technology) follows
                         best practice approaches for disaster recovery. 
               It was recommended that geographic redundancy should be added for the Operations network,
                       Enterprise network, and Internet Egress. Management agrees with the recommendation and plans
                          to provide an alternate data center location locally, in addition to the Spokane center. 
                   Improved integration with the National Incident Management System's Incident Command System
                        is recommended to avoid risk of inefficient recovery efforts. Management has responded with plans
                          to incorporate appropriate training and coordination efforts. 
              Information Technology Audit  IT Change Management: 
                The Committee received a presentation from Mr. Watson that included the following information: 
              Change management is the practice that governs all changes to production environments.
                          Effective  change  management  involves  minimized  service  disruptions,  and  appropriate
                         prioritization of and communication regarding changes and disruptions to affected stakeholders. 
                     ICT change statistics reflect an average of eight system changes per night. 
                Processes were generally in accordance with industry best practices, and culturally reinforced by
                      ICT team members. 
                     It was recommended that the existing toolset be replaced with a single integrated system, and that
                        existing processes be adapted to effectively use the new toolset. Management responded that they
                         have selected a toolset and expect to deploy it by March 31, 2018.

            PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES             Page 3 of 5 
             TUESDAY, DECEMBER 19, 2018 
               It was also recommended that ICT and Aviation Maintenance coordinate to share tools and
                       processes. Internal Audit plans to independently review the Aviation Maintenance change
                        management process as part of their 2018 work plan. 
              Recessed and Reconvened: 
                The meeting was recessed at 9:16 a.m. and reconvened at 9:25 a.m., chaired by Commissioner Gregoire. 
                Limited Operational Audit  Eastside for Hire: 
                The Committee received a presentation from Mr. Fernandes that included the following information: 
                 Auditors examined reconciliation of prepayments of fees made by drivers, as well as a broader
                         examination of the contract. 
                It was found that no reconciliation of per-trip fees had been done between the commencement of
                         the contract in October of 2016, and July 31, 2017. This resulted in 323 drivers who were owed an
                     average of $2,224 apiece, and an independent set of 360 drivers who owed Eastside for Hire an
                        average of $2,251 apiece. 
               It was also found that tracking technology has not been implemented. Instead, Eastside for 
                       Hire has been using manual counts, which are significantly lower than the Port'sAutomated
                           Vehicle Identification data. 
                Deadheading targets have not been met. Although financial penalties are being paid, the spirit of
                        the contract provision is not being met. Furthermore, this  practice undermines the competitive
                        process under which the contract was awarded. 
                    A labor harmony agreement, required by the contract, has not been obtained. 
                 Public comment regarding the Eastside for Hire audit was received from the following individual(s): 
                  Suldan Mohamed, driver. 
                     Cindi Laws, Director, Wheelchair Assisted Taxi Association. 
                    Samatar Guled, General Manager, Eastside for Hire. 
                   Saramjen Sheflami, driver. 
                   Dawn Gearhart, Teamsters Local 117. 
                  Ali Aden, E-Cab. 
                   Amin Shifow, General Manager, Puget Sound Dispatch. 
                 In lieu of a spoken response from management, Commissioner Gregoire suggested referring to the
             management response in the written report. She proposed a report to the full commission regarding the
                  contract. 
              On motion by Commissioner Gregoire, seconded by Commissioner Felleman, it was moved that the
               audit committee recommend a management response to the full commission to address the
                following: (1) Issues of contract noncompliance; (2) Updating all issues from the management
               response included in the December 19, 2017, report; (3) Recommended changes to the taxicab/forhire
               system at SeaTac airport; and (4) If necessary, recommended changes to the current contract,
                by February 1, 2018.

            PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES             Page 4 of 5 
             TUESDAY, DECEMBER 19, 2018 
                Limited Operational Audit  Maritime Stormwater Utility: 
                The Committee received a presentation from Mr. Chase that included the following information: 
               This audit covered the period of January 2016 to June 2017, and was performed to assess the
                          design and operating effectiveness of internal controls. 
              The key terms of the internal controls were achieved, but it was recommended that PROPworks
                       software be implemented to decrease the likelihood of building errors. Management agrees, and
                         plans to migrate the billing process into a new system by March 2018. 
               Limited Operational Audit  Onboarding and Offboarding of Consultants & Contractors: 
                The Committee received a presentation from Mr. Chase that included the following information: 
              The purpose of this audit was to determine whether on- and off-boarding of consultants and
                        contractors is being performed in compliance the Port's Contingent (Contract) Workers Policy and
                        IRS requirements. 
               It was determined that Port policy needs to be updated to remain consistent with IRS guidelines
                        and case law. 
               It was also determined that a process must be established to manage and monitor on- and offboarding
                         of contingent and contract workers to ensure that policy is being followed. 
               Management has agreed to develop updated policies and develop centralized processes and
                        procedures. 
                Limited Operational Audit  Capital Program (International Arrivals Facility): 
                The Committee received a presentation from Mr. Fernandes that included the following information: 
                    Work is being performed with insufficient design and some work performed by Clark Construction
                         is not authorized by the Port, resulting in delayed payments to subcontractors. 
               Management responded that Clark Construction has made improvements to their training and
                          controls for subcontractors. 
                    A decision point on a guaranteed maximum price is expected early in 2018 and will likely alleviate 
                          some of the issues seen in this audit. 
               Lease and Concession Audit  Hertz Rent-a-Car: 
                 Without objection, a written report was accepted in lieu of a verbal presentation on the Internal Audit Report
                for Hertz Rent-a-Car, covering the period of June 2014-May 2016. The purpose of the audit, as reported,
                was to determine whether Port management's monitoring controls were effective and to assure that: 
                         Hertz reported concession fees were complete, properly calculated, and remitted timely to the
                             Port of Seattle. 
                         Hertz complied with significant financial provisions of the concession agreement as amended;
                        and 
                         The Customer Facility Charge was properly collected and remitted. 
              There was no discussion of this agenda item. However, the report included findings of fees owed due to
               underreported Customer Facility Charges. Aviation Commercial Management will pursue collection from
               Hertz for the fees, audit cost, and applicable late fees and interest, and notify Committee members when
               repayment has been made.

            PORT COMMISSION AUDIT COMMITTEE MEETING MINUTES             Page 5 of 5 
             TUESDAY, DECEMBER 19, 2018 
               Lease and Concession Audit  Avis/Budget Rent-a-Car: 
                 Without objection, a written report was accepted in lieu of a verbal presentation on the Internal Audit Report
                  for Avis/Budget Rent-a-Car, covering the period of June 2013-May 2016. The purpose of the audit,  as
                reported, was to determine whether Port management's monitoring controls were effective and to assure
                  that: 
                         Avis/Budget complied with significant financial provisions of the Concession Agreement, as
                       amended; and 
                         The Customer Facility Charge was properly collected and remitted. 
                There was no discussion of this agenda item. However, the report found that Avis/Budget did not maintain
                  sufficient documentation of billing adjustments in their recordkeeping system. Internal Audit is disallowing
                $94,039 in adjustments and is seeking reimbursement for this amount. Aviation Commercial Management
                  will pursue collection from Avis/Budget for the amount owed and will notify Committee members when
               repayment has been made. 
              Adjournment: 
                There being no further business, the special meeting was adjourned at 10:30 a.m. 
               Fred Felleman 
               Minutes approved: March 19, 2018