Anton Airfood
INTERNAL AUDIT REPORT ANTON AIRFOOD (dba Anthony's at Sea-Tac) LEASE AND CONCESSION AGREEMENT JULY 1, 2011 JUNE 30, 2014 ISSUE DATE: OCTOBER 21, 2014 REPORT NO. 2014-15 ANTON AIRFOOD (dba Anthony's at SeaTac) INTERNAL AUDIT JULY 1, 2011 JUNE 30, 2014 TABLE OF CONTENTS TRANSMITTAL LETTER ....................................................................................... 3 EXECUTIVE SUMMARY ........................................................................................ 4 BACKGROUND ................................................................................................. 5 FINANCIAL HIGHLIGHTS ..................................................................................... 5 AUDIT SCOPE AND METHODLOGY .......................................................................... 5 CONCLUSION .................................................................................................. 6 2 ANTON AIRFOOD (dba Anthony's at SeaTac) INTERNAL AUDIT JULY 1, 2011 JUNE 30, 2014 TRANSMITTAL LETTER Audit Committee Port of Seattle Seattle, Washington We have completed a compliance audit of Anton Airfood Lease and Concession Agreement. We reviewed information for the period July 1, 2011 June 30, 2014. We conducted the audit in accordance with Generally Accepted Government Auditing Standards and the International Standards for the Professional Practice of Internal Auditing. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We extend our appreciation to the management and staff of the Aviation Business Development Department and Accounting and Financial Reporting for their assistance and cooperation during the audit. Joyce Kirangi, CPA, CGMA Internal Audit, Director AUDIT TEAM RESPONSIBLE MANAGEMENT TEAM Jack Hutchinson, Audit Manager Jim Schone, Director Aviation Business Development Deanna Zachrisson, Manager Aviation Properties Group 3 ANTON AIRFOOD (dba Anthony's at SeaTac) INTERNAL AUDIT JULY 1, 2011 JUNE 30, 2014 EXECUTIVE SUMMARY AUDIT OBJECTIVES AND SCOPE The purpose of the audit was to determine whether: 1. The reported concession fees were complete, properly calculated, and remitted timely to the Port. 2. The Port and lessee complied with significant provisions of the Lease and Concession Agreement, as amended. We reviewed information for the period July 30, 2011 - June 30, 2014. Details of our audit's scope and methodology are on page 5. BACKGROUND Anton Airfood, a subsidiary of HMSHost North America, Inc., operates two restaurants in the airport's central terminal under license from Anthony's Restaurants: 1) Anthony's at SeaTac Airport and 2) Anthony's Fish Bar. The agreement called for a 10-year term beginning in March 2003, with an option for two five-year extensions at the Port's discretion. The agreement calls for a minimum annual guarantee of 85% of the prior year's reported concession fees and a monthly concession payment of 8% of gross receipts. AUDIT RESULT The reported concession fees were complete, properly calculated, and remitted timely to the Port. Anton Airfood complied with significant provisions of the Lease and Concession Agreement. 4 ANTON AIRFOOD (dba Anthony's at SeaTac) INTERNAL AUDIT JULY 1, 2011 JUNE 30, 2014 BACKGROUND BACKGROUND Anton Airfood, a subsidiary of HMSHost North America, Inc., operates two restaurants in the airport's central terminal, under license from Anthony's Restaurants: Anthony's at Sea-Tac Airport an informal sit-down restaurant and lounge based on Anthony's eponymous restaurants located at Bell Street Marina at Pier 66 and Fishermen's Terminal in Ballard. Anthony's Fish Bar a quick-serve/to-go restaurant based on the Anthony's 'Fish Bars' in operation at Pier 66 and Fishermen's Terminal. Anton Airfood operates two distinct concepts under Agreement No. 000374. The agreement called for a 10-year term beginning in March 2003, with an option for two five-year extensions at the Port's discretion. The agreement calls for a minimum annual guarantee of 85% of the prior year's reported concession fees and a monthly concession payment of 8% of gross receipts. FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS ANTON AIRFOOD GROSS REVENUES AND CONCESSION TO THE PORT AGREEMENT REPORTED GROSS CONCESSION YEAR REVENUES REVENUE 2011-2012 $12,275,418 $982,033 2012-2013 $13,068,095 $1,045,448 2013-2014 $13,426,181 $1,074,094 TOTAL $38,769,694 $3,101,575 Data Source: PeopleSoft Financials AUDIT SCOPE AND METHODLOGY AUDIT SCOPE AND We reviewed information for the period July 1, 2011 June 30, 2014. We utilized a risk-based audit approach from planning to testing. We gathered information through document requests, inquiries, observations, and data analysis, in order to obtain a complete understanding of the financial requirements of the agreement between the Port of Seattle and Anton Airfood. We applied additional detailed audit procedures to areas with the highest likelihood of significant negative impact as follows: 1. To determine whether the reported concession fees were complete, properly calculated, and remitted timely to the Port. Reviewed the lessee's chart of accounts to ensure all revenue accounts were reported. Reviewed and reconciled the lessee's daily sales rerecord to the reported concession revenues. 5 ANTON AIRFOOD (dba Anthony's at SeaTac) INTERNAL AUDIT JULY 1, 2011 JUNE 30, 2014 For a sample of six months, reconciled the reported revenues to point-of-sales records to ensure: o All concession items transacted at the register were properly and completely reported. o Disallowed deductions did not reduce concession revenues. For a sample of 15 days, reconciled the reported cash sales to bank statements to ensure all cash sales were properly and completely reported. Reviewed third-party voucher and gifts card transactions to ensure they were properly and completely included in the reported revenues. Reviewed all payment records for the audit period for compliance with the required due date. 2. To determine whether the lessee complied with significant provisions of the Lease and Concession Agreement, as amended. Reviewed the Certified Statement of Gross Revenues for compliance with the timely and complete submission requirements. Reviewed required insurance coverage in force for the audit period. CONCLUSION CONCLUSION CONCLUSION The reported concession fees were complete, properly calculated, and remitted timely to the Port. Anton Airfood complied with significant provisions of the Lease and Concession Agreement. 6
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