Internal Audit Report

Small Federal Grants Administration
Limited Operational Audit


January 1, 2011  December 31, 2012




Issue Date: October 1, 2013
Report No. 2013-16

Internal Audit Report
Small Federal Grants Administration
January 1, 2011  December 31, 2012

Table of Contents

Transmittal Letter ........................................................................................................................ 3 
Executive Summary .................................................................................................................... 4 
Background ................................................................................................................................ 5 
Highlights and Accomplishments ................................................................................................ 5 
Audit Scope and Methodology .................................................................................................... 6 
Conclusion .................................................................................................................................. 7 










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Internal Audit Report
Small Federal Grants Administration
January 1, 2011  December 31, 2012
Transmittal Letter

Audit Committee
Port of Seattle
Seattle, Washington

We have completed an audit of Small Federal Grants Administration.
We examined information from January 1, 2011 - December 31, 2012.
We conducted this performance 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 grant project administrators throughout the Port and the
management and staff of Accounting and Financial Reporting for their assistance and cooperation
during the audit.



Joyce Kirangi, CPA, CGMA
Director, Internal Audit


Audit Team:                          Responsible Management Team:
Ruth Riddle, Sr. Internal Auditor            Rudy Caluza, Director, Accounting & Financial Reporting
Jack Hutchinson, Audit Manager          Dan Thomas, Chief Financial & Admin. Officer


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Internal Audit Report
Small Federal Grants Administration
January 1, 2011  December 31, 2012
Executive Summary

Audit Scope and Objectives The purpose of the audit was to determine whether:
1.  There are adequate policies and procedures to guide the administration of smaller grants.
2.  The  administrators  of  the  smaller grants  are provided  adequate  training  in  federal  grant
requirements.
3.  Costs for smaller grant-funded projects are properly estimated prior to grant application, to
ensure that requested federal funding is maximized and Port funding is minimized.
4.  Controls over receipt of federal funds are adequate.
The scope of our audit covered the period January 1, 2011 - December 31, 2012.
Background  Federal grants are a significant source of revenue to the Port, with the majority of
funding  coming  from  the  United  States  Department  of  Transportation's  Federal  Aviation
Administration as part of the Airport Improvement Program (AIP).
For 2010, 2011, and 2012, the AIP funding was $30,178,849, $19,461,655, and $21,064,783,
respectively. The AIP grant (and other federal grants) is audited annually by a CPA firm.
Total federal expenditures for this same period were $37,451,922, $22,713,762, and $27,751,934,
respectively.
Unaudited grants for the same period totaled $3,598,350, $2,217,319, and $2,229,733, respectively,
and included grants under $100,000, which totaled $492,225, $173,798, $226,426, respectively.
Our audit focused on the administration of smaller federal grants (below $100,000). We also selected
smaller departments that charge less than significant costs to the AIP grant, but which may not be
visited by the CPA firm, in order to evaluate the effectiveness of grant administration.
Audit Result Summary The policies and procedures that guide the administration of smaller grants
are adequate. Training provided to the administrators of smaller grants is adequate. Costs of smaller
grant-funded projects are properly estimated prior to grant application.  Controls over receipt of federal
funds are adequate.





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Internal Audit Report
Small Federal Grants Administration
January 1, 2011  December 31, 2012
Background
Federal grants are a significant source of revenue to the Port. Federal dollars have been flowing into 
the Port since its inception, primarily for the benefit of the airport. The largest grant is from the United
States Department of Transportation, Federal Aviation Administration, Airport Improvement Program
(AIP), CFDA 20.1061.
The Port of Seattle has an annual single audit2 conducted by a CPA firm. The Port is considered a lowrisk
auditee3 (i.e., only 25% of total grants are required to be audited annually as major4 programs).
However, the CPA firm audits over 90% of the federal expenditures as major programs, due to the size
of the AIP grant. The mandated coverage threshold of 25% cannot be achieved without its inclusion.
Our audit focused on the administration of smaller federal grants (below $100,000). We also selected
smaller departments that charge less than significant costs to the AIP grant, but which may not be
visited by the CPA firm, in order to evaluate the effectiveness of grant administration.
The following table provides an overview of federal grant expenditures:
Port of Seattle Federal Grant Expenditures 
Fiscal Years 2011 & 2012* 
Description                                                               2011             2012 
Total Federal Expenditures                                            $22,713,762     $27,751,934 
Total Audited Federal Expenditures                                     20,496,443       25,522,201 
Total Unaudited Grants (including grants under $100,000)                 2,217,319        2,229,733 
Total Grants Under $100,000 (included in unaudited)                        173,798          226,426 
Data Source: Schedule of Expenditures of Federal Awards (SEFA). 
Data Note* For the Port's fiscal year: January 1  December 31. Not concurrent with the federal fiscal year: October 1  September 30. 
Highlights and Accomplishments
The Port has had no federal audit findings since 2008,5 allowing it to be considered a low-risk
auditee,3 requiring audit of only3 25% of its annual federal expenditures.
The process for reviewing grant reimbursements has become more efficient and the claims
submitted to the federal agencies have been automated, with approximately 98% of grant funds
received by wire.
The Port's Central Procurement Office published CPO-9 in December 2012, which formalized
guidance for grant-funded procurements.

1 The Catalog of Federal Domestic Assistance (CFDA) assigns a number to each grant.
2 A single audit is the audit of federal grants as part of the Port's financial audit. A CPA firm audits the Port's financial
statements and the federal grant expenditures.
3 The federal government defines a low-risk auditee as one that has (a) annual audits, (b) unqualified opinions on the financial
statements and SEFA, (3) no deficiencies in internal controls, and (4) no audit findings in the preceding two years.
4 Major programs are selected from Type A and Type B programs (Type A programs are the larger of $300,000 or 3% of total
federal expenditures; Type B programs are the larger of $100,000 or 0.3% of total federal expenditures) sufficient to ensure
that either 25% or 50% of federal expenditures are audited as majors, in accordance with OMB A-133.
5 The finding in 2008 did not involve a questioned cost or noncompliance. Rather, it recommended improvements to the
procurement process to ensure that contractors and vendors had not been suspended or debarred from participation in
federally funded projects.
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Internal Audit Report
Small Federal Grants Administration
January 1, 2011  December 31, 2012

Audit Scope and Methodology
The scope of the audit covered the period from January 1, 2011 - December 31, 2012. We focused on
smaller federal grants below $100,000.  We also selected smaller departments that charge less than
significant costs to the AIP grant, but which may not be visited by the CPA firm, in order to evaluate the
effectiveness of grant administration. We utilized a risk-based audit approach from planning to testing.
In  order  to  obtain  a  complete  understanding  of  federal  grants  administration,  we  interviewed
management and staff, reviewed policies and procedures, conducted a preliminary survey of grant
project administrators, and analyzed and compared federal grant activity for 2010, 2011, and 2012. We
assessed significant risks and identified controls to mitigate those risks. We evaluated whether the
controls were functioning as intended.
We applied additional detailed audit procedures to areas with the highest likelihood of significant
negative impact as follows:
Objective 1
There are adequate policies and procedures to guide the administration of smaller grants.
We conducted a follow-up survey of grant project administrators, to determine whether they
considered the current policies and procedures to be sufficiently visible and to provide
adequate guidance on grants administration.
Objective 2
Administrators of smaller grants are provided adequate training in federal grant requirements.
We conducted a follow-up survey of all grant project administrators, to determine whether
they deemed the current training methods adequate.
We tested two smaller grants (less than $100,000) to determine whether:
o  Incurred expenditures were allowable.
o  Required reports were submitted timely and accurately.
o  Grant expenditures were incurred during the period of availability. (In other words,
expenditures charged to federal programs were not incurred prior to grant approval.)
o  Reimbursements of grant expenditures were properly recorded.
o  Grant expenditures properly presented on the SEFA 



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Internal Audit Report
Small Federal Grants Administration
January 1, 2011  December 31, 2012

Selected 2012 Schedule of Expenditures of Federal Awards (SEFA) for Audit Testing 
CFDA Number  Federal Agency, Program, and (local) Grant Administrator             Total Expenditures
US Fish and Wildlife Service - Clean Vessel Act Grant Program:
15.616                Passed through Washington State Parks and                             $ 16,254 
Recreation Commission
US Department of Energy - Conservation Research and Development
81.086          (Clean Cities Video):
$ 38,495 
Passed through Puget Sound Clean Air Agency 
Data Source: Schedules of Expenditures of Federal Awards 
We also selected eight smaller departments that charge costs to the AIP grant, CFDA
20.106. Although this grant is audited annually as a major program, we wanted to determine
the effectiveness of grant administration within the smaller departments which may not be
visited by the CPA firm. 
Objective 3
Costs for smaller grant-funded projects are properly estimated prior to grant application, to ensure that
requested federal funding is maximized and Port funding is minimized.
We conducted a follow-up survey of grant administrators to determine their process for
developing projects and applying for grant funding.
Objective 4
Controls over receipt of federal funds are adequate.
We determined which grants were reimbursed by wire versus check.
We inquired of the Port's bank to determine whether all bank accounts containing the name
"Port of Seattle" were authorized.
Conclusion
The policies and procedures that guide the administration of smaller grants are adequate. Training
provided to the administrators of smaller grants is adequate. Costs of smaller grant-funded projects are
properly estimated prior to grant application. Controls over receipt of federal funds are adequate.




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