Attachment Exh A for Audit Meeting held Jun 11, 2013 1:00PM at Pier 69

Exh A

PORT OF SEATTLE 
MEMORANDUM 
DATE:    July 3, 2013 
TO:      Audit Committee 
FROM:    Melinda Miller, Director, Portfolio & Asset Management 
SUBJECT:  Bell Harbor International Conference Center Internal Audit follow-up memo 

During the June Audit Committee meeting, the committee requested that staff revise their
Management Response memo to answer to the following five specific issues as posed by
Commissioner Bryant. 
1)  Committee request: Briefly describe the new format for monthly reports 
As a result of the 2013 audit, CHI will include the following new reports in the monthly Owner's
Report that is reviewed by Real Estate management and Seaport Finance: 
a)  Monthly Payroll Report for Shared Staff and Central Services 
b)  Affiliated (Related) Party Transactions for events booked including CHI business use of
Port facilities 
These new reports will be added to the information that has been historically provided and
reviewed: 
1.  Narrative with brief overview of financial conditions 
2.  Quarterly Forecast of Net Income 
3.  Consolidated Rolling Three Quarter Forecast for Combined Event Centers (Bell Harbor
International Conference Center (BHICC), Smith Cove Event Center (SCEC) & World
Trade Center Seattle (WTCSE)) 
4.  Year-to-Date Market Conditions Report and Related Action Plans to Address Revenue
Shortfall to Budget, submitted as necessary 
5.  Consolidated Forecast of all the event centers with three quarter forecast 
6.  Capital Projects Overview 
7.  Affiliated Party Transactions (when purchasing from or making payments to) 
8.  Legal and regulatory issues 
9.  Highlights for each Event center noting higher revenue generating events 
10. New Sponsors for WTCSE 
11. Renewing Sponsors WTCSE 
12. Action Steps and Sales initiatives WTCSE 
13. Expense Budget Variance Reports: 
a.  BHICC 12 Month Budget Expense Variance Report 
b.  SCEC 12 Month Budget Expense Variance Report 
c.  WTCSE 12 Month Budget Expense Variance Report 
\\P69MS103\P69-deptdata\Legal\CommRecords Online\Minutes\2013\20130611_SCM\2013-07-
03FINALAuditCommitteeFollowUpMemo.docx        Page 1 of 5

Memorandum 
Page 2 of 5 

14. Summary of Capital Reserves for the Combined Event Centers January through
December: 
a.  Combined Capital Reserve Accruals 
b.  BHICC Capital Reserve Accruals 
c.  SCEC Capital Reserve Accruals 
d.  WTCSE Capital Reserve Accrual 
15. Consolidated Income Statements Summary at the Department Level: 
a.  Consolidated Income Statements combined for all Event Centers (BHICC,
WTCSE, & SCEC) 
b.  Consolidated Income Statement for BHICC 
c.  Consolidated Income Statement for BHICC & SCEC combined 
d.  Consolidated Income Statement for WTCSE 
e.  Consolidated Income Statement for SCEC 
16. Balance Sheet for BHICC, SCEC, and WTCSE 
17. BHICC use of CTA space  details of events in the CTA leased space and payment due
CTA at a pre- approved rate by the Port 
18. BHICC/SCEC Income Statement (reported for each use) 
19. Unifocus Guest Surveys for the month 

2)  Committee request: Provide a brief description of the allocation methodology (for
shared staff and centralized services) 
2010- Present: 
During the audit period, CHI approach to staffing costs was to manage to the budgeted payroll
costs that were approved by the Port during review of the Annual Plan. The departmental
budgets were viewed as a "whole" not as "individual staff" line expenses. Their intent was to not
exceed our budgeted department budgets and at times did charge by the budgeted amounts while
other times they charged by "actual" time spent. 
Actual shared staff and centralized services charges were determined by subjective percentages
of time spent during the month and the resulting charges were determined on a monthly basis
jointly by the General Manager, CFO, and President based on various factors including business
volumes, staff turnover, skill level of staff in specific positions, market wage demands and
adjustments, efficiencies found, types of groups and related revenue, temporary assignments,
FMLA, etc. While this approach ultimately did save the Port money, our agreement requires
clear documentation of actual costs that can more easily be reviewed by the Port on a regular
basis. 
July 2013- Moving Forward 
As we move forward, CHI will continue to utilize their staff in the most efficient and effective
manner necessary to respond to shifting demands of the conference market and the specific needs
of the users of our facilities and the Port. They will improve the reporting of payroll for all
shared staff and centralized services on an individual staff member basis by submitting a 
"Monthly Payroll Report" format of which was developed by the Port Management Team to

Memorandum 
Page 3 of 5 

provide improved documentation and visibility of actual payroll charges. This report will be
included in the monthly Owner's Report and discussed at the monthly meeting. A copy of this 
new format is attached 
3)  Committee request: Conduct an analysis of the last 3.5 years (of payroll charges for
shared staff and centralized services) 
The audit suggested that due to CHI's approach to allocating payroll for shared staff, the Port
may have reimbursed CHI in excess of the costs incurred by them. As recommended by the
audit, we have analyzed the charges for shared staff and central services to assess whether the
costs reimbursed by the Port exceeded the actual payroll costs incurred by CHI for the audit
period through April, 2013. Our conclusion is that the Port did not overpay for these costs. 
Quoting from the memo from Seaport Finance to Real Estate Management: 
"2010** - Net impact of posting allocations using budget rather than actual pay at budgeted
percentage was that the Port was not overcharged. Amount charged was $3,614 less than
amounts calculated using actual pay at budgeted percentage. 
Note**: Internal Audit's Schedule A for 2010 did not take into account staff turnover or the
impact of a family leave in Human Resources. Turnover and family leave are ordinary costs of
doing business. 
2011 - Net impact of posting allocations using budget (for some) rather than actual pay at
budgeted percentage was that the Port was not overcharged. Amount charged was $18,203 less
than amounts calculated using actual pay at budgeted percentage. 
2012 - Net impact of posting allocations using budget (for some) rather than actual pay at
budgeted percentage was that the Port was not overcharged. Amount charged was $11,078 less
than amounts calculated using actual pay at budgeted percentage. 
2013 - 2013 year-to-date actuals have been largely analyzed, but will be completed in the context
of implementing new procedures for the full year." 
An explanation of our methodology and the summary results of the analysis are include in the
attached "Analysis of Allocated Payroll Costs Bell Harbor International Conference Center and
the related Schedule 1  2010, Schedule 2-2011 and Schedule 3-2012. 

4)  Committee request: Formalize the monitoring procedures into a single document 
We have consolidated our various written monitoring procedures into a single document and
have included a copy as an attachment to this memo.

Memorandum 
Page 4 of 5 

5)  Committee request: Identify the clarifications to the management agreement which are 
criteria for any variation off the standard. Any adjustments to this standard need a
note. 
During the audit process we identified various procedures or definitions that needed further
clarification. We do not feel that revision of the Management Agreement is necessary at this time
and we have incorporated written descriptions of the following into our monitoring procedures: 
Related Party Transactions  As required by the agreement, CHI will disclose events that are
booked by affiliates and request prior written approval for any financial transactions (e.g.
purchasing) from affiliated entities. CHI will include this information in their monthly Owner's
Report to Port management. 
Booking Policy and negotiated conference rates - CHI has refined and documented their
booking policy in writing and will use the document to provide clear guidance to the sales team
to encourage consistency. CHI will provide written documentation for criteria used in
negotiating event contracts utilizing the below mentioned eight elements. 
Regarding public use of the facility, it is important to know that most hospitality booking
agreements are negotiated. The following explains how CHI negotiates pricing for group
business at Port conference facilities. The total pricing for events varies on a regular basis due to 
eight different elements that are taken into consideration when making a proposal. 
The sales team meets on a daily basis to look at a variety of booking options and develop
opportunities to secure the business. The general booking policy includes the following eight
elements: 
1.  Date/s of Event (Peak or Off-Season) 
2.  Size of Group (e.g. one Room or a buy-out) 
3.  Number of days of facility utilization 
4.  Food, Beverage, Space and Equipment requested 
5.  Time in advance for inquiry and booking (lead time) 
6.  Historical volume of business from client 
7.  Future potential business volume from client 
8.  Business demographic of attendees relative to future use of the facility 

CHI use of Port facilities - Regarding CHI's internal business use of our facilities, we believe
that it is a benefit to BHICC and the WTCSE for CHI and Bell Harbor team members to utilize
the facilities for business meetings that include non-BHICC staff (e.g. staff meetings and
orientations, General Manager meetings, etc., client entertaining, tastings, etc.) as it provides
exposure of Port facilities to clients and staff other CHI businesses. Likewise, it is a value for
Bell Harbor team members to visit other CHI venues for the purposes of idea generation, client
entertaining, service standard development, etc. 
To that end, and as is common in the industry, have approved a joint marketing and use
agreement between BHICC and CHI that will allow team members from each CHI property to

Memorandum 
Page 5 of 5 

utilize the services of other facilities on a cost recovery basis which will result in no expense to
the property. A formula for calculating the cost is included. This agreement will provide clarity,
transparency, and consistency for CHI business use of the Port's facilities and will be reported as
"Related Party Transactions" in the monthly Owner's Report. 


Attachments: 
1)  Monthly Payroll Report format 
2)  Memo regarding " Analysis of Allocated Payroll Costs for Bell Harbor International
Conference Center" prepared by Seaport Finance 
3)  Schedule 1  2010 Allocated/Shared Staff  Summary Spreadsheet 
4)  Schedule 2  2011 Allocated/Shared Staff Summary Spreadsheet 
5)  Schedule 3  2012 Allocated/Shared Staff Summary Spreadsheet 
6)  Management Agreement Monitoring Procedures

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To:         Melinda Miller

From:      Boni Buringrud, Director Seaport Finance & Budget

Subject:     Analysis of Allocated Payroll Costs Bell Harbor International Conference Center

Date:       July 2, 2013


Per your request, Susie Archuleta, Senior Financial Analyst Ill, and I prepared an analysis of actual payroll
costs incurred by Columbia Hospitality (CHI) to manage Bell Harbor International Conference Center
(BHICC) and compared these costs to amounts reimbursed by the Port. The years we analyzed were
2010, 2011, and 2012 full year actuals".

The analysis was broken down into two separate parts to address issues raised in the audit.

Part 1. Accounting and Human Resources

Objective: Answer the question, "Did the costs reimbursed by the Port exceed actual payroll costs
incurred?" Per Internal Audit, these positions were charged to the Port based on Budget.

Conclusions: The summary results of the analysis are included in Schedule 1-2010, Schedule 2-2011
and Schedule 3-2012 attached.

2010" - Net impact of posting allocations using budget rather than actual pay at budgeted
percentage was Port was Movercharged. Amount charged was $3,614 less than amounts
calculated using actual pay at budgeted percentage.2

2011 - Net impact of posting allocations using budget (for some) rather than actual pay at
budgeted percentage was Port was mtpvercharged. Amount charged was $18,203 less than
amounts calculated using actual pay at budgeted percentage.

2012 - Net impact of posting allocations using budget (for some) rather than actual pay at
budgeted percentage was Port was mtovercharged. Amount charged was $11,078 less than
amounts calculated using actual pay at budgeted percentage.







1
*2013 year-to-date actuals have been largely analyzed, but will be completed in the context of implementing new
procedures for the full year.
2
"Internal Audit's Schedule A for 2010 did not take into account staff turnover nor the impact of a family leave in
Human Resources. Turnover and family leave are an ordinary cost of doing business.

Page 1   Attachment 2

3.  Earnings information by employee for each year. Information was provided by CHI for each
position that was budgeted or charged to BHICC and represented amounts earned for each year
exclusive of PTO pay. Amounts were adjusted by CHI to exclude the first paycheck of the year
(which relates to prior year) and include the first paycheck of following year (which relates to
current year). In some cases, CHI provided us with salary information for positions that did not
appear applicable to the analysis (i.e. salary information for some CHI employees whose salaries
were not being charged to BHICC was included). In other cases, salary information that was
needed was not initially included because the records were located at other locations.

4.  Calculated field "Actual Applicable Earnings". For Accounting and Human Resources this was
calculated by multiplying Actual Earning times Approved Budget Time Percent. For the Part 2.
departments this was equal to Actual Reimbursement but was backed into by calculating an
Average Allocation % (Actual Reimbursement/Actual Earnings).

Accounting and Human Resources Department -
Basis for Comparison: Compared "Applicable Earnings" to "Amount Charged".
Calculation ofApplicable Salary: Actual Earning multiplied by Approved Budget Time Percent
Positions/People Included: All positions included in the Approved Budget. If more than one person
held that a position during the year due to turnover and /orfamily leave, then multiple people were
includedfor one position. Turnover andfamily leave are an ordinary cost of doing business.

General ManagerI Sales & MarketingI Food Payroll' Audio - Visual & Technology - Salaried Sta
Basis for Comparison: Compared "Actual Percent" to "Budget Percent" (where available) and Actual
Charge to Budgeted Charge
Calculation ofApplicable Salary: Actual Earnings multiplied by Actual Percent
Calculation ofActual Percent: Amount Charged divided by Actual Earnings
Positions/People Included: All salaried persons allocated or charged to BHICCfor the above
departments.










Page 3   Attachment 2

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