Internal Audit Report 

Lease and Concession Audit 
Concessions International, LLC 

January 1, 2009 through December 31, 2011 




Issue Date: February 5, 2013 
Report No. 2013-02

Internal Audit Report 
Concessions International, LLC 
January 1, 2009, through December 31, 2011 

Table of Contents 

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














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Internal Audit Report 
Concessions International, LLC 
January 1, 2009, through December 31, 2011 
Transmittal Letter 

Audit Committee 
Port of Seattle 
Seattle, Washington 

We have completed an audit of Concessions International, LLC for the period from January 1, 2009 
through December 31, 2011. 
We conducted this performance audit in accordance with generally accepted government auditing
standards. 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 Aviation Business Development and
Accounting and Financial Reporting for their assistance and cooperation during the audit. 


Joyce Kirangi, CPA, CGMA 
Director, Internal Audit 








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Internal Audit Report 
Concessions International, LLC 
January 1, 2009, through December 31, 2011 
Executive Summary 

Audit Scope and Objective 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 the lessee complied with significant provisions of the Lease and Concession
Agreement. 
We examined the books and records of Concessions International for a period ofthirty-six months 
from January 1, 2009, through December 31, 2011.
Aviation Business Development, in conjunction with Accounting and Financial Reporting, has the
primary responsibility for administering and monitoring the agreement to ensure compliance with
agreed-upon terms. 

Agreement Terms  The agreement provides a Minimum Annual Guarantee (MAG) or percentage
fees on their gross receipts generated at the airport. The concession percentage fees range from 10%
on branded food and beverage up to 26.5% on souvenirs. 
The percentage fee is due on or before the 15th of each month for the preceding month. For untimely
payments, the agreement provides for a one-time late fee of 5% of the overdue amount and interest
to be accrued at the rate of 18% per-year from the due date until paid. 
During the audit period, the agreement generated approximately $1 million annually in concession
revenues for the Port. 

Audit Result Summary  The concession reported to the Port was materially complete, properly
calculated, and timely paid. Additionally, we noted no significant compliance exceptions with the
Lease and Concession Agreement. 






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Internal Audit Report 
Concessions International, LLC 
January 1, 2009, through December 31, 2011 
Background 
Concessions International, LLC (CI) has been in business since 1979 and is currently headquartered
in Atlanta, Georgia. It is a family and minority-owned company with operations in eight major U.S.
cities, including Seattle. 
Under the terms of the agreement with the Port, the lessee agreed to pay a Minimum Annual
Guarantee (MAG) or percentage fees on their gross receipts generated at the airport. The percentage
concession fees range from 10% on branded food and beverage up to 26.5% on souvenirs. 
For the audit period, the lessee operated and managed the following stores and subtenants: 
1.  Stores: 
a.  Three Seattle's Best Coffee. 
b.  Two Runaway Grill Delis 
Concourse D location discontinued operations in the fourth quarter of 2010 
c.  Kobo / Udon 
2.  Subtenants: 
a.  Burger King  discontinued operations in the third quarter of 2009 
b.  BigFoot Food and Spirits 
The percentage fee is due on or before the 15th of each month for the preceding month. For untimely
payments, the agreement provides for a one-time late fee of 5% of the overdue amount and interest
to be accrued at the rate of 18% per year from the due date until paid. 
Below are the revenue highlights for the last four calendar years: 
2009       2010      2011     2012 
Food & Beverage         $964,664   $1,083,771   $1,084,950  $1,115,790 
Liquor                  $139,122    $ 164,146    $200,633   $193,301 
Data source: PeopleSoft, as of 1/25/2013 

Audit Scope and Methodology 
We conducted the audit to determine whether the lessee was in compliance with the lease agreement
terms including, but not limited to, proper concession payments. We utilized a risk-based audit
approach from planning to test sampling. We gathered information through document requests,
interviews, observation and analytical reviews in order to obtain a complete understanding of the
financial requirements of the agreement. We applied additional detailed audit procedures to areas
with the highest likelihood of significant negative impact as follows: 
a)  Timely Payment 
We reviewed all payment records for the audit period to determine whether the lessee made
timely payments as stipulated in the agreement. 

b)  Annual Report 
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Internal Audit Report 
Concessions International, LLC 
January 1, 2009, through December 31, 2011 

We reviewed annual reports to determine compliance with the timely and complete submission of
the report. 
c)  Minimum Annual Guarantee (MAG) 
We re-calculated the MAG amount for each agreement year during the audit period, as well as
applicable MAG reliefs. The agreement provides a relief in the monthly MAG amount, triggered by 
a set percentage reduction in enplanements. 
d)  Concession Revenue 
To determine whether the lessee completely reported all concession revenues, we performed the
following: 
Reconciled the reported concession to the lessee's accounting records  to ensure
consistency and completeness. 
Reconciled the reported concession to revenues reported to third parties, including
Washington State on its excise tax returns and a franchisor, to ensure consistency and
reasonableness. 
Conducted a walk-through of retail locations to ensure that the reported concession and its
components reflect operations. 
Conducted a test of Branded Food and Beverage definition, which has a lower concession
rate. 
Conducted a test of point-of-sales data for nine days with highest discounts. The batches
were reconciled to bank statements to ensure complete and accurate reporting of 
concession revenues and discounts. 
Conducted trend analyses of concession revenue to ensure overall reasonableness of the
reported concession. 

Conclusion 
The concession reported to the Port was materially complete, properly calculated, and timely paid.
Additionally, we noted no significant compliance exceptions with the Lease and Concession
Agreement. 





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