Internal Audit Report 


Third-Party Management Services Agreement 
for 
World Trade Center (WTC) - Seattle 

January 1, 2010 through December 31, 2011 



Issue Date: February 5, 2013 
Report No. 2013-01

Internal Audit Report 
Third-Party Management Services Agreement for WTC-S 
January 1, 2010  December 31, 2011 
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 
Third-Party Management Services Agreement for WTC-S 
January 1, 2010  December 31, 2011 
Transmittal Letter 

Audit Committee 
Port of Seattle 
Seattle, Washington 

We have completed a third-party management services agreement audit of the World Trade Center
Seattle. Columbia Hospitality, Inc. (CHI) manages this Facility on behalf of the Port of Seattle. 
We examined information related to the period January 1, 2010, 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 CHI management and staff of the Real Estate Portfolio
Management and Seaport Finance for their assistance and cooperation during the audit. 


Joyce Kirangi, CPA, CGMA 
Director, Internal Audit 







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Internal Audit Report 
Third-Party Management Services Agreement for WTC-S 
January 1, 2010  December 31, 2011 
Executive Summary 
Audit Scope and Objectives The purpose of the audit was to determine whether: 
1.  Port management monitoring controls are adequate to ensure: 
a.  Billings are complete and accurate 
b.  Expenses are proper and in accordance with the agreement terms and conditions 
2.  Columbia Hospitality, Inc. complied with the agreement terms and conditions, as amended,
related to : 
a.  Revenues 
b.  Expenses 
We reviewed information for the period January 1, 2010 through December 31, 2011. 
Background  The Port of Seattle owns the World Trade Center Seattle (WTCS). The primary
objective of the WTCS is to foster international trade and commerce, and to expose Seattle to
international trade. 
The WTCS building is located on Seattle's downtown waterfront. The fourth floor of the building
contains conference rooms, as well as an executive and a private dining room. The sponsoring
companies and their members have the privilege to use the Facility and its services for a fee. In
addition, private catered events are also held at this Facility. 
The Port has outsourced the day-to-day management of the WTCS to Columbia Hospitality Inc. The
services include sales and marketing, member services, solicitation of memberships, food preparation
services, and overall accounting services. 
Audit Result Summary  Port management monitoring controls are adequate to ensure compliance
with the agreement. Additionally, Columbia Hospitality, Inc. materially complied with terms and
conditions related to the agreement.






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Internal Audit Report 
Third-Party Management Services Agreement for WTC-S 
January 1, 2010  December 31, 2011 
Background 
The Port of Seattle owns the World Trade Center Seattle (WTCS). The Facility was developed under
the Washington State authority of RCW 53.29  Trade Center Act. The Port and the local private
sector are the primary sponsors of the WTCS. The primary objective of the Facility is to foster
international trade and commerce and to expose Seattle to international trade. 
The WTCS building is located on Seattle's downtown waterfront. The fourth floor of the building
contains conference rooms, as well as an executive and a private dining room. The sponsoring
companies and their members have the privilege to use the Facility and its services for a fee. In
addition, private catered events are also held at the Facility. 
The Port has outsourced the day-to-day management of the WTCS to Columbia Hospitality Inc. (CHI).
The services include sales and marketing, member services, solicitation of memberships, food
preparation services, and overall accounting services. Revenue generated from the Facility is remitted
to the Port daily. 
The Port of Seattle is responsible for the costs of operating the Facility. The Port pays for all costs
including repair and maintenance; utilities; insurance; legal and accounting services; and labor
compensation related to CHI employees working at the Facility. 
Financial Highlights 
2010       2011 
Revenue 
Membership and other Club Services         $365,079     $406,964 
Food and Beverage                   532,632      514,398 
Gross Revenue                       897,711      921,362 
Expense 
Cost of Sales                          122,779      126,200 
Direct Expenses                       236,348      259,936 
Operating Expenses                    247,185      263,875 
Fixed Expenses                        5,984       5,657 
Management/Incentive Fees               168,029      161,560 
Capital Reserve and Other                 21,185       (7,871) 
Net Income                         $96,201     $112,005 
Data source: WTCS Consolidated Income Statement, 12/31/2011 

Highlights and Accomplishments 
During the course of the audit, we observed the following accomplishments in management
monitoring: 

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Internal Audit Report 
Third-Party Management Services Agreement for WTC-S 
January 1, 2010  December 31, 2011 
CHI submits a detailed annual budget for the Port's approval. The budget includes monthly
budgeted amounts by detailed categories of revenue and expense types and the details of
assumptions used in preparing the budget expenses. 
On a monthly basis, representatives from the Port's Real Estate and Seaport Finance &
Budget departments meet with CHI management to review marketing, financial reports, and
activities. These reports include, among other items: 
Analysis of forecasted operating performance for two quarters and the fiscal year 
A summary line item review of revenue & expenses vs. budgeted and an explanation of
the variances; Port management approves the explanations provided 
Approval of monthly expenses by the responsible Port management 
A listing of monthly expenses from which a sample is selected for detailed review by the
responsible Port management 
Current financial statements 
A sales and marketing report. 

Audit Scope and Methodology 
We utilized a risk-based audit approach from planning through testing. We gathered information
through interviews, observations, and analytical reviews in order to obtain a complete understanding
of the WTCS operation including its policies and procedures. We conducted an assessment of
significant risks and identified controls established to mitigate those risks. We evaluated whether the
established controls were functioning effectively, as intended. 
We applied additional detailed audit procedures to areas with the highest likelihood of significant
negative impact as follows: 
1.   To determine whether Port management monitoring controls are adequate to ensure (1) Billing
are complete and accurate, and (2) Expenses are proper and in accordance with the terms and
conditions of the agreement, 
a.   We reviewed the annual budget submissions to determine if they were timely and contained
the required information 
b.   We did a risk-based re-performance of management's review of monthly expenses 
c.    We analyzed monthly and quarterly expenses for any significant variances to budgeted
amounts as specified in the terms; we tested two months in 2010 and three months in 2011
for compliance with the agreement terms 
2.   To determine if CHI complied with the terms and conditions of the agreement, as amended,
related to revenues and expenses, 
a.   We analyzed the financial statements for significant ratios, such as gross margin and
department profit 
b.   We analyzed sponsorship revenues and records and tested a risk-based sample of ten
sponsorships (25% of membership revenue) for proper recording 

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Internal Audit Report 
Third-Party Management Services Agreement for WTC-S 
January 1, 2010  December 31, 2011 
c.    We analyzed event records and tested a risk-based sample (companies with multiple events
as more likely to receive a discount) of ten events for revenue completeness; we traced to
supporting documentation, such as menu pricing, and to the general ledger 
d.   We identified related party events and tested a risk-based sample of thirteen related-party
events for the appropriateness of discounts 
e.   We reconciled total payroll expenses from payroll registers for 2010 and 2011 to the general
ledger; we tested selected accounts and reconciled to the payroll registers; we tested four
pay periods in 2011 and reconciled to the reimbursements in the monthly reports 
f.     We analyzed the detailed payroll records for the reasonableness of pay rates and hours
charged 
g.   We reviewed and reconciled six pay periods in 2011 with inter-company payroll transactions 
h.   We analyzed payments for potential contractual relationships 
i.     We reviewed monthly disbursements for nature, timing, and value; we tested risk-based
samples of inter-company and other disbursements 

Conclusion 
Port management monitoring controls are adequate to ensure compliance with the agreement. 
Additionally, Columbia Hospitality, Inc. materially complied with terms and conditions related to the
agreement.










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