01 11 13 2012 PowerPoint
Internal Audit Briefing Presented to the Port of Seattle Audit Committee and Tay Yoshitani, CEO Joyce Kirangi, CPA Director, Internal Audit November 13, 2012 Agenda Audit Report 1. Lease and Concession Audits Avis Rent-A-Car Budget Rent-A-Car 2. Operational Audits Central Processing System None Comprehensive Operational Audit Real Estate Portfolio Management Department Limited Operational Audit None 3rd Party Audit None Briefing/Updates 1. Proposed Charter for the Internal Audit Department 2. Preliminary 2013 Internal Audit Budget 3. Preliminary Discussion of the 2013 Internal Audit Work Plan Lease and Concession Audit Avis Rent-A-Car Background The Avis retail location around the airport is wholly owned by Avis Budget Group, LLC. In 2008, Avis entered into a 30-year agreement with the Port to operate from the consolidated rental car facility. The terms of the agreement provide for a Minimum Annual Guarantee (MAG) of 80% of the total amount paid to the Port in the previous agreement year. An additionally Percentage Fee equal to 10% of gross revenues is required, if the fee is higher than the MAG. Fiscal Reported Paid Year Gross Revenue Concession 2008 2009 $40,271,615 $4,225,757 2009 2010* 38,181,518 4,058,000 2010 2011* 42,257,572 4,058,000 Total $120,710,705 $12,341,757 * MAG is greater than concession for the Agreement Year Lease and Concession Audit Avis Rent-A-Car Audit Objectives 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 provisions of the Lease and Concession Agreement, as amended. 3. Customer Facility Charges (CFC) were properly collected and remitted timely to the Port. We examined a three-year period from November 1, 2008, through October 31, 2011. Lease and Concession Audit Avis Rent-A-Car Audit Result Two Finding o Noncompliance with record retention requirements related to certain key records o Underreporting of concession revenues Lease and Concession Audit Budget Rent-A-Car Background The Avis retail location around the airport is wholly owned by Avis Budget Group, LLC. In 2008, Avis entered into a 30-year agreement with the Port to operate from the consolidated rental car facility. The terms of the agreement provide for a Minimum Annual Guarantee (MAG) of 80% of the total amount paid to the Port in the previous agreement year. An additionally Percentage Fee equal to 10% of gross revenues is required, if the fee is higher than the MAG. Fiscal Reported Paid Year Gross Revenue Concession 2008 2009* $24,626,865 $3,500,400 2009 2010* 21,527,526 2,452,727 2010 2011 26,263,513 2,626,085 Total $72,417,904 $8,579,212 * MAG is greater than concession for the Agreement Year Lease and Concession Audit Budget Rent-A-Car Audit Objectives 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 provisions of the Lease and Concession Agreement, as amended. 3. Customer Facility Charges (CFC) were properly collected and remitted timely to the Port. We examined a three-year period from November 1, 2008, through October 31, 2011. Lease and Concession Audit Budget Rent-A-Car Audit Result Two Finding o Noncompliance with record retention requirements related to certain key records o Underreporting of concession revenues Comprehensive Operational Audit Real Estate Portfolio Management Background The Real Estate Portfolio Department (REP) is a department of 14 FTEs with an annual operating budget of approximately $1.3 million. REP is responsible for developing and managing business agreements for the Real Estate Division's properties including commercial office space, maritime industrial, and retail locations. To manage these agreements, the department uses PROPWorks, which is a Port's system for managing real estate agreements. Real Estate Portfolio Department Expenses Expense Category 2011 Expenditures % of 2011 Expenditures Salaries & Benefits $1,118,097.00 84.84% General Expenses $100,121.00 7.60% Outside Services $42,367.00 3.21% Travel & Other Employee Expenses $17,329.00 1.31% Wages & Benefits $15,835.00 1.20% Other Expenses $24,096 1.83% Grand Total $1,317,844.00 100.00% Comprehensive Operational Audit Real Estate Portfolio Management Audit Objectives The purpose of the audit was to determine whether the Real Estate Portfolio Department has sufficient controls to reasonably ensure: 1. Real Estate Division lease agreements comply with the Port's Real Estate Policies 1 and 2. 2. Real Estate and Seaport Division agreements are effectively managed within PROPWorks. We reviewed information for the period January 1, 2011 June 30, 2012. Comprehensive Operational Audit Real Estate Portfolio Management Audit Result One Finding o The Department's controls for its Real Estate agreement development process were inconsistently applied to ensure compliance with the Port's Real Estate 1 Policy. Briefing/Updates Proposed Charter for the Internal Audit Department Preliminary 2013 Internal Audit Budget Preliminary Discussion of the 2013 Internal Audit Work Plan See Attached
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