1 Presentation
Internal Audit Briefing Presented to the Port of Seattle Audit Committee and Tay Yoshitani, CEO Joyce Kirangi, CPA Director, Internal Audit January 10, 2012 Agenda Audit Report 1. Lease and Concession Audits Simply Wheelz (dba Advantage Rent-A-Car)- No Finding/No Discussion Emerald Catering - No Finding/No Discussion Cruise Terminals of America (CTA) 2. Operational Audits Central Processing System None Comprehensive Operational Audit None Limited Operational Audit ABM Janitorial Contract 3rd Party Audit None Preliminary Scope Discussion for IT Risk Assessment and Performance Audit Peer Review Scope 2012 Proposed Internal Work Plan Concession and Lease Audit Simply Wheelz (dba Advantage Rent-A-Car) Background Simply Wheelz is a subsidiary of The Hertz Corporation. Simply Wheelz began as Advantage Rent-A-Car at Seattle-Tacoma International Airport in May 2009 after Hertz had acquired Advantage Rent-A-Car out of bankruptcy. The Sea-Tac location is the only Advantage Rent- A-Car location in the State of Washington. The terms of the agreement provide for a Minimum Annual Guarantee (MAG) to be paid to the Port on a monthly basis. Additionally, the agreement requires a 10% Percentage Fee the extent the fee exceeds the MAG Below are financial highlights for the last two agreement years: Year Reported Paid Gross Revenue Concession 2009 $ 2,016,799 $ 339,972 2010 5,175,706 517,570 Source: PropWorks Concession and Lease Audit Simply Wheelz (dba Advantage Rent-A-Car) Audit Objectives The purpose of the audit was to determine whether : 1.Reported concession was complete, properly calculated, and remitted timely to the Port. 2.Port and the lessee complied with provisions of the Lease and Concession Agreement. 3.Customer Facility Charges (CFC) were properly collected and remitted timely to the Port. The scope of the audit covered the period from May 1, 2009 through October 31, 2010. Concession and Lease Audit Simply Wheelz (dba Advantage Rent-A-Car) Audit Result No Audit Findings Concession and Lease Audit Emerald Cove Enterprises Background In 2009, the Port of Seattle entered into its first agreement with a caterer for the exclusive rights to cater events at the Airport Conference Center. The concession agreement was awarded to Emerald Cove Enterprises of Normandy Park, Washington. Emerald Cove is a full-service caterer, founded in 1999. The concession percentage per the agreement is 25% of gross revenues on food and beverage sales to external customers of the Airport Conference Center. Below are financial highlights for the last two agreement years: 25% Reporting Period Gross Sales Commission 9-1-09 9-30-10 $91,979 $22,995 10-1-10 9-30-11 $125,335 $31,333 Concession and Lease Audit Emerald Cove Enterprises Audit Objectives The purpose of the audit was to determine whether : 1.The concession revenue was complete, properly calculated, and remitted timely to the Port. 2.The concessionaire complied with significant provisions of the lease and concession agreement. The scope of the audit covered the period September 23, 2009, through September 30, 2011. Concession and Lease Audit Emerald Cove Enterprises Audit Result No Audit Findings Concession and Lease Audit Cruise Terminal of America (CTA) Background CTA has entered into an agreement with the Port to lease and operate the cruise terminal facilities, in exchange for which it remits a percentage fee to the Port as follows: 0% - for gross receipts less than $400,000 73% - for gross receipts greater than $400,000 but less than $4.9 million 76% - for gross receipts greater than $4.9 million Below are financial highlights for the last three agreement years: Year Gross Percentage Fee 2008 $12,280,187 $9,384,994 2009 12,413,916 8,995,576 2010 13,659,453 9,942,185 Source: PropWorks and PeopleSoft Concession and Lease Audit Cruise Terminal of America (CTA) Audit Objectives The purpose of the audit was to determine whether : 1.The revenue reported was complete, properly calculated, and remitted timely to the Port. 2.The parties complied with significant provisions of the lease and concession agreement. 3.Port management oversight of the lease agreement was adequate. The scope of the audit covered the period January 1, 2009, through December 31, 2010. Concession and Lease Audit Cruise Terminal of America (CTA) Audit Result Three Audit Findings 1. Cruise Terminals of America (CTA) did not report gross revenues in accordance with the lease agreement. See Recommendations and Management Response in the audit report 2. CTA did not fully comply with its lease agreement with the Port of Seattle and certain multi-tier service arrangements hindered the port's understanding of parking/shuttle costs. See Recommendations and Management Response in the audit report 3. Port management did not properly administer the terms of the CTA agreement. See Recommendations and Management Response in the audit report Limited Operational Audit- ABM Janitorial Contract Background Sea-Tac has historically contracted with a third-party vendor for the janitorial services. The current three-year janitorial contract with ABM was awarded by the Port Commission on January 13, 2009 with the provision for two one-year extensions. The contract covers the main terminal complex and satellites, comprising approximately 94 percent of total janitorial services areas. Aviation Operations manages the ABM contract. The Port expends over $8.0 million annually for janitorial services at the airport. The contract cost is charged based on the service area. The size of the agreement in terms of dollar amount is one of the largest at the Port of Seattle in terms of vendor-related operating expenses. Source: PeopleSoft Limited Operational Audit- ABM Janitorial Contract Audit Objectives The purpose of the audit was to determine whether management has adequate and effective monitoring over: 1. Financial management to ensure accountability and completeness. 2. Performance management to ensure compliance and effective oversight. We reviewed information for the period February 1, 2009 through the end of fieldwork in November 2011. Limited Operational Audit- ABM Janitorial Contract Audit Result Two Audit Findings 1. The current contract lacks specific industry standards and measures. . 2. The Port's oversight and monitoring of the contract has not been consistent and complete. Preliminary 2012 Work Plan Discussion Preliminary 2012 Audits by Type Est. Hours Audit Type Count Hours % Lease and Concession 9 32% 2,800 Limited Operational Audit 7 38% 3,250 Comprehensive Operational Audit 6 20% 1,700 3RD Party Management 2 7% 600 Central Key Processing Systems 1 3% 300 Contingency 10% 875 Preliminary 2012 Work Plan Discussion Central Key Processing System General Ledger Accounting Processes Comprehensive Operational Audits Commission Office Ground Transportation Risk Management Air Terminal Operation Noise Program Real Estate Division Portfolio Management 3rd Party Management Audits World Trade Center (WTC) - Seattle Bell Harbor International Center Preliminary 2012 Work Plan Discussion Limited Operating Audits Human Resources Policies/Procedures related Compliance Cost of CPO 3rd Party Administrator of self-funded to the use of service/PTO hours after series policies/procedures Medical and Dental separation Delegation of Authority Monitoring of Insurance Requirements Policy on Various Contracts Corp. Cost Allocations/Aviation Procurement Card Administration Revenue Diversion Lease and Concession Audits HOST International, Inc. Hertz Corporation Concessions int'l Inc. National car rental Avis rent a car system Crane Rental Alamo rent a car Seattle Restaurant Associates budget rent a car
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