Internal Audit Report

Lease & Concession Audit
Massage Bar, Inc.

July 1, 2009  June 30, 2012




Issue Date: October 1, 2013
Report No. 2013-15

Internal Audit Report
Massage Bar, Inc.
July 1, 2009  June 30, 2012

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
Massage Bar, Inc.
July 1, 2009  June 30, 2012

Transmittal Letter

Audit Committee
Port of Seattle
Seattle, Washington

We have completed an audit of Massage Bar, Inc. We reviewed information relating to a threeyear
period from July 1, 2009 through June 30, 2012.
We conducted the audit in accordance with Generally Accepted Government Auditing
Standards and the International Standards for the Professional Practice of Internal Auditing.
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

Audit Team:                                   Responsible Management Team:
Margaret Songtantaruk, Internal Auditor           Deanna Zachrisson, Mgr. Concessions Management
Jack Hutchinson, Audit Manager                 James Schone, Dir. AV Business Development




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Internal Audit Report
Massage Bar, Inc.
July 1, 2009  June 30, 2012
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 of Seattle.
2.  The Port and lessee complied with provisions of the Lease and Concession Agreement,
as amended.
The scope of our audit covered the period from July 1, 2009 through June 30, 2012.
Agreement Terms  The terms of the agreement require a Minimum Monthly Guarantee
(MMG) of 85% of the total amount paid to the Port in the previous agreement year and
additional percentage fees, provided the fee is higher than the monthly MMG payment. These
percentage fees range from 12% to 14% on massage services and 15% on product sales.
The MMG is payable in advance, on or before the first day of each month. The percentage fee
is due on or before the 15th of each month for the preceding month. The agreement provides for
a one-time late fee of 5% of the past due amount and accrued interest charges of 18% per
annum from the date due until paid.
Audit Result Summary Massage Bar, Inc. materially complied with the provisions of the
Lease and Concession agreement. The reported concession fees were complete, properly
calculated, and remitted timely to the Port.









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Internal Audit Report
Massage Bar, Inc.
July 1, 2009  June 30, 2012
Background
Massage Bar, Inc. is recognized as a pioneer and leader in airport seated massages and
wellness services. Including Seattle-Tacoma International Airport (STIA) locations in the North
Satellite and C Concourses, Massage Bar operates at seven other airports. Massage Bar is
headquartered in Green Lake, Washington.
The terms of the agreement require a Minimum Monthly Guarantee (MMG) of 85% of the total
amount paid to the Port in the previous agreement year and additional percentage fees,
provided the fee is higher than the MMG payment. These percentage fees range from 12% to
14% on massage services and 15% on product sales.
The MMG is payable in advance, on or before the first day of each month. The percentage fee
is due on or before the 15th of each month for the preceding month. The agreement provides for
a one-time late fee of 5% of the past due amount and accrued interest charges of 18% per
annum from the date due until paid
The following are the only agreed-upon deductions to concession revenues in the agreement:
Refunds of unacceptable or unsatisfactory goods or services to the extent such refund
was actually granted and adjustment actually made.
Discounts actually granted.
Tax imposed or collected on behalf of a taxing authority.
Below are the financial highlights for the last three fiscal years:
Massage Bar, Inc. Concession Fees Paid to the Port of Seattle
Broken-out by location and category, July 1, 2009  June 30,2012*
Service/Location               2010            2011            2012 
Massages:
- Concourse C     $ 180,656   $ 193,395   $ 195,985 
- North Satellite               3,837             30,865             44,005 
Product Sales:
- Concourse C             3,340           4,008            4,118 
- North Satellite                 661                888                964 
Grand Total           $ 188,494   $ 229,156   $ 245,072
Data Source: Port of Seattle PeopleSoft Financials
Data Note:* The Agreement Year Ends on June 30th 
Audit Scope and Methodology
We reviewed information for the period from July 1, 2009 through June 30, 2012. We utilized a
risk-based audit approach from planning to testing phase. We gathered information through
research, interviews, observations, and analytical reviews, in order to obtain a complete
understanding of the Massage Bar lease and concession agreement.

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Internal Audit Report
Massage Bar, Inc.
July 1, 2009  June 30, 2012
We applied detailed audit procedures to areas with the highest likelihood of significant negative
impact as follows:
A) Timely Payment:
We reviewed the payment records to determine whether the lessee complied with the due
date requirement.
B) Liability Insurance:
We reviewed the certificates of insurance and determined whether insurance coverage was
maintained current and in compliance with the terms of the lease agreement.
C) Minimum Monthly Guarantee (MMG):
We re-calculated MMG amounts to determine accuracy and compliance with the lease
agreement.
D) Surety Bond:
We determined whether the Surety Bond was calculated correctly in compliance with the
lease agreement.
E) Concession Revenue:
We interviewed Massage Bar personnel about policies and procedures over cash receipts,
accounting, and reporting. We also reviewed lessee's financial records including point-ofsale
data, general ledger, bank records, and daily tally sheet reconciliation, as well as the
reported revenues to the Port. We selected sales information from the following months for
detailed testing procedures:
December 2009
January, February, and March 2010
September 2011
May 2012
We agreed the revenue from the point-of-sale to the general ledger, to deposit records, to
daily tally sheet reconciliation, and to the revenues Massage Bar reported to the Port.

Conclusion
Massage Bar, Inc. materially complied with the provisions of the Lease and Concession
agreement. The reported concession fees were complete, properly calculated, and remitted
timely to the Port.

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