Washington State Auditor’s Office Pat McCarthy Independence • Respect • Integrity Port of Seattle Accountability Audit Exit Conference  February 7, 2017  Washington State Auditor’s Office 2 Kelly Collins, CPA, Director of Local Audit –Kelly has been with the Washington State Auditor’s Office since 1992. In her role she oversees the audit teams which perform the audits for over 2,200 local governments. SheservesontheWashingtonFinanceOfficersAssociationBoardandisamemberofthe Washington Society of Certified Public Accountants’ Government Auditing and Accounting Committee. Mark Rapozo, CPA, Assistant Director of Local Audit –MarkhasbeenwiththeWashingtonState Auditor’s Office since 1983. In his role as Assistant Director he assists with the statewide oversight and management of all the audits for local government. Joe Simmons, CPA, Audit Manager –JoehasbeenwiththeStateAuditor’sOfficesince1987andbecame Audit Manager of Team Central King County in November of 2015. In his prior role as Assistant Audit Manager on two different teams he worked on audits of state and local governments throughout Pierce, Kitsap, Mason, Clallam, and Jefferson counties. Elizabeth Pyatt, Assistant Audit Manager –Elizabeth has been with the State Auditor’s Office since 2013. During her time with the Office, she has conducted financial statement, federal grant compliance, and accountability audits for state and local governments throughout the Seattle area. Melia Lucero, CPA; Audit Lead –Melia holds a Master of Accounting degree and has been with the State Auditor’s Office since 2014. In her role as Assistant State Auditor, Melia has worked on two different teams covering state and local governments throughout King County, which include the larger audits of King County, the University of Washington, the Port of Seattle, and Harborview Medical Center. SAO Audit Te a m Audits tity Audit Type Audit Scopert of Seattle Accountability January 1 through December 31, 2015rt of Seattle Industrialvelopment CorporationAssessment Fiscal year ends: •2013 •2014 •2015 A ccountabilityDetermined if controls are in place to protect public resources and if the  Port is in compliance with laws and regulations relating to financial  matters. A ssessmentRisk‐based, limited‐scope review of small local governments usually identified as having less than $300,000 in annual revenues. Assessment Audit Summary of Seattle Industrial Development  oration Assessment Audit Report Conducted in conjunction with the  Port ’s accountability audit  Limited audit procedures  ?Based on the work performed,  nothing came to our attention in the  areas we reviewed that caused us to  believe the Corporation was not in  substantial compliance with  applicable state laws, regulations,  and its own policies, or had  significant weaknesses in controls  over the safeguarding of public  resources.” f Seattle Accountability Report “In most areas we audited, Port  operations complied with  applicable requirements and  provided adequate safeguarding  of public resources.  The Port also  complied with state laws and  regulations and its own policies  and procedures in most areas we  examined.” “However, we identified areas in  which the Port could make  improvements.”  Reportable Condition (Finding) Accountability Audit Summary o motional hosting expenditures  Reviewed internal controls and selected transactions  Compliance with state law (RCW 53.36.120‐150)  Audit result: no issues o curement of public works contracts   Reviewed internal controls and selected transactions  Compliance with procurement, prevailing wage, and change order requirements  Audit results: no issues lice Department overtime   Reviewed internal controls  Selected transactions to test for adequate support  Audit results: no issues Accountability Audit Areas e et fuel and maintenance card program   Reviewed internal controls and selected fuel cards  Audit result: Recommendations were provided to the Departments sh receipting at the Bell Harbor and Shilshole Bay Marinas  Reviewed internal controls and compliance with state law over timely deposits  Performed unannounced cash counts  Audit result: Recommendations were provided to the Marina  Accountability Audit Areas A udit highlight: We appreciated the Port ’s effort to take corrective action to  address our departmental audit recommendations before our audit was complete.  m mediate initiative was taken by the Accounting and Financial Reporting  D epartment to work directly with the Marine Maintenance Department and the  Shilshole Bay Marina to address their control deficiencies.  n e‐time special payment made to the non‐represented salaried employees  Gained an understanding of the payment  Determined if the payment was allowable under state law  Determined if individuals were eligible based upon stated criteria  Audit result: finding Accountability Audit Areas n e‐time Payment to non‐represented Salaried Employees 642 non‐represented salaried Port employees received a one‐time special payment for a total expense to the Port of $4,782,796.  The payment was authorized by the Port Commission at the December 8, 2015 open public meeting under Resolution 3712.  The one‐time payment was not contingent on rendering future services, not based upon past hours worked, not tied to job performance, and was not a salary increase. Also, employees were not obligated to return the one‐time payment upon termination of employment.  Thepaymentwasmadeinordertoimproveemployeemoraleandto support a high‐performing organization that enables the Port to attract and retain the most qualified high‐performing employees in response to the newly adopted 40 hour work week. Audit Finding Background Audit Finding e  Port paid extra compensation to  p loyees that did not comply with the e Constitution” $4,782,796 payment does not comply  with the state Constitution •Article II, section 25 •Article VIII, section 7  $227,029 was paid to 26 employees  already working a 40 hour work week  Retroactive increase in annual pay•To t a l overpayment amount = $1,120  Ineligible employees•To t a l payment amount = $16,570 a uses of Condition  The method in which the Port executed this one‐time payment constitutes extra compensation not allowed by the state Constitution.  The Port did not establish performance standards or goals that exceeded normal employment requirements prior to the payment of the extra compensation as required by the state Constitution. u dit Recommendations We recommend the Port establish policies to ensure extra compensation payments are based on performance standards or goals as required by the state Constitution.  We also recommend the Port conduct additional legal review to determine if any further actions, such as repayment, are necessary or required by state law. Audit Finding Causes and Recommendations W e would like to take this opportunity to extend our  p preciation to your staff for the cooperation and  s sistance given during the audit. e bbi Browning and Rudy Caluza provided valuable  s sistance during our accountability audit, as our main o ints of contact.  We appreciate their availability and illingness to address our questions timely. Concluding Remarks h e Acountability audit report will be released and published on bruary 7, 2017. You can view it at:www.sao.wa.gov u dit reports are published on our website and distributed via e‐a il in an electronic .pdf file. We also offer a subscription rvice that allows you to be notified by email when audit p orts are released or posted to our website. You can sign up r this convenient service at: https://portal.sao.wa.gov/saoportal/Login.aspx Report Publication Pat McCarthy, State Auditor (360) 902‐0360  Pat.McCarthy@sao.wa.govKelly Collins, Director of Local Audit                            (360) 902‐0091  Kelly.Collins@sao.wa.govKathleen Cooper, Assistant Director for  Communication (360) 902‐0470  Kathleen.Cooper@sao.wa.govMark Rapozo, Assistant Director of Local Audit  (360) 902‐0471  Mark.Rapozo@sao.wa.gov Contact Information