Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 TABLE OF CONTENTS Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 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 an d staff of the Aviation and Marine Maintenance Departments for their assistance an d cooperation during the audit. Joyce Kirangi, CPA, CGMA Internal Audit, Director RESPONSIBLE MANAGEMENT TEAM Dan Chase, Senior Internal Auditor Skip Himes, Interim General Manager ? Marine Maintenance Stuart Mathews, General Manager ? Aviation Maintenance Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 EXECUTIVE SUMMARY AUDIT OBJECTIVES Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 BACKGROUND Marine Maintenance (MM) provides facilities and equipment maintenance and service to customers and community. MM has 14 craft or specialized functi ons to support the Real Estate Department and Maritime Line of Business within the Port of Seattle. MM has approximately 4,700 stock keeping units (SKUs), which is comprised of 2, 900 stock and 1,800 non-stock items. These stock and non-stock items are valued at about $290,000. Aviation Maintenance (AVM) ensures all airport facili ties, equipment, and systems function properly 24 hours a day 365 days a year. Its guiding principle in cludes the optimal use of equipment and inventory and the ability to leverage technology. AVM has 14 functional maintenance shops with 32 satellite locations. AVM has 29,816 SKUs, which represents 10,824 stock and 18,992 non-stock items. The 29,816 SKUs are valued at approximately $6.5 million. AVM has an established process for adding new in ventory items into the Maximo system. New stock inventory items are requested by each craft shop based on a need identified by system technical subject matter experts with Management oversight. This process includes id Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 During the course of the audit, management achi eved the following significant accomplishments: Aviation Maintenance set a goal of a 5% exception or a 95% success rate for the 2015 year-end inventory audit. The results at the Distribution Ce nter as well as the shop locations received at least 95%. Seven of the locations received a 100% success rate. Marine Maintenance has begun the disposition proc ess. They have also been actively reviewing purchase orders for items that are already exist in inventory. Aviation Maintenance is familiar with the Port?s existing AC-13 disposition policy and has been using the on-line disposition SharePoint tool si INVENTORY TURNOVER RATIO AND DAYS IN INVENTORY RATIO MARINEMARINEMARINEAVIATIONAVIATIONAVIATION EAR ENDEDINVENT RYTURN VERDAY INVENT RYINVENT RYTURN VERDAY INVENT 2012327,992 $ 1.05 347 6,503,823 $ 0.47 770 2013345,476 0.99 368 6,341,000 0.47 782 2014358,218 0.84 433 6,487,198 0.49 747 2015 as of October 3 364,125 0.87 418 6,513,752 0.47 770 Data Source: PeopleSoft Financials FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS AUDIT SCOPE AND METHODOLOGY HIGHLIGHTS AND ACCOMPLISHMENTS Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 CONCLUSION Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 SCHEDULE OF FINDINGS AND RECOMMENDATIONS AVIATION MAINTENAINCE ZE INVENTORY ITEM LAST ISSUED Within 1 year 101 2% Within 2 years 84 1 Within 3 years 85 Within 4 years 68 1 Over 4 years 4,898 94 5,236 100% INVENTORY ITEM LAST ISSUEDAMOUNT PERCENTAGEAMOUNTPERCENTAGE Within 1 year1,841,488 $ 28%171,958 $ 59% Within 2 years332,982 5 24,828 9 Within 3 years348,445 5 18,646 6 Within 4 years204,090 3 8,903 3 Over 4 years3,851,203 59 66,636 23 TOTAL 6,578,208 $ 100%290,970 $ 100% Data Source: Maximo MARINE AVIATION Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 Data Source: Maximo inventory such as communicating the order and transp ortation costs. Carrying costs are incurred from holding inventory such as storage and opportunity costs. same item. However, 50% or 20 of the 40 items tested had the same inventory in both zero October 31, 2015. Of the 18 purchases tested, 15 purchases were made for items that were already in inventory. To reduce inventory costs, thereby increasing the efficiency at which inventory is used, procuring inventory should be made when the item is not available in the warehouse. Recommendations Establish a sustainable and repeatable process which incorporates strong internal controls so that inventory is identified and dispositioned within Policy timelines. Marine Maintenance has received and reviewed the findings of the internal audit and concurs with the recommendations. We will use an inventory report that identifies turnover ratios and will create an internal policy for dispositioning aged inventory by December 31, 2016. The policy will outline the process and procedure for reviewing aged and stagnant inventory. This will include a collaborative review by the Materials and Inventory Specialist, Purchasing and Inventory Supervisor and Crew Chiefs. The results of the review will be submitted to the Senior Logistics and Finance Manager for final approval. The Material acquisition process will be revised by requesting a review by the Material and Inventory Specialists for available stock, non-stock and zero value inventories prior to the submission of the Maximo Purchase Requisitions. Marine Maintenance will continue to procure materials in the most cost efficient manner. This may include ordering materials that are currently in our inventory due to insufficient quantity on hand or direct delivery to job site. Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015 Marine Maintenance welcomes the opportunity to strengthen our process and strives to increase our efficiency. We welcome a collaborative approach with AV Maintenance to share expertise and knowledge to improve our purchasing and disposition procedures. Aviation Maintenance 1) We concur with the auditor?s recommendation #1 and we have begun to take proactive steps to work towards an established process prior Aviation and Marine Maintenance Inventory January 1, 2015 - October 31, 2015