Port of Seattle Audit Committee

1. Presentation

Port of Seattle Audit Committee

Financial Stewardship Accountability Transparency
Port of Seattle Audit Committee
Internal Audit Update
Glenn Fernandes - Director, Internal Audit

June 20, 2024
P69 Commission Chambers
10:00 AM – 12:00 PM

Operational Excellence Governance

Internal Audit Organization Structure Item #5

Item #6
Open Issues Status – Aging Report as of June 04, 2024
7 Issues Outstanding (from Target Date)1
10
Issues 5
0
Not Due 0-6 months
Time Outstanding

1. Security Sensitive issues from Information Technology and Performance audits are excluded from the Public Session Open Issues Status presentation
and will be discussed at the September non-public session.
See Appendix A for a detailed listing of outstanding issues, including Report Finding, Issue Owners, and Current Status as of June 04, 2024.

Approved 2024 Audit Plan Item #7
Limited Contract Compliance Performance Information Technology
• Stellar Bambuza SEA, LLC Performance • Application Software Security
• Seattle Food Partners, LLC • Fire Department – PFAS Use, Storage, and • Network Infrastructure Management
• 1915 KCHouse Concepts – SEATAC, Phase-out (ICT)
LLC • Time Approval Controls • TSA Cybersecurity
• Pallino SeaTac, LLC • Delegation of Authority
• Equity Policy Directive Compliance
• Utility Management – Port-wide
Capital
• Concourse A Building Expansion for
Lounges/Delta TRA1
• T-117 Sites 23-25 Restoration Project
GC/CM Closeout
• TSE - Phase 2 Bollards and ADA Ramps
• Parking Garage Elevator Modernization

1. This audit was started in the Fourth Quarter of 2023 and was completed in the First Quarter of 2024.

Internal Audit Capital GC/CM Continuous Audits Item #7
RCW 39.10.385 requires an independent audit, paid for by the public body, to confirm the proper accrual of
costs.
We procure the independent auditor, provide oversight of work performed, and assist in fieldwork as
needed.
The independent auditor will provide the Audit Committee with annual updates and final reports upon
completion of each project.
Capital GC/CM Continuous Audits
• Main Terminal Low Voltage System Upgrade Under Contract
• Post IAF Airline Realignment Under Contract
• C Concourse Expansion Project Under Contract
• Eastside Fire Station Anticipated Contract July 2024
• Baggage Optimization Phase 3 Under Contract
• Concourse Low Voltage Upgrade Anticipated Contract July 2024
• South Concourse Evolution Under Contract

Item #7
2024 AUDIT PLAN STATUS
Audit Title Type Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fire Department – PFAS Use, Storage, and Phase-out Performance
Time Approval Controls Performance
Delegation of Authority Performance
Equity Policy Directive Compliance Performance
Utility Management – Port-wide Performance
Concourse A Building Expansion for Lounges/DELTA TRA1 Performance - Capital
T-117 Sites 23-25 Restoration Project GC/CM Closeout Performance - Capital
TSE - Phase 2 Bollards and ADA Ramps Performance - Capital
Parking Garage Elevator Modernization Performance - Capital
Application Software Security IT
Network Infrastructure Management (ICT) IT
TSA Cybersecurity IT
Stellar Bambuza SEA, LLC Contract Compliance
Seattle Food Partners, LLC Contract Compliance
1915 KCHouse Concepts – SEATAC, LLC Contract Compliance
Pallino SeaTac, LLC Contract Compliance
Seattle Chocolates Company, LLC 2 Contract Compliance
Complete
KEY In Process
Not Started
1. This audit was started in the Fourth Quarter of 2023 and was completed in the First Quarter of 2024.
2. Added from the 2024 Contingency Audit Plan.
6

Items # 8-11
Audits Completed in Second Quarter - 2024
1) Time Approval Controls (Item #8)
2) Parking Garage Elevator Modernization (Item #9)
3) 1915 KCHouse Concepts – SEATAC, LLC 1 (Item #10)
4) Stellar Bambuza SEA, LLC 1 (Item #11)

1 Limited Contract Compliance Audits without any issues will not be presented, however, the final reports are made available.

Item #8
Time Approval Controls
The Port of Seattle (Port) employs approximately 2,532 people,
comprised of both represented and non-represented employees.
The primary focus of this audit was Aviation Maintenance (AVM),
specifically represented hourly employees within the department.
• Focus was on the three departments with the largest headcount:
o Aviation Electrical & Electronic Systems (135)
o Aviation Mechanical Systems (124)
o Facility, Fleet, Systems, & Grounds (116)

Item #8
Time Approval Controls
Most hourly represented employees are supposed to enter their
hours worked in Maximo prior to leaving.
All hours in Maximo, including Overtime, Vacation, and Sick Leave
are tracked and linked to specific work orders.
Ideally, supervisors review their crew’s time on a weekly basis to
verify the accuracy of the hours that are being submitted. Then, at
the end of every two weeks, timesheets are submitted in Maximo
and reviewed by the AVM Time Administrator.
AVM Time Administrator runs various validation reports to assure
that errors are corrected prior to Payroll’s Monday deadline.
9

Item #8
Time Approval Controls
Most common checks performed:
• Each employee has at least 40 regular straight time hours for each week.
• Each employee has at least 8 or 10 regular straight time hours a day.
Errors are emailed to the respective employee, Chief Foreman, and
manager to resolve.
• In 2023, there were over 3,400 adjustments that had to be remedied.
• As of April 2024, there were over 430 adjustments needed.

Item #8
1) Rating: High
There is no formal review and approval process performed over
employees’ timesheets assuring the accuracy of hours submitted every
pay period.
Current timekeeping process is disjointed and fragmented within the
department.
Some foremen review time almost daily, some review weekly, while some do
not review at all, and merely wait to hear from the AVM Time Administrator.
Due to the inconsistencies in the overall review process, the number of errors
and adjustments greatly vary period to period.
Overall burden primarily falls on the AVM Time Administrator, which is not
sustainable and feasible due to the volume of AVM hourly employees (300+).

Item #8
Recommendations
Develop a formal process of reviewing and approving timesheets.
Allocate administrative time for approvers to have adequate time to
thoroughly review timesheets.
Consider physical punch time clocks to improve accurate reporting of
employees’ entry and exit during every shift.
Formal training opportunities to raise awareness about the importance
of submitting time accurately and timely.
Consequences for employees who regularly forget to submit their
timesheets or require corrections and adjustments often.

Management Response Item #8
 Management concurs with the recommendation regarding a formal review and
approval process to ensure the accuracy of employee hours submitted to
payroll. AVM will develop and implement a time entry review and approval
process for Maintenance Shop Supervisors to enable the validation of hours
recorded by each employee.
 Management will explore opportunities regarding physical punch time clocks in
shop locations to improve the current process and prevent manual data entries.
 Management will develop and deliver training, emphasizing the importance of
recording hours worked accurately, as well as highlight the expectation that
each employee should record hours worked on jobs daily.
DUE DATE: 3/31/2025 Management will discuss in detail. (Full response in Audit Report No. 2024-04)

Item #8
2) Rating: High
A policy limit to control the amount of overtime employees work has not
been established. Without a limit, the likelihood of accidents could
increase, and employee well-being could decline.
 In 2023, a total of 74,264 Overtime (OT) hours were worked, with higher hours
worked primarily during the summer and winter months.
 During our testing, we noted the following five employees within AVM with the
highest number of OT hours:
Job Title Total Overtime Double Time
(OTDT) Hours in 2023
Aviation Field Technician 1,026
Aviation Field Technician 761
Aviation Field Technician 760
Laborer Parking/ Fuel Cleaner 856
Laborer Parking/ Fuel Cleaner 847

Issue Continued: Item #8
Our testing identified the following:
 One employee who worked a 34-hour shift
 One employee who worked a 90-hour work week
 One employee who worked several 20-hour shifts after already working a
10-hour day
Additionally, Internal Audit noted that the longest streak of
consecutive OT performed was four days.
In 2023, the Port paid over $8M in total overtime labor costs vs. the
budgeted amount of $3.3M.

Item #8
Recommendations
 Develop a Port-wide policy to enforce a formal cap and
limit on the number of consecutive hours that an
individual can work within a 24-hour period, highlighting
safety concerns and supporting employees’ overall health
and wellbeing.
 Integrate the language from the Port-wide policy into
Collective Bargaining Agreements (CBAs).

Item #8
Management Response
Management concurs with the Audit team’s recommendations. There is
a definite need for a Port-wide policy to enforce a formal cap on the
amount of overtime an individual employee can work; we as a
management team share the same concerns around safety and the
overall health and well-being of the employee.
We also agree with the plan to integrate the Port-wide policy into each
CBA to ensure standardization across the board. At this time, we will
refrain from taking any action related to these recommendations at the
department level.
DUE DATE: 12/31/2024 Management will discuss in detail. (Full response in Audit Report No. 2024-04)

Item #8
3) Rating: Low
During testing, Internal Audit (IA) noted that for some
of our selections, supporting documentation was
missing and/or unavailable.
 Within AVM, different departments have varying policies regarding requests for
Vacation, Leave without Pay (LWOP), FMLA, etc.
 Out of 45 total samples, we had eight items (three related to LWOP, four related
to Vacation, and one related to FMLA), for which supporting documentation
could not be provided since they were missing, lost, or non-existent.
 Since supporting documentation could not be provided, IA was not able to
verify and substantiate that these hours were indeed approved appropriately.

Item #8
Recommendations
 Streamline the entire request process and develop an AVM-
wide policy regarding Vacation and Leave requests. Internal
Audit recommends the usage of electronic requests to avoid
any possible loss and misplacement of supporting
documentation.
 Coordinate with the Port’s HR regarding employees’ FMLA
requests to develop a more formalized and standardized
process to avoid delays and errors when processing
timesheets.
19

Item #8
Management Response
Management agrees that a standard process or department
policy is needed to ensure the whole department is using the
electronic SharePoint leave form.
Management will partner with HR to identify gaps in the current
process related to FMLA. This process affects and involves
multiple stakeholders currently including the AVM employee,
AVM manager, AVM timekeeper, Corporate Payroll, HR, and
Sedgwick.
DUE DATE: 12/31/2024 Management will discuss in detail. (Full response in Audit Report No. 2024-04)

Parking Garage Elevator Modernization Item #9
 The Project replaces ten elevators, nine motor drives, and upgrades all 27
elevator cabs at the SEA parking garage.
 The Project is being performed through a Design-Bid-Build project delivery
method between Osborne Construction and the Port.
 The modernized elevators will use energy efficient regenerative drives that use
less energy and produce less waste heat.
 Energy Savings Estimate: 56,000 to 211,0000 kWh/year, which aligns with the
Port’s goal to be the greenest and most energy efficient port in North America.
 Our work focused on the procurement process and change orders.
 Additionally, we performed tests on the Pay Application review process and
insurance coverage.

Parking Garage Elevator Modernization Item #9
 The original contract was $8.5 million.
 As of May 2024, contract was at $12.5 million, because of approximately $4 million
in change orders.
 There are $310,728 in Open Trends, which increases the projected final contract
amount to $12.8 million.
Schedule (Per May 8, 2024, Trend Log)
Original Contract Completion Date 1/17/2024
Approved Time Extension (Calendar Days) 166
Days Project Suspended Due to Addendum Error 638
Port Estimated Completion Date 3/31/2026
Budget (Per May 8, 2024, Trend Log)
Original Contract Sum $8,515,805.00
Executed Change Orders $3,975,042.00
Potential Risk (Open Trends) $310,728.00
Projected Contract Amount $12,801,575.00
 Project is anticipated to be completed by March 31, 2026.

Item #9
1) Rating: Medium
Removal of important material specifications during the bidding phase resulted in
post award change orders that are expected to increase the cost of the contract by
$3.5 million and incur additional Port soft costs of $284,856.
 Addendum 5 erroneously crossed out material and pattern specifications.
 Error was identified during construction.
 Resulted in five change orders potentially costing $3.5 million.
 Added 166 days to Project schedule (approximately $284,856 in soft costs).
 CPO procedure lacks documentation requirements for Construction Manager (CM), Project
Manager (PM), and Resident Engineer (RE) approvals.
 No Port estimate was performed for Change Order #1. It was approved for $74,000, despite
Standard Operating Procedures requiring an estimate for changes over $50,000.

Item #9
Recommendations
1. Revise the CPO procedure to specify required
approvers prior to issuing addenda and maintain
sufficient documentation.
2. Perform Port estimates in accordance with Standard
Operating Procedures.

Item #9
Management Response
 CPO agrees with the recommendation and will revise the CPO procedure to specify
required approvers prior to issuing addenda and maintain sufficient documentation.
 Engineering Construction Management (CM) acknowledges the required estimate
was missing from the Not-To-Exceed Change Order (CO) 01 documentation. Per
Standard Operating Procedures, CO 01 requires a reconciling change order to
execute the final amount for the change. This provides an opportunity for the
project team to include an independent estimate in the reconciling change order.
Targeted training will also be done with the CM Resident Engineers and CPO
Contract Administrators on this topic during our bi-monthly training session.
DUE DATE: 07/31/2024 Management will discuss in detail. (Full response in Audit Report No. 2024-06)

1915 KCHouse Concepts – SEATAC, LLC Items #10 & 11
This is a Limited Contract Compliance Audit without any
issues and will not be presented during this meeting.
However, the final reports are made available.
Stellar Bambuza SEA, LLC
This is a Limited Contract Compliance Audit without any
issues and will not be presented during this meeting.
However, the final reports are made available.

Questions/Committee Comments Item #12

Appendix
A – Aging of Outstanding Issues as of June 4, 2024

Appendix A – Aging of Outstanding Issues as of June 04, 2024
Performance, Capital, and Limited Contract Compliance Audits
Days Outstanding (from Days Outstanding
Audit Type Audit Title Rating Target Date Report Date Report Date) (from Target Date) Issue Owner Report Finding Current Status from Management as of 06/04/2024
Performance Airport Parking Garage High 12/31/2024 11/30/2023 187 -210 Director, Airport Operations Complimentary Parking – We identified 603 instances of misuse of The Transportation Access Program Manager is project managing each recommendation
complimentary parking cards issued to organizations that have business at the to ensure the right staff are working on the appropriate issue in a timely fashion and
Airport. The cards, and the associated Port policy, allowed their staff to park at documenting progress for management. All four recommended items are being worked
the Airport Parking Garage for 24 hours or less. This amounted to on towards individual, target completion dates. One item related to card reissue is no
approximately $74,000 in unbilled parking revenue, during our 18-month test longer relevant as a result of the discontinued practice. Agreed upon target date is
period. 12/31/2024.
Performance Airport Parking Garage High 12/31/2024 11/30/2023 187 -210 Director, Airport Operations Complimentary Parking – The Port needed to enhance controls relating to The Transportation Access Program Manager is project managing each recommendation
retrieving and shutting off complimentary parking cards for employees who to ensure the right staff are working on the appropriate issue in a timely fashion and
leave the Port. By looking at the 1,397 active employee parking cards, we documenting progress for management. All three recommended items are being worked
identified 99 active cards that were assigned to employees who were no longer on towards individual, target completion dates. One item related to Employee ID number
employed by the Port, 16 of which continued to use their cards after separation in the parking system is complete as the data field's existence. Agreed upon target date
from the Port. is 12/31/2024.

Capital Concourse A Building Expansion for Lounges - Delta TRA High 12/18/2024 3/13/2024 83 -197 Chief Engineer/Director, Engineering Services An implicit agreement between Hensel Phelps and the Port’s Risk Management Agreed upon target date is 12/18/2024.
Director Aviation Project Management Department settled on $10 Million in Commercial General Liability Insurance
Director Risk Management (GLI) at an estimated cost of $559,500. Hensel Phelps subsequently materially
Director Aviation & Business Properties overbilled the Port for $100 Million in GLI, at a cost of $1,120,784.

Limited Contract Compliance Seattle Air Ventures Medium 6/30/2024 11/29/2023 188 -26 Director, Aviation Commercial Management In 2021, a variance of $142,500 in gross sales was reported between the No update as of 06/03/2024.
externally audited financial statements and the amount previously reported to
the Port. We also identified differences between point-of-sale revenue and the
general ledger.
Performance Airport Parking Garage Medium 11/30/2024 11/30/2023 187 -179 Director, Airport Operations Complimentary Parking – Controls to deactivate complimentary parking cards The Transport Access Program Manager is project managing each recommendation to
at the end of a 12-month duration (unless reapplied and renewed), for ensure the right staff are working on the appropriate issue in a timely fashion and
contractors, consultants, and airline workers, were not functioning as intended. documenting progress for management. All four recommended items are being worked
Online request forms were not used or, if used, some were incomplete or on towards individual, target completion dates. Agreed upon target date is 11/30/2024.
inaccurately reflected in the parking system.

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