Port of Seattle 

Internal Audit Report 

Comprehensive Operational Audit--Central Processing System
Asset Management 

January 1, 2010 to July 31, 2011 




Issue Date: October 4, 2011 
Report No. 2011-21

Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

Table of Contents 
Internal Auditor's Report ...................................................................................................................................................... 3 
Executive Summary ............................................................................................................................................................... 4 
Background.............................................................................................................................................................................. 5 
Audit Objectives ..................................................................................................................................................................... 6 
Highlights and Accomplishments ...................................................................................................................................... 6 
Audit Scope and Methodology ............................................................................................................................................ 6 
Observation Noted During the Audit ................................................................................................................................. 7 
Conclusion ............................................................................................................................................................................... 8 













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Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

Transmittal Letter 
We have completed an audit of the Port's asset management system.       The asset management
system involves many departments  at the Port; however, our audit focused on the functions
performed by the Capital Services team within Accounting and Financial Reporting Department. 
The purpose of the audit was to assess controls and determine whether: 
1) Newly created assets are entered in the asset management system timely, efficiently and
completely. 
2) Asset retirements are recorded in asset management in a timely, efficient and complete 
manner. 
3) The capital asset list used for the physical inventory in all Divisions is accurate and
complete. 
4) Capital Services new asset creation and retirement processes are effective and complete. 
We reviewed information relating to the period between January 1, 2010 and July 31, 2011. 
Management has the primary responsibility to establish and implement effective controls. Our role
was to assess and test those controls in order to establish whether the controls were adequate and
operating effectively. 
We conducted the audit using due professional care. The audit was planned and performed to
obtain reasonable assurance that department controls are adequate and operating effectively as
intended. 
Based on the audit procedures performed, Capital Services has established adequate and
effective controls related to asset management. 
We extend our appreciation to Capital Services Management and staff for their assistance and
cooperation during the audit. 


Joyce Kirangi, CPA 
Internal Audit, Director 


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Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

Executive Summary 

Audit Scope and Objective The purpose of the audit was to assess controls                          and determine
whether: 
1) Newly created assets are entered in the asset management system timely, efficiently and
completely. 
2) Asset retirements are recorded in asset management in a timely, efficient and complete 
manner. 
3) The capital asset list used for the physical inventory in all Divisions is accurate and
complete. 
4) Capital Services new asset creation and retirement processes are effective and complete. 
We reviewed information relating to the period between January 1, 2010 and July 31, 2011. 
Background  The Port's investment in capital assets includes land, air rights, facilities and
improvements, equipment, vehicles, furniture and fixtures, and construction work in progress. As of
December 31, 2010, the Port had $5.5 billion in capital assets (net of accumulated depreciation).
The Port's investment in capital assets increased by $34.2 million in 2010. During 2010, completed
projects totaling $73.8 million were closed from construction work in progress to their respective
capital accounts. 
The asset accounting management functions for the Port are handled centrally by the Capital
Services team within the Accounting and Financial Reporting Department. Capital Services tracks
information related to construction work in progress, asset creation, asset existence, and asset
retirement for use in asset management and financial reporting. 
Audit Result Summary  Capital Services has established adequate and effective controls
related to asset management. 





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Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

Background 
The asset accounting management functions for the Port are handled centrally by the Capital
Services team within the Accounting and Financial Reporting Department. Port policy dictates that
capital assets be identifiable and have to meet the following criteria: 
1)  The Port has ownership of the capital asset (i.e. the Port has control over asset use); 
2)  The capital asset has a useful life of three or more years; 
3)  The total capital project costs are greater than $20,000.
Note: The capitalization threshold under #3 may include multiple components that form a system asset. 
For example, a camera surveillance security system across multiple terminals may be linked through
shared software. 
As of July 28, 2011, the Port has 26,130 in-service capital assets with a historical cost of $6.6
billion across several different categories as follows: 
In-Service Capital Assets by Category 
Historical Cost 
Asset Category 
(in millions) 
Land                    $1,652 
Building                      1,485 
Utility and Other Systems          1,047 
Structures                    1,046 
Roads & Grounds              584 
Land and Air Rights               306 
Equipment                  260 
Improvements                125 
Software                      43 
Vehicles                       34 
Intangibles                      26 
Furniture                        17 
Art Work                       7 
Total                         $6,631 
Source: PeopleSoft 
Capital Services is responsible for the project costing and asset management information systems,
where they track information reported by the individual business units related to construction work
in progress, asset creation, asset existence, and asset retirement. This information is used to
generate the physical asset inventory list and in financial reporting. 
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Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

Audit Objectives 
The purpose of the audit was to assess the controls and to determine whether: 
1) Newly created assets are entered in the asset management system timely, efficiently and
are complete. 
2) Asset retirements are recorded in asset management in a timely, efficient and complete 
manner. 
3) The capital asset list used for the physical inventory in all Divisions is accurate and
complete. 
4) Capital Services new asset creation and retirement processes are effective and complete. 

Highlights and Accomplishments 
Capital Services implemented a staff cross-training approach towards many of its functions.
The cross-training approach is intended to promote departmental effectiveness and
efficiency. 

Audit Scope and Methodology 
We reviewed information for the period January 1, 2010, through July 31, 2011. We utilized a riskbased
audit approach from planning to test sampling. We performed a multitude of information
gathering methods including research, interviews, observations, and analytical reviews in order to
obtain a complete understanding of Capital Services' operations and environment. We conducted 
an assessment of significant risks and identified controls to mitigate those risks. We evaluated
whether the implemented controls were functioning as intended.
We applied additional detailed audit procedures to areas with the highest likelihood of significant
negative impact as follows: 
1)  Timely Recording of Assets 
We identified 349 asset additions between 1/1/2010 and 7/31/2011 as a test population to
determine whether Capital Services records assets in the Asset Management System in a
timely manner. Of 349 assets, we focused on those that were posted more than 30 days
after their in-service date. After having considered a time lag between the enter/post date
and multiple line items for the same asset number, we identified a population of 154 assets. 
A sample of 20 assets was judgmentally selected from the population for testing based on
the following criteria: 
- Selection of assets from 20 different organizational units; 
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Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

- one selection of multiple similar assets with the same asset number or type of asset 
for same project, (i.e., MDA Video Implementation); 
- A variety of asset types (equipment, buildings, systems, vehicles) concentrating on
those <$500,000. 
2)  Timeliness of Asset Retirements 
We tested to determine whether Capital Services processes asset retirements in a timely
manner. We reviewed retired assets between January 1, 2010 and July 31, 2011 to
establish a test population. We selected ten retirement transactions by focusing on assets 
that were entered into the system more than thirty days after the out-of-service-date. The
retired assets were a mix of assets from across the Port's divisions.
3)  Asset Inventory 
We reviewed the queries used to produce the capital asset lists for the physical inventory to
determine whether any capital assets were being inappropriately excluded from the
inventory. We compared the queries used by Capital Services to produce the lists for the
Aviation and Corporate divisions with the queries used by Seaport Finance to produce the
lists for the Seaport and Real Estate divisions. The objective was to determine whether the
queries resulted in complete asset lists. 
4)  Effectiveness of Capital Services in Asset Creation and Retirement 
To determine the effectiveness of Capital Services operations in asset activation or
retirement, we reviewed projects between 1/1/2010 and 7/31/2011. A total of ten projects 
were selected based on the following risk-based criteria: 
- Excluded projects >500K which is the materiality threshold for Moss Adams assets
and a focal point of their review procedures. 
- Included projects under but close to Commission Approval requirements ($300,000)
and those between $300,000 and $400,000 for Commission Approval. 
- Included those with an apparent budget overrun (budget adjustment approval
required) 

Audit Observation that is Outside the Scope of this Audit 
The primary focus of the audit was whether the central asset accounting system, as operated and
managed by AFR, is effective and efficient (i.e., timely) with its processes. To test for the
timeliness, we used a risk-based approach. We conducted an asset analysis to determine the
timeliness of asset creation and retirement. Through the analysis, we identified a number of 
instances where the creation or retirement of assets in PeopleSoft was delayed, ranging from 30 to
120+ days. We further tested the transactions that appeared late and observed that the delay was
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Internal Audit Report 
Asset Management System 
January 1, 2010 to July 31, 2011 

caused by some Port departments not timely submitting the necessary documents                  to Capital
Services.
Since our primary focus of the audit was the central accounting system, we will follow up on this
issue when we conduct departmental audits. 

Conclusion 
Capital Services has established adequate and effective controls related to asset management. 














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