8 Ivars
Port of Seattle Internal Audit Report Lease and Concession Compliance Audit Ivar's Inc. June 1, 2007 May 31, 2010 Issue Date: October 4, 2011 Report No. 2011-19 Internal Audit Report Lease and Concession Compliance Audit Ivar's Inc. June 1, 2007 to May 31, 2010 Table of Contents Transmittal Letter ................................................................................................................................................................... 3 Executive Summary ............................................................................................................................................................... 4 Background.............................................................................................................................................................................. 5 Financial Highlights for the Audit Period ......................................................................................................................... 5 Audit Objectives ..................................................................................................................................................................... 5 Audit Scope and Methodology ............................................................................................................................................ 5 Conclusion ............................................................................................................................................................................... 6 2 of 6 Internal Audit Report Lease and Concession Compliance Audit Ivar's Inc. June 1, 2007 to May 31, 2010 Transmittal Letter We have completed an audit of the Lease and Concession Agreement, as amended, between the Port of Seattle and Ivar's Inc. The purpose of the audit was to determine whether: 1) The revenue reported was reasonable and complete 2) Rent payments were received in a timely manner 3) The lessee complied with provisions of the lease and concession agreement We examined information related to a three-year period from June 1, 2007 to May 31, 2010. We conducted our audit using due professional care. We planned and performed the audit to obtain reasonable assurance as to compliance with significant provisions of the agreement, including complete and timely reporting of concessionable revenues. Ivar's Inc. reported the concessionable revenue properly and materially complied with the terms of the Lease and Concession agreement. We extend our appreciation to the management and staff of Aviation Business Development and Accounting & Financial Reporting for their assistance and cooperation during the audit. Joyce Kirangi, CPA Internal Audit, Director 3 of 6 Internal Audit Report Lease and Concession Compliance Audit Ivar's Inc. June 1, 2007 to May 31, 2010 Executive Summary Audit Scope and Objective The purpose of the audit was to determine whether: 1) The revenue reported was reasonable and complete 2) Rent payments were received in a timely manner 3) The lessee complied with provisions of the lease and concession agreement We examined the books and records of Ivar's Inc. for a three-year period between June 1, 2007 and May 31, 2010. Aviation Business Development has the primary responsibility for administering and monitoring the agreement to ensure compliance with agreed-upon terms. Agreement Terms Ivar's Inc. is a private company that was founded on Pier 54 in Seattle in 1938. Since then, the company has expanded to include 25 fast casual Seafood Bars and three full-service waterfront restaurants. The Seafood Bars, including the location at Sea-Tac International Airport, serve fresh, grilled seafood entrees and salads as well as traditional favorites such as Ivar's famous chowders and fish n' chips. The current agreement with Ivar's Inc. has been in effect since 2004. The agreement requires a fixed monthly rent that is adjusted annually to be 85% of the total amount of the prior year's sales. In addition, the agreement requires a percentage fee to the extent that the percentage fee exceeds the monthly minimum rent in accordance with the following structure: 12% - for receipts up to $1.2 million 13% - for receipts greater than $1.2 million, but less than $1.5 million 14% - for receipts greater than $1.5 million, but less than $2.0 million 15% - for receipts greater than $2.0 million Audit Result Summary The reported concession was reasonable and complete. Other than minor exceptions, Ivar's Inc. materially complied with the terms of the Lease and Concession agreement. 4 of 6 Internal Audit Report Lease and Concession Compliance Audit Ivar's Inc. June 1, 2007 to May 31, 2010 Background Ivar's Inc. is a private company that was founded on Pier 54 in Seattle in 1938. Since then, the company has expanded to include 25 fast casual Seafood Bars and three full-service waterfront restaurants. The Seafood Bars, including the location at Sea-Tac International Airport, serve fresh, grilled seafood entrees and salads as well as traditional favorites such as Ivar's famous chowders and fish n' chips. The agreement requires a fixed monthly rent that is adjusted annually to be 85% of the total amount of the prior year's sales. In addition, the agreement requires a percentage fee to the extent that the percentage fee exceeds the monthly minimum rent in accordance with the following structure: 12% - for receipts up to $1.2 million 13% - for receipts greater than $1.2 million but less than $1.5 million 14% - for receipts greater than $1.5 million but less than $2.0 million 15% - for receipts greater than $2.0 million The agreement has the following due dates for the minimum rent and percentage fee: The minimum rent advance payment on or before the first day of each month The percentage fee payment on or before the 15th day of the following month Financial Highlights for the Audit Period Year Reported Gross Revenue Total Rent Paid 2007-08 $ 2,964,296.41 $ 397,644.46 2008-09 $ 2,848,825.91 $ 387,681.50 2009-10 $ 2,759,134.16 $ 373,025.16 Total $ 8,572,256.48 $ 1,158,351.12 Source: PROPWorks Audit Objectives The purpose of the audit was to determine whether: 1) The revenue reported was reasonable and complete. 2) Rent payments were received in a timely manner. 3) The lessee complied with provisions of the lease and concession agreement. Audit Scope and Methodology The scope of the audit covered a three-year period between June 1, 2007 and May 31, 2010. 5 of 6 Internal Audit Report Lease and Concession Compliance Audit Ivar's Inc. June 1, 2007 to May 31, 2010 We conducted the audit to determine whether the lessee was in compliance with the terms of the lease agreement including, but not limited to, the percentage fee and timely payment. Our approach to the audit was risk-based from planning to test sampling. Specifically, we preformed detailed procedures in the following areas: 1. Completeness of Reported Revenue We met with the lessee to discuss and understand their accounting and operating procedures. We reviewed financial records including the lessee's state tax returns and monthly revenue reports. In addition, we selected a week of sales and traced the revenue through from the point of sale to the daily summary report and reconciled the sales with the general ledger and the revenues reported to the Port. 2. Timely Submission of Rent and Percentage Fee We reviewed the Port's records to determine when the rent payments were received and whether or not they were late. In the event that payments were later than the 10-day grace period identified in the lease and concession agreement, we calculated the expected interest and late charge and determined whether it had been assessed. 3. Compliance with Insurance Requirements We identified the insurance coverage required by the lease and concession agreement and determined whether the lessee had obtained sufficient coverage and submitted evidence to the Port. 4. Compliance with Letter of Credit Requirements We identified the letter of credit amounts required by the lease and concession agreement and determined whether the lessee had obtained the appropriate letter of credit and submitted evidence to the Port. 5. Compliance with Annual Reporting Requirement. We identified the annual reports required by the lease and concession agreement and determined whether the lessee had submitted the reports on time and in accordance with the agreement. Conclusion The reported concession was reasonable and complete. Other than minor exceptions, Ivar's Inc. materially complied with the terms of the Lease and Concession agreement. 6 of 6
Limitations of Translatable Documents
PDF files are created with text and images are placed at an exact position on a page of a fixed size.
Web pages are fluid in nature, and the exact positioning of PDF text creates presentation problems.
PDFs that are full page graphics, or scanned pages are generally unable to be made accessible, In these cases, viewing whatever plain text could be extracted is the only alternative.