Internal Audit Report 

Bill & Nick, Inc. 
d/b/a Bay Cafe 

Lease and Concession Compliance Audit 


January 1, 2009 to December 31, 2010 


Issue Date: September 07, 2011 
Report No. 2011-17

Internal Audit 
Bill & Nick, Inc. 
d/b/a Bay Cafe 

Table of Contents 
Transmittal Letter .............................................................................................................. 3 
Executive Summary .......................................................................................................... 4 
Background ....................................................................................................................... 5 
Audit Objective .................................................................................................................. 5 
Audit Scope and Methodology ......................................................................................... 5 
Conclusion ......................................................................................................................... 6 












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Internal Audit 
Bill & Nick, Inc. 
d/b/a Bay Cafe 

Transmittal Letter 

We have completed an audit of the Lease and Concession Agreement, as amended, between
the Port of Seattle and Bill & Nick, Inc., d/b/a Bay Caf. 
The purpose of the audit was to determine whether: 
1)  Reported concession was complete and properly calculated. 
2)  The lessee complied with provisions of the Lease and Concession Agreement. 
We examined information related to a two-year period from January 1, 2009, through December
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. 
Bill & Nick, Inc. reported concession properly and complied materially with the terms of the
Lease and Concession agreement. 
We extend our appreciation to Portfolio Management in Real Estate Division and to Accounting
& Financial Reporting for their assistance and cooperation during the audit. 
Thank you. 


Joyce Kirangi, CPA 
Director, Internal Audit 





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Internal Audit 
Bill & Nick, Inc. 
d/b/a Bay Cafe 

Executive Summary 

Audit Scope and Objective The purpose of the audit was to determine the following: 
1)  Reported concession was complete and properly calculated. 
2)  The lessee complied with provisions of the Lease and Concession Agreement. 
We examined the books and records of Bill and Nick, LLC for a two-year period from January 1,
2009 through December 31, 2010. Portfolio Management in Real Estate Division in conjunction
with Accounting and Financial Reporting (AFR) has the primary responsibility for administering
and monitoring the agreement to ensure compliance with agreed-upon terms. 
Agreement Terms  Bill & Nick, Inc. (d/b/a Bay Caf) is a private company that has operated a
diner on Fisherman's Terminal since 1987. Based in Seattle, Washington, this establishment
has been serving visiting and local patrons food items, beverage items, and other business
related services just feet from the wharf. 
The current agreement with Bill & Nick, Inc. at the Fisherman's Terminal location has been in
effect since 1987. The agreement requires a fixed monthly minimum rent to be adjusted
annually based on a 3 prior year average. In addition, the agreement requires a percentage fee
of 6%, provided the fee exceeds the fixed monthly minimum rent. 
Audit Result Summary  Reported concession was complete and properly calculated. In
addition, other than minor exceptions, Bill & Nick, Inc. complied materially with the terms of the
Lease and Concession agreement. 







4

Internal Audit 
Bill & Nick, Inc. 
d/b/a Bay Cafe 

Background 
Bill & Nick, Inc. (d/b/a Bay Caf) is a private company that has operated a diner on Fisherman's
Terminal since 1987. Based in Seattle, Washington, this establishment has been serving visiting
and local patrons food items, beverage items, and other business related services just feet from
the wharf. 
The agreement requires a fixed monthly minimum rent to be adjusted annually based on a 3
prior year average. In addition, the agreement requires a percentage fee of 6%, provided the fee
exceeds the fixed monthly minimum rent. 
The agreement has the following due dates for the minimum and percentage rent: 
the minimum rent - advance payment on or before the first day of each calendar month 
the percentage rent - within thirty days after each calendar month 
Financial Highlights for the Audit Period 
Reported 
Total Rent Paid 
Year    Gross Revenue 
2009          $766,313         45,978.80 
2010          $795,754         47,745.22 
Source: PROPWorks and PeopleSoft 

Audit Objective 
The purpose of the audit was to determine the following: 
3)  Reported concession was complete and properly calculated. 
4)  The lessee complied with provisions of the Lease and Concession Agreement. 
The scope of the audit covered a two-year period from January 1, 2009 to December 31, 2010. 

Audit Scope and Methodology 
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 rental. Our approach to the 
audit was risk-based from planning to test sampling. We applied additional detailed audit
procedures to areas with the highest likelihood of significant negative impact as follows: 
Concession                 CPA Certified Annual Report 
Insurance                   Annual Rent Adjustment 

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Internal Audit 
Bill & Nick, Inc. 
d/b/a Bay Cafe 

a.  Concession 
We met with the lessee to discuss and understand lessee revenue accounting and operating
procedures. We reviewed the lessee's financial records including state Business Occupation
(B&O) tax returns for the audit period to determine if reported gross revenues were
complete. Additionally, we selected two highest gross months in the audit period and 
reconciled the sales to daily sales journals and bank statements. 
b.  CPA Certified Annual Report 
We reviewed CPA reports for the audit period to determine compliance with the timely and
complete submission of the report. 
c.  Insurance 
To determine compliance with insurance requirements, we reconciled insurance
requirements to the coverage reflected in the certificate of insurance in force for the audit
period. 
d.  Annual Rent Adjustment 
We reviewed and recalculated annual rent adjustments for the audit period to determine if
the rent was properly and accurately adjusted. 

Conclusion 
Reported concession was complete and properly calculated. In addition, other than minor
exceptions, Bill & Nick, Inc. complied materially with the terms of the Lease and Concession
agreement. 






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