Internal Audit Briefing
Presented to the Port of Seattle
Audit Committee and Tay Yoshitani, CEO
Joyce Kirangi, CPA
Director, Internal Audit
October 5, 2010

Agenda
Audit Report
Lease and Concession Audits
In-Flight Meal Concessionaires
Flying Food
Gate Gourmet
Sky Chefs
Qdoba
Palino
System Audit
Billing and Accounts Receivable

Lease and Concession
Audits
Background
Concession Paid
Flying Food  Gate Gourmet  Sky Chefs   Qdoba     Palino
2007    $1,088,030    $1,029,383 $908,508   $367,474 $346,378
2008      983,987    1,098,441 1,351,834    467,513  352,925
2009      845,402     798,665 1,654,627    429,821  315,391
Concession Terms
Flying Food
3.5% for non-airline sales
Gate Gourmet
7% for airline sales
Sky Chefs
Qdoba       Minimum Annual Guarantee (MAG) of 85% of the previous year's
payments, plus a percentage fee to the extent that the fee
Palino
exceeds the MAG. The percentage fee rages from 10% to 15% of
total receipts.

Lease and Concession
Audits
Audit Objectives
The purpose of the Lease and Concession audits was to determine whether:
1) Reported concession was complete, properly calculated and remitted timely
to the Port.
2) Port and the lessee complied with provisions of the Lease and Concession
Agreement.
3) Lease and Concession Agreement, as amended, complies with applicable
state and Port requirements.

Lease and Concession
Audits
Audit Result
Suggested
Issue
Recovery
Misclassification of Gross Sales  airlines sales       $26,624
versus non-airline sale  rates are different
Flying Food
Untimely Payments                       $1,178
(9 instances of late payment in 2008)
Gate Gourmet Untimely Payments                      $2,978
(21 and 20 instances of late payment for 2008
and 2009, respectively)
Sky Chefs    Disallowed Revenue Deductions               $6,890
Qudoba    Untimely Payments                   $2,204
(11 and 12 instances of late payment for 2008
and 2009, respectively)
Palino                       Clean Report
$39,874

System Audit
Billing and A/R
Background
The billing and accounts receivable functions for the Port are handled
centrally by the Revenue Services team within Accounting and
Financial Reporting (AFR). Revenue Services is responsible for
managing accounts receivables and collection efforts, which includes
assessing finance charges and one-time late fees.
Revenue Services is staffed with 15 FTEs and processes
approximately $1/2 billion in billings annually .

System Audit
Billing and A/R
Background (continued)
The following are top five business units that account for
approximately 90% of the total billings.
(in millions)
Business                     2010
2008    2009
Unit                       (as of 7/31)
Lease STIA              290     301       171
Lease Marine              84      84        45
Corporate STIA             66      64        34
Containers                 22      17        11
Ground Access             10      10        6

System Audit
Billing and A/R
Audit Objectives
To determine if the Port has implemented effective controls to
ensure that the Billing and Accounts Receivable system is efficient,
complete, and accurate with respect to:
System access and segregation of duties
Accounts receivable aging
Credits and write-offs to customer account balances
Pier 69 receipting and cash handling procedures
Audit Result
Clean Audit Report