Committee Briefing
Internal Audit Briefing Presented to the Port of Seattle Audit Committee and Tay Yoshitani, CEO Joyce Kirangi, CPA Director, Internal Audit August 3, 2010 Agenda Audit Planning Updates Capital Improvement Program (CIP) Billings/Receivables 2010 Audit Work Plan - Progress Update Audit Planning Updates Capital Improvement Program (CIP) Audit Objectives 1.To determine if the Port has effectively managed its Capital Improvement Program (CIP) in order to minimize costs and increase efficiency related to planning, design, procurement and construction, and close-out of its capital projects. 2. Assess the Port's efforts to address significant recommendations from the 2007 SAO performance audit. Audit Planning Updates Capital Improvement Program (CIP) continued Audit Scope The Washington State Auditor's Office (SAO) conducted an audit of the Port's construction management practices and issued its report in December of 2007. The audit report contained a number of findings, and the CEO responded to the audit report by implementing many policy changes including department re-alignment and re-organization. Based on the time frame of the SAO audit report and the implementation of Port changes, the scope of our audit will be 2009. We believe the implemented policies and procedures should have taken effect and matured prior to 2009. Audit Planning Updates Capital Improvement Program (CIP) continued Background The Port Capital Development Division (CDD) oversees Port wide procurement and construction services and is comprised of the following groups: Airport Project Management, Seaport Project Management, Engineering Services, Port Construction Services, and the Central Procurement Office (Construction Contract Services, Service Agreements, Procurement Services) Audit Planning Updates Capital Improvement Program (CIP) continued Financial Highlights Approximate breakdown of all project costs in millions by division. Division 2008 2009 Corporate $ 14 $ 10 Aviation $ 237 $ 207 Seaport $ 112 $ 76 Real Estate $ 21 $ 75 Total $ 384 $ 368 Source: PeopleSoft Audit Planning Updates Capital Improvement Program (CIP) continued Audit procedures Completed or in Progress Consideration of the 2007 SAO performance audit issues and Port's response Interviews with Capital Development Division (CDD) key personnel Document procedural practices and conduct walk-through In-depth data analysis Risk assessments Audit Planning Updates Capital Improvement Program (CIP) continued Preliminary Areas of Focus Procurement of professional and personal services for Port's defined categories I & II, including compliance with the CPO requirements Change Orders evidence of documentation and due diligence over cost estimates, negotiation, monitoring, and approval. Consider change and impact on the original scope of work. Performance measures - assess established performance measures for reasonableness, practicality, and effectiveness in measuring intended outcomes Audit Planning Updates Capital Improvement Program (CIP) continued Preliminary Areas of Focus (continued) Contract payments: Professional and Personal Services adequate support and review of contract payment requests Small Works adequate support and review of contract payment requests, including allowable labor and material; and overhead markups Major Construction - adequate support for percentage of completion, subcontract markups, etc., Audit Planning Updates Billings and Receivables Audit Objective To determine if the Port has implemented effective controls to ensure that the Billing and Accounts Receivable system is efficient, complete, and accurate. Audit Scope Current Practices Audit Planning Updates Billings and Receivables continued Financial Highlights BUSINESS_UNIT 2008 2009 LEASS 289,514,650 301,448,768 LEASM 84,334,802 83,843,897 CORPS 65,747,487 63,765,425 CONT 21,907,981 17,450,720 AIRFD 14,592,234 4,381,729 GRACC 9,914,653 9,564,153 SHILS 8,010,704 8,681,757 CORPM 4,320,106 6,928,789 CARGP 3,265,438 3,467,587 FTPP 2,490,656 2,572,405 GRPIN 1,453,602 1,419,827 IDACC 570,174 489,982 HIM 431,144 432,144 MIC 192,624 153,305 FTZ 10,000 0 HOUSE 3,600 6,400 BHRBM 44,867 Grand Total 506,759,855 504,651,757 Audit Planning Updates Billings and Receivables continued Audit procedures Completed or in Progress Identification of potential risks facing a Billing and Accounts Receivable function. Control identification based on interviews with key personnel and a complete understanding of the procedures. In-depth data analysis. Risk assessments. Review external auditor's working papers. Audit Planning Updates Billings and Receivables continued Preliminary Areas of Focus Logical separation of duties including system access Account Receivable Aging Credits Pier 69 miscellaneous receipting and cash handling 2010 Audit Work Plan Progress Update 2010 Audit Work Plan - Progress Update Audit Committee Approved 2010 Audits " 35 individual engagements Completed and In-Progress Audits " 23 audits ( 65%) of the approved audits " Non-scheduled reviews Payment Card Industry (PCI) compliance over credit card information Completed five 2009 audits in the 1st Quarter of 2010
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