Audit Report AVBD
Port of Seattle Internal Audit Report Aviation Business Development & Management (AVBD) Audit Audit Period January 1, 2007 through December 31, 2008 Issue Date: February 2, 2010 Report No.: 2010-01 Internal Audit Report Aviation Business Development & Management Departments Audit Period January 1, 2007 December 31, 2008 Table of Contents Audit Audit Internal Auditor's Report .............................................................................................................................................. 3 Compliance Audit Executive Summary ....................................................................................................................................................... 4 Compliance Audit Background...................................................................................................................................................................... 5 Audit Objective ................................................................................................................................................................ 6 Scope of the Audit .......................................................................................................................................................... 6 Audit Approach ............................................................................................................................................................... 6 Conclusion ....................................................................................................................................................................... 7 2 of 7 Internal Audit Report Aviation Business Development & Management Departments Audit Period January 1, 2007 December 31, 2008 Audit Audit Internal Auditor's Report Compliance Audit We have completed an auditCompliance Audit of the AV Business Development & Management. The audit objective was to determine whether the department has established adequate and effective controls to reasonably ensure that the department: Achieves its goals and objectives. Performs a regular risk assessment to adequately address the risks impacting their department and to mitigate those risks to an acceptable level. Effectively monitors and maintains material agreement provisions in PROPWorks including, but are not limited to, billing rules for proper concession and MAG calculation. Efficiently manages lease agreements. Management has the primary responsibility to establish and implement effective controls. Our audit objective 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. We planned and performed the audit to obtain reasonable assurance that department controls related to resources, operations, and compliance are adequate and operating as intended. Aviation Business Development & Management (AVBD) has established adequate and effective controls, and there were no significant issues noted during the audit review. During the audit period, AVBD well managed 300+ concession agreements and non-aeronautical properties at/around the airport, and was instrumental in generating annual non-aeronautical revenues of ~$50M. As part of Internal Audit's continuing efforts to add value toward management control improvement, we identified certain opportunities to strengthen existing controls over the department's risk assessment and agreement management processes, which have been communicated to management in a separate letter. We extend our appreciation to the AV Business Development management and staff for their assistance and cooperation during the audit. Joyce Kirangi, CPA Director, Internal Audits 3 of 7 Internal Audit Report Aviation Business Development & Management Departments Audit Period January 1, 2007 December 31, 2008 Audit Audit Executive Summary Audit Scope and Objective Our audit objectiveCompliance Audit was to determine whether the department has Compliance Audit established adequate and effective controls to reasonably ensure that the department: Achieves its goals and objectives. Performs a regular risk assessment to adequately address the risks impacting their department and to mitigate those risks to an acceptable level. Effectively monitors and maintains material agreement provisions in PROPWorks including, but not limited to, billing rules for proper concession and MAG calculation. Efficiently manages agreements. The scope of our audit covered the period from January 1, 2007 through December 31, 2008. Background Aviation Business Development & Management (AVBD) mission is to enhance nonaeronautical revenue opportunities through aggressive efforts to support existing non-aeronautical businesses and to develop new business opportunities. AVBD is a group of Aviation Division organization units (referred to as a node) and consists of the following four (4) individual work units: Business Development & Analysis o Function - provides property development and analytical support. Concessions Business o Function - manage retail, food, and concessions in the airport. Property Management o Function manage property leases. Acquisitions/Relocations o Function manages the property acquisitions and relocation in the areas surrounding the airport. These individual units serve different functions but have a common thread of serving property and business needs of the airport. AVBD operates on an average annual budget of ~$4.5M with ~20 Full Time Equivalents (FTEs) and generates approx. $50 million in non-aeronautical revenues. Audit Result Summary Aviation Business Development & Management (AVBD) has established adequate and effective controls, and there were no significant audit issues noted during the review. During the audit period, AVBD well managed 300+ concession agreements and non-aeronautical properties at/around the airport, and was instrumental in generating annual non-aeronautical revenues of ~$50M. As part of Internal Audit's continuing efforts to add value toward management control improvement, we identified certain opportunities to strengthen existing controls over the department's risk assessment and agreement management processes, which have been communicated to management in a separate letter. 4 of 7 Internal Audit Report Aviation Business Development & Management Departments Audit Period January 1, 2007 December 31, 2008 Background Audit Audit The Aviation Business Development & Management (AVBD) is a group of Aviation Division organization units (referred to as a node) and consists of the following four (4) individual units: Compliance Audit Business Development & Analysis Compliance Audit o Function--provides property development and analytical support. o Types of Activity--analysis on off-airport properties, cargo development, parking rates, rental car facility analysis, etc. Concessions Business o Function--manages retail, food, and concessions in the airport. o Types of Activity--monitoring of concession venues at the airport to include Smarte Carte, restaurants, news stand, book store, and the like. Property Management o Function manages property leases at the airport. o Types of Activity negotiation of new leases, lease contract compliance, providing real estate expertise to senior management. Acquisitions/Relocations o Function manages the property acquisitions and relocation in the areas surrounding the airport. o Types of Activity acquisition of properties and relocation of tenants of the acquired property in accordance with Federal and Port's own policies and procedures. Individual units serve different functions but with a common thread of serving property and business needs of the airport. AVBD has an average annual budget of ~$4.5M and operates with ~20 Full Time Equivalents (FTEs). AVBD mission is to enhance non-aeronautical revenue opportunities through aggressive efforts to support existing non-aeronautical businesses and to develop new business opportunities. Acquisitions/Relocations unit is not part of the current review as Internal Audit previously audited the operation as a separate engagement. Below are financial highlights for a 4-year period ending in 2008: Revenues (in thousands) Description 2005 2006 2007 2008 Aviation Fees $1,435 $1,306 $1,181 $1,417 Maintenance Fees 298 351 369 389 Land Rental 5,807 5,320 5,445 5,528 Space Rental 6,198 6,447 5,089 5,420 Advertising Revenue 2,900 2,947 4,172 3,727 Food & Beverage Revenue 14,057 11,744 11,976 12,444 Gift & Newspaper Revenue 12,990 8,761 10,560 11,380 In-Flight Kitchen 3,264 2,682 3,026 3,434 5 of 7 Internal Audit Report Aviation Business Development & Management Departments Audit Period January 1, 2007 December 31, 2008 Flight Insurance & Foreign Exchange 292 316 355 699 Locker and Vending 477 Audit Audit407 547 587 Other Service & Property Rental 763 1,010 1,231 2,417 Grand Total $48,481 $41,292 $43,951 $47,442 Source: PeopleSoft Compliance Audit Compliance Audit Expenses (In thousands) Description 2005 2006 2007 2008 Salaries/Wages & Benefits $1,683 $1,677 $1,741 $2,003 Outside Services 6,883 1,949 443 676 General Expenses 1,141 517 897 1,091 Equipment Expense 21 5 11 10 Travel & Other Employee Expenses 30 22 40 41 Workers Compensation 8 23 (4) 5 Miscellaneous 53 2 0 1,098** Others 109 111 43 74 Grand Total $9,928 $4,306 $3,171 $4,998 Source: PeopleSoft (depreciation excluded) **One-time Federal reimbursable improvement expenses. The expenses were fully reimbursed in 2009. Audit Objective Our audit objective was to determine whether the department has established adequate and effective controls to reasonably ensure that the department: Achieves its goals and objectives. Performs a regular risk assessment to adequately address the risks impacting their department and to mitigate those risks to an acceptable level. Effectively monitors and maintains material agreement provisions in PROPWorks including, but not limited to, billing rules for proper concession and MAG calculation. Efficiently manages agreements. Scope of the Audit The scope of this audit covered the period January 1, 2007 through December 31, 2008. Audit Approach We performed the following audit procedures: We obtained an understanding of the Department operations and its environment. 6 of 7 Internal Audit Report Aviation Business Development & Management Departments Audit Period January 1, 2007 December 31, 2008 We reviewed applicable state and local laws, and regulations, as well as Port policies, procedures, Audit Audit and guidelines. We obtained and analyzed financial data and other relevant information and assessed risks within the department. We tested data and supporting documentationCompliance Audit to determine completeness and accountability including compliance. Compliance Audit We performed detailed testing including physical walk-through of concession venues atthe airport and in-depth reviews of agreements and amendments. Conclusion Aviation Business Development & Management (AVBD) has established adequate and effective controls, and there were no significant issues during the review. During the audit period, AVBD well managed 300+ concession agreements and non-aeronautical properties at/around the airport, and was instrumental in generating annual non-aeronautical revenues of ~$50M. As part of Internal Audit's continuing efforts to add value toward management control improvement, we identified certain opportunities to strengthen existing controls over the department's risk assessment and agreement management processes, which have been communicated to management in a separate letter 7 of 7
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