Audit WTC Management Services
Internal Audit Report _________________________________ World Trade Center Seattle Management Services Agreement No. 677 Audit Period January 1, 2005 through December 31, 2007 Issue Date: June 2, 2009 Report No. 09-07 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 Table of Contents INTERNAL AUDITOR'S REPORT ............................................................................................................... 3 EXECUTIVE SUMMARY .............................................................................................................................. 4 AUDIT OBJECTIVES ................................................................................................................................... 6 AUDIT SCOPE .............................................................................................................................................. 6 AUDIT APPROACH...................................................................................................................................... 6 CONCLUSION: ............................................................................................................................................. 6 SUMMARY OF FINDINGS AND RECOMMENDATIONS ............................................................................ 7 A. Ineffective Budget Monitoring 2 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 Internal Auditor's Report We completed an audit of the World Trade Center Seattle (WTCS). The Port of Seattle (Port) owns the World Trade Center and has outsourced the management of this Facility to Columbia Hospitality, Inc. (CHI). CHI oversees the day-to-day management of the WTCS. The Port's Real Estate Property Management Department administers the management services agreement between the Port and CHI. We conducted the audit using due professional care. The audit was planned and performed to obtain reasonable assurance that Columbia Hospitality, Inc (CHI) complied with the provisions of the management services agreement as well as other applicable laws and regulations. We also evaluated the effectiveness of Port management's monitoring system. Port 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 identified an opportunity to improve the effectiveness of the current Port management's monitoring practices, and our recommendation is discussed in the subsequent sections of this report. We extend our appreciation to Port Real Estate Property Management and Columbia Hospitality, Inc staff for their assistance and cooperation during the audit. Joyce Kirangi, CPA Internal Audit Manager 3 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 Executive Summary Audit Scope and Objective The audit covered the period from 2005 through 2007. The purpose of the audit was to determine whether: 1) Columbia Hospitality, Inc (CHI) complied with the provisions of the management services agreement as well as applicable laws and regulations. 2) Port management effectively monitored the management services agreement with CHI. Agreement Terms and Obligations CHI is responsible for the day-to-day management of the WTCS, including sales, marketing, food preparation, executive dining catering services, accounting services etc. The management services agreement provides for a tiered management fee based on gross revenue/profit. The Port of Seattle is responsible for the costs of operating the Facility. Audit Result Summary We noted inadequate management monitoring of budgeted and actual operating expenses. 4 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 Background The Port of Seattle owns the World Trade Center Seattle (WTCS). The Facility was developed under the Washington State authority of RCW 53.29 Trade Center Act. The Port of Seattle and local private sector are the primary sponsors of the WTCS. The primary objective of the WTCS is to foster international trade and commerce, and to expose Seattle to international trade. The WTCS building is located on Seattle's downtown waterfront. The fourth floor of the building contains conference rooms, as well as an executive and a private dining room. The sponsoring companies and their members have the privilege to use the Facility and its services for a fee. In addition, private catered events are also held at this Facility. At a fee, the Port has outsourced the day-to-day management of the WTCS to Columbia Hospitality Inc. (CHI). The services include sales and marketing, fundraising, member services, solicitation of sponsorships, food preparation services, and overall accounting services. Revenue generated from the Facility is remitted to the Port daily. The Port of Seattle is responsible for the costs of operating the Facility. It pays for all costs including repair and maintenance; utilities; insurance; legal and accounting services; and labor compensation related to CHI employees working at the Facility. Financial Highlights Revenues Description 2005 2006 2007 Club Service Membership $402,235 $403,541 $377,356 Food Services 618,372 705,909 656,850 Beverage 81,844 138,816 129,990 Club Service Others 187,938 208,061 201,830 Total $1,290,389 $1,456,327 $1,366,026 Expenses Description 2005 2006 2007 Club Services & Others $102,213 $128,903 $117,611 Food & Beverage 386,221 480,726 406,750 Administrative 351,279 429,909 427,163 Capital Reserved 26,645 31,584 29,660 Management and IMF Fees 247,036 229,837 232,424 Total $1,113,394 $1,300,959 1,213,608 5 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 Audit Objectives The purpose of our audit was to: 1) Determine whether Columbia Hospitality, Inc. (CHI) complied with the provisions of the management services agreement as well as with other applicable laws and regulations. 2) Assess how effectively Port management monitored the agreement with Columbia Hospitality Inc. Audit Scope The scope of the audit covered the period 2005 through 2007. Audit Approach We performed the following audit procedures: Obtained an understanding of the WTCS operations, and the Port Real Estate management monitoring system related to the WTCS. Reviewed applicable state and local laws, rules and regulations, and Port policies. Analyzed financial data (internal and external) and other relevant information to achieve our audit objectives. Conclusion: Overall, Columbia Hospitality Inc. was in compliance with the terms and conditions of the management services agreement. We also observed that Port management monitors this agreement, but that its current monitoring system could be improved. 6 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 Summary of Findings and Recommendations A. Ineffective Budget Monitoring A well-designed and well-placed system of monitoring is necessary to provide management with reasonable assurance of compliance with the agree-upon terms and conditions of the agreement. Port management's monitoring of the World Trade Center Seattle budgeted and actual expenses was not adequate. The management agreement states: G.4 "CHI shall submit to the Port an Annual Plan for the Facility for the following calendar year... the Annual Plan will be the CHI's best estimate of the operations for the following calendar yearthe Plan will contain a summary of the proposed expenditures for the year" M3 "CHI must consult with the Port promptly if total Operating Expenses for any three- month period exceed the Annual Plan by more than 10%..." While actual expenses exceeded the budget in the following fiscal quarters, there was no evidence or documentation that CHI notified the Port of the overages or that Port management questioned the budget variances. Without documentation, the auditor could not determine whether CHI had fully complied with the above budget requirement. The World Trade Center Seattle budget was exceeded as follows: Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 2006 over(under) 24% 18% 27% 28% Port Approved Budget 239,909 261,000 273,984 271,955 Actual Expenses 297,648 307,545 248,197 347,572 2007 over(under) 4% 11% 28% (9%) Port Approved Budget 269,996 280,823 288,971 285,291 Actual Expenses 281,025 312,332 360,625 259,626 Recommendation We recommend that Port management improve its budget monitoring procedures, and hold the contractor accountable to the service agreement's budget communication requirements. Management Response Every month, Port Management and CHI meet to discuss the current financial and marketing reports as well as the anticipated revenues and corresponding expenses for the subsequent quarter. Variances in operating expenses are always discussed and generally have proportional increases in revenue and net income so have not been detrimental to the operation of the WTCSE. Unfortunately, during the period audited, we did not keep written documentation of these discussions. 7 Internal Audit Report World Trade Center Seattle - Management Agreement #677 Audit Period: January 1, 2005 December 31, 2007 As a result of a similar finding in the BHICC audit in 2008, Port Management requested that CHI document operating variances over 10% at WTCSE in writing. They will continue to do so in the future. 8
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.