Presentation

INTERNAL AUDIT 
COMPREHENSIVE 2018 AUDIT STATUS 
COMPLETED AUDITS - 2017 AUDIT PLAN CARRYOVER 
Audit Title                  Type               Status     Jan    Feb    Mar   Apr    May   Jun    Jul     Aug   Sep    Oct    Nov   Dec 
Host International, Inc.                       Limited Compliance Complete 
Delta Lounge - TRA           Operational         Complete 
P66 Norwegian - TRA         Operational        Complete 
Employee Parking                     Operational        Complete 
TNCs                       Operational        Complete 
Fishing & Comm. Ops. T-91                     Operational         Complete 
2018 AUDIT PLAN STATUS 
Audit Title                  Type               Phase     Jan    Feb    Mar   Apr    May   Jun    Jul     Aug   Sep    Oct    Nov   Dec 
Beecher's Handmade Cheese Limited Compliance Reporting 
Disbursements / AP                      Operational        Fieldwork 
Sky Chef's Inc.                         Limited Compliance Planning 
Capital - N. Satellite                         Operational          Planning 
Dollar Rent a Car                        Limited Compliance Planning 
Thrifty Car Rental              Limited Compliance Planning 
TNC's Rematch (EKPI's)       Operational         Planning 
Marine Maintenance Shops   Operational        Planning 
ParkingSoft System           IT                  Not Started
Change Management - AVM  IT                Not Started
Data Center - AVM           IT                  Not Started
Fox Rent-A-Car               Limited Compliance Not Started
Capital - W. Fire STA*         Operational         Not Started
Seatac Utilities                 Operational          Not Started
Northwest Seaport Alliance   Operational         Not Started
Capital - IAF                     Operational          Not Started
Taxi Cabs (Eastside for Hire)   Operational         Not Started
* Audited Suns, Inc. under Host from the 2017 Audit Plan / Adding Fire Station Westside                                                                          Complete 
Key:     In Process 
Not Started 
1

INTERNAL AUDIT 
CAPITAL PROGRAM  AUDIT UNIVERSE 




$4 Billion Total Estimated Project Costs through 2022 
2017 Audits  IAF, Delta Lounge Tenant Improvement, Pier 66
Norwegian Tenant Improvement 
2018 Audits  IAF, North Satellite, (recommending Fire Station West
Side) 
36% of Total Estimated Capital Cost 

2

INTERNAL AUDIT 

CAPITAL PROGRAM  PROPOSED ADJUSTMENT TO 2018 AUDIT PLAN 
Completed Suns, Inc. from 2018 Audit Plan. Suns, Inc. audited under Host, Inc.
from the 2017 Audit Plan. The audit scope covered January 2015 through
December 2016. 
Recommendation 
Add Fire Station West Side: 
Original estimate $2.4 million revised to $5.5 million 
Understand and validate rationale for revised estimate 
Extremely high cost per square foot / Commission interest 


3

IT  AUDIT UNIVERSE                                         INTERNAL AUDIT 
IT Applications by Recovery Priority 

48 Noncritical
74 Critical           Applications 
Applications             39% 
61% 


Source: ICT Management - Business Impact Analysis 
Utilizing NIST Framework (National Institute of Standards & Technology) 
Focus on Critical IT Applications 
Critical Applications include Priority 1 & Priority 2: 
Priority 1, is when downtime <= 2 hours 
Priority 2, is when downtime <= 4 hours 
2017 IT Audits  Change Management & Disaster Recovery (ICT) 
2018 IT Audits  Change/Patch Management, Data Centers, & T2
ParkingSoft System (AVM). 
4

INTERNAL AUDIT 
2018 Audit Plan 
Limited Contract                              Information
Operational 
Compliance                               Technology 
Beecher's Handmade         Taxi Cabs (ESF)               Data Centers - AVM 
Cheese                        TNC's  Rematch (EKPI's)       ParkingSoft System 
Sky Chefs, Inc.                    Maritime Maintenance          Change/Patch
Suns, Inc.2                          Shops                               Management - AVM 
Dollar Rent-A-Car (CMC        Capital Program IAF 
Investments, Inc.)                Capital  W. Fire STA2 
Thrifty Car Rental (DTG)         Capital Program North
Fox Rent-A-Car                   Satellite 
Northwest Seaport
Alliance 
Seatac Utilities  
Disbursements /
Accounts Payable  
Carryover to 2018 from 2017 Audit Plan 
2 Suns Inc. audited under Host, Inc. from 2017 Audit Plan / Adding West Fire Station 

5

INTERNAL AUDIT 
INDEPENDENCE REQUIREMENT 
International Standards for the Professional Practice of Internal
Auditing (Standard 1110) requires annual confirmation of
organizational independence. 
The Port of Seattle Internal Audit Department continues to
maintain organizational independence by reporting
functionally to the Audit Committee and administratively to
the Executive Director. 



6

INTERNAL AUDIT 
QUALITY ASSURANCE REQUIREMENTS 
Institute of Internal Audit (Standard 1312) requires both an internal
& external quality assurance and improvement program. External
assessments (Peer Reviews) need to occur at least every 5 years. 
Generally Accepted Government Auditing Standards /
Government Accountability Office requires an external
assessment every 3 years. 
Our approach: 
Conduct a self assessment in the 2nd Quarter of 2018. In late
2018 / early 2019, after implementing the recommendations from
this self assessment, we will conduct an external assessment. 

7

INTERNAL AUDIT 
IIA Standard 2500.A1  Requires a system to monitor 
that  management  actions  have  been  effectively 
implemented. 
Internal Audit implemented a new monitoring / follow up process 
Beginning with audit reports from 2017 Audit Plan 
High or Medium rated issues 

Status Update on outstanding audit issues will be presented at the
June Audit Committee Meeting 



8

Operational Audits 
1) Delta Lounge  Tenant Reimbursement Agreement 
2) Pier 66  Norwegian Tenant Improvement Partnership 
3) Fishing & Commercial Operations  Maritime 
4) Employee Parking  Airport Garage 
5) Transportation Network Companies 




9

INTERNAL AUDIT 
DELTA LOUNGE  TENANT REIMBURSEMENT AGREEMENT 
BACKGROUND 
The Port and Delta entered into an Agreement to construct a 23,000 
square  foot  lounge  for  its  members  and  guests.  While  Delta  was 
responsible for the cost of completing the interior, the Agreement required 
the Port to reimburse Delta for the cost to construct the shell (exterior) and 
core utilities. 
Port Commission approved a project budget of $13.7 million. Construction 
began in October 2015 and was completed and fully functional in October 
2016. As of January 2018, total construction costs were $24 million, of 
which $13.2 million was paid by the Port. 
Port Management and Delta complied with the requirements of the Tenant 
Reimbursement Agreement. 

10

INTERNAL AUDIT 
DELTA LOUNGE  TENANT REIMBURSEMENT AGREEMENT 
RESULTS 
(High) The Agreement does not give Port management the authority or ability to
be included in the selection process of contractors. However, the Port remained
financially responsible for the majority of costs from these decisions. Below we list
three examples: 
Delta Airlines received three bids, for design services, and selected ECH 
architect, with a bid of $317,245. The bid was later revised to $623,000. IA 
estimated that the Port incurred an additional $190,000 as a result. 
Delta Airlines allowed PCL to review bids, including their own, and to select 
themselves as the successful bidder of "self-performed" work. PCL's estimate 
was $203,473 but the actual cost was $450,536. 
The full contingency fund of $912,000 was expended, however the Port was 
not given an opportunity to assess if it aligned to the original scope of the 
project or to determine the reasonableness of the charges until after the work 
had been completed. 

11

INTERNAL AUDIT 
DELTA LOUNGE  TENANT REIMBURSEMENT AGREEMENT 

MANAGEMENT RESPONSE 
Will be discussed by: 
Ralph Graves  Sr. Director Capital Development 

For detailed management response  see Audit Report 



12

INTERNAL AUDIT 
PIER 66  NORWEGIAN TENANT IMPROVEMENT PARTNERSHIP 
BACKGROUND 
On August 14, 2015 the Port of Seattle (Port) entered into a Lease 
Agreement  (Agreement)  with  Norwegian  Cruise  Line  Holdings  LTD. 
(NCLH) to renovate the cruise terminal at Pier 66. 
The Agreement included a 15 year lease with NCLH with an option to 
extend the lease for an additional five years. The total cost of the 
renovation was estimated at $30 million. The Port agreed to invest up to 
one-half of the renovation costs, not to exceed $15 million, through its 
property tax levy. 
The renovation expanded space for processing cruise passengers from 
44,000   square   feet   to   151,000   square   feet.   The   facility   now 
accommodates 4,500 passengers, both embarking and disembarking, 
from a single vessel. 

13

INTERNAL AUDIT 
PIER 66  NORWEGIAN TENANT IMPROVEMENT PARTNERSHIP 
RESULTS 
(Medium)  Port  management  should  strengthen  its  monitoring  and 
approval of change orders. We tested two change orders (CO's) that 
represented the largest financial change  and identified the following 
exceptions: 
Eight approved subcontractor CO requests did not include quotes 
and/or a breakdown of costs to substantiate or support the cost of 
the CO at a total cost of $98,000. 
NCLH did not re-estimate the costs to determine whether the CO 
costs were reasonable prior to submitting the CO request to Port 
Management. 


14

INTERNAL AUDIT 
PIER 66  NORWEGIAN TENANT IMPROVEMENT PARTNERSHIP 
MANAGEMENT RESPONSE 
Will be discussed by: 
Ralph Graves  Sr. Director Capital Development 

For detailed management response - see Audit Report 




15

INTERNAL AUDIT 
FISHING & COMMERCIAL OPERATIONS - MARITIME 
BACKGROUND 
Maritime Operations manages Terminal 91, which includes: Pier 90, Pier 
91, and an upland area with leased premises, and storage for trailers, 
containers, cranes, and fishing nets. The Terminal provides short-term 
and long-term moorage for fishing and commercial vessels, including: 
tugs,  barges,  ferries,  research  vessels,  and  military  and  commercial 
vessels in lay-up or idle status; additionally, several leased buildings are 
housed at the Terminal.
REVENUE GENERATED BY BILLING CATEGORY 
Billing Category                         2015                           2016                             2017 
Dockage                          $2,388,826                   $2,246,035                     $2,271,232 
Wharfage                            405,963                     509,262                       432,283 
Electrical                                   492,490                          520,754                             555,230 
Water                                 52,347                       53,453                         68,099 
Equipment Rental                      211,635                      181,070                         252,515 
Security                                  126,592                         106,136                           101,736 
Yard Use                                391,270                       489,593                          658,331 
Miscellaneous                            5,251                         6,644                           9,469 
Total Revenue                       $4,074,375                    $4,112,945                      $4,348,895 

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INTERNAL AUDIT 
FISHING & COMMERCIAL OPERATIONS - MARITIME 
RESULTS 
1.  (High)  The  Maritime  Operations  Team  and  outsourced  security 
personnel  are  responsible  for  manually  observing,  counting  and 
measuring a constantly rotating clientele of marine vessels, land vehicles 
(i.e. trucks, cranes, fishnets, etc.) and storage. We observed this process 
to be manual, labor intensive and occasionally prone to error.  Revenue 
leakage can be exacerbated if an individual is sick or out of the office, as 
limited   observations/counts   generally   occur   during   that   period. 
Additionally, segregation of duties are not adequate. 
2. (High) Maritime Operations utilizes a variety of internally developed 
Access databases and Excel spreadsheets to record billable activities. 
The billing process is at risk of error due to a manual process and limited 
error checks. The process is also inefficient, labor intensive, and includes 
redundancies. 

17

INTERNAL AUDIT 
FISHING & COMMERCIAL OPERATIONS - MARITIME 
MANAGEMENT RESPONSE 
Will be discussed by: 
Stephanie Jones Stebbins, Managing Director, Maritime 
Kelli Goodwin, Manager, Maritime Operations 

For detailed management response - see Audit Report 




18

INTERNAL AUDIT 
EMPLOYEE PARKING  AIRPORT GARAGE 
BACKGROUND 
The Seattle-Tacoma International Airport (STIA) Parking Garage is owned 
and operated by the Port of Seattle. The garage is the largest parking facility 
in the region with more than 13,000 stalls. The garage offers General parking 
and Terminal Direct parking. General parking is available on floors one to 
three and five to eight. Terminal Direct parking is available on the fourth floor 
and provides direct access to the Main Terminal via sky bridges at a slightly 
higher cost. 
In 2017, ParkingSoft was implemented replacing the Scheidt & Bachmann 
parking system. ParkingSoft includes automated entrance and exit gates and 
processes prepaid tickets and credit cards. It also monitors the remaining 
capacity. 
Employee Parking encompasses parking for Port employees, contractors, 
consultants, and tenants (i.e. concessionaires). As of November 2017, a total 
of  2,671  parking  access  cards  were  issued.  Revenue  generated  from 
employee parking was approximately $9.3 million in 2016 and increased to 
$9.6 million in 2017. 
19

INTERNAL AUDIT 
EMPLOYEE PARKING  AIRPORT GARAGE 
RESULTS 
1. (Medium) Processes related to Employee Parking at the STIA Garage
do not always incorporate internal controls to reduce the likelihood of
errors and policy exceptions. Opportunities also exist to streamline
processes, thereby increasing efficiencies. 

2. (Medium) Motorcyclists do not enter the garage the same way. Some
enter on the first floor, and pay $30, while others bypass the gated entry
and enter via Arrivals on the third floor, thus not paying a fee. Once in the
garage, motorcyclists use two unofficial parking locations. If an accident
were to occur, the Port would most likely be liable for not providing an
official parking space. 


20

INTERNAL AUDIT 
EMPLOYEE PARKING  AIRPORT GARAGE 
MANAGEMENT RESPONSE 

Will be discussed by: 
Michael Ehl, Director, Airport Operations 
Jeff Hoevet, Senior Manager, Airport Operations 

For detailed management response - see Audit Report 



21

INTERNAL AUDIT 
TRANSPORTATION NETWORK COMPANIES 
BACKGROUND 
Lyft and Rasier, LLC (Uber) entered into a pilot program with the Port on March 31, 
2016 and Wingz entered into a pilot program on April 4, 2016. The agreements 
expired on March 31, 2017 and all three are now operating on a month to month 
agreement. 
The agreements allow Lyft, Uber, and Wingz, collectively known as Transportation 
Network Companies (TNCs), to pick up and deliver passengers at the airport. 
During the audit period, TNCs paid the Port $5.00 per outbound trip or passenger 
pickup. As of late 2017, the fee was raised to $6.00 per trip. 
TNCs connect riders and drivers through a mobile application. TNC platforms 
sometimes referred to as ridesharing, connect passengers with drivers using their 
personal or non-commercial vehicle. The mobile application has functionality to 
provide the requestor, or person receiving the ride, with an estimated pick up time, 
manage the payment process, and provide customers an opportunity to evaluate 
the driver. 


22

INTERNAL AUDIT 
TRANSPORTATION NETWORK COMPANIES 
RESULTS 
1. (Medium) Uber provided IA with a list of drivers that operate at the 
airport. When IA meshed this with available trip information by month, we 
noted  some  discrepancies.  Uber  recalculated  trip  activity  based  on 
discrepancies noted, and through this process, Uber "self-identified" an 
underpayment of revenue of $30,045. 
2. (Medium) TNCs are growing faster than expected and many of the
TNC drivers did not display or present a valid King County Decal, a forhire
permit, or the TNC Trade Dress (Uber, Lyft or Wingz Logo). During
the time of our audit, King County was behind on issuing Decals and
permits, however, drivers appeared to lack a sense of urgency to pick up
and display this information. 


23

INTERNAL AUDIT 
TRANSPORTATION NETWORK COMPANIES 
MANAGEMENT RESPONSE 
1. Aviation staff agrees with the Audit team's recommendation to seek 
recovery of underreported revenue. Staff will pursue collection of the 
$30,045 from Uber and $1,250 from Wingz. 

2.  In  early  January,  Port  staff  communicated  with  TNCs  regarding 
consistent  enforcement  of  credentials.    Enhanced  enforcement  is 
underway (February 1, 2018) in agreement from King County. 


For detailed management response - see Audit Report 

24

Limited Contract Compliance Audits 
1) HOST INTERNATIONAL, INC. 





25

INTERNAL AUDIT 
HOST INTERNATIONAL, INC. 
BACKGROUND 
The original Agreement between Host and the Port was executed June 6, 
2003 for the right to operate certain food and beverage concessions at the 
Airport. In March 2016, the MAG was adjusted downward to approximately 
$5.2 million because seven stores/units were deleted from the Agreement; 
nonetheless,  the  concession  revenues  from  Host  have  consistently 
exceeded the MAG. The table below reflects the total concession revenue 
earned by the Port through the Host agreement. 
HOST CONCESSION REVENUE BY CATEGORY* 
Category                                                                      2015            2016 
Food and Beverage (Includes branded and non-branded)                                          $5,563,032          $5,129,985 
Alcohol, Beer, Wine                                                                                1,835,889           1,803,435 
Retail                                                                                                       280,397              244,252 
TOTAL                                                                               $7,679,318        $7,177,672 
* Data Source: PeopleSoft for 15 Stores Operated Under Agreement 000435 
As of 2016 Host also operated an additional nine stores under Agreement
000439 
26

INTERNAL AUDIT 
HOST INTERNATIONAL, INC. 
RESULTS 
(Medium)  For  the  period,  October  2015  to  November  2016,  Host 
reported a DBE participation of 24.29%. Host also reported a DBE 
participation of 17.15% under the Lease and Concession Agreement with 
Seattle Restaurant Associates, a partnership of Host and Uwajimaya. The 
targeted DBE participation goal in both Agreements was 25%. 
MANAGEMENT RESPONSE 
The  federal  regulation  requires  Host  to  make  good  faith  efforts  to 
maintain the 25%. Port staff have asked Host to present documentation 
on their good faith efforts to achieve the ACDBE participation goal for the 
period of the audit as well as for the time subsequent to that covered by 
the audit by the end of March 2018. Also, Port staff recognizes the need 
for additional mechanisms in the lease, short of default, for holding 
tenants accountable for non-compliance with lease provisions including 
ACDBE  good  faith  efforts.  Port  staff  will  develop  recommendations 
towards this goal for incorporation into future leases by the end of 
September 2018. 
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