PowerPoint
Internal Audit Briefing Presented to the Port of Seattle Audit Committee and Tay Yoshitani, CEO Joyce Kirangi, CPA, CGMA Director, Internal Audit October 01, 2013 Agenda Audit Report 1. Lease and Concession Audits Host International Seattle Restaurant Associates Dilettante Chocolates, Inc. Massage Bar, Inc. 2. Operational Audits Central Processing System None Comprehensive Operational Audit /Departmental Audit None Limited Operational Audit Federal Inspection Services (FIS) Revenue Small Federal Grants Administration Follow-up Review of Port Fleet Operations 3rd Party Audit None Briefing/Updates None Lease and Concession Audit Host International Background HMS Host operates a food and beverage concession at Sea-Tac International Airport and formerly operated a Duty-Free concession until August of 2011. The concession agreements state that a specific percentage of gross receipts are to be paid to the Port. The concession fee percentage depends on the category of the revenue, such as non-branded food and beverage, branded food and beverage, alcohol, advertising, and merchandise. Concession Received (in thousands) 2009 2010 2011 Food & Beverage Agreement (#435) $4,513 $4,785 $5,095 Branded Food $2,466 $2,591 $3,050 Non-Branded Food $930 $976 $805 Alcohol $1,020 $1,097 $1,093 Merchandise $97 $121 $147 Duty Free Agreement (#436) $1,486 $1,926 $1,210 Advertising $7 $17 $11 Duty Free and Tax Paid $1,479 $1,909 $1,199 Total $5,999 $6,711 $6,305 Lease and Concession Audit Host International Audit Objectives The purpose of the audit was to determine whether: 1. The reported concession revenue is complete, properly calculated, and remitted timely. 2. The lessee complied with significant provisions of the lease and concession agreement. The scope of our audit covered a three-year period from January 1, 2009 through December 31, 2011. Lease and Concession Audit Host International Audit Result HMS Host did not properly report the concession owed to the Port. Specifically, certain concession amounts were reported at the lower branded food and beverage concession rate when the gross receipts did not meet the criteria defined by the agreement. In addition, HMS Host did not provide the auditor with the requested accounting records and did not provide documents in a reasonable timeframe. Three Findings Lease and Concession Audit Host International Audit Result Continued 1. HMS Host did not use the correct concession rate, resulting in an additional $635,704 owed to the port. Audit Recommendation Seek recovery of $635,704 in underpaid concession fees, late charges, and interest. Review agreement years prior to the audit period, to determine compliance with the Branded Food definition, and seek recovery, as appropriate. Seek recovery of $34,029 in audit costs, in accordance the lease agreement. Strengthen internal controls over the determination of Branded Food eligibility. Work with HMS Host to ensure that all receipts subject to the concession fee are accurately reported. Lease and Concession Audit Host International Audit Result Continued 2. Host did not provide adequate documentation to support gross sales, as required by the agreement. Audit Recommendation Seek recovery of $5,788 in underpaid concession fees, late charges, and interest. Work with the lessee to ensure compliance with record keeping requirements. Lease and Concession Audit Host International Audit Result Continued 3. Host did not transmit accounting records and other requested documents in a timely manner. Audit Recommendation Work with the Lessee to ensure compliance with the transmittal of accounting records for audit purposes. Lease and Concession Audit Seattle Restaurant Associates Background Seattle Restaurant Associates (SRA) is a joint venture between HMS Host and Uwajimaya. HMS Host is the agreement's managing partner. SRA operates or oversees ten unique food and beverage concessions for Seattle-Tacoma International Airport (STIA), with a focus on regional brands and nationally recognized chains. Under the terms of the agreement, SRA agreed to pay either a Minimum Annual Guarantee (MAG) or percentage fees (ranging from 14% to 18%) of their gross receipts, whichever is higher. Concession Category Rate 2009 2010 2011 Food & Beverage Sales 14% $4,521,394 $4,306,984 $4,552,635 Branded Food & 12% 6,031,557 6,034,610 6,346,805 Beverage Sales Alcoholic Beverage Sales 18% 3,465,210 3,337,565 3,557,223 Souvenir Merchandise 27% 0 0 0 Advertising Revenue 15% 0 0 0 TOTAL $14,018,161 $13,679,159 $14,456,663 Data Source: Seattle Restaurant Associates PeopleSoft Financials, CPA-Audited Reports for 2009-2011. 1 Data Notes: Gross Sales Receipts are rounded to the nearest dollar. Lease and Concession Audit Seattle Restaurant Associates Audit Objectives The purpose of the audit was to determine whether: 1. The reported concession revenue is complete, properly calculated, and remitted timely. 2. The lessee complied with significant provisions of the lease and concession agreement. The scope of our audit covered a three-year period from January 1, 2009 through December 31, 2011. Lease and Concession Audit Seattle Restaurant Associates Audit Result Seattle Restaurant Associates (SRA) materially complied with the terms of the Lease and Concession agreement, with two exceptions: we identified a minor revenue discrepancy for one of the subtenants, and SRA did not provide requested documents in a reasonable time frame as required by the agreement. See Schedule of Findings and Recommendations in the audit report. Two Findings Lease and Concession Audit Seattle Restaurant Associates Audit Result Continued 1. SRA did not provide adequate documentation to support gross sales, as required by the agreement. Audit Recommendation Seek recovery of $1,703 in underpaid concession fees, late charges, and interest. Work with the lessee to ensure compliance with record keeping requirements and compliance with audit requirements. Lease and Concession Audit Seattle Restaurant Associates Audit Result Continued 2. SRA did not transmit accounting records and other requested documents in a timely manner. Audit Recommendation Work with SRA to ensure compliance with the transmittal of accounting records for audit purposes. Limited Operational Audit Federal Inspection Services (FIS) Revenue Background International passengers are required to clear US Customs and Immigration by Federal Inspection Services, a division of Homeland Security of the Federal government. Per the Signatory Lease Operating Agreement (SLOA), international airlines self-report monthly the number of deplaned international passengers to the Port. The airlines are billed monthly a 1/12th of a flat annual fee and a per deplaned passenger fee. 2011 2012 FIS Passenger FIS Passenger (in thousands) Revenue* Count Revenue* Count Delta $1,308 308 $1,139 350 Horizon 583 132 432 126 British Airways 425 94 360 104 United Airlines 311 66 269 75 Lufthansa 335 72 259 72 Others 2,184 440 1,909 500 Total $5,146 1,112 $4,368 1,227 *includes both the annual and per-passenger fees Limited Operational Audit Federal Inspection Services (FIS) Revenue Audit Objectives The purpose of the audit was to determine whether: 1. Management controls are adequate to provide reasonable assurance that Federal Inspection Services (FIS) revenue is accurate and complete. The scope of our audit covered a three-year period from January 1, 2011 through December 31, 2012. Limited Operational Audit Federal Inspection Services (FIS) Revenue Audit Result Management controls are adequate to provide reasonable assurance that Federal Inspection Services revenue is accurate and complete. No Findings Limited Operational Audit Small Federal Grants Administration Background The scope of our audit covered the period January 1, 2011 - December 31, 2012. We focused on federal grants below $100,000 and smaller Port departments that charge less than significant costs to federal grants and which may not have been audited in the past. Description 2011 2012 Total Federal Expenditures $22,713,762 $27,751,934 Total Audited Federal Expenditures $20,496,443 $25,522,201 Total Unaudited Grants (including the grants under $100,000) $2,217,319 $2,229,733 Total Grants Under $100,000 (included in unaudited) $173,798 $226,426 Source: Schedules of Expenditures of Federal Awards (SEFA) Limited Operational Audit Small Federal Grants Administration Audit Objectives The purpose of the audit was to determine whether: 1. There are adequate policies and procedures to guide the administration of smaller grants. 2. The administrators of the smaller grants are provided adequate training in federal grant requirements. 3. Costs for smaller grant-funded projects are properly estimated prior to grant application, to ensure that requested federal funding is maximized and Port funding is minimized. 4. Controls over receipt of federal funds are adequate. Limited Operational Audit Small Federal Grants Administration Audit Result The policies and procedures that guide the administration of smaller grants are adequate. Training provided to the administrators of smaller grants is adequate. Costs of smaller grant-funded projects are properly estimated prior to grant application. Controls over receipt of federal funds are adequate. No Findings Limited Operational Audit Follow-up Review of Port Fleet Operations Background In September 2011, Internal Audit completed a limited operational audit of the Port's fleet maintenance operations (Audit Report No. 2011-16) with the following conclusion: "The fleet maintenance shops have adequate controls to ensure maintenance operations are efficient, effective, and in compliance with internal policies and procedures. However, we identified two significant issues related to the monitoring and oversight of fleet management activities." We issued two audit findings: 1. Maximo Software (IBM) for Fleet Maintenance Is Not Used At Optimal Capacity: The Port's fleet management software, Maximo, was not utilized effectively to manage fleet, particularly with identifying fleet assets. 2. Certain Requirements of the Fleet Management Policy Are Not Being Met: Executive Policy 17: The Port's fleet policy requirements for the use of fleet assets were not being consistently tracked and met among the various groups utilizing assigned and pool vehicles. Limited Operational Audit Follow-up Review of Port Fleet Operations Audit Objectives The purpose of the audit was to determine the status of the prior audit's findings and recommendations: 1. Management has implemented recommendations to ensure optimal use of Maximo. 2. The requirements of Executive Policy 17 (as revised by management) are being met. We reviewed information for the period October 1, 2011 June 30, 2013 Limited Operational Audit Follow-up Review of Port Fleet Operations Audit Result Management has implemented the recommendations to ensure optimal use of Maximo, and continues to pursue process improvements. Management is in process of ensuring that the requirements of the recently amended EX-17 are being met. No Findings
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.