P.O. Box 1209 
Seattle, Washington 98111 
www.portseattle.org 
206.787.3000 
APPROVED MINUTES 
AUDIT COMMITTEE SPECIAL MEETING DECEMBER 7, 2018 
The Port of Seattle Commission Audit Committee met in a special meeting Friday, December 7, 2018, in
the Commission Chambers at Pier 69, 2711 Alaskan Way, Seattle, Washington.  Committee members
present included Commissioners Felleman and Steinbrueck. Public member  Christina Gehrke was not
present. Also in attendance were Glenn Fernandes, Director, Internal Audit; Dan Chase, Internal Audit
Manager; Olga Darlington, Partner, Moss Adams; Tyler Reparuk, Senior Manager, Moss Adams; Rudy
Caluza, Director, Accounting and Financial Reporting; Bruce Klouzal, Senior IT Auditor; Scott Watson,
Point B consultant; Mike Tasker, Aviation Facilities and Infrastructure; Stuart Mathews, Director, Aviation
Maintenance; Dan Thomas, Chief Financial Officer; Aaron Pritchard, Commission Issues and Policy
Manager; and Paul J. White, Commission Clerk. 
Call to Order: 
The committee special meeting was called to order at 1:05 p.m. by Commissioner Felleman. 
Approval of Audit Committee Meeting Minutes of September 28, 2018: 
The minutes of the Audit Committee special meeting of September 28, 2018, were approved. 
External Audit  Moss Adams 2018 Engagement Service Plan 
The Committee received a presentation on the Moss Adams 2018 Service Engagement Plan from Ms.
Darlington and Mr. Reparuk. The audit service team was listed and the audit schedule was summarized.
Moss Adams' services include an external audit on financial statements for the port'sEnterprise Fund and
the Warehousemen's Pension Trust Fund as part of the port'sComprehensive Annual Financial Report
(CAFR). These services include the following audit and reporting activities conducted in accordance with
Government Accounting Standards: 
Internal controls and compliance over financial reporting. 
Compliance related to major federal award programs (federal grants). 
Receipts, expenditures, and controls for the Passenger Facility Charge program at Seattle-Tacoma
International Airport. 
Net revenues available for revenue bond debt service. 
Financial procedures relating to environmental remediation at Terminal 91. 


Audit Committee Minutes of December 7, 2018, submitted for review on February 4, 2019, and proposed for approval on March 1, 2019.



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FRIDAY, DECEMBER 7, 2018 
Committee members asked for more information pertaining to risk assessment methodology. Areas of audit
emphasis, based on assessment of risk, include the following: 
Internal control cycles 
Management estimates 
Bond accounts 
Accounting for leases 
Revenue recognition 
Capital assets 
Net position classification 
Pension and other post-employment benefits liabilities 
Environmental remediation liability 
Investments 
Northwest Seaport Alliance joint venture 
Uniform grant guidance ("single audit") 
Committee members asked about the scope of the audit's focus on the Northwest Seaport Alliance, which
is separately audited. They also requested clarification about the difference between the focus of an
external and internal auditor. 
2018 Audit Plan Update: 
The status of audits performed by the Internal Audit Department for 2018 was summarized. Audits not
completed in 2018 include an operational audit of the Marine Maintenance Shops, an information
technology audit of security of personally identifiable information, and a limited compliance audit of Sixt
Rent-a-Car. The latter two audits were added to the work plan in September. These three audits will carry
over to the proposed 2019 audit work plan. 
Proposed 2019 Internal Audit Plan: 
The proposed work plan for the Internal Audit Department for 2019 was presented. Ratings for risk
assessment and revenue or capital budget assessment for each item were provided, and recent revenue
recoveries related to Internal Audit activities were summarized. Audits planned in 2019 include the
following: 
Limited Contract Compliance 
Sixt Rent-a-Car LLC 
Enterprise Rent-a-Car 
Anton Airfoods 
Mad Anthony's 
Concessions Marketing Fund 
Operational 
Airport Security Screening 
Diversity Program 
Marine Maintenance



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FRIDAY, DECEMBER 7, 2018 
Capital 
Airport Baggage Optimization 
Airport Noise Insulation Programs 
Airport Concourse D Hardstand 
Shilshole Bay Marina Tenant Service Building 
Information Technology 
Security of Personally Identifiable Information 
HIPAA (Health Insurance Portability and Accountability Act) Compliance 
Payment Card Industry Quality Security Assessor 
Closed Network System Security 
T2 Airport Garage Parking System Replacement 
Contingency Audits (should resources be available) 
Lenlyn Limited (limited contract compliance) 
AlClear LLC (limited contract compliance) 
2019 Taxi Cab Contract (operational) 
Cruise Terminal (capital) 
Inventory and Control of Hardware Assets (information technology) 
The 2019 Internal Audit work plan was approved as presented. 
Operational Audit  Sea-Tac Utilities: 
The audit period covered January 1, 2017, through October 31, 2018. The audit objective was assessment
of the accuracy, completeness, and timeliness of utility billing and supporting processes. The utility was
established in 2001 to provide water, natural gas, electricity, garbage, and wastewater service to Seattle-
Tacoma International Airport. Findings focused on technical or oversight errors resulting in unbilled utility
fees. A management response was provided. 
Operational Audit  International Arrivals Facility: 
The audit period covered July 2015 through October 2018. The audit objective was to assure compliance
with key terms of the port's contract with Clark Construction. 
Three findings were presented, both with an assigned risk level of "medium." First, the maximum amount of
insurance coverage required by the port's risk management group is $3.95 per $1,000, which is in line with
general liability insurance rates in the Seattle market. The contract with Clark stipulates port reimbursement
for insurance coverage at $7.49 per $1,000. Use of the lower general liability insurance rate would have
saved the port approximately $2.8 million. Internal Audit recommends specifying a maximum insurance
coverage for port reimbursement, ensuring review of contract language by the risk management group, and
avoiding audit limitations in future contracts, as auditing facilitates transparency and enables the port to
ensure contract compliance. 
Second, payroll-related costs for the guaranteed maximum price (GMP) for the International Arrivals Facility
represent use of a labor multiplier rate that increased from 35.7 percent in the original 2015 contract with



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FRIDAY, DECEMBER 7, 2018 
Clark/SOM to 88.7 percent in the GMP contract. The labor multiplier rate in the Seattle region is typically
between  30  percent  and  45  percent  and  includes  fringe  benefits,  burdens,  bonuses,  deferred
compensation, profit sharing, health care, sick leave, vacation, et al. Use of a labor multiplier between 30
percent and 45 percent might result in a labor-related cost savings of between $8.2 million and $11 million
for the International Arrivals Facility. Auditors were unable to assess the reasonableness of the higher rate
because the contract includes a "not-subject-to-audit" clause. 
Committee members commented on the not-subject-to-audit clause applied to some of the negotiated
contractual elements. The need for the port to be able to validate future compliance and determine
reasonableness of contract requirements was stressed. 
Third, although instructed to issue subcontracts with a not-to-exceed method, and the presence of "not-to-
exceed" language in seven of the main subcontracts reviewed, Clark is managing these subcontracts on a
lump-sum basis. This means that subcontractors are compensated for 100 percent of the contract value,
regardless of actual costs. In not-to-exceed contract management, savings, decreased costs, or process
efficiencies would inure to the benefit of the port rather than the subcontractor. Lump-sum contracts do not
provide the ability to review actual costs in an open-book environment. Internal Audit recommends that
future contract language be explicit as to facilitate enforcement of reimbursement methods. 
A management response was provided. 
Information Technology Audit  Aviation Maintenance and Facilities and Infrastructure Data Centers 
The audit period covered January 1, 2017, through November 15, 2018. The audit objective was to
evaluate the effectiveness of information technology controls over Aviation Maintenance and Facilities and
Infrastructure data centers and network closets. Findings focused on appropriate controls on personnel
access, presence of clutter or storage of extraneous items, and presence of fire suppression measures. A
management response was provided. 
Information Technology Audit  Aviation Maintenance IT Change and Patch Management 
Change management and patch management processes were summarized. Current practices of the
Aviation Maintenance department reflect many best practices, though internal controls and processes have
room for improvement to meet critical infrastructure environment requirements. A management response
was provided. 
Limited Contract Compliance Audit  Thrifty Car Rental 
The audit period covered June 1, 2014, through May 31, 2017. The audit objective was to determine
whether the concessionaire complied with significant financial provisions of the lease agreement. Findings
included failure by the lessee to report $103,577 in incidental gross revenue resulting in about $10,358 in
percentage fees and failure to charge and remit $111,912 in customer facility charges to the port. A
management response was provided. 
Committee Comments: 
None.

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FRIDAY, DECEMBER 7, 2018 
Adjournment: 
There was no further business, and the special meeting adjourned at 3:17 p.m. 

Prepared:                                      Attest: 
Paul J. White, Commission Clerk                Peter Steinbrueck, Audit Committee Chair 
Minutes approved: March 1, 2019.