The Audit Meeting meeting scheduled for 2023-06-30 at Pier 69

Transcript

The Audit Meeting meeting scheduled for 2023-06-30 at Pier 69

YOU
THIS IS COMMISSIONER MOHAMED CALLING
THIS CALLING TO ORDER
THE PORT OF SEATTLE'S AUDIT COMMITTEE SPECIAL MEETING TO ORDER
TODAY IS FRIDAY, JUNE 30, 2023, AND THE TIME IS 1059
WE ARE MEETING TODAY AT THE PORT OF SEATTLE'S HEADQUARTERS, COMMISSIONER CHAMBERS AND VIRTUALLY VIA TEAMS PLATFORM
PRESENT WITH ME TODAY IS COMMITTEE MEMBERS COMMISSIONER SAM CHO AND PUBLIC MEMBER SARAH HOMESTORM
TO MAKE THIS MEETING MORE ACCESSIBLE TO THE PUBLIC, THE MEETING IS BEING LIVE STREAMED AND DIGITALLY RECORDED, AND MAY BE VIEWED OR HEARD AT ANY TIME ON THE PORT'S WEBSITE
A CALL IN TELEPHONE NUMBER IS ALSO PROVIDED FOR ANYONE WHO WOULD LIKE TO LISTEN IN INTO THE MEETING
THE FIRST ITEM OF BUSINESS IS THE APPROVAL OF OUR LAST MEETING MINUTES FROM APRIL 6, 2023
AS A REMINDER TO THE VIEWING AUDIENCE, THE PUBLIC MEMBER OF THE AUDIT COMMITTEE, SARAH, IS NOT A VOTING MEMBER FOR THE PURPOSES OF CASTING VOTES ON MOTIONS MADE PER THE COMMITTEE RULES
ARE THERE ANY CORRECTIONS TO THE MINUTES? ARE THERE ANY OBJECTIONS TO APPROVE TO APPROVAL OF THE MINUTES AS PRESENTED HEARING NONE
THE MINUTES ARE APPROVED
THAT TAKES US INTO ITEM NUMBER THREE, THE MOSS ADAMS 2022 FINANCIAL STATEMENT AUDIT RESULTS
MR FERNANDEZ, PLEASE INTRODUCE OUR SPEAKERS TODAY
THANK YOU, COMMISSIONER
TODAY WE HAVE OLGA DARLINGTON, WHO'S PARTNER AT MOSS ADAMS, AND CONOR MCAULEY, WHO'S A SENIOR AUDITOR WHO DID THE WORK, WHO'S PART OF THE TEAM
AND THEY'LL BE TALKING ABOUT OUR FINANCIAL STATEMENT AUDIT RESULTS FOR THE YEAR
OLGA, IT'S ALL YOURS
THANK YOU, GLENN
GOOD MORNING, COMMISSIONERS OR MEMBERS OF THE COMMITTEE
AND WE HAVE A SHORT SLIDE PRESENTATION, SOME VISUALS FOR PRESENTING TO YOU THE RESULTS OF THE 2022 YEAR END AUDIT
OKAY
ALL RIGHT, WE CAN GO TO THE NEXT SLIDE
SO, WHAT WE WILL PRESENT TO YOU TODAY IS THE OVERVIEW OF THE REPORTS THAT WE HAVE ISSUED AS A RESULT OF THE AUDIT
WE ALWAYS LIKE TO TALK TO TELL YOU A LITTLE BIT MORE ABOUT THE SIGNIFICANT AREAS OF THE AUDIT WHERE WE SPENT A LOT OF AUDIT EFFORTS, TOUCH ON INTERNAL CONTROLS AND THEN COVER THE MATTERS THAT ARE REQUIRED TO BE COMMUNICATED TO THOSE [inaudible 00:03:20] GOVERNANCE, SUCH AS THE AUDIT COMMITTEE
BRIEFLY OVERVIEW THE UPCOMING ACCOUNTING STANDARDS THAT THE PORT WILL BE IMPLEMENTING IN THE FUTURE YEARS
ON THE NEXT SLIDE, THIS IS THE HIGHLIGHT OF OUR PRESENTATION
SO, THE AUDIT WAS COMPLETED IN APRIL, AND AS A RESULT OF OUR AUDIT ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2022, WE ISSUED SEVERAL REPORTS
THE FIRST ONE IS THE REPORT ON THE FINANCIAL STATEMENTS THEMSELVES, AND THEY COVER THE ENTERPRISE FUND, WHICH WAS THE PORT ITSELF, AS WELL AS THE FIDUCIARY FUND, WHICH IS THE WAREHOUSMAN'S PENSION TRUST FUND
THE PORT IS UNMODIFIED OPINION, WHICH IS, AS YOU KNOW, A CLEAN OPINION
THAT'S EXACTLY THE KIND OF OPINION THAT YOU WANT AS A RESULT OF FINANCIAL AUDIT
ALSO ISSUED THE PORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
THAT REPORT GENERALLY WOULD DISCLOSE ANY MATERIAL WEAKNESSES OR SIGNIFICANT DEFICIENCIES IF WE HAD FOUND THEM
POLICE TO REPORT
THERE WERE NO FINDINGS IN THAT REPORT AS WELL
ADDITIONAL COMPLIANCE REPORT WAS RELATED TO THE FEDERAL AWARDS THAT THE PORT SPENDS THROUGHOUT THE YEAR
THE TWO REPORTS WERE ISSUED, ONE ON THE COMPLIANCE SCHEDULE ITSELF
IT'S A SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, AND THE SECOND REPORT ONCE AGAIN ON INTERNAL CONTROLS COVERING THE COMPLIANCE WITH THOSE FEDERAL AWARDS
THAT REPORT INCLUDED ALL OF THE FEDERAL AWARDS THAT THE PORT RECEIVED IN 2022, AND ONE MAJOR PROGRAM WAS IDENTIFIED FOR TESTING AND THAT'S AIRPORT IMPROVEMENT PROGRAM THAT SHOWED EXPENDITURES OF 174,000,000, OF WHICH 149,000,000 WERE COVID RELATED FUNDS THAT WERE RECEIVED
ON THE NEXT SLIDE, WE HAVE A FEW MORE REPORTS THAT WE HAVE ISSUED
THE FIRST ONE IS THE AUDIT REPORT ON THE SCHEDULE OF PASSENGER FACILITY CHARGES
THIS IS A SPECIAL COMPLIANCE REPORT THAT'S REQUIRED TO BE SUBMITTED TO FEDERAL AVIATION ADMINISTRATION, AND IT'S PERFORMED IN ACCORDANCE WITH A SPECIAL GUIDE THAT FAA ISSUES FOR COLLECTION AND DISBURSEMENT OF PASSENGER FACILITY CHARGE FEES
ANOTHER REPORT ON SCHEDULE OF NET REVENUES AVAILABLE FOR REVENUE BOND DEBT SERVICE
THAT'S A TEN YEAR SCHEDULE THAT SHOWS REVENUES AND EXPENDITURES AND COMES TO A CALCULATION OF A DEBT SERVICE COVERAGE THAT THE PORT COMPLIES WITH
AND THEN TWO REPORTS ON AGREED UPON PROCEDURES THAT ARE SPECIFICALLY OUTLINED AND GO TO THE DEPARTMENT OF ECOLOGY AND DEPARTMENT ENVIRONMENTAL PROTECTION AGENCY
SO THAT COVERS ALL OF THE REPORTS
NO FINDINGS IN ANY OF THE REPORTS
SO THEY'RE ALL CLEAN
ALL GOOD NEWS
ALL RIGHT
I'LL ASK CONNOR TO COVER SOME OF THE AREAS OF AUDIT EMPHASIS FOR US
YES, HI
I'M JUST GOING TO COVER KIND OF WHERE OUR FOCUS WAS DURING THE AUDIT TO START OFF WITH INTERNAL CONTROL ENVIRONMENT
FOR ANY BUSINESS OR ANY ENTITY, INTERNAL CONTROLS ARE IMPORTANT TO MAKE SURE THAT DAY TO DAY TRANSACTIONS ARE BEING PROPERLY APPROVED AND RECORDED
SO SOME OF THE MAIN CONTROL PROCESSES WE LOOKED AT WERE AROUND CAPITAL ASSETS AND PROJECT MANAGEMENT, THE CASH RECEIPTS AND RECEIVABLES
THE OTHER SIDE OF THAT IS THE CASH DISBURSEMENTS AND PAYABLES, BOND AND INVESTMENT TRANSACTIONS, AS WELL AS THE ADMINISTRATION OF FEDERAL AWARDS, AS OLGA MENTIONED, WITH THE MAIN FOCUS ON KIND OF COVID-19 FUNDING THIS YEAR
ANOTHER AREA IS MANAGEMENT ESTIMATES
ANYTIME YOU HAVE ESTIMATES INVOLVED, THERE'S A HIGH LEVEL OF JUDGMENT INVOLVED
AND SO FOR ANY SIGNIFICANT ESTIMATES, WE PAY CLOSE ATTENTION TO THAT
SOME OF THESE ESTIMATES INCLUDE THE ALLOWANCE FOR DOUBTFUL ACCOUNTS, ENVIRONMENTAL REMEDIATION LIABILITY, LEGAL CONTINGENCIES AND INSURANCE RECOVERIES, AND ACTUARIAL VALUATIONS OF PENSION AND POST EMPLOYMENT BENEFITS
AND THEN WE ALSO TAKE A LOOK AT THE NORTHWEST SEAPORT ALLIANCE JOINT VENTURE
THEY ACTUALLY ISSUE THEIR REPORT BEFORE WE DO SO WE CAN KIND OF TAKE A LOOK AT THAT AND CONFIRM THE PORT SHARE OF THAT JOINT VENTURE OPERATING REVENUE AND THEN CAPITAL ASSETS
AS YOU GO THROUGH THE FINANCIAL REPORT, YOU'LL SEE THAT'S ONE OF THE LARGER ITEMS, LARGER BALANCES
AND SO WE TAKE A LARGE LOOK INTO THERE
SOME OF OUR CONSIDERATIONS INCLUDE CAPITALIZATION POLICIES, TESTING OF ADDITIONS, ANY RETIREMENTS, THE APPLICATION OF OVERHEAD THROUGHOUT THE YEAR
AND THEN IN THE PAST FEW YEARS WE'VE SPENT EXTRA CONSIDERATION AROUND THE TIMELY CLOSING OF CAPITAL IMPROVEMENT PROJECTS, SPECIFICALLY AROUND YEAR END AND MAKING SURE IF A PROJECT IS IN SERVICE IT IS BEING RECORDED AND DEPRECIATION IS GOING AS OPPOSED TO BEING IN CONSTRUCTION AND PROCESS WHERE IT WOULD NOT BE DEPRECIATING
ON THE NEXT SLIDE WE HAVE A FEW MORE AREAS
SO ANOTHER LARGE BALANCE ON THE REPORT WILL BE BOND ACTIVITY AND DEBT AND SO WE ALWAYS TAKE A LOOK THERE
WE TESTED THE FIVE NEW BOND ISSUANCES AND FOUR REFUNDING BONDS THIS YEAR
WE ALSO LOOK AT DEBT REPAYMENTS, ARBITRAGE LIABILITIES, ANY COMPLIANCE WITH RELEVANT COVENANTS ATTACHED TO THOSE DEBT, DEBT AND THEN PROCEDURES OVER THE NET REVENUE SCHEDULE AND MAKING SURE THAT ALL TIES OUT CORRECTLY AND THEN MOVING ON
WE'VE GOT THE AIRPORT LEASE AND OPERATING AGREEMENT
THIS IS THE LARGE SOURCE OF REVENUE, ONE OF THE LARGE SOURCES OF REVENUE FOR THE PORT
WE DO BOTH A TEST OF DETAIL AND ANALYTICAL APPROACH
ANALYTICAL APPROACH WILL TAKE A LOOK AT BUSINESS INDICATORS SUCH AS LANDING WEIGHT AND PLANE MINT, GATE USAGE
WE'LL DEVELOP OUR OWN EXPECTATION ON WHAT WE'D EXPECT, LANDING FEES, TERMINAL RENTS AND GATE FEES TO BE COMPARE THAT TO WHAT THEY ACTUALLY WERE AND THEN ANY LARGE DIFFERENCES WE'LL KIND OF INVESTIGATE AND UNDERSTAND
AND THEN WE ALSO SEND CONFIRMATIONS OF REVENUE OUT TO SOME OF THE LARGER AIRLINES TO GET COMFORT OVER THERE
OTHER SOURCES OF REVENUE WE'RE LOOKING AT ARE ADVALORUM TAX LEVIES, INVESTMENT INCOME, PASSENGER FACILITY CHARGES, CUSTOMER FACILITY CHARGES AND FEDERAL GRANTS
AND THEN LAST BUT NOT LEAST WE ALSO LOOK AT THE COLLECTIBILITY OF ANY RELATED RECEIVABLES AT YEAR END TO MAKE SURE THAT IF THEY ARE RECORDED AS REVENUE THE EXPECTATION IS THAT THEY ARE BEING COLLECTED
AND ON THE NEXT SLIDE ONE OF THE MORE SIGNIFICANT AREAS THIS YEAR, IF NOT THE MOST SIGNIFICANT AREA WAS LOOKING AT MANAGEMENT'S IMPLEMENTATION OF THE NEW GASB LEASING STANDARD GASB 87
SO A COUPLE OF THINGS WITH THIS STANDARD IS IT IS RETROACTIVELY APPLIED TO DECEMBER 31, 2020 AND 2021, WHICH RESULTED IN A RESTATEMENT I'LL COVER IN A SEC AND THE PORT
AND ESSENTIALLY WHAT IT DOES IS IT TAKES THE NET PRESENT VALUE OF ALL EXPECTED AS THE LESSEE OR LESS OR SORRY ALL EXPECTED FUTURE PAYMENTS OF LEASES AND PUTS THAT AS AN ASSET ON THE BALANCE SHEET AND A CORRESPONDING DEFERRED INFLOW AND THEN AS A LESSEE THERE WOULD BE THE LEASE LIABILITIES KIND OF IN SIMILAR THEORY THERE
AND THEN IT ALSO MOVES SOME REVENUE BELOW THE OPERATING INCOME LINE INTO KIND OF AN OTHER INCOME LEASE INTEREST EXPENSE
SO THOSE ARE KIND OF THE MAIN IMPLEMENTATION STUFF THAT WE LOOKED AT
PORTS MANAGEMENT HAS BEEN WORKING ON THIS IMPLEMENTATION FOR MULTIPLE YEARS NOW AND WE WERE ABLE TO WORK THROUGH MOST OF OUR TESTING IN SEPTEMBER AND NOVEMBER OF LAST YEAR, AND THEN KIND OF FINISH IT UP WHEN WE WERE OUT FOR FINAL FIELD WORK IN MARCH OF THIS YEAR
AS YOU CAN SEE, THE OVERALL RESTATEMENT IMPACT WAS PRETTY SIGNIFICANT
THERE'S ADDED LEASE RECEIVABLE OF 345,000,000 AND THAT DEFERRED INFLOW IN THE SAME AMOUNT
THERE'S SOME INTANGIBLE LEASED ASSETS OF 8.5 MILLION AND RELATED ACCUMULATED AMORTIZATION OF 3.8 MILLION
ON THE LESSEE SIDE, THERE'S THAT 4.7 MILLION IN LEASE LIABILITIES THAT'S BEEN ADDED, AND THEN A DECREASE IN FINANCIAL YEAR END 2000 AND 22,021 OPERATING REVENUE OF 11 MILLION AND 12 MILLION
AND ESSENTIALLY IT JUST RECLASSED THAT DOWN BELOW OPERATING INCOME TO LEASE INTEREST
SOME OF THE PROCEDURES WE PERFORMED AS PART OF OUR AUDIT INCLUDED REVIEWING MANAGEMENT'S PROFESSIONAL MEMOS AND WHITE PAPERS OF THEIR UNDERSTANDING OF THE GUIDANCE AND IMPLEMENTATION
AND THEN WE RECALCULATED MANAGEMENT'S CALCULATIONS FOR THE NET PRESENT VALUE CALCULATIONS AND THEN ENSURED THAT PROPER DISCLOSURES AND REQUIRED DISCLOSURES WERE BEING MADE
WE ALSO TO DO THAT, WE SELECTED A SAMPLE OF LEASE AGREEMENTS AND REPERFORMED THE CALCULATIONS THAT MANAGEMENT HAD PERFORMED
NEXT SLIDE, PLEASE
SO THEN FINALLY, ON THE OTHER AREAS, THE PORT IS A FIDUCIARY FOR THE WAREHOUSEMAN'S PENSION TRUST FUND
AND SO WE ALWAYS PERFORM PROCEDURES AROUND THAT, WHICH INCLUDE LOOKING AT INVESTMENT BALANCES AND DISTRIBUTIONS
AT THIS POINT, THERE'S NO MORE CONTRIBUTIONS, SO PRIMARILY FOCUSED ON THOSE DISTRIBUTIONS AND THEN INFORMATION TECHNOLOGY
AND IT IS JUST A GROWING SUBJECT AROUND THE WORLD IN GENERAL WITH THE TECHNOLOGICAL ERA THAT WE'RE IN
AND SO WE HAVE OUR IT SPECIALISTS COME IN AND DO INTERNAL CONTROL TESTING AND IT TESTING AROUND SOME GENERAL COMPUTER CONTROLS, PRIMARILY AROUND THE SECURITY AND ACCESS, PROVIDING ACCESS AND REVOKING ACCESS IN A TIMELY MANNER, WHERE THEY'RE ALSO LOOKING AT THE EXCHANGE OF INFORMATION BETWEEN SYSTEMS AND ENSURING THAT THAT INFORMATION IS COMPLETE AND ACCURATE AS IT'S BEING TRANSFERRED BETWEEN THE DIFFERENT SYSTEMS AND THEN FINALLY, AS OLGA KIND OF TOUCHED ON EARLIER, WE HAVE SEPARATE PROCEDURES AROUND FEDERAL AWARDS AND THE EXPENDITURES OF THOSE FEDERAL AWARDS
THIS YEAR, WE IDENTIFIED THE AIRPORT IMPROVEMENT PROGRAM AS THE SIGNIFICANT FEDERAL AWARD
YOU CAN SEE UP THERE, 174,000,000 OF THE TOTAL 175,000,000 SPENT WAS PART OF THIS IMPROVEMENT PROGRAM
AND THEN WE HAD A SPECIAL FOCUS ON COVID RELIEF FUNDING, WHERE 149,000,000 OF THAT 74 MILLION WERE RELATED TO THAT
SO, ON THE NEXT SLIDE, WE'LL GO OVER JUST SOME REQUIRED COMMUNICATIONS WE HAVE
AS THE AUDITOR, OUR RESPONSIBILITY IS TO FORM AND EXPRESS AN OPINION ABOUT WHETHER THE FINANCIAL STATEMENTS ARE FAIRLY PRESENTED
AND THEN WE ALSO PLAN AND PERFORM OUR AUDIT IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS AS WELL AS GOVERNMENT AUDITING STANDARDS
I DO WANT TO POINT OUT THAT THIS DOES NOT RELIEVE PORT MANAGEMENT AND THE PORT COMMISSION OF THEIR RESPONSIBILITIES TO THE ACCURATE REPORTING
OUR AUDIT WAS PERFORMED TO THE PLANNED SCOPE
THERE WEREN'T ANY CHANGES IN THAT SCOPE DURING OUR PROCEDURES AND THE TIME FRAME
I'D ALSO LIKE TO POINT OUT, NOTE ONE IN THE ANNUAL FINANCIAL REPORT WILL SUMMARIZE THE SIGNIFICANT ACCOUNTING POLICIES AND IT ALSO DISCUSSES THE IMPACT OF GAS V 87 AND THOSE NEW POLICIES THERE
AND THEN, PLEASED TO SAY THERE ARE NO DISAGREEMENTS WITH MANAGEMENT OR DIFFICULTIES ENCOUNTERED DURING THE AUDIT
IS A CLEAN AUDIT AND WE APPRECIATE MANAGEMENT'S DILIGENCE ON THAT
AND THEN ON THE NEXT SLIDE, SIMILAR, THERE WERE NO UNCORRECTED AUDIT ADJUSTMENTS IDENTIFIED AS WELL
SO CLEAN OPINION THERE, WE DIDN'T UNCOVER ANY ILLEGAL ACTS, ANYTHING LIKE THAT
THERE IS ALSO NO CONCERN WITH THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN FOR ONE YEAR PAST THE ISSUANCE DATE
AND THEN WE ALSO DO HAVE KIND OF TARGETED PROCEDURES TOWARDS FRAUD IN THE FINANCIAL STATEMENT AUDIT, AND THESE PROCEDURES INCLUDE TARGETED JOURNAL ENTRY TESTING, DEFERRED PAYMENT PLAN ANALYSIS, AS WELL AS INTERVIEWS WITH EXECUTIVE PERSONNEL AND PORT MANAGEMENT
JUST A COUPLE MORE THINGS
SO ON THE NEXT SLIDE, WE HAVE NEW AND UPCOMING ACCOUNTING PRONOUNCEMENTS
SO YOU NOTICE THAT THE STANDARDS THAT WERE IMPLEMENTED IN 22, THE GATSBY 87 GOT KIND OF THE MOST PUBLICITY, BUT THERE WERE OTHER STANDARDS THAT THE PORT WORKED THROUGH IMPLEMENTATION OF
ONE NOTE ON GATSBY 87 IS THAT AS A RESULT OF IMPLEMENTATION OF THAT STANDARD AND BECAUSE IT HAD SUCH A SIGNIFICANT IMPACT, PARTICULARLY ON PREVIOUSLY REPORTED RESULTS FOR 2021 AND 2020, THERE IS AN EMPHASIS OF A MATTER PARAGRAPH IN OUR OPINION, WITH RESPECT TO IMPLEMENTATION OF THAT STANDARD
IT DOES NOT IMPACT THE UNMODIFIED OPINION THAT WE ISSUE, BUT IT DOES HIGHLIGHT THAT THERE'S A SIGNIFICANT NEW STANDARD THAT WAS IMPLEMENTED THAT RESTATED PRIOR PERIOD PRESENTATION
SO JUST WANTED TO HIGHLIGHT THAT FOR YOU ON THE UPCOMING ACCOUNTING PRONOUNCEMENTS
AS ALWAYS, I'D LIKE TO SAY THAT GATSBY DOESN'T SLOW DOWN
THERE'S QUITE A FEW NEW STANDARDS THAT ARE COMING UP IN THE NEXT COUPLE OF YEARS
THE BIGGER ONE, ONES THAT WE WILL BE WORKING WITH FOR 23 IMPLEMENTATION IS THE GATSBY 96 SUBSCRIPTION BASED INFORMATION TECHNOLOGY ARRANGEMENTS, WHICH IS VERY SIMILAR TO GATSBY 97 BUT RELATES TO SOFTWARE AS A SERVICE TYPE AGREEMENTS AND OTHER IT ARRANGEMENTS
SO MANAGEMENT IS WORKING ON THAT IMPLEMENTATION ALREADY
WE'RE TAKING A LITTLE BREATHER AFTER 87 AND WE'LL GET RIGHT BACK INTO THAT IMPLEMENTATION IN THE FALL
AND THE NEXT SLIDE IS WE ALWAYS LIKE TO ACKNOWLEDGE THE TEAM HERE AT THE PORT, NOT ONLY AFR TEAM, BUT ALSO THE INTERNAL AUDIT, THE EXECUTIVES, WE TALK WITH MANY, MANY PEOPLE THROUGHOUT THE ORGANIZATION IN AVIATION, MARITIME AND ECONOMIC DIVISION AND ALL OF THE DIFFERENT DIVISIONS
AND EVERYBODY IS VERY COLLABORATIVE, VERY OPEN IN ANSWERING OUR QUESTIONS AND PROVIDING INFORMATION
SO JUST WANT TO THANK THE PERSONNEL, EVERYONE THAT HAD CONNECTED WITH US DURING THE AUDIT OVER THE COURSE OF A FEW MONTHS AND ASSISTED US IN GETTING THE AUDIT DONE TIMELY
ALSO WANTED TO POINT OUT THAT GASB 87 IMPLEMENTATION WAS JUST A HUGE, HUGE UNDERTAKING FOR THE PORT TEAM
AND AS MUCH OF WORK AS THAT WAS, THE INFORMATION WAS STILL PROVIDED TO US FOR THE AUDIT ON TIME AS WE REQUESTED
SO THAT FACILITATED US ISSUING THE REPORTS ON A VERY SIMILAR TIMELINE AS IT HAS IN THE PAST
SO THERE WERE NO DELAYS BECAUSE OF THAT BIG IMPLEMENTATION
I JUST WANTED TO COMPLIMENT THE PORT AFR TEAM ON THAT HUGE UNDERTAKING
AND AS CONNOR MENTIONED, WE DID NOT HAVE ANY AUDIT ADJUSTMENTS AS A RESULT OF OUR AUDIT, WHICH MEANS ALL OF THE INFORMATION THAT WE WERE PRESENTED WITH WAS ACCURATELY STATED FROM THE START
AND I ALWAYS LIKE TO HIGHLIGHT THAT WE DO WORK WITH SMALL BUSINESS FIRMS AS PART OF OUR AUDIT TEAM
THERE WERE THREE DIFFERENT FIRMS, ACTUALLY THAT WORKED WITH US THROUGHOUT THE 22 AUDIT, TWO OF WHICH ARE WOMEN OWNED BUSINESS ENTITIES DESIGNATED AS SUCH
SO OVERALL, 12% OF OUR TOTAL AUDIT CONTRACT WENT TO THOSE TWO FIRMS THAT ARE WOMEN OWNED
SO WE INTEND TO CONTINUE THAT RELATIONSHIP WITH THOSE FIRMS AND THEY'RE A BIG PART OF OUR TEAM
AND THAT CONCLUDES OUR PRESENTATION
THANK YOU
THANK YOU BOTH FOR PRESENTING AND THANKS TO THE ENTIRE MOSS ADAMS TEAM
IT'S ALWAYS GOOD TO HEAR THAT WE HAD A CLEAN AUDIT, ESPECIALLY CONSIDERING WITH ALL THE FEDERAL COVID $19 THAT WERE INCLUDED IN THOSE AUDITS
SO REALLY APPRECIATE THE WORK THAT YOU DO AND THANKS TO ALL OF OUR PORT STAFF WHO PARTICIPATED AND SUPPORTED YOU GUYS THROUGH THAT PROCESS
ARE THERE ANY QUESTIONS FROM OUR COMMITTEE MEMBERS AT THIS TIME? I HAVE TWO QUICK QUESTIONS, IF THAT'S OKAY
YES, PLEASE
THE FIRST QUESTION I HAVE IS, WHEN WE DO OUR NPV CALCULATIONS, WHAT'S THE TIME PERIOD THAT WE CONSIDER, OR IS IT JUST LIKE THE LIFE OF THE LEASE OR HOW IT DOES TAKE INTO ACCOUNT THE LIFE OF THE LEASE? AND THE LIFE OF THE LEASE IS DEFINED BY THE ORIGINAL TERM OF THE LEASE AND ANY EXTENSION PERIODS THAT ARE CERTAIN TO BE EXERCISED DURING THAT
SO IT'S NOT JUST THE AGREEMENT PERIOD
THERE'S ADDITIONAL TERMS THAT ARE INCLUDED TO THAT, WHICH WAS PART OF THE CHALLENGE IN IDENTIFYING WHAT IS THE CORRECT PERIOD FOR THAT CALCULATION
FOR EVERY SINGLE CONTRACT, THE PORT TEAM HAD TO GO THROUGH, READ THOSE CONTRACTS, IDENTIFY THE CORRECT PERIODS THAT WOULD BE INCLUDED IN THAT CALCULATION
SO, FOR INSTANCE, IF WE HAVE A TEN YEAR LEASE WITH THREE TWO YEAR EXTENSIONS, THEN YOU WOULD COUNT THOSE EXTRA SIX YEARS? THAT IS CORRECT
A COMMISSIONER SHOW ONLY IF WE DETERMINE TO BE HAPPENING
IT'S NOT JUST AN OPTION SITTING OUT THERE
I'M SORRY
THANK YOU FOR RECOGNIZING ME, MADAM CHAIR
I'M RUDY KALUZA, AFR DIRECTOR, ACCOUNTING, FINANCIAL REPORTING
THANK YOU FOR THE QUESTION, COMMISSIONER CHO
AND JUST AS OLGA MENTIONED A LITTLE EARLIER, IS WE HAVE TO MAKE A JUDGMENT CALL IN TERMS OF IS IT LIKELY TO HAPPEN OR NOT? AND THESE EXTENSIONS ARE LIKELY TO HAPPEN
THEY WILL FACTOR THEM IN THE NET PRESENT VALUE CALCULATION
IF NOT SO THAT'S THE SCRUTINY WE RECEIVED FROM MOSS ADAMS AS WELL
I SEE
AND THEN LASTLY, WHEN IT COMES TO AUDITING, THINGS LIKE PFCS, HOW MUCH OVERLAP, IF ANY, IS THERE WITH ANY AUDITS WE MIGHT HAVE WITH THE FAA? IS IT SOMETHING THAT WE REPLICATE, SOMETHING WE CAN JUST PASS ON? OR ARE THEY TWO COMPLETELY SEPARATE AUDITS THAT WE MAY HAVE TO UNDERTAKE? THEY ARE SEPARATE AUDITS
SO THE PFC AUDIT THAT WE ARE PERFORMING IS REQUIRED BY FAA TO BE COMPLETED ANNUALLY IN ACCORDANCE WITH THE CRITERIA THAT THEY HAVE SET
THEY GENERALLY COME AND PERFORM THEIR AUDITS AT SPECIFIC TIMES
SO AT THE COMPLETION OF, FOR EXAMPLE, OF A CERTAIN APPLICATION OR FOR OTHER NON FINANCIAL AUDITS
SO THEY'RE NOT DEFINITELY NOT
SO IT'S NOT A DELEGATED AUDIT WHERE WE SEND THEM OUR AUDIT REPORT AND SAY, CHECK OFF THE BOX
THE FAA ACTUALLY COMES AND PERFORMS THE AUDIT THEMSELVES, NOT THE PFC AUDIT? NO, THEY RELY ON OUR REPORT THAT IS SUBMITTED TO THEM EVERY YEAR AFTER IT'S COMPLETED
CORRECT
OKAY, GREAT
OKAY
THAT'S WHAT I WANT
THANK YOU
COMMISSIONER [inaudible 00:22:39] , CLARIFY, PLEASE
THANK YOU FOR RECOGNIZING ME
YES, THESE ARE REQUIRED AUDITS BY THE FEDERAL AGENCIES, AND THEREFORE, WE'RE REQUIRED AS A PORT ENTITY TO OBTAIN INDEPENDENT AUDITOR ENGAGEMENT WITH REGARD TO THIS
AND THIS PROVIDES THE CREDIBILITY TO THE PUBLIC WITH REGARD TO ACCOUNTABILITY AS IT RELATES TO PASSENGER FACILITY CHARGE REVENUES
AND WE'RE TALKING A LOT, AS WELL AS EVEN THE SINGLE AUDIT, WHICH COVERS THE MAJOR FEDERAL GRANT PROGRAMS AS WELL
BUT THE MANDATORY REQUIREMENT IS THAT WE OBTAIN INDEPENDENT AUDITOR OBSERVATION AND SCRUTINY
AND COMMISSIONER CHO, IF I CAN ADD ONE MORE COMMENT, I BELIEVE BECAUSE THE FAA REQUIRES THESE AUDITS AND MOSS ADAMS IS DOING THESE AUDITS, THERE'S NO DUPLICATION
THE FAA IS RELYING ON THEIR WORK, AND THEY'RE ASKING THEM
GREAT
YEAH, THAT'S WHAT I WAS CURIOUS ABOUT
THANK YOU
ANY OTHER ADDITIONAL QUESTIONS? YEAH
RECOGNIZE MADAM CHAIR
ABSOLUTELY
GO FOR IT
THANK YOU SO MUCH
I JUST WANT TO EMPHASIZE, SINCE THIS IS PUBLIC VISIBILITY, THAT THE PORT OF SEATTLE REALLY NEEDS TO BE VERY PROUD OF OUR COLLEGE MISSIONS HERE
THIS IS A HUGE AUDIT
IT'S ON OUR FINANCIAL STATEMENTS
WE'RE TALKING ABOUT OVER A BILLION DOLLARS COMING IN, BILLION DOLLARS GOING OUT ANNUALLY, AS WELL AS ABOUT 10 BILLION IN CAPITAL ASSETS AND ALL OF THE COMPLEXITIES RELATED TO THE INDUSTRY PRESCRIBED ACCOUNTING STANDARDS
WE'RE REQUIRED TO COMPLY TO THE T, AND WE'RE AUDITED TO THAT LEVEL OF SCRUTINY, BUT ALSO TO ALSO ENSURE INDEPENDENCE AND CREDIBILITY OF MOSS ADAMS AUDITS
STATE AUDITOR'S OFFICE GOES TO MOSS ADAMS OFFICES AND REVIEW THEIR AUDIT WORK PAPERS AS WELL TO VALIDATE THAT THE AUDIT WAS CONDUCTED IN ACCORDANCE WITH RCW REVISED CODE OF WASHINGTON EXPECTATIONS, WHICH PRESCRIBED IN ACCORDANCE WITH INDUSTRY PRESCRIBED ACCOUNTING STANDARDS AS WELL
SO THIS IS SOMETHING TO BE VERY PROUD OF, BUT IT'S ALSO A DEMONSTRATION OF ACTUALIZING, WHERE IT STARTS FROM THE TOP
THE PRIORITY SET BY THE PORT COMMISSION YOURSELVES WITH REGARD TO ENSURING THAT WE DEMONSTRATE FINANCIAL TRANSPARENCY, PUBLIC ACCOUNTABILITY, ALL THAT RESPONSIBILITY WE ALL HAVE AS PORT EMPLOYEES AND ELECTED OFFICIALS
AND WE'RE ABLE TO ACTUALIZE THAT TO A VERY CLEAN DEGREE
AND I'D LIKE TO ACKNOWLEDGE THE TEAM MEMBERS OF ACCOUNTING FINANCIAL REPORTING, ALL 60 OF THE TEAM MEMBERS
THEY WORK SO HARD TO MEET YOUR EXPECTATIONS AT THE POLICY LEVEL
ALONG WITH OUR EXECUTIVE DIRECTOR METRUCK AND CHIEF FINANCIAL OFFICER DAN THOMAS, THIS IS THE TONE THAT SET AT THE TOP, AND WE ARE VERY DEDICATED PUBLIC SERVANTS TO MAKE SURE WE MEET THAT EXPECTATION ON PART OF THE COMMISSION
SO THANK YOU SO MUCH FOR GIVING US THAT GUIDANCE AND THE OPPORTUNITY TO BE RECOGNIZED AS WELL WHEN WE DO EXCEPTIONAL WORK
THANK YOU
MADAM CHAIR AND COMMISSIONER CHO AND PUBLIC MEMBER HOMESTROM
THANK YOU
THANK YOU SO MUCH FOR YOUR COMMENTS AND IT'S ALL FACTUAL AND TRUE AND REALLY DO APPRECIATE THE WORK THAT YOUR TEAM HAS DONE AND THE ENTIRE TEAM AT THE PORT WHO'VE WORKED ON THIS AUDIT
AND THANK YOU TO THE MOSS ADAMS TEAM FOR THE WORK THAT YOU ALL HAVE DONE
DIRECTOR FERNANDEZ, DO YOU HAVE ANY THOUGHTS? I DON'T
I DO WANT TO SAY CONGRATULATIONS TO THE AFR FINANCE TEAM AND DAN THOMAS'S ENTIRE ORGANIZATION
THANK YOU
GREAT
SO IF THERE'S NO ADDITIONAL QUESTIONS FOR THE PRESENTERS, I WILL BE MOVING US ON TO THE NEXT ITEM
ITEM NUMBER FOUR ON OUR AGENDA IS THE OPEN ISSUE STATUS
DIRECTOR FERNANDEZ, PLEASE PROCEED WITH THE UPDATES
THANK YOU, COMMISSIONER MOHAMMED
COMMISSIONER MOHAMMED
BEFORE I EVEN MOVE TO THE FIRST SLIDE, I WANT TO KIND OF POINT OUT THAT RECENTLY WE HAD BRUCE CLAUSAL, WHO IS OUR IT AUDIT MANAGER RETIRE
AND HE BUILT A LOT AND DONE A LOT
SO WE WENT THROUGH THIS RECRUITING PROCESS EXTERNALLY AND WE FOUND THE BEST CANDIDATE FOR THE JOB
LUCKILY, IT CAME INTERNALLY
IT'S RIDICA MARWAHA, WHO'S IN THE BACK THERE? WHO'S OUR NEW IT AUDIT MANAGER
CONGRATULATIONS
WITH THAT, I'LL MOVE TO THE NEXT SLIDE, PLEASE, MICHELLE, ONE OF THE KEY ITEMS, COMMISSIONERS ON ITEM FOUR
THIS IS THE ITEM, THE FIRST ITEM, WE'LL BE DISCUSSING OPEN ISSUES
ONE OF THE THINGS WE DO AUDITS AND WHEN THE AUDITS ARE DONE, WE DON'T WANT THE REPORTS TO BE PUT ON A SHELF AND NOBODY TO FOLLOW UP ON THEM ANYMORE AND NOTHING TO BE DONE
SO WE MAKE SURE THOSE CONTROL WEAKNESSES ARE CLOSED OUT AND CLEANED UP
SO AT THE END OF THE DAY, WE GET CLEAN AUDITS FROM MOSS ADAMS AND FROM EVERY OTHER AGENCY THAT COMES IN
SO WE'RE THE LAST LINE OF DEFENSE BEFORE IT FALLS OVER TO THEM
AND EXTERNAL AGENCIES, WE HAVE A FEW OPEN ONES
MOST OF THEM, I'M HAPPY TO SAY, ARE BEING ADDRESSED
I BELIEVE THERE'S SEVERAL THAT ARE IN IT THAT I'LL TALK ABOUT FROM A VERY HIGH LEVEL, BUT THEY'LL BE DISCUSSED IN NON PUBLIC SESSION IN A LITTLE MORE DETAIL IN THIS SEPTEMBER AUDIT COMMITTEE MEETING
WE DON'T HAVE ANY IT AUDITS TO DISCUSS TODAY, SO WE'VE DEFERRED EVERYTHING TO SEPTEMBER AND WE'LL HAVE NON PUBLIC SESSION DECEMBER, SO EVERYTHING'S GOING TO BE PUBLIC TODAY
CONSULT THE RE TWO POLICY AND SURETY AMOUNT REVIEW
THERE'S AN ACTION THAT NEEDS TO COME TO THE COMMISSION
AND THIS IS PRIMARILY THERE'S BEEN A LOT OF CHANGE BECAUSE OF COVID AND THE AMOUNT OF SURETY OR THE DEPOSITS THAT CONCESSIONNAIRES MAKE WITH THE PORT
THERE'S BASICALLY THE RCW THAT SAYS YOU HAVE TO HAVE THIS AMOUNT AND THE COMMISSION CAN OVERRIDE IT AND SAY A DIFFERENT AMOUNT
WELL, RIGHT NOW WE'RE NOT COMPLYING WITH EITHER, SO WE NEED TO GET THAT BACK TO THE COMMISSION OR MANAGEMENT DOES TO BASICALLY ASSURE THAT THE SURETY THAT WE HAVE FROM OUR CONCESSIONNAIRES ARE IN LINE WITH WHAT THE COMMISSION'S DIRECTED OR THE RCW IS DIRECTED
THE OTHER ISSUE THAT WE HAVE THAT'S BEEN OPENED IS ARCHITECTURAL AND ENGINEERING THE FAIR AND REASONABLE RATE DETERMINATIONS
THE RCW SAYS YOU PICK THE BEST QUALIFIED CANDIDATE AND THEN YOU DETERMINE A FAIR AND REASONABLE RATE
AND IF YOU CAN'T COME TO AN AGREEMENT AS TO WHAT A FAIR AND REASONABLE RATE IS, THEN YOU GO TO THE NEXT PERSON AND YOU NEGOTIATE WITH THEM
WELL, THE PORT HAS SOME BROKEN PROCESSES THAT THEY'RE WORKING ON AND DETERMINING WHAT A FAIR AND REASONABLE RATE IS
WE'VE HAD AN AUDIT THAT WAS A COUPLE OF YEARS OLD THAT IT'S STILL BEEN OPENED PRIMARILY
A LOT OF THINGS GOT SLOWED DOWN BECAUSE OF COVID BUT IT IS IN THE PIPELINE NOW AND WE ARE WORKING WITH CPO TO MAKE SURE THAT THAT IS ADDRESSED BECAUSE IT'S A SIZABLE AMOUNT OF MONEY
IF YOU LOOK AT ARCHITECTURAL AND ENGINEERING COSTS, YOU'RE LOOKING ABOUT 10% TO 20% OF YOUR CAPITAL BUDGET
SO IT'S A SIZABLE CHUNK OF CHANGE
THAT SAID, ON OPEN ISSUES, WE HAVE CLOSED DOWN QUITE A FEW AS FAR AS THE REST OF THE ORGANIZATION GOES
BUT WE'LL KEEP THESE OPENED UNTIL THEY'RE ADDRESSED TO THE COMMITTEE SATISFACTION AND TO AUDIT SATISFACTION
NEXT SLIDE, PLEASE, MICHELLE
AND COMMISSIONERS, I BELIEVE, ON OPEN ISSUE FOLLOW UP
THAT'S ITEM FOUR
THAT'S IT
SO IF THERE'S ANY QUESTIONS, PLEASE FEEL FREE TO JUMP IN
THANK YOU, DIRECTOR FERNANDEZ, FOR THE PRESENTATION
ARE THERE ANY QUESTIONS FOR MY COMMITTEE MEMBERS? SARAH? YEAH, I HAVE A QUESTION
OR I GUESS MAYBE JUST A COMMENT
I FEEL LIKE WHEN WE GO THROUGH THESE, IT'S KIND OF ALARMING TO LOOK AT THE LARGEST BAR GRAPH IS IN THE PORT THAN TWO YEARS OLD
SO I'M WONDERING IF THERE WOULD BE A WAY TO MAYBE SPLIT OUT SOME OF THESE TO IN PROGRESS, SOMETHING'S ACTUALLY BEING DONE ON IT VERSUS NOTHING'S HAPPENING
BECAUSE SOMETHING I'VE NOTICED IS AS WE CONTINUE TO LOOK AT THESE, WE CONTINUE TO SEE THEM SITTING IN THIS STILL OPEN
AND IT WOULD BE REALLY HELPFUL TO KNOW, IS THERE ACTUALLY PROGRESS BEING MADE? LIKE SOMETHING'S HAPPENING
WE'RE WORKING ON THIS, IT'S JUST TAKING TIME VERSUS WE HAVEN'T EVEN LOOKED AT THIS AND IT HAPPENED MORE THAN TWO YEARS AGO
THOSE ARE TWO VERY DIFFERENT SITUATIONS IN MY MIND
AND BE REALLY HELPFUL TO BE ABLE TO SEE WHERE THESE ACTUALLY LAND
YEAH, ABSOLUTELY
I'M HAPPY TO REPORT THAT MOST OF THESE, WHEN WE DON'T HAVE A BLOCK UP TOP, WE TRY TO PUT IN THE NOTES WHETHER THEY'RE BEING WORKED ON OR NOT
AND MOST OF THEM ARE ACTIVELY BEING WORKED ON
BUT WE WILL DO A BETTER JOB OF SPLITTING THAT OUT
I THINK THAT'S A GREAT IMPROVEMENT
OPPORTUNITY ADDITION
ANOTHER THING I THINK I MIGHT ALSO ADD IS I'LL PROVIDE YOU WITH A TREND YEAR, MONTH OVER MONTH SO YOU CAN SEE IF IT'S GOING UP OR DOWN IN THE PRIME MONTH
THOSE ARE REALLY GREAT POINTS
ANY OTHER QUESTIONS? GREAT
SO I CAN THEN MOVE US ON TO ITEM NUMBER FIVE ON THE AGENDA, WHICH IS THE 2023 AUDIT PLAN UPDATE
OKAY, COMMISSIONER, SO ON THIS, THIS IS A SNAPSHOT ON WHERE WE ARE ON ALL OUR AUDITS, ACTUALLY, THAT WE'VE GOT APPROVED AND WE PLAN ON DOING
I'LL GO THROUGH A SLIDE AS TO WHICH ONES WE'VE COMPLETED AND WHICH ONES ARE STILL OPENED
BUT WE TRY TO BREAK OUR AUDITS DOWN TO THREE MAJOR CATEGORIES
LIMITED CONTRACT COMPLIANCE AUDITS THAT ARE IN THE GREEN
THOSE ARE ESSENTIALLY CONCESSIONNAIRES AT THE AIRPORT, AND THAT'S A LITTLE OVER $100 MILLION IN REVENUE IN LEASE AND CONCESSION AUDITS THAT COME TO THE PORT
AND A LOT OF IT IS SELF REPORTED
SO THEY'LL SEND IN THEIR INFORMATION AND WE'LL BILL BASED ON THEIR FINANCIAL NUMBERS
SO ONE OF THE KEY CONTROLS THAT WE HAVE IS AS AN INTERNAL AUDIT FUNCTION, WE GO OUT AND WE LOOK AT THESE ORGANIZATIONS AND MAKE SURE THAT THEIR FINANCIALS AND WHAT THEY'RE SUBMITTING IS ACTUALLY WHAT THEY PAID
SO WE TRY TO COVER AT LEAST THE LARGER ONES EVERY THREE TO FIVE YEARS OR SO AND THE SMALLER ORGANIZATIONS IN A LITTLE LARGER TIME FRAME
BUT WE ARE WORKING ON SPEEDING UP THE PROCESS AND ADDING MORE AND BECOMING A LITTLE MORE EFFICIENT THERE
BUT WE ARE GETTING QUITE A LOT OF COVERAGE THERE
PERFORMANCE AUDITS ARE BROKEN OUT INTO TWO SECTIONS, THE TOP OR THE OPERATIONAL TYPE AND THE BOTTOM OF THE CAPITAL
DAN CHASE IS THE MANAGER THAT DOES THE OPERATIONAL AUDITS AND SPENCER BRIGHT DOES THE CAPITAL AUDITS
A LOT OF THE CAPITAL AUDITS THAT YOU SEE NOW ARE MANDATED BY THE RCW
IF THERE'S A GCCM OR GENERAL CONTRACTOR CONSTRUCTION MANAGER TYPE PROJECT, WHICH IS FOUR OUT OF THE SIX OVER THERE, WE HAVE TO AUDIT THEM FOR THE RCW, AN INDEPENDENT AUDIT HAS TO BE DONE
AND ALTHOUGH WE HAVE AN OUTSIDE FIRM THAT WORKS WITH US, WE HAVE TO GET COVERAGE THERE
AND THEN FINALLY, ON THE IT AUDITS, I THINK YOU HEARD BOTH FROM CONNOR TODAY ABOUT CYBER RISK FROM MOSS ADAMS BEING A KEY THREAT
AND EVEN YESTERDAY IN THE BUDGET RETREAT, ONE OF THE MAJOR THREATS IS THE CYBERSECURITY RISK
AND I THINK ONE OF THE POINTS THAT'S POINTED OUT IS THAT AN OPERATIONS TECHNOLOGY ON THE MARITIME SIDE, THREATS HAVE INCREASED 900% YEAR OVER YEAR
AND IT'S JUST BECAUSE STANDARDIZATION OF PLATFORMS HAVE CREATED AN
EASIER PLATFORM FOR CYBERCRIMINALS
SO WE SPEND A LOT OF TIME THERE
AND RIDICA MARWAHA AND HER TEAM WILL BE COVERING THESE AREAS AND MAKING SURE, WORKING WITH IT, OUR AUDITS ARE JUST TO MAKE SURE THAT WE HAVE CONTROLS IN PLACE
SO I THINK IF YOU DO THESE CIS AUDITS, WHICH IS A BULK OF WHAT WE DO, THEY SAY SOMETHING LIKE 90% OF THE THREATS CAN BE BLOCKED, KNOWN THREATS
SO CRITICALNESS OF DOING THAT
NEXT SLIDE, PLEASE, MICHELLE
AND THIS IS A QUICK GANTT CHART, COMMISSIONER, THAT SHOWS YOU WHERE WE STAND
THE GREEN ITEMS ARE COMPLETED, THE YELLOW ONES ARE IN PROCESS, AND THE PINKISH ORANGEISH ONES ARE PLANNED AND SCHEDULED FOR THE REST OF THE YEAR
SO AS OF RIGHT NOW, WE'RE HOPING TO BE ABLE TO COMPLETE THE AUDIT PLAN, WHAT WE'VE PROPOSED TO DO, AND I'LL ADVISE YOU IN SEPTEMBER IF ANYTHING'S SLIPPING INTO NEXT YEAR
BUT AS OF RIGHT NOW, IT LOOKS LIKE WE'RE ON TRACK WITH EVERYTHING
OKAY, COMMISSIONER, THAT CONCLUDES THE AUDIT PLAN ITEM
PASS IT BACK TO YOU
GREAT
ARE THERE ANY QUESTIONS FROM MY COMMITTEE MEMBERS? ALL RIGHT, I'LL MOVE US ON TO ITEM NUMBER SIX ON THE AGENDA, WHICH IS THE UPDATE ON THE PORT WIDE PAYROLL CONTROLS
DIRECTOR FERNANDEZ
PLEASE PROCEED
THANK YOU, COMMISSIONER
AND FOR THIS, I'M GOING TO ASK RUMI OKUMA, WHO'S ONE OF THE INTERNAL AUDITORS ON OUR TEAM, SENIORS THAT BASICALLY DID THIS AUDIT
SO I'M GOING TO PARTNER WITH HER AND SHE'S GOING TO DO A LITTLE BIT OF THE SPEAKING AS WELL
I'LL OPEN IT UP
AND I BELIEVE WE HAVE MANAGEMENT FROM THE AIRPORT, FROM AVIATION MAINTENANCE ON TEAMS TODAY
TODAY IS SUPPOSED TO BE ONE OF THE AIRPORT'S BUSIEST DAYS, SO I BELIEVE THEY'RE GOING TO ANSWER QUESTIONS FROM TEAMS, FROM THE COMMITTEE
SO ONE OF THE AUDITS THAT WE DID NEXT SLIDE, PLEASE, MICHELLE
WAS WE LOOKED AT OUR PAYROLL SYSTEMS WE SPEND A LOT OF MONEY IN PAYROLL, AND ONE OF OUR BIGGEST OPERATIONAL EXPENSES IS PAYROLL
AND THE PEOPLE AND THE PORT IS VERY, VERY COMPLICATED
WE HAVE LABOR CONTRACTS, WE HAVE REPRESENTED WORKFORCE, NON REPRESENTED WORKFORCE, AND A LOT OF COMPLEXITY THAT ADDS TO RISK AND THE WORKLOAD
SO WE WANTED TO LOOK AT CONTROLS AND WE WANTED TO MAKE SURE THAT BOTH PREVENTATIVE DETECTIVE CONTROLS WERE FUNCTIONING EFFECTIVELY
WE ALSO WANTED TO MAKE SURE THAT SOME OF THE BASIC THINGS THAT YOU SEE IN PAYROLL RISKS WERE ADDRESSED AND THAT RUDY KALUZA AND AYE
TEAM AND THE REST OF THE ORGANIZATION HAD THOSE CONTROLS IN PLACE
AND OUR COMMENTS IN GENERAL, THOSE KEY CONTROLS WERE IN PLACE
THEY WERE WELL DESIGNED AND OPERATING EFFECTIVELY
BUT WE DID FIND SOME ISSUES THAT WE'RE GOING TO TALK ABOUT, NOT NECESSARILY IN AFR, BUT THEY'RE VERY DEPENDENT ON THE ENTIRE ORGANIZATION
AND THIS IS AN ORGANIZATIONAL WIDE AUDIT
SO IF SOMETHING ISN'T WORKING, SOMEWHERE DOWN THE LINE, IT JUST FLOWS UP INTO THE PAYROLL SYSTEMS SO WE'LL TALK A LITTLE BIT ABOUT THAT AS WELL, NEXT SLIDE PLEASE, MICHELLE
AS YOU CAN SEE AND I ALLUDED TO SOME OF THESE THINGS IN THE PREVIOUS SLIDE WE HAVE ABOUT 2500 FULL TIME EMPLOYEES THAT SPORTS GOT TO PAY AND THAT AMOUNTS TO ABOUT $317,000,000 IN THE YEAR, WHICH IS A HUGE AMOUNT REPRESENTING 67% OF OUR OPERATING EXPENSES
SO VERY LARGE AMOUNTS
WE USE SOMETHING CALLED HCM OR THE HUMAN CAPITAL MANAGEMENT SYSTEM WHICH IS A PEOPLESOFT SYSTEM TO TRACK AND PAY OUR PAYROLL TAXES
PAYROLL PAYCHECKS ESSENTIALLY HOURS WORKED AND EVERYTHING ARE TRACKED IN THIS SYSTEM
HOWEVER, THERE ARE SUBSYSTEMS SUBSIDIARY SYSTEMS THAT FEED INTO HCM AND WE'VE GOT MAXIMO WHICH IS FOR AVIATION MAINTENANCE AND MARITIME MAINTENANCE, TWO DIFFERENT VERSIONS OF THAT
BUT INFORMATION THAT YOUR HOURS ARE PUT IN THERE AND THEY FEED UP INTO HCM AND PAYCHECKS ARE CUT
BASED ON THAT
THE FIRE DEPARTMENT HAS THEIR OWN SYSTEM AND THE POLICE DEPARTMENT HAS THEIR OWN SYSTEM
AND ONE OF THE THINGS WE HEARD IN THE PUGET RETREAT YESTERDAY IS WE OPERATE IN SILOS AND WE HAVE DIFFERENT SYSTEMS THAT ADD TO THE COMPLEXITY OF THE PORT AND RUMI WILL TALK A LITTLE BIT ABOUT THAT
BUT HAVING THESE MULTIPLE SYSTEMS LIKE PLANET TELES AND YAKIMA WHILST THEY ALL HAVE THEIR NEEDS, THEY ADD TO COMPLEXITY AND A LOT OF THAT INFORMATION HAS TO BE MANUALLY ENTERED AND IT JUST BECOMES VERY CHALLENGING BUT IT IS BEING DONE
MAXIMO, THE LAST BULLET POINT IS THE ONLY ONE OF THE THREE THAT'S ACTUALLY CURRENTLY INTERFACED WITH HCM
EVERYTHING ELSE HAS TO BE MANUALLY ENTERED, WHICH RUBIO TALK ABOUT
WE HAVE THREE ISSUES AND ONE EFFICIENCY OPPORTUNITY
I'LL TOUCH ON THIS ONE, THE HIGH RISK ISSUE AND THEN WE'LL ASK MIKE TASKER OR AYE
TEAM TO ANSWER
THEY'VE ALREADY PROVIDED A RESPONSE
BUT THE GIST OF THIS ISSUE IS WE HAVE AVIATION MAINTENANCE SYSTEM MAXIMO THAT THEY USE
MAXIMO THE TECHNICIANS, AVIATION MAINTENANCE STAFF, THE REPRESENTATIVE WORKERS PUT IN THEIR HOURS AND THEIR TIME INTO THE MAXIMO SYSTEM WHICH THEN SO IF THEY WORK ON A PROJECT, THEIR TIME IS PUT IN AND THEN IT FEEDS UP INTO HCM AND THEY GET THEIR PAYCHECKS CUT
SO IT'S BASED ON THE HOURS THAT THEY WORK
WELL, WE FOUND THAT THE MAXIMO SYSTEM HAD A FLAW IN IT IN THAT WHEN ASSETS WERE DISPOSED OR RETIRED THEY WEREN'T FUNCTIONING ANYMORE
IT WAS STILL EVERY SIX MONTHS OR PERIODICALLY GENERATING THESE PREVENTATIVE MAINTENANCE WORK ORDERS
SO SOMEBODY WASN'T GOING INTO THE SYSTEM AND SHUTTING OFF THESE ASSETS CORRECTLY AND THAT RESULTED IN THESE TICKETS BEING CREATED
AND I WOULD ASSUME OVER TEN YEARS STAFF WOULD KNOW THAT THESE ASSETS DON'T EXIST BUT NONETHELESS THEY BOOKED TIME TO IT ANYWHERE FROM AN HOUR AND A HALF TO 3 HOURS GOING OUT AND WORKING ON THESE PARTICULAR ASSETS
SOME OF THE SYSTEMS LIKE THE LIFELINES WERE THE ONES THAT WE WERE ADVISED ABOUT AND WE SPENT A LOT OF TIME LOOKING AT
THEY'RE BASICALLY CABLE ATTACHMENT SYSTEMS ON THE ROOF
SO WHEN YOU'RE GOING TO WORK IN SOME HIGH LOCATION ON THE AIRPORT ON A SKY BRIDGE OR SOMETHING, WHICH YOU FALL OFF, YOU'RE PROBABLY NOT GOING TO MAKE IT
YOU HAVE TO CLIP IN AND THERE'S A BIG RED TAG SAYING OUT OF SERVICE, PLEASE DON'T USE
SO THERE SHOULD BE NO PREVENTIVE MAINTENANCE DONE ON IT
AND WE NOTED THAT PEOPLE WERE STILL GOING UP, CHARGING TIME TO THESE SYSTEMS I THINK OUR HEALTH AND SAFETY DEPARTMENT SAID WE SHOULDN'T EVEN BE ON THE ROOF IF THESE SYSTEMS ARE OUT OF CERTAIN SECTIONS OF THE ROOF IF THESE SYSTEMS ARE OUT OF ORDER
SO WE SHOULDN'T BE DOING ANY WORK ON THEM ANYWAYS
THE GIST OF THIS ISSUE IS THAT SOMEBODY NEEDS TO GO INTO THE SYSTEM ON A TIMELY BASIS AND SHUT THESE ASSETS DOWN SO THESE TICKETS AREN'T CREATED AND TIME ISN'T CHARGED TO THEM
NEXT SLIDE, PLEASE, MICHELLE
ONE BACK
SO THIS HIGHLIGHTS SOME OF THE THINGS THAT I TALKED ABOUT ON THE TEN YEARS THAT THE TICKETS WERE BEING CREATED, THE VISIBLY MARKED OUT OF SERVICE SIGNS THAT SHOWED THAT THEY SHOULDN'T BE WORKED ON
AND THEN ANOTHER THING WE NOTED IS ON THE AVIATION SIDE, WHEN A SYSTEM WAS WORKED ON, NO NOTES WERE PUT INTO THE SYSTEM AS TO WHAT PEOPLE DID
SO ALTHOUGH THERE IS A REQUIREMENT AND THEIR POLICIES REQUIRED NOTES TO BE PUT IN SAYING I DID THIS AND THIS AND THIS TO THE SYSTEM, THAT FIELD WAS GENERALLY BLANK, NOT SHOWING WHAT WAS DONE
I WILL POINT OUT THAT ON THE MARITIME SIDE, I BELIEVE THERE WAS A REQUIREMENT THAT NOTES ARE PUT IN AND THE NOTES ARE BEING USED THERE
SO THIS IS SPECIFICALLY ON THE AVIATION SIDE
AND AS FAR AS THESE PARTICULAR ASSETS, HEALTH AND SAFETY IS TAKING OWNERSHIP OF THEM
SO GOING FORWARD ON THESE PARTICULAR SYSTEMS, THEY ARE ADDRESSED, THEY ARE SHUT DOWN IN THE SYSTEM, AND AVIATION MAINTENANCE HAS WORKED JOINTLY WITH THEM TO MAKE SURE THAT THESE SYSTEMS ARE SHUT DOWN AND THE PREVENTIVE MAINTENANCE TICKETS WON'T COME OUT AGAIN
BUT THE ISSUE IS LARGER IN THAT ASSET DISPOSITION
ALL ASSETS NEED TO BE SHUT DOWN, NOT JUST THESE PARTICULAR ONES NEED TO BE IDENTIFIED AND THERE NEEDS TO BE A PROCESS SO THEY SHUT DOWN A MORE TIMELY BASIS
NEXT SLIDE, PLEASE, MICHELLE
AND THAT'S ESSENTIALLY WHAT OUR RECOMMENDATIONS SAY
THESE PARTICULAR ASSETS SHOULD BE SHUT DOWN ON A MORE TIMELY BASIS AND CLEANED UP, I BELIEVE
RUMI, IS THERE ANYTHING ELSE YOU'D LIKE TO ADD TO THIS ONE? AND WHO DO WE HAVE FROM AB? MIKE? I BELIEVE WE HAVE MIKE TASKER
YEAH, GLENN, I'M ON
THANK YOU
IF YOU LIKE ANY COMMENTS, I KNOW WE'VE GOT YOUR RESPONSE, SO YEAH, GLENN, YOU GOT THE RESPONSE
THIS IS MIKE, TASKER DIRECTOR OF AVIATION MAINTENANCE
AND GLENN, I AGREE WITH THE FINDINGS
RIGHT
I AGREE
AND SOMETHING I PROVIDE IS WE'VE GOT TO DO A BETTER JOB WITH RETURNING OUT OF SERVICE ASSETS SO WE DON'T HAVE THESE ISSUES
GLENN ALSO MENTIONED THE COMPLEXITY OF HAVING MULTIPLE DISPARATE SYSTEMS WHERE SOMEONE DOES AN INSPECTION AND TAKES IT OUT OF SERVICE AND IT'S NOT AN AUTOMATIC COMMUNICATION BETWEEN THE SYSTEM
SO WE'VE GOT TO MAKE THAT BETTER AND THAT'S WHAT'S LED TO SOME OF THIS STUFF
THERE WAS ALSO NUANCE WITH THE RESPONSE WHERE BECAUSE OF SOME OF THE COMPLEXITIES THAT MAY HAVE JUST BEEN TITLED SOMETHING WITH THE LIFELINE, BUT THERE MAY BE OTHER WORK AS WELL
SO WE WILL IMPROVE IT
I AGREE WITH THE RESPONSE AND WE WILL WORK WITH GLENN TO PROVE THE PROCESS FOR RETIRING OUT OF SERVICE ASSETS AND GETTING THEM OUT OF MAXIMO SO THEY DON'T GENERATE WORK ORDERS
ANYONE? COMMISSIONERS QUESTIONS? THANK YOU FOR THE PRESENTATION AND THE INFORMATION THAT YOU'VE SHARED AND THE COMMENTS THAT HAVE BEEN PROVIDED
ARE THERE ANY QUESTIONS FOR MY COMMITTEE MEMBERS? SARAH? OKAY, SO IT SOUNDS LIKE WE WERE KIND OF GIVEN NOTICE TO CHECK SOME OF THESE
IT LOOKS LIKE THIS FALL PROTECTION WAS SPECIFICALLY CALLED OUT TO SAY HEY, YOU SHOULD LOOK INTO THIS
DID WE LOOK INTO OTHER ASSETS TOO? DO WE HAVE A WAY TO SAY, HEY, WE KNOW THESE THINGS ARE OUT OF SERVICE OR WAS THIS SPECIFIC TO THIS ONE BUT WE ASSUME THERE'S A BIGGER PROBLEM
WHICH ONE IS IT? I BELIEVE WE ASSUME THERE'S A BIGGER PROBLEM
RUMI, I DON'T BELIEVE YOU LOOKED INTO SPECIFIC SYSTEMS RIGHT
SO WE LOOKED AT MY NAME IS RUMI OKUMA
I'M THE LEAD AUDITOR FOR THIS AUDIT
SO FOR THIS ISSUE BROUGHT ABOUT BASED ON THE CONCERN, WE SPECIFICALLY LOOKED AT LIFELINE SYSTEMS AND SO BESIDES THIS PARTICULAR LIFELINE SYSTEM DISCUSSED HERE, THERE ARE AT LEAST FOUR MORE LIFELINE SYSTEMS AND THE INDICATION WAS THAT THOSE ASSETS, OTHER ASSETS MIGHT BE IN THE SAME
YES
OKAY, SO WE LOOKED AT ONE BUT WE ASSUME THERE'S OTHER OF THESE LIFELINE SYSTEMS BUT I GUESS I'M ASSUMING LIKE IT COULD BE MUCH BIGGER SCALE
LIKE OBVIOUSLY COMPLETELY OUTSIDE OF THIS FALL PROTECTION THING
WE'RE TALKING ANY ASSETS THAT THERE ARE
OKAY
I BELIEVE WE'VE FRAMED IT AS AN ASSET DISPOSITION PROCESS
THE ENTIRE SO IT PROBABLY EXTENDS TO THAT
MIKE, IF THERE'S ANYTHING THAT YOU WANT TO ADD, I KNOW YOU LOOK AT THE ENTIRE PROCESS
YEAH, SHE'S RIGHT
IT WAS POINT OUT THE LIFELINES AND WE HAVE A PROCESS WHERE WE GO THROUGH AND WE DISPOSE
A LOT OF FOCUS HAVE BEEN ONBOARDING ASSETS
NOW WHEN WE DISPOSE OF ASSETS, WE'VE GOT TO WORK THROUGH AND MAKE SURE ALL THOSE ASSETS ARE OUT OF MAXIMO AS WE PUT NEW ASSETS IN
SO WE WANT TO MAKE SURE WE DON'T DOUBLE COUNT THE NUMBER OF ASSETS WE HAVE TO MAINTAIN
BUT THERE IS AN IMPROVEMENT IN THAT PROCESS AND IT MAY BE A RESOURCE NEED TO ENSURE WE DO A BETTER JOB OF GETTING ASSETS OUT OF MAXIMO
BECAUSE YOU MAY BE NOT AWARE THAT LIKE BRINGING AN IAF INTO A NORTH SATELLITE THAT IS 1500 LARGE CAPITAL ASSETS WITH MAYBE 3000 PARTS THAT HAVE TO BE MAINTAINED
IT'S JUST A LARGE VOLUME OF WORK AND SOMETIMES THERE CAN BE PERFECTIONS THE ENEMY HAVE DONE
I DON'T WANT TO MAKE EXCUSES THERE, BUT WE WILL WORK THE PROCESS TO ENSURE WE MITIGATE OR ELIMINATE THIS ISSUE WITH DOUBLE TIME
OKAY, SO I GUESS IN THE RESPONSE WE TALK ABOUT THAT THERE'S A NEW WAY TO ONBOARD ASSETS, WHICH SEEMS LIKE IT'LL MAKE A MORE STREAMLINED PROCESS TO GET RID OF THEM
BUT IS THERE AN ACTIVE EFFORT THEN TO GO THROUGH THE DATABASE ITSELF TO IDENTIFY THOSE ONES WHO WEREN'T PART OF THAT OLDER OR PART OF THAT NEW ONBOARDING PROCESS? AND IS THAT WHAT YOU'RE TALKING ABOUT? OF ADDITIONAL HELP OR RESOURCES NEEDED? YES
WE'VE GOT A PROGRAM CALLED PREVENTATIVE MAINTENANCE OPTIMIZATION, WHICH IS AN EFFORT WE'RE DOING IN MAINTENANCE THIS YEAR, WHICH WILL CONTINUE THROUGH NEXT YEAR, IS TO ENSURE WE DON'T HAVE DUPLICATION OF ASSETS AND ENSURE THAT WE WORK TO ELIMINATE THIS ISSUE
OKAY
AND THEN THE LAST QUESTION I HAD, I THINK GLENN, YOU MIGHT HAVE MENTIONED IT WHEN YOU WERE SPEAKING ON THIS ISSUE, IS THERE LIKE A SAFETY CONCERN AROUND THIS ONE SPECIFICALLY THAT THESE ARE OUT OF SERVICE AND WE DON'T HAVE FALL PROTECTION OUTSIDE OF THIS? NO, I BELIEVE IF THE ASSET IS RED TAGGED, NOBODY SHOULD BE GOING UP AND WORKING ON IT
I'M NOT AWARE
AND MIKE, YOU CAN CONFIRM THAT IF THEY'RE NOT SUPPOSED TO BE UP ON THE ROOF, THEY'RE NOT GOING UP ON THE ROOF IN THAT PARTICULAR ZONE WHERE THE ASSET IS
GLENN IS RIGHT, IT'S CLOSE
WHERE THERE ARE FALL PROTECTION RULES, WHERE WITHOUT BEING HARNESSED IN, YOU CAN'T GO SO CLOSE TO THE EDGE OF THE ROOF
IF THE SLOPE IS A CERTAIN HEIGHT OR CERTAIN STEEPNESS, YOU CAN'T GO UP THERE AT ALL WITHOUT A LIFELINE
SO THERE ARE SOME NUANCES WHERE YOU CAN DO PART OF THE WORK, BUT YOU CAN'T GO NEAR THE EDGE
THERE'S A LOT OF NUANCED RESPONSE, BUT COMMISSIONER, I THINK YOU UNDERSTAND THAT YES
NOT HAVING FALL PROTECTION DOES LIMIT THE WORK THAT CAN BE DONE
SORRY, COMMISSIONER MOHAMED
GO AHEAD
HEALTH AND SAFETY IS WORKING WITH AN OUTSIDE VENDOR TO ADDRESS THESE AND REPLACE THE SYSTEMS AND THEY'VE TAKEN OWNERSHIP OF THEM
SO GOING FORWARD, AT LEAST THE SAFETY CONCERNS ARE BEING ADDRESSED
ANY OTHER QUESTIONS? OKAY, WELL, THANK YOU FOR THE RESPONSES
THOSE ARE GREAT QUESTIONS
YOU WANT TO ASK THEM, COMMISSIONER, WE'RE STILL IN ITEM SIX, SO WE'RE GOING TO CONTINUE ON IN ITEM SIX
A COUPLE OF MINUTES
GO FOR IT
NEXT SLIDE PLEASE, MICHELLE
SO, COMMISSIONERS, THIS IS MIKE'S RESPONSE, IT'S FOR THE RECORD
AND NEXT SLIDE PLEASE, MICHELLE
WE HAVE A SECURITY SENSITIVE ITEM ON THIS AUDIT, COMMISSIONERS, THAT WE'LL TALK ABOUT IN NON PUBLIC SESSION IN SEPTEMBER
AN IT NEXT SLIDE PLEASE
AND THERE'S A COUPLE ISSUES ITEMS LEFT THAT RUMI OKUMA IS GOING TO TALK ABOUT VERY QUICKLY
SO RUMI, IT'S ALL YOURS ON THIS
AYE.AGAIN
THIS IS RUMI
OKUMA
I NEED AUDITOR FOR THIS AUDIT, SO SUPERVISORY APPROVAL OF EMPLOYEES TIME IS CONSIDERED A KEY PREVENTIVE CONTROL IN THE TIMEKEEPING AND APPAREL PROCESSES
EMPLOYEES SHOULD NOT APPROVE OR MODIFY THEIR TIME AFTER THAT
HOWEVER, WE NOTED THAT CURRENTLY THERE ARE NO HARD STOPS CONFIGURED INTO THE HCM SYSTEM TO STOP EMPLOYEES CHANGE THEIR TIME IN THEIR TIMESHEETS AFTER SUPERVISORY APPROVAL
WE ALSO NOTED THAT THE CHANGE TIME BY AN EMPLOYEE, FOR EXAMPLE, FROM REGULAR PAY TIME TO SICK LEAVE TIME, WOULD AFFECT THE TIME AND LEAVE BALANCES RECORDED IN THE SYSTEM, BUT NOT AFFECT THE PAYROLL PAYMENTS THAT HAD BEEN PROCESSED
SO THE CHANGE TO TIME TRANSACTIONS WILL BE REFLECTED IN THE SO CALLED APPROVED PAYABLE TIME TABLE IN THE SYSTEM
BUT THE CENTRAL PAYROLL TEAM NEEDS TO APPROVE AND REPROCESS THE CHANGE TIME AFTER OBTAINING THE AUTHORIZATION AND RELATED SUPPORT FROM THE EMPLOYEES DEPARTMENT
NEXT SLIDE, PLEASE
SO WE RECOMMENDED THAT ACCOUNTING AND FINANCIAL REPORTING IMPLEMENT HARD STOP CONFIGURATIONS INTO THE HCM SYSTEM
NOW, RUDY IS HERE TO DISCUSS MANAGEMENT
IT'S A LOW RISK ISSUE
IF YOU WANT TO MAKE ANY COMMENTS, I KNOW YOUR RESPONSE IS UP THERE, RUDY
THANK YOU
I'M RUDY KALUZA, ACCOUNTING AND FRENCH REPORTING DIRECTOR
THANK YOU, MANAGER, FOR RECOGNIZING ME
YES, I'LL MAKE THESE COMMENTS SHORT
I RESPECT THERE'S A NEED TO MOVE FORWARD ON THIS
WITH REGARD TO THE KEY POINTS IS THAT THE HCM SYSTEM PROVIDED BY HUMAN CAPITAL MANAGEMENT SYSTEM PROVIDED BY PEOPLESOFT ORACLE HAS THAT AS A FEATURE, A FUNCTIONALITY
WE WEREN'T AWARE OF IT BECAUSE BASICALLY THE IMPACT IS PRETTY MUCH INNOCUOUS
ONCE A TEAM MEMBER ENTERS TIME, IT'S REVIEWED BY THE TIME ADMINISTRATOR, IT'S APPROVED BY THE DEPARTMENT MANAGER WHO'S AWARE OF THE WORK THAT'S SUPPOSED TO BE CHARGED THAT PROCESSES OVER TO CENTRAL PAYROLL
WE PROCESS ACCORDING TO APPROVED TIME
WHATEVER ANY TEAM MEMBER DOES AFTER THAT, IT HAS NO IMPACT ON PAY
BUT THIS IS A VERY GOOD OBSERVATION PROVIDED BY RUMI THAT WE JUST CAN'T HAVE LOOSE ENDS
AND SINCE IT WAS NOT SIGNIFICANTLY TRANSACTIONALLY IMPACTING AS IT RELATES TO STEWARDSHIP OVER PUBLIC FUNDS, ADMINISTERING PAYROLL, IT DIDN'T RECEIVE THE VISIBILITY IT NEEDED
NEVERTHELESS, WE TAKE IT SERIOUSLY
WE'RE WORKING WITH INFORMATION COMMUNICATIONS TECHNOLOGY PROGRAMMERS AND WE'RE WORKING TO SHUT THAT DOWN WHERE YOU CAN'T MAKE ANY CHANGES
I JUST WANT TO EMPHASIZE THAT THERE IS NOT AN IMPACT ON PAY
THANK YOU
THANK YOU
OKAY, SO WE ARE CONTINUING
SO DURING THIS AUDIT, WE NOTED ONE EFFICIENCY OPPORTUNITY FOR THE PORT, WHICH WOULD HELP STREAMLINE TIMEKEEPING AND APPAREL SUB PROCESSES AT THE PORT
JUMP IN RUMI, PLEASE, COMMISSIONER
IS AN EFFICIENCY OPPORTUNITY ISN'T A CONTROL ISSUE
SO SOMETHING WASN'T BEING DONE WRONG
WHEN WE DO OUR AUDITS, SOMETIMES WE'LL FIND AN OPPORTUNITY TO COME BETTER FOR THE PORT
IT'S LIKE BEING AN INTERNAL CONSULTANT AND SAYING, HEY, WE'RE WORKING IN SILOS
WE HAVE THESE MULTIPLE SYSTEMS AND IT'S PUTTING TREMENDOUS BURIEN ON THE AFR TEAM AND ON TIMEKEEPERS
SO THE WHOLE PORT IS UNDER STRESS
IT ENDS UP IN A SWOT ANALYSIS THAT COMES TO YOU IN A BUDGET RETREAT
AND HERE'S OUR WAY OF SAYING THESE ARE OPPORTUNITIES
THEY'RE SMALLER PIECES OF THE PIE, BUT THERE ARE OPPORTUNITIES TO GET BETTER
SO, AS GRAHAM MENTIONED EARLIER, ALONG WITH THE HCM SYSTEM, THREE OTHER SUBSYSTEMS HAVE INTERNALLY BEEN USED BY CERTAIN DEPARTMENTS TO TRACK SHIFTS, SCHEDULES, TIME AND ATTENDANCE, AND OR TO MANAGE WORK ORDERS
THESE SYSTEMS ARE MAXIMAL BY THE AVIATION MAINTENANCE AND MARINE MAINTENANCE DEPARTMENT, TERRACE STAFF USED BY THE FIRE DEPARTMENT, AND PLANET USED BY THE POLICE DEPARTMENT
MAXIMO IS THE ONLY SYSTEM THAT IS CURRENTLY INTERFACED WITH HDM SYSTEM
NEXT SLIDE PLEASE
SO THESE TWO TABLES, I HOPE YOU CAN SEE THOSE TABLES CONTENTS, BUT THESE TWO TABLES WILL PROVIDE YOU WITH BETTER IDEAS ABOUT HOW DYNAMIC AND COMPLEX THE PORT'S TIMEKEEPING AND APPAREL PROCESSES ARE
SO TABLE ONE SHOWS THE 2022 FULL TIME EQUIVALENT BREAKDOWN HIGHLIGHTING DEPARTMENTS WITH VARIOUS SCHEDULING AND TIMEKEEPING SYSTEMS FTES OF THOSE DEPARTMENTS UTILIZING SUBSYSTEMS MAKE ABOUT ONE THIRD OF THE TOTAL FTES AT THE PORT
THE PORT HAS MANY COLLECTIVE BARGAINING AGREEMENTS FOR REPRESENTED EMPLOYEES WITH THOSE DEPARTMENTS
THAT IS 21 OUT OF 30 OR 70% OF THE TOTAL AGREEMENTS
AND ADDENDUMS SO MANY SUBSYSTEMS IN USE WITH A COMPLEX PAY RATE, STRUCTURES OF THOSE AGREEMENTS COULD INCREASE THE RISK OF ERRORS AND PROCESS TO FINALIZE AND IMPLEMENT NEW RATES
IN THE SYSTEMS INVOLVING MULTIPLE DEPARTMENTS, INCLUDING HR, TOTAL REWARDS, LABOR RELATIONS, LEGAL AND CENTRAL PAYROLL IS VERY TIME CONSUMING AND OFTEN RESULTS IN RETROACTIVE ADJUSTMENTS WHICH INCREASE WORKLOADS IN THE PAYROLL PROCESSING
SO TABLE TWO JUST QUICKLY, TABLE TWO SHOWS THE TIME ENTRY FLOW TO HCM BY DEPARTMENTS AND EMPLOYEE TYPE
IT INVOLVES A LOT OF MANUAL INTERVENTION, INTERVENTION BY TIME ADMINISTRATORS AND THEIR MANAGERS IN THOSE DEPARTMENTS TO CONTINUOUSLY VALIDATE THE TIME DATA IN THEIR OWN SYSTEMS AND ALSO BETWEEN THEIR SUBSYSTEMS AND HDM SYSTEMS CONTINUOUSLY
NEXT SLIDE PLEASE
SO, MOST OF THE TIME ADMINISTRATORS AND THEIR MANAGERS WE INTERVIEWED EXPRESSED SOME LEVEL OF FRUSTRATION ABOUT A SIGNIFICANT AMOUNT SPENT EACH PAY PERIOD TO VALIDATE AND CORRECT TIME DATA FOR ACCURACY
ON A RELATIVE NOTE, CENTRAL PAYROLL TEAM PROCESSED APPROXIMATELY 2000 CORRECTIONS AND ADJUSTMENTS PER PAY PERIOD IN 2022, WHICH WERE REQUESTED AFTER TIME SUBMISSION CUT OFF
SO OPPORTUNITY MAY EXIST TO ANALYZE THE DATA TO IDENTIFY THE CORRECTION TYPES AND PATTERNS
LAST, BUT NOT THE LEAST, THE FIRE DEPARTMENT'S RAPID PROCESS IMPROVEMENT PROJECT IS CURRENTLY UNDERGOING WITH THE PORT'S CONTINUOUS IMPROVEMENT PROCESS OR CPI TEAM
WE'D LIKE TO RECOMMEND THE PORT CONTINUE THE CPI EFFORTS TO STREAMLINE THE SUBSYSTEMS NEXT SLIDE PLEASE
SO, IN ADDITION, WE'VE MADE SEVERAL RECOMMENDATIONS TO GAIN OPERATIONAL EFFICIENCIES
THOSE ARE TO CONSIDER REDUCING THE NUMBER OF SUBSYSTEMS AND TAKING OTHER ACTIONS RELATED TO DATA ROOT CAUSE ANALYSIS, TRAINING, EDUCATION AND COMMUNICATIONS
NOW, RUDY IS HERE TO RESPOND
AND RUDY, I CAN ADD ONE MORE THING
I KNOW THE COMPLEXITY OF THESE SYSTEMS IS HUGE AND IT'S A MONUMENTAL TASK
I KNOW RUDY AND TEAM SOME YEARS AGO TRIED TO OUTSOURCE SOME OF THIS STUFF
THE CONSULTANT, THE OUTSIDE COMPANY, SAID IT'S TOO COMPLICATED FOR US
WE DON'T WANT TO TOUCH IT, BUT WE HAVE TO LOOK INSIDE AND SEE WHAT OPPORTUNITIES WE HAVE
THANK YOU, MR FERNANDEZ FOR RECOGNIZING THAT IT WAS WITH CERIDIAN, A MAJOR PAYROLL ADMINISTRATION COMPANY
AND THEY DID COME IN HERE, DID A VERY THOROUGH REVIEW OF OUR PROCESSES
IT'S JUST TOO COMPLEX
THAT'S WHERE I LIKE TO ADDRESS
I'D BE SUCCINCT, MADAM CHAIR, WITH REGARD TO REDUCING TIMEKEEPING SYSTEMS, THAT IS OUR LONG TERM GOAL
I THINK WE NEED TO ADDRESS SOME THINGS FOUNDATIONALLY FIRST AND THAT'S WITH WHAT IS CAUSING THE NEED TO HAVE THESE TIMEKEEPING SYSTEMS SEPARATE FROM OUR CENTRAL PEOPLESOFT FINANCIAL
THE HCM HUMAN CAPITAL MANAGEMENT SYSTEM IS A VERY ROBUST SYSTEM, BUT NOT AS AGILE AS TO BE ABLE TO ADDRESS THE COMPLEXITIES OF OUR 26 LABOR AGREEMENTS
AND WE'RE MAKING PROGRESS WITH LABOR RELATIONS AND I APPRECIATE THE LEADERSHIP THAT THEY'RE PROVIDING TO PROVIDE MORE CONSISTENCY, THERE'S MORE STANDARDIZATION AS WELL AS MORE REALITY CHECK ON WHAT IS REASONABLE OR NOT WITH REGARD TO PAY ADMINISTRATION
BUT THEY ARE VERY COMPLEX AND THE TWO MAJOR AREAS IS FIRE DEPARTMENT AND POLICE DEPARTMENT
THE PAY STRUCTURE IS VERY COMPLICATED AND SOMETHING THAT PEOPLE SOUTH HCM CANNOT HANDLE A STANDALONE AND WE NEED TO HAVE SEPARATE SYSTEMS SO THE FOUNDATIONAL FUNDAMENTAL AREA WE NEED TO ADDRESS IS TRYING TO MAKE THIS A MORE MANAGEABLE ENVIRONMENT WITH REGARD TO PAY ADMINISTRATION
THEN WE CAN LOOK AT SYSTEM SOLUTION THAT ARE, ALTHOUGH AGILE AND VERY COMPLEX, CAN EMBRACE THIS AND BE A SOLUTION FOR US
I JUST WANTED TO MENTION THIS IS A LONG TERM SOLUTION
IT'S A VERY GOOD RECOMMENDATION FROM INTERNAL AUDIT
WE EMBRACE THAT AND WE LOOK FORWARD TO MOVING FORWARD, WORKING ON THE STEPS TO GET THERE
WITH REGARD TO CONTINUING REGULAR MEETINGS, AGAIN, RUMI INDICATED THE COMPLEXITY WITH REGARD TO THE PARTNERSHIP THAT'S REQUIRED AMONG PORT DEPARTMENTS AND WE DO MEET REGULARLY, ESPECIALLY ACCOUNTING, FINANCIAL REPORTING DEPARTMENT, PAYROLL ADMINISTRATION ALONG WITH LABOR RELATIONS AND HUMAN RESOURCES
WE DO MEET REGULARLY AND THAT WAS SOMETHING THAT STARTED YEARS AGO UNDER DIRECTION OF OUR CHIEF FINANCIAL OFFICER DAN THOMAS REGARD TO LET'S GET THE DIALOGUE GOING
WE MEET REGULARLY, BUT ALSO WE ARE MEETING AT THE DEPARTMENT LEVEL AS WELL
AND I THINK THIS IS A RECOMMENDATION FROM INTERNAL AUDIT AND WE'RE GOING TO CONTINUE DOING THAT BECAUSE IT'S REALLY IMPORTANT THAT WE HAVE GOOD COORDINATION, GOOD COLLABORATION, UNDERSTANDING IN TERMS OF WHAT ARE THE CHALLENGES THAT THE DEPARTMENTS ARE FACING
SO PAYROLL ADMINISTRATION HAS ASSIGNED SPECIFIC TEAM MEMBERS IN PAYROLL TO ALIGN WITH THE LABOR AGREEMENTS ALIGNED WITH THE DEPARTMENT
SO THERE'S A MORE SUBJECT MATTER EXPERTISE GROUP DEALING WITH THESE THINGS AND HOPEFULLY THROUGH CONTINUED COMMUNICATIONS WE'LL BE ABLE TO ADDRESS THESE AND THAT KIND OF GETS INTO USE OF HCM GENERATOR REPORTS
THE SYSTEM DOES GENERATE A LOT OF REPORTS, BUT ONE THING THERE IS NOT AN ABILITY TO ANALYZE THE REASON FOR CHANGES
AND AGAIN, WHEN RUMI MENTIONED THERE'S 2000 CORRECTIONS AFTER A PAY APPROVAL, THAT'S NOT US, IT'S FROM THE DEPARTMENT SAYING, HEY, WE APPROVED ENTER A TIME, CAN YOU CHANGE THIS? SO WE'RE KIND OF RESPONDING TO THIS
AND I THINK THAT'S WHEN YOU HAVE SUCH A VOLUME, WHEN YOU'RE TRYING TO MANAGE PAYROLL AND YOU GET DISTRACTED WITH MAKING CORRECTIONS AFTER THE FACT, THAT'S A CHALLENGE BECAUSE IT COULD LEAD TO DISTRACTION AND ERRORS
BUT WE HAVE NOT BEEN HAD ANY ERRORS
WE HAVE OUR ACT TOGETHER IN PAYROLL BECAUSE WE'RE ADMINISTERING PUBLIC FUNDS
WE'VE GOT TO BE TIGHT ON THAT
BUT WITH REGARD TO BEING MORE INFORMED THROUGH THE SYSTEM IN TERMS OF REPORTS, WE ARE ENHANCING THE FACTORS IN THE REPORTS THAT ARE GENERATED
THEN WE CAN DO ANALYSIS
SO WE'LL FACTOR THAT IN USING THE REPORTS, WORKING WITH THE DEPARTMENTS IN DIALOGUE
AND THEN THE LAST TWO POINTS IN TERMS OF TRAINING, VERY GOOD POINT
WE'LL INCREASE THE TRAINING
WE'RE GETTING MORE FORMAL IN TERMS OF LEARNING MANAGEMENT SYSTEM, HR ADMINISTRATOR SYSTEM, HUMAN RESOURCES, AND WE'RE GOING TO INCORPORATE THAT
AND THE REQUIREMENT IS BEFORE ANYONE CAN TOUCH PAYROLL, THE HCM SYSTEM, THEY'RE REQUIRED TO TAKE THIS MANDATORY TRAINING
SECONDLY, FOR THOSE THAT ARE EXISTING, THEY HAVE TO TAKE A RECURRING TRAINING EVERY TWO YEARS TO BE AFFIRMED AS TO BEING ABLE TO HAVE THE COMPETENCE AND KNOWLEDGE TO DO THEIR JOB THERE
AND THEN THEY'LL CONTINUE THE CPI, CONTINUED PROCESS IMPROVEMENT
WE ARE LEVERAGING THE EXPERTISE OF OFFICE OF STRATEGIC PLANNING AND THEY ARE VENTURING INTO COORDINATING ALL OF US AT THE PORT, ESPECIALLY STARTING WITH THE FIRE DEPARTMENT IN THE LABOR RELATIONS, HUMAN RESOURCES, ACCOUNTING, FINANCIAL REPORTING WITH REGARD TO MOVING FORWARD AND REALLY DOCUMENTING CURRENT STATE AND THEN IDENTIFYING THE KEY PAIN POINTS
AND THIS HAS JUST STARTED AND WE'VE ALREADY MOVED FORWARD WITH THE LEADERSHIP OF OFFICE, STRATEGIC PLANNING DURING SPECIFIC AREAS, MAKING IMPROVEMENTS ALONG THE WAY
BUT THIS IS A PROJECT THAT'S GOING TO BE GOING THROUGH 2023 AND THIS IS SOMETHING WE REALLY NEED TO DO UNDER THE LEAN MODEL, CONTINUOUS PROCESS IMPROVEMENT TO DOCUMENT OUR CURRENT STATE, IDENTIFY AREAS FOR IMPROVEMENT AND THEN EXECUTE THEM
THANK YOU
WELL, THANK YOU SO MUCH FOR THOSE THOROUGH ANSWERS AND INFORMATION THAT YOU'VE SHARED
ACTUALLY, IS THERE ANY QUESTIONS FOR MY COMMITTEE MEMBERS? OKAY, I WILL BE MOVING US ALONG TO ITEM NUMBER SEVEN
THANK YOU
THANK YOU
ITEM NUMBER SEVEN ON THE AGENDA IS AN UPDATE ON THE SOCIAL AND ENVIRONMENTAL REPORTING
GLENN, YOU HAVE THE FLOOR
THANK YOU
COMMISSIONER
COMMISSIONER, I'M GOING TO ASK DAN CHASE, OUR AUDIT MANAGER, OVER WHO DID THE AUDIT AND I BELIEVE DAN, YOU LIKE BOOKEDA AND MIAN BOOKED IT
YOU CAN STAY
YEAH, WE AGREE
THANKS MIA
OKAY, SO THANK YOU GLENN, AND GOOD AFTERNOON AUDIT COMMITTEE MEMBERS
AND THANKS MIAN FOR BEING HERE
ME AND RICE
SO I'LL GO THROUGH THE FIRST FEW SLIDES FAIRLY QUICKLY
THE PERIOD THAT WE COVERED WAS JANUARY THROUGH DECEMBER OF 2022
WE AUDITED THREE REPORTS, THE OEDI REPORT, THE ENVIRONMENTAL REPORT, AND THE DIVERSITY AND CONTRACTING REPORT
AND THE PURPOSE OF COURSE WAS TO EVALUATE INTERNAL CONTROLS
AND THEN IT WAS ALSO TO ASSESS THE ACCURACY OF WHAT WAS REPORTED
NEXT SLIDE, PLEASE
SO THIS SLIDE REFLECTS THE DIVERSITY AND CONTRACTING ASPIRATIONAL GOALS
AND IN 2018, THERE WERE TWO GOALS
THE FIRST WAS TO TRIPLE THE NUMBER OF WMBE FIRMS THAT CONTRACT WITH THE PORT OVER A FIVE YEAR PERIOD
AND THE SECOND WAS TO TRIPLE THE SPEND OVER THAT SAME FIVE YEAR PERIOD
PORT RESOLUTION 37 37, WHICH WAS ESTABLISHED IN 2018
IT DEFINES WHAT A WMBE BUSINESS IS, AND IT'S DEFINED AS 51% OWNED AND CONTROLLED BY A WOMAN OR A MINORITY
PORT PROCESSES ALLOW FIRMS TO SELF DECLARE THEIR WMBE STATUS, AND A LITTLE OVER HALF, ABOUT 55%, ARE SELF DECLARED
NEXT SLIDE, PLEASE
THANK YOU, MICHELLE
SO THE WASHINGTON STATE OFFICE OF MINORITY AND WOMEN BUSINESS ENTERPRISES, OR OMWBE, ACCORDING TO THEIR WEBSITE, THEY'RE THE SOLE AGENCY IN THE STATE THAT CERTIFIES WMBE BUSINESSES
THERE ARE THREE REQUIREMENTS
THE FIRST IS MIRRORS 37 37, WHICH IS 51% OWNED AND CONTROLLED BY A WOMAN OR MINORITY
AND THEN THERE'S TWO ADDITIONAL REQUIREMENTS
THE FIRST ONE IS TO BE ECONOMICALLY DISADVANTAGED, AND IT'S DEFINED BY THE OWNER HAVING A NET WORTH OF LESS THAN 1.32 MILLION
AND THEN THE SECOND IS THAT THE BUSINESS MUST BE SMALL, AND THAT'S DEFINED AS ANNUAL RECEIPTS LESS THAN OR EQUAL TO 30.4 MILLION OVER A THREE YEAR PERIOD, ON AVERAGE
SARAH, DID YOU HAVE A QUESTION? NO
THANKS, GLENN
NEXT SLIDE, PLEASE
SO I'M GOING TO CIRCLE BACK TO WHAT WE JUST DISCUSSED, BUT I WANTED TO GO THROUGH THE ISSUES THAT MANAGEMENT HAS PROVIDED RESPONSES FOR
SO IN THE DIVERSITY AND CONTRACTING REPORT FOR 2022, WE LOOKED AT THE NON PUBLIC WORKS WMBE FIRMS REPORTED AS 271
AND WHAT WE FOUND IS WE FOUND 17 DUPLICATES
SO THAT WOULD REDUCE THE NUMBER FROM 271 TO 254
AND THE MANAGEMENT RESPONSE AND ME
AND IF YOU DON'T MIND, I'LL JUST GO REAL QUICKLY HOW YOU RESPOND, AND IF YOU WANT TO ADD ANYTHING, YOU CAN
ONCE THEY GET THE INFORMATION FROM OUR CENTER PROCUREMENT OFFICE, THEY'RE GOING TO LOOK AT THE DATA, AND THEN ANYTHING THAT APPEARS TO BE A DUPLICATE, THEY'LL DO RESEARCH AND THEN REMOVE THOSE GOING FORWARD
AND THEN ALSO THEY'RE GOING TO LOOK BACK SINCE FROM 2019, SINCE WE'RE MEASURING THIS OVER A FIVE YEAR PERIOD
ME AND DO YOU NEED TO ADD ANYTHING? I THINK THAT'S PRETTY STRAIGHTFORWARD, YEAH
OKAY, GOOD
AND NEXT SLIDE, PLEASE
THERE'S OUR RECOMMENDATIONS
YOU CAN GO TO THE NEXT SLIDE AND YOU CAN GO TO THE NEXT SLIDE
THIS IS A LOW RATED ISSUE, AND THIS IS FOR THE OFFICE OF EQUITY DIVERSITY INCLUSION iSBOOKDA GHEISAR HERE IF YOU HAVE ANY QUESTIONS THAT YOU CAN ANSWER
BUT WHAT WE FOUND IS THAT THE NUMBER OF EMPLOYEES THAT WE REPORTED AS BEING EMPLOYED THROUGH THE AIRPORT PROGRAM DIDN'T AGREE TO THE SUPPORTING DOCUMENTATION
AND WHY THAT WAS IS THE NUMBER WASN'T FINAL
AND SO SIMPLY EARMARKING THAT AS AN ESTIMATE OR WAITING TILL THE NUMBER IS
FINAL WILL ALLEVIATE THAT
SO, AGAIN, PRETTY STRAIGHTFORWARD AND RELATIVELY LOW RISK
SO WHAT I WANTED TO DO IS CIRCLE BACK TO THE DIFFERENCE BETWEEN RESOLUTION 37 37 AND THE STATE REQUIREMENTS
SO AS WE DO OUR AUDITS, ONE STEP WE DO IS RESEARCH, AND THAT GIVES US A BASELINE UNDERSTANDING SO THAT WE HAVE A RELATIVELY GENERAL UNDERSTANDING OF WHAT WE'RE AUDITING
WE LOOKED AT 37 37 AND WE ALSO LOOKED AT THE STATE REQUIREMENTS AND NOTICED THAT THERE'S DIFFERENCES
AS I MENTIONED EARLIER, THE STATE REQUIRES FIRMS TO ALSO BE SMALL AND ECONOMICALLY DISADVANTAGED
AND SO AS WE WENT THROUGH OUR AUDIT, WE HIGHLIGHTED THOSE DIFFERENCES AND BRING THOSE FORWARD TO THE AUDIT COMMITTEE FOR CONSIDERATION AND DISCUSSION
BEFORE GO AHEAD, I JUST WANTED TO ASK A CLARIFY
IS THAT IN THE SLIDES HERE, DID I MISS THAT? THOSE COMPARISONS THOSE COMPARISONS ARE ON
YEAH
MAYBE YOU COULD BACK UP TO I THINK THIS YEAH, IT'D BE HELPFUL
YEAH
SO THAT'S 37 37
IT'S 51% OWNED AND CONTROLLED BY A WOMAN OR A MINORITY
OKAY
AND THEN THE NEXT SLIDE HAS THE STATE REQUIREMENTS
SO THERE ARE TWO ADDITIONAL REQUIREMENTS TO BE ECONOMICALLY DISADVANTAGED AND ALSO TO BE SMALL
SO BEFORE WE OPEN IT UP FOR DISCUSSION AND COMMENT, I WANT TO SAY THAT IN NO WAY DO I WANT TO GIVE THE AUDIT COMMITTEE THE IMPRESSION THAT MANAGEMENT HASN'T COMPLIED WITH RESOLUTION 37 37
THEY HAVE, AND I COMMEND MIAN AND DAVE MCFADDEN AND LAWRENCE COLEMAN AND OTHERS THAT HAVE GROWN THIS PROGRAM
BUT THE SALIENT POINTS THAT WE POINT OUT HERE IS SOMETHING INTERNAL AUDIT DOES, AND WE JUST BRING IT FORWARD FOR ADDITIONAL CONSIDERATION AND DISCUSSION
GLENN, DID YOU WANT TO ADD ANYTHING BEFORE NO, ACTUALLY, WE JUST I'M SORRY, COMMISSIONERS
ONE OF THE THINGS WE WANT TO DO IS, AS WE DO OUR AUDITS, WE WANT TO BE TRANSPARENT AND OBJECTIVE AND PRESENT TO THE COMMISSION
AND THAT WHEN YOU ARE GETTING THESE REPORTS, JUST AS YOUR GENERAL AWARENESS THAT WE ARE NOT FOLLOWING ITEM TWO AND THREE, NOR IS IT A REQUIREMENT FOR US
SO IF THAT'S SOMETHING THAT YOU WOULD LIKE TO CONSIDER, THAT'S YOUR PREROGATIVE TO WORK WITH ME AS APPROPRIATE AS WELL
WITH THAT, BACK TO YOU
THANK YOU
DOES THAT CONCLUDE THIS SECTION BEFORE WE JUMP INTO THAT, WE DO HAVE OKAY, SO I'LL OPEN IT UP TO QUESTIONS TO MY COMMITTEE MEMBERS
I JUST HAVE A QUICK COMMENT
WE DON'T NEED TO GO INTO IT TODAY, BUT I THINK 37 37, I THINK WAS A GOOD START FOR US AS AN ORGANIZATION IN TERMS OF PUTTING IN REQUIREMENTS TO INCREASE WMBE REPRESENTATION
BUT I THINK CHECKING OFF A BOX TO SAY, YES, I'M A WMBE BUSINESS, AND HAVING AN ACTUAL MECHANISM THAT CHECKS TO MAKE SURE THAT THEY'RE BEING TRUTHFUL AS A STEP THAT WE NEED TO TAKE TO MAKE SURE THAT THOSE BUSINESSES THAT ARE CLAIMING TO BE THAT ARE ACTUALLY THAT RIGHT
SO THAT OUR NUMBERS AREN'T INFLATED, SO TO SPEAK
COMMISSIONER MOHAMMED AND I HAD A LISTENING SESSION WITH SEVERAL BUSINESS OWNERS AND STAKEHOLDERS
MAYBE IT WAS TWO WEEKS AGO, A WEEK AGO
OKAY
AND OBVIOUSLY ONE OF THE CONCERNS AROUND THAT CERTIFICATION WAS THAT IT'S ONEROUS FOR SMALL BUSINESS OWNERS
AND I UNDERSTAND THAT, AND I HEAR THAT
BUT I DO THINK THERE'S SOMETHING IN BETWEEN HERE THAT WE CAN FIGURE OUT
WHETHER IT'S OUR OWN PROCESS, WHETHER IT'S WE DO REGULAR AUDITS OF OUR ACTUAL SMALL BUSINESSES TO MAKE SURE THEY'RE BEING TRUTHFUL, WHETHER IT'S CERTAIN DISCLOSURES OR AN AFFIDAVIT THAT THEY SIGN IN ORDER TO MORE THAN JUST CHECKING A BOX
BUT TO SAY I SAY THAT I'M THIS AND I UNDERSTAND THE REPERCUSSIONS AND MAYBE THERE SHOULD BE SOME REPERCUSSIONS ON PAPER THAT SAY IF YOU LIE ABOUT THIS, THIS IS WHAT HAPPENS
IN OTHER WORDS, TO CREATE A DETERRENT SO PEOPLE DON'T LIE ABOUT IT
RIGHT
I'M NOT SAYING THAT THIS IS A RAMPANT PROBLEM
I LIKE TO THINK THAT MOST FOLKS, THE VAST MAJORITY OF OUR MINORITY BUSINESS CONTRACTORS ARE TRUTHFUL, BUT PEOPLE TAKE ADVANTAGE OF THE SYSTEM
AND I THINK THERE'S A WAY TO TRUST BUT CONFIRM IN A NON PUNITIVE WAY
AND I'D LOVE FOR US THAT WE CAN DO THAT
ANY OTHER QUESTIONS? I ECHO THOSE SAME SENTIMENTS, AND I THINK IT IS A POLICY DISCUSSION FOR US TO FIGURE OUT AS A COMMISSION, WHAT IS THE NEXT SORT OF STEP THAT WE WANT TO TAKE
I REALLY APPRECIATE THE COMPARISONS THAT WERE PROVIDED
THAT'S HELPFUL FOR US TO USE THAT INFORMATION TO DISCUSS WHAT WE WANT TO DO NEXT
AND I REALLY JUST WANT TO EXPRESS DEEP GRATITUDE FOR ME AND RICE'S TEAM
I KNOW THIS WORK IS REALLY DIFFICULT
WE DON'T WANT TO CREATE BARRIERS FOR OUR COMMUNITY MEMBERS TO BE ABLE TO ACCESS OPPORTUNITIES AT THE PORT
AND SO HOW DO WE BE TRANSPARENT, ACCOUNTABLE WHEN THINGS ARE NOT HAPPENING IN THE WAY THAT WE WOULD LIKE TO SEE THEM? AND WE'VE HEARD SO MANY STORIES AND ANECDOTES AND THIS AUDIT ACTUALLY CONFIRMS SOME OF THOSE STORIES I WAS HEARING OUT IN THE PUBLIC
AND SO IT'S HELPFUL
IT GIVES US AN OPPORTUNITY TO ANALYZE THAT AND COME BACK AND DECIDE WHAT WE WOULD LIKE TO DO NEXT AS A COMMISSION
BUT I DEFINITELY DO THINK IT'S A POLICY DISCUSSION FOR US TO HAVE NEXT TIME
OH, THANK YOU, RUDY, FOR TURNING ON THE MIC FOR ME
APPRECIATE THAT
I'LL PAY YOU LATER
ONE OF THE THINGS I DID WANT TO BRING UP, THOUGH, REAL QUICK IS SINCE INITIATIVE 200, I 200 TURNED STATE OF WASHINGTON IN AN ANTI AFFIRMATIVE ACTION STATE
AND SO YOU KNOW WHAT'S BEEN HAPPENING RECENTLY AND SO FORTH
BUT ONE OF THE THINGS SINCE THAT HAPPENED, THE AMOUNT OF CERTIFICATION IN WOMEN MINORITY BUSINESSES AT OMW WENT DOWN PLUMMETED
AND WE HAVE DATA FOR THAT AS WELL THROUGH THE STATE OF WASHINGTON
SO A LOT OF ONE OF THE THINGS THAT I DID WANT TO BRING UP, THOUGH, AS PART OF THE RESIDENT 37 37, WHICH WAS A GREAT FOUNDATION TO THE GREAT WORK THAT THE PORT OF SEATTLE AND YOU COMMISSIONERS AND STAFF HAS REALLY TURNED REALLY TRYING TO BE INTENTIONAL ABOUT, IS ALSO THERE ARE SOME BUSINESSES THAT DECIDED NOT TO GET CERTIFIED
AS YOU MENTIONED ALREADY, COMMISSIONER CHO
BUT SOME OF THEM ALL GO SOMETIMES THEY GO TO OTHER ORGANIZATIONS LIKE THE NORTHWEST MINORITY SUPPLIER DEVELOPMENT COUNCIL THAT'S ANOTHER ORGANIZATION THAT GO AS A MEMBERSHIP
OR THE WE BANK, WHICH IS THE WOMAN'S BUSINESS
I FORGOT THE LAST LETTER
BUT THERE ARE SOME OTHER MEMBERSHIP ORGANIZATIONS THAT WE CANNOT DISCOUNT
AS WE CONTINUE TO THINK ABOUT OUR GAP YEAR NEXT YEAR, WHEN WE LOOK AT OUR POLICIES, WHAT WE'RE GOING TO DO WHEN IT COMES DOWN TO HOW WE'RE GOING TO MOVE THE NEEDLE FORWARD FOR OUR NEXT FIVE YEAR GOALS, I'M ASSUMING IN THE FUTURE THAT WE'LL BE ALL GOING THROUGH
THANK YOU
THANK YOU FOR THOSE COMMENTS AND THANK YOU FOR PRESENTING ON THE PORT
IF THERE'S NO FURTHER QUESTIONS, I WILL BE MOVING US ON TO ITEM NUMBER EIGHT ON THE AGENDA
SO, ITEM NUMBER EIGHT, THAT IS OUR RESTORATION CONSTRUCTION PROJECT
GLENN, PLEASE PROCEED
THANKS, COMMISSIONER
I'M GOING TO ASK SPENCER BRIGHT TO COME UP AND I KNOW WE ONLY HAVE A FEW MINUTES LEFT, ABOUT TWELVE MINUTES, SO I'M GOING TO MOVE THROUGH THIS PRETTY QUICKLY
THE LAST AUDIT IS A CLEAN AUDIT, ITEM NINE ON THE AGENDA
SO THIS IS OUR FINAL ITEM TO DISCUSS
SPENCER, IN THE INTEREST OF TIME, I'M GOING TO GO THROUGH THE FIRST COUPLE OF FEW SLIDES AND THEN I'M GOING TO HAND IT TO YOU
BUT ESSENTIALLY, THIS IS ENVIRONMENTAL REMEDIATION
WE'RE GOING TO BE SPENDING A LOT OF MONEY ON IT IN THE FUTURE
AGAIN, AS YOU HEARD YESTERDAY, WE'RE GOING FROM ABOUT 7.5 MILLION A YEAR TO 50 MILLION ENVIRONMENTAL REMEDIATION
THIS IS ONE OF THOSE PROJECTS
AND AS WE DO THESE, WE HAVE TO AUDIT THEM
OBVIOUSLY, AS THE SLIDE SHOWS, MALARKEY ASPHALT COMPANY CREATED A MESS THAT WE'RE CLEANING UP AND THE PORT ACQUIRED THE PROPERTY, WE'RE CLEANING IT UP
AND THIS WAS MONEY TO BUILD THE DUWAMISH PEOPLE'S PARK ON THAT SITE
THE NEXT SLIDE, PLEASE, MICHELLE
THE SLIDES ESSENTIALLY SHOW A LITTLE BIT OF A BACKGROUND AS TO WHAT WE'RE SPENDING
BUT WITH SCARSELLA AND BROTHERS, THERE'S ALMOST $15 MILLION THAT WE'RE SPENDING
AND AS THE PRIME GCCM CONTRACTOR, WHERE OUR JOB IS TO AUDIT THEM AND MAKE SURE THAT WHAT THEY'RE SUBMITTING TO THE PORT IS ACCURATE AND WE WORK WITH JANISON AND CONSTRUCTION MANAGEMENT TEAM ON THIS
NEXT SLIDE, PLEASE
SO ONE OF THE THINGS WE DID DO, WE'RE REQUIRED TO HAVE AN INDEPENDENT AUDIT
WE CAN MAKE THE ARGUMENT THAT WE'RE INDEPENDENT AS WELL, BUT WE DO GO OUT AND GET SPECIAL ADDITIONAL FIRM COMES IN AND WORKS WITH US
AND WE DID HAVE MINORITY WMBE FIRM BRANCH RICHARDS, WHICH THAT DID THE WORK HERE AND THEY DID AMAZING WORK
SO YOU'LL SEE IN THE NEXT SLIDE THAT SPENCER TALKS ABOUT THAT THEIR WMBE FIRM
UNFORTUNATELY, THE PARTNER IS RETIRING THIS YEAR, SO WE'LL HAVE TO FIND ANOTHER FIRM
BUT THEY DID MARVELOUS WORK AND NEXT SLIDE, PLEASE, AND SPENCER WILL TALK ABOUT THAT
THANK YOU, GLENN, AND GOOD AFTERNOON, COMMITTEE MEMBERS
I'M SPENCER BRIGHT, THE CAPITAL PROJECTS AUDIT MANAGER
SO, THE FOLLOWING TABLE DEPICTS THE RESULTS OF BRANCH RICHARD'S WORK
THERE'S STILL SOME MINOR WORK THAT THEY NEED TO PERFORM AS THIS PARTICULAR PROJECT IS ON HOLD
BUT TO DATE, BRANCH IDENTIFIED A NET OVER BILLING OF APPROXIMATELY $340,000
THIS HAS ALREADY BEEN RECONCILED THROUGH THE PAY APPLICATION PROCESS DURING THE PROJECT, MEANING WE GOT THE MONEY BACK
NEXT SLIDE, PLEASE, MICHELLE
SO OUR PARTICULAR AUDIT, ABOVE AND BEYOND WHAT BRANCH RICHARDS DID, FOCUSED ON WE REVIEWED BRANCH RICHARDS WORK, THEIR WORK PAPERS, TO SEE IF WE AGREED WITH THE WORK THEY PERFORMED
WE LOOKED AT THE BIDDING REQUIREMENTS, GCCM NEGOTIATED SUPPORT SERVICE WORK, AND SELF PERFORMED WORK THAT THEY PERFORMED
OUT OF THE AREAS WE REVIEWED, WE NOTED TWO LOW LEVEL OBSERVATIONS
THE REST OF THE AREAS WERE GOOD, AND WE HAVE NO RECOMMENDATIONS OR ANYTHING FOR THOSE AREAS
SO, FOR ISSUE NUMBER ONE, WE NOTICED AS PART OF THE GCCM REQUIREMENTS, BY STATE LAW, WHEN THE GCCM GOES OUT TO BID FOR WORK, IF THEY INTEND TO SUBMIT A BID THEMSELVES, THEY HAVE TO PUT AN INTENT NOTIFICATION WITHIN THAT PROPOSAL REQUEST FOR THIS PROJECT
WHEN THESE SOLICITATIONS WENT OUT IN 2020, THAT INTENT WAS NOT INCLUDED IN THEIR RFP PRIOR TO OUR AUDIT, AND CENTRAL PROCUREMENT OFFICE CPO IDENTIFIED THAT THAT DID OCCUR AND DID UPDATE THEIR PROCESSES
SO CURRENTLY, THEIR PROCESS MAKES SURE THAT THIS REQUIREMENT IS MET AND SO THAT WILL BE MOVING THROUGH FUTURE SOLICITATIONS
NEXT SLIDE, PLEASE
THE SECOND ISSUE IS RELATED TO TWO SELF PERFORMED TASKS THAT THE GCCM PERFORMED AT THAT TIME
THE GCCM WAS DIRECTED BY THE RESIDENT ENGINEER OR THE PERSON IN CHARGE OF THE PROJECT TO BILL ON A PERCENT COMPLETION BASIS MONTHLY INSTEAD OF ACTUAL COSTS AS THE CONTRACT WAS WRITTEN
THIS RESULTED IN AN OVER BILLING OF APPROXIMATELY $166,000 OR OVERPAYMENT PRIOR TO OUR AUDIT
AGAIN, THE CURRENT RE THAT'S ASSIGNED TO THE AUDIT NOTED THIS BILLING DISCREPANCY AND HAS BEEN IN THE PROCESS OF RECONCILING THE DIFFERENCE BEFORE WE CAME ON SITE
THE CONSTRUCTION MANAGEMENT TEAM HAS ALREADY BEEN IN DISCUSSIONS WITH THE GCCM, WHO IS IN AGREEMENT, AND THERE IS A PLAN TO GET A CREDIT OF THIS DIFFERENCE, WHICH IS APPROXIMATELY $166,000
COMMISSIONER, SINCE WE'RE CLOSE IN TIME, AND THESE ARE BOTH LOW RISK ISSUES THAT HAVE BEEN ADDRESSED, UNLESS YOU WANT TO HEAR FROM MANAGEMENT, WE CAN CLOSE THIS OUT AND MOVE ON OR TAKE QUESTIONS IF NEEDED
NOW, HOLD FOR A SECOND
ANY QUESTIONS FROM THE COMMITTEE MEMBERS? ALL RIGHT, NO QUESTIONS
WE CAN MOVE ON TO THE NEXT ITEM THEN
VERY GOOD
THE NEXT ITEM ON THE AGENDA IS ITEM NUMBER NINE, WHICH IS THE DOUG FOX PARKING
GLENN, PLEASE PROCEED
THANK YOU, COMMISSIONER
SO I WON'T GO INTO A LOT OF DETAIL ON THIS, BUT DOUG FOX IS A PARKING LOT, ONE OF THE LARGEST ONES
THAT'S PORT OWNED RIGHT BY THE AIRPORT
AND THIS IS ESSENTIALLY A CLEAN AUDIT
THEY'RE LARGE REVENUES ARE ABOUT 14, 15 MILLION A YEAR
THEY PAID US EVERYTHING
THEY'RE A SMALL BUSINESS, KIND OF, BUT I MEAN, THE INDIVIDUAL THAT RUNS IT, IT DEPENDS IF YOU LOOK AT AYE
REVENUE AND THE DEFINITION THAT WE USE
BUT NONETHELESS, I THINK THERE WAS A CREDIT THAT HE WAS OWED
AND WHEN WE DO THESE AUDITS, ONE OF THE THINGS WE DO, IT GOT LOST IN THE SHUFFLE
SO HE HAD SENT THE REQUEST OVER FOR AYE
CREDIT IN 2020, I BELIEVE, GOT LOST JUST A FEW HUNDRED DOLLARS
BUT WE RECONCILED THAT WE FOUND IT, AND WE MADE SURE HE GOT DES MOINES BACK SO SMALL
BUT THAT'S IT
COMMISSIONERS, IT'S A CLEAN AUDIT, AND I HAVE NOTHING MORE TODAY
SORRY
THANK YOU FOR SHARING THAT INFORMATION
ARE THERE ANY QUESTIONS FOR MY COMMITTEE MEMBERS, COLLEAGUES? ALL RIGHT, SO IT LOOKS LIKE WE'RE AT THE END OF OUR AGENDA
MAKE SURE I DIDN'T MISS ANYTHING
OKAY, SO THIS BRINGS US TO THE CLOSE OF THE MEETING
MR FERNANDEZ, DO YOU HAVE ANY CLOSING COMMENTS THAT YOU'D LIKE TO SHARE NOW? I JUST WANT TO SAY THANK YOU TO EVERYONE HERE THAT CAME AND BOOKED ME AND THE FOLKS THAT LEFT, AS WELL AS OUR TEAM THAT DID ALL THE WORK
SO THANK YOU VERY MUCH
COMMISSIONER
THANK YOU
ARE THERE ANY CLOSING COMMENTS FROM THE COMMITTEE MEMBERS? NO COMMENTS
GREAT
WELL, THANK YOU SO MUCH FOR ALL OF THE HARD WORK THAT YOU AND YOUR TEAM DO
AND THANKS TO EVERYONE WHO PRESENTED TODAY
I WILL BE CLOSING US OUT, HEARING NO FURTHER COMMENTS, AND HAVING NO FURTHER BUSINESS, IF THERE IS NO OBJECTIONS TO ADJOURN, WE ARE NOW ADJOURNED, AND THE CURRENT TIME IS 12:27
THANK THANK YOU.

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