Financial Stewardship
Accountability
Transparency
Port of Seattle Audit Committee
Internal Audit Update
Glenn Fernandes - Director, Internal Audit
March 18, 2025
P69 Commission Chambers
8:30 AM - 10:30 AM
Operational Excellence
Governance
Internal Audit Director's Annual Communication
Item #3
Annual communication is required by the Institute of Internal Auditors
Global Internal Audit Standards on:
➢ Organizational Independence
➢ Quality Assurance and Improvement Program
2
Independence Requirement
Item #3
➢IIA Standards require annual confirmation of organizational independence
of the internal audit function
➢Internal Audit Department continues to maintain organizational
independence by reporting functionally to the Audit Committee and
administratively to the Executive Director
➢This is also consistent with the 2007 State Auditor's recommendation
3
Quality Assurance Requirement
Item #3
➢ Generally Accepted Government Auditing Standards (GAGAS)/Government
Accountability Office (GAO) require an external peer review every three years
➢ IIA Standards require both an internal and external quality assurance and
improvement program; external assessments need to occur at least every five years
➢ An external peer review was conducted by the Association of Local Government
Auditors (ALGA) in August of 2022
➢ An external peer review was due in 2025, but due to the cyber event, was postponed
to 2026
4
Quality Assurance Requirement
Item #3
➢ Internal Audit's periodic, quality self-assessment was most recently
performed in the fourth quarter of 2024
▪ Reviewed a sample of audit engagements and workpapers
▪ Interviewed staff to gain an understanding of workflow processes
immediately following the cyber attack incident
▪ Offered enhancement opportunities and recommendations
▪ Created a new folder structure and naming convention guide to increase
standardization and consistency
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Item #4
Internal Audit Outreach Program
Partnered with the Office of Equity, Diversity, & Inclusion (OEDI), to create a
training presentation targeted to leadership of contracted community-based
organizations (CBOs).
2025 Goals and Strategy:
1. Strive to build trust/develop partnerships
• Attend the Quarterly SKCCIF Economic Recover Partner Meeting
• Join SKCCIF Environmental Improvements Partner Site Visits
• Direct introduction/connection to CBOs' leadership from Port Program
Managers
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Item #4
Internal Audit Outreach Program
2025 Goals and Strategy:
2. Socialize our approach and the importance of controls
• Simplify language and concepts about Internal Audit
• 1:1 consultation session instead of large group presentations
• Offer technical assistance if needed
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Item #5
2025 AUDIT PLAN STATUS
Audit Title
Recovery Effort - Data Integrity - General
Banking/Fraud Controls
South King Co. Fund (Community Initiatives)
Consultants/Contractor Management1
Port Management Governance Committees
Terminal 91 Uplands Redevelopment
Maritime Center at Fishermen's Terminal
2023 Airfield Projects - Contract 2
Widen Arrivals Roadway
Construction Solicitation/Bidding
Recovery Effort - Data Integrity - Construction Management
Closed Network System - Satellite Transit System (STS) (AVM)
Third-Party Risk Management
Access Control Management
New IT Environment - Information Technology General Controls (ITGC)
Gate Gourmet, Inc.
BF Foods, LLC
Concourse Concessions, LLC
SSP America SEA, LLC (Ballard Brew Hall)
SSP America SEA, LLC (Mi Casa Cantina)
SSP America SEA, LLC (Le Grand Comptoir)
SSP America SEA, LLC (Camden Food Co.)
Type
Jan
Feb
Mar
Apr May Jun
Jul
Aug
Sep
Oct
Nov
Dec
Performance
Performance
Performance
Performance
Performance
Performance - Capital
Performance - Capital
Performance - Capital
Performance - Capital
Performance - Capital
Performance - Capital
IT
IT
IT
IT
Contract Compliance
Contract Compliance
Contract Compliance
Contract Compliance
Contract Compliance
Contract Compliance
Contract Compliance
Complete
KEY In Process
Not Started
1 Original approved plan included interns, which has been subsequently removed.
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Approved 2025 Audit Plan
Item #5
Limited Contract Compliance
Performance
Information Technology
• Gate Gourmet, Inc.
• BF Foods, LLC
• Concourse Concessions, LLC
• SSP America SEA, LLC (Ballard Brew
Hall)
• SSP America SEA, LLC (Mi Casa
Cantina)
• SSP America SEA, LLC (Le Grand
Comptoir)
• SSP America SEA, LLC (Camden Food
Co.)
Performance
• Recovery Effort - Data Integrity - General
• P-Cards & Accounts Payable Payments and
Banking/Fraud Controls
• South King Co. Fund (Community
Initiatives)
• Consultants/Contractor Management1
• Port Management Governance
Committees
• Closed Network System - Satellite Transit
System (STS) (AVM)
• Third-Party Risk Management
• Access Control Management
• New IT Environment - Information
Technology General Controls (ITGC)
Capital
• Terminal 91 Uplands Redevelopment
• Maritime Center at Fishermen's Terminal
• 2023 Airfield Projects- Contract 2
• Widen Arrivals Roadway
• Construction Solicitation/Bidding
• Recovery Effort - Data Integrity Construction Management
1 Original approved plan included interns, which has been subsequently removed.
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Internal Audit Capital GC/CM Continuous Audits
Item #5
➢ RCW 39.10.385 requires an independent audit
➢ We have procured a third-party independent auditor
➢ Independent auditor provides the Audit Committee with annual updates and final reports upon completion of
each project
➢ The following table represents GC/CM projects that IA is overseeing and assisting in fieldwork as needed:
Capital GC/CM Continuous Audits
Main Terminal Low Voltage System Upgrade
Under Contract
Post IAF Airline Realignment
Under Contract
C Concourse Expansion Project
Under Contract
Eastside Fire Station
Under Contract
Baggage Optimization Phase 3
Under Contract
Concourse Low Voltage Upgrade
Under Contract
South Concourse Evolution
Under Contract
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Audits Completed in First Quarter - 2025
Items #6-12
1) Consultants/Contractor Management (Item #6)
2) Banking/Fraud Controls (Item #7)
3) 2023 Airfield Projects - Contract 2 (Item #8)
4) Closed Network System - Satellite Transit System (STS) (AVM)1 (Item #9)
5) BF Foods LLC (Item #10)
6) Concourse Concessions LLC (Item #11)
7) Gate Gourmet, Inc. (Item #12)
1 Security Sensitive - Exempt from public disclosure per RCW 42.56.420 and will be presented during the Non-Public Session.
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Consultants/Contractor Management
Item #6
➢ Audit was performed to:
▪ Assess general compliance to Port Policy EX-10 Contracted Worker
Guidance
▪ Evaluate the Port's onboarding and offboarding processes
➢ Port Policy EX-10 states, "Contracted workers are hired under a
contractual relationship, not an employer-employee relationship"
➢ Misclassification occurs when contracted worker are treated and/or
regarded as if they were employees
12
Consultants/Contractor Management
Item #6
The Internal Revenue Service has criteria to determine whether individuals
providing services are employees or contractors:
1) Behavioral control: The payer has the right to control or direct only the result
of the work and not what will be done or how it will be done
2) Financial control: The nature of how the individual is paid, e.g., weekly or
hourly versus a flat fee
3) Type of relationship: How permanent and how the organization and
individual views the relationship
Did not identify significant exceptions to EX-10
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Item #6
1) Rating: Medium
The Port does not have a centralized way to track and monitor when
equipment, keys, parking permits, and badges are issued and collected.
As a result, on-and off-boarding procedures between departments are
inconsistent and are not well understood.
➢ Dependent upon project manager ability to accurately account for and
collect, when a contractor's relationship with the Port ends
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Item #6
1) Rating: Medium
➢ Nine (9) of 273 contractors whose active directory account reflected
disabled, still had an active parking permit
➢ Some contractors were still working at the Port, even though their
active directory account reflected disabled
➢ Difficult to determine what the contractor was issued and whether it
was returned
15
Recommendations
Item #6
➢ Establish a cross functional team tasked to create a uniform
methodology and to design a uniform system to track contractor
start and end dates, the issuance and return of keys, parking
permits, badges, equipment, and other assets
➢ Cross functional team might consist of representatives from key
departments, including ICT, Maritime Security, Engineering, and
Aviation Maintenance with an Executive Sponsor(s)
16
Management Response
Item #6
Thank you for sharing the audit analysis and recommendation. We
will look for an opportunity to develop a standardized, automated
on-and off-boarding check list for contractors with the goal of
completing this work by the end of First Quarter, 2026.
DUE DATE: 03/31/2026
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Banking/Fraud Controls
Item #7
➢ Reviewed bank statements for the Port's authorized accounts
▪ No issues were noted
➢ Contacted 25 financial institutions
▪ Nine responded as of the date of the audit report
▪ No unauthorized accounts detected
➢ Reviewed grant payments, confirming all funds were received
➢ Interviewed Prime contractors
▪ Independent and fair process was followed for subcontractor selection
We did not identify any issues that warranted reporting.
18
2023 Airfield Projects - Contract 2
Item #8
Five critical projects, addressing both immediate and long-term needs for the Airport's
airfield infrastructure.
➢ Snow Storage Expansion: Increased snow storage capacity
➢ Overheight Vehicle Damage Protection System: Warning bars on the perimeter road to stop
overheight vehicles from striking bridge
➢ Cascade Road: A mid-airfield power ductbank
➢ Perimeter Intrusion Detection System: Power and communication infrastructure for safety
➢ Secured Area Vehicle Checkpoints Project: Infrastructure and equipment to support employee
screening at the airfield's secured area
The Port's processes for this Project were effective and met industry standards. We
did not identify any issues that warranted reporting.
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Item #10
BF Foods LLC
➢ OMWBE and recognized as an ACDBE
➢ Period audited January 2023 to June 2023
➢ Expanded scope (January 2022 - December 2024)
➢ 2023 Gross Sales and Percentage Fees:
Period
Gross Sales
Percentage Fee
January - June 2023
$2,444,034
$293,284
July - December 2023
2,527,151
303,258
$4,971,185
$596,542
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Item #10
1) Rating: Medium
Revenue categories titled "bag fees" and "retail" were not reported and
captured as revenue. For the six- month period beginning January
through June 2023, $12,963 in revenue was underreported and $1,555 in
percentage fees were underpaid.
Month
January
February
March
April
May
June
Retail
$1,214
1,229
1,354
846
1,167
2,052
Bag Fee
$633
706
803
862
956
1,141
Total
Total
$1,847
1,935
2,157
1,708
2,123
3,193
$12,963
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Management Response
Item #10
We agree with the audit finding and will pursue billing and collection of
the additional monies related to the bag and retail fees, including those
amounts which may be due under the broader scope, no later than
September 30, 2025.
DUE DATE: 9/30/2025
22
Concourse Concessions LLC
Item #11
This is a Limited Contract Compliance Audit without any
issues and will not be presented during this meeting.
However, the final reports are made available.
23
Gate Gourmet, Inc.
Item #12
This is a Limited Contract Compliance Audit without any
issues and will not be presented during this meeting.
However, the final reports are made available.
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Committee Comments
Item #13
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