INTERNAL AUDIT REPORT
Operational Audit
Consultants/Contractor Management
January 2023 - December 2024
Issue Date: March 5, 2025
Report No. 2025-06
This report is a matter of public record, and its distribution is not limited. Additionally, in accordance with
the Americans with Disabilities Act, this document is available in alternative formats on our website.
Consultants/Contractor Management
TABLE OF CONTENTS
Executive Summary ................................................................................................................................................. 3
Background ............................................................................................................................................................. 4
Audit Scope and Methodology ............................................................................................................................... 5
Schedule of Observations and Recommendations ................................................................................................ 6
Appendix A: Risk Ratings ......................................................................................................................................... 7
2
Consultants/Contractor Management
Executive Summary
Internal Audit (IA) completed an audit of Consultants/Contractor Management, for the period January
2023, through December 2024. The audit was performed to assess general compliance to Port Policy
EX-10 Contracted Worker Guidance and to evaluate the Port of Seattle's (Port) onboarding and
offboarding processes.
Port Policy EX-10 states "Contracted workers are hired under a contractual relationship, not an
employee-employer relationship. Misclassification occurs when contracted workers are treated and/or
regarded as if they are employees." The Internal Revenue Service (IRS) has three criteria to evaluate
their classification. Those criteria are: behavioral control, financial control, and type of relationship.
These criteria are discussed further in the Background section of this report.
Our testing, which included discussions with management, did not identify significant exceptions to EX10.
Our assessment of on-and-offboarding, however, identified opportunities to improve. Our conclusions
are limited because data and information came from disparate sources and was sometimes based on
manager assertions.
Onboarding and offboarding of consultants and contractors are important, as these individuals are also
provided access to a variety of Port systems, facilities, and assets. When not onboarded in a consistent
and accurate manner, it becomes more difficult to know what access and assets the individuals have at
their departure.
Described below, is a brief description of the issue and is discussed in more detail beginning on page
six of this report.
1. (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-offboarding
procedures between departments are inconsistent and are not well understood.
We extend our appreciation to Port management and staff for their assistance and cooperation during
this audit.
Glenn Fernandes, CPA
Director, Internal Audit
Responsible Management Team
Karen Goon, Deputy Executive Director
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Consultants/Contractor Management
Background
Port Policy EX-10 (Contracted Worker Guidance) states that 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.
The IRS has criteria to determine whether individuals providing services are employees or contractors.
Generally, the greater the behavioral and financial control, and the more permanent the relationship, the
more likely the individual would be considered an employee. Below are the three IRS criteria:
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.
Port Policy EX-10 outlines the essence of IRS guidance by referencing that contractors are hired under
a contractual relationship and not an employee-employer relationship and that misclassification occurs
when contracted workers are treated and/or regarded as if they were employees. The Policy provides
general guidelines to follow, such as making sure they don't attend employee recognition events, staff
meetings, or employee orientation. Between January 2023 and December 2024, the Port activated 386
independent contractor accounts. Listed below are the distributions by operating division:
Aviation
Maintenance
Capital Program Management
Operations
Customer Experience
Facilities
Commercial Management
Security, Finance & Budget, Innovation
Total
Number of Contractors
83
34
26
23
12
11
14
203
Maritime
Security
Facilities and Capital Programs
Cruise, Fishing, Marinas
Project Management
Total
Number of Contractors
59
3
7
1
70
Support Services
ICT
Engineering
Accounting & Financial Reporting
Environment and Sustainability
Internal Audit, HR, Equity, Commission, External Relations
Total
Number of Contractors
47
37
14
10
5
113
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Consultants/Contractor Management
Audit Scope and Methodology
We conducted the engagement in accordance with Generally Accepted Government Auditing Standards
and the Global Internal Audit Standards. These standards require us to plan and execute the
engagement to obtain sufficient, appropriate evidence to support our findings and conclusions based on
the engagement objectives. We believe the evidence obtained provides a reasonable basis for our
findings and conclusions.
Not included in the scope was an assessment of how IT assets are used, as outlined in Third Party User
Access Policy for Access to Port of Seattle Technology Information Systems & Services (CC-7a).
In some instances, we used judgmental sampling methods to determine the samples selected for our
audit test work. In those cases, the results of the work cannot be projected to the entire population.
The period audited was January 2023 through December 2024 and included the following procedures:
Document Review
•
•
•
Reviewed Port of Seattle Policy and Procedural documents
Obtained contractor data for the period beginning January 1, 2023, through December 1, 2024
Categorized this data into operating groups
Inquiries
•
•
Discussed on-and-offboarding experiences with Port managers based on the number of
contractors overseen by that individual
Inquired whether a checklist or other procedural tool are used by the manager.
Testing
•
Compared the date the account was disabled to the parking permit status (active or returned)
o Identified accounts that were disabled but continued to have an active status
o Confirmed with Landside Management that the permit was still active and obtained the
date that the parking permit was last used
o Inquired with the Port manager to assess if they had additional details regarding the
status of the parking permit
o Identified parking permits that reflected returned and confirmed the status with Landside
Management
Port Policy EX-10 Compliance
•
Selected 20 individual contractors, who had active directory accounts beginning January 2023,
through November 2024 and performed the following tests:
o Determined if the individual attended staff meetings or employee recognition events
o Validated that the Central Procurement Office and Executive Leadership Team (ELT)
member approval was obtained, if parking privileges were provided
o Validated that only safety or technology training was provided if necessary to perform
their work
o Obtained the reason that a laptop or cell phone was issued to the individual, if applicable
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Consultants/Contractor Management
Schedule of Observations and Recommendations
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-offboarding procedures
between departments are inconsistent and are not well understood.
Tracking and monitoring the issuance of keys, parking permits, badges, and equipment is the
responsibility of the Port project manager and hinges on their ability to accurately account for and collect
these, when a contractor's relationship with the Port ends. Without being able to accurately account for
this information, assessing the effectiveness of offboarding was difficult. The following are some
examples that make it difficult to determine how well the process is working:
•
We obtained contractors that were awarded a contract between January 2023 and November
2024 and the date that their active directory account was disabled. However, based on our
discussions with Port project managers, some contractors were still working at the Port,
therefore we could not rely on the disabled date.
•
To validate if parking permits, keys, and/or badges were issued and collected, we had to either
rely on the managers verbal assertion or contact a different department. From an auditing
perspective, this approach doesn't lend itself to conclusively determine what the contractor was
issued and whether it was returned. For example, 9 of the 273 contractors whose active directory
account reflected disabled, still had an active parking permit. When we spoke to the Port project
manager, they confirmed that the contractor was still working at the Port.
Recommendations:
The Port should establish a cross functional team that is tasked with creating a uniform methodology
and designing a uniform system, that tracks contractor start and end dates, the issuance and return of
keys, parking permits, badges, equipment, and other assets. In developing this system, a standard
on/offboarding checklist should be created, so that information can be captured in a consistent manner
across the organization.
The cross functional team should consist of representatives from key departments, including ICT,
Maritime Security, Engineering, and Aviation Maintenance, with an Executive Sponsor(s). These groups
account for more than 50% of contractors onboarded between January 2023 and December 2024.
Management Response/Action Plan:
Thank you for sharing the audit analysis and recommendation. We will look for an opportunity to
develop a standardized, automated on-and-offboarding check list for contractors with the goal of
completing this work by the end of 1st quarter, 2026
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Consultants/Contractor Management
Appendix A: Risk Ratings
Observations identified during the audit are assigned a risk rating, as outlined in the table below. Only
one of the criteria needs to be met for an observation to be rated High, Medium, or Low. Low rated
observations will be evaluated and may or may not be reflected in the final report.
Rating
High
Financial/
Operational
Impact
Internal
Controls
Compliance
Significant
Missing or
partial
controls
Non-compliance
with Laws, Port
Policies,
Contracts
Partial
controls
Medium
Low
Moderate
Minimal
Not
functioning
effectively
Functioning
as intended
but could be
enhanced
Partial
compliance with
Laws, Port
Policies
Contracts
Mostly complies
with Laws, Port
Policies,
Contracts
7
Public
High probability
for external audit
issues and / or
negative public
perception
Moderate
probability for
external audit
issues and / or
negative public
perception
Low probability
for external audit
issues and/or
negative public
perception
Commission/
Management
Requires
immediate
attention
Requires
attention
Does not
require
immediate
attention