Commissioners                                               Tay Yoshitani 
Chief Executive Officer 
Bill Bryant 
Chair and President 
Tom Albro                             P.O. Box 1209 
John Creighton                       Seattle, Washington 98111 
Rob Holland                           www. portseattle.org 
Gael Tarleton                              206.728.3000 

An audio of the meeting proceedings and meeting materials are available on the Port of Seattle
web site - http://www.portseattle.org/about/organization/commission/commission.shtml 
APPROVED MINUTES 
AUDIT COMMITTEE SPECIAL MEETING AUGUST 3, 2010 
The Port of Seattle Commission Audit Committee met in a special meeting at 9:00 a.m., Tuesday,
July 13, 2010 in the Commission Chambers at Pier 69, 2711 Alaskan Way, Seattle, WA.
Committee members Albro, Tarleton and Miller were present, as well as CEO Tay Yoshitani and
Joyce Kirangi, Port Internal Audit Manager. 
CALL TO ORDER 
The committee special meeting was called to order at 9:15 a.m. by Commissioner Gael Tarleton.
She then noted that there would be a change in the order of agenda items presented at the
meeting. 
APPROVAL OF MINUTES 
Commissioner Albro suggested a revision in wording to the June 8 proposed meeting minutes to
better characterize comments made by him regarding concerns of amending agreements
unilaterally. 
Motion to amend minutes, as suggested  Tarleton 
Second  Albro 
Motion carried by the following vote: 
In Favor: Albro, Tarleton (2) 
Mr. Miller participates as a non-voting member of the Committee 
Motion for approval of the minutes of the June 8, 2010 meeting, as amended  Albro 
Second  Tarleton 

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Motion carried by the following vote: 
In Favor: Albro, Tarleton (2) 
Mr. Miller participates as a non-voting member of the Committee 
Discussion of Public Member Recruitment for 2011 
A document for discussion was provided reflecting qualifications which were used for the initial
public member recruitment, as well as proposed revisions to those qualifications. 
Presenter: Tom Barnard, Research and Policy Analyst 
At the beginning of the discussion, Mr. Miller raised the question of whether or not it will be a
requirement that the next public Committee member be a resident of King County, and noted that
he was not proposing this, but suggesting it be considered.
Several suggested revisions to the proposed 'new' version of the list of qualifications were
discussed, including: 
Experience with generally accepted accounting principles (GAAP) and generally accepted
accounting auditing standards (GAAS). (bullet 1) 
Question as to whether general or specific knowledge of GAAP and GAAS should be
required (bullet 1) 
An understanding of, or experience with a public sector audit committee functions (bullet
five) 
Commitment to a three-year term (new addition) 
Mr. Barnard stated his belief that it should be a requirement that the public member be a resident
of King County. Commissioners Tarleton and Albro concurred; however, Commissioner Albro
stated that Mr. Miller has actually served more as an expert member of the Committee and that
what he cares about is finding a replacement that can provide that same level of expertise, whether
from King County or not. 
Ms. Kirangi agreed that the primary focus should be more on the level of the applicant's expertise
rather than where they reside.
Following further discussion, Commissioner Tarleton stated that she believes the applicants should
be able to come from anywhere, with the focus being on their qualifications. It was decided not
necessary to add as a qualification that the applicant must be a resident of King County. 
Request was made to revise the opening statement of the proposed 'new' version as follows: 
"The Audit Committee is composed of two POS Commissioners and one public independent
expert member. Commissioner Tarleton also noted that she wants it clear that applicants cannot
come from inside the Port.

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CEO Yoshitani suggested that in order to recruit appropriate applicants, the position be elevated as
clearly as possible as to its importance.
Commissioner Tarleton noted that it needs to be clear that the principal amount of conversation by
this Committee is held in public and that this should be included in the position description. 
It was noted that the statement of opportunity would be made available sometime in September
and the hope is to begin interviewing for the position sometime in October. 
Audit Planning Updates 
Ms. Kirangi noted that the two presentations being given by Internal Audit today (CIP and
Billings/Receivables) are to provide background information about audits currently in process,
rather than waiting until the audit is completed to provide the exit report. 
Capital Improvement Program (CIP) 
Presenter: Ms. Kirangi 
Ms. Kirangi stated that this audit was driven by findings and recommendations related to the 2007 
State Auditor's Office (SAO) audit report.She noted that doing this follow-up work will help assure
a basic, strong foundation exists in terms of how the CIP is being managed. Ms. Kirangi stated
that the objective is to make sure there is a good system in place with good controls, as well as
policies and procedures that are meaningful in order to effectively manage that particular program.
She also noted that the way in which staff responded to the SAO recommendations will be
reviewed.
Commissioner Albro commented on the two audit objectives, stating that the audit scope
addresses only the objective of looking at how staff responded to SAO recommendations, and he
asked for further elaboration on determining if the Port has effectively managed its CIP.
Ms. Kirangi explained that this audit is being done in phases, and the way in which the CIP is
managed will be looked at in terms of planning, design, construction and close-out. Each of these
areas will be looked at to ensure the policies and procedures have been implemented in terms of
effective management. She also stated that within this audit, there is not an objective to establish
benchmarks with other organizations, but rather to ensure that there is compliance with Central
Procurement Office (CPO) requirements.
CEO Yoshitani commented on the project in process of establishing performance metrics
throughout the entire organization. 
Commissioner Tarleton suggested that the scope of the audit be revised to clarify the audit will
assess the Port's efforts to address significant recommendations from the 2001 SAO performance
audit, related to the Capital Improvement Program. 

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Commissioner Albro commented that as more performance audits are taken on in the future, it is
not sufficient to compare effectiveness of the organization only to its own measuring stick  it
needs to be compared to some benchmarking. He suggested that the audit scope be revised to
clarify that staff is going beyond the SAO recommendations to our own identified best practices.
He said also that it may be a good time for the audit team to start scoping out how and when
benchmarking could be done regarding these issues, and what resources would be required. 
Ms. Kirangi provided background financial highlights related to the CIP for 2008 and 2009 with a
breakdown by division. 
She then reviewed the preliminary areas of focus of the audit as follows: 
Procurement of professional and personal services for Port's defined categories I and II,
including compliance with CPO requirements. Regarding Category III services, she stated
that these are not reviewed as the CPO is already heavily involved with those.
Change Orders  evidence of documentation and due diligence over cost estimates,
negotiation, monitoring and approval.
Performance measures  assess established performance measures for reasonableness,
practicality and effectiveness in measuring intended outcomes.
Commissioner Albro again spoke of the importance of being able to compare performance not only
within the organization, but also externally.
CEO Yoshitani again commented again on the initiative of establishing performance metrics, noting
the challenge he has given staff to look for outside, third party, certifying agencies, and stated that
the further down in details you go, the more difficult it may be to find an appropriate third party
assessor or a way to measure that unique performance against another institution. 
Commissioner Albro agreed that this is much more achievable at the higher levels of an
organization. 
Ms. Kirangi noted that initially a baseline or foundation must be established before attempting to
compare ourselves to other entities.
CEO Yoshitani reiterated that his role is to establish these performance measures, and it will be a
function of Internal Audit to ensure that the measurements are being addressed correctly.
Commissioner Albro agreed that this is something that should be driven by the CEO and Executive
staff. 
Additional areas of preliminary focus of this audit were as follows: 
Contract payments 
o Professional and Personal Services - adequate support and review of contract
payment requests 
o Small works  adequate support and review of contract payment requests, including
allowable labor and material; and overhead markups 

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o Major construction  adequate support for percentage of completion, subcontract
markups, etc. 
Mr. Miller commented on the focus on documentation as presented by Ms. Kirangi, and stated the
importance of looking at the end result and reviewing processes and procedures all the way
through the audit.
Mr. Miller then pointed out that the fact that performance measures will be reviewed is a very good
fit in connection with risk assessment, as typically, things will be reviewed which are important in
the management of the organization.
Mr. Yoshitani noted the importance of also looking at trends related to performance. 
Mr. Miller then noted that when risk assessment is being done, 'objective setting is a precondition
to risk identification and assessment.'
Mr. Miller then commented on the upcoming review of new procedures as well as documentation,
noting that even though the inclination may be to overreact to what has happened in the past, it
may be beneficial to include a cost-benefit analysis. 
Commissioner Albro requested the following two things: 
1. That this presentation be modified to reflect today's discussion and be brought back next
month to the Audit Committee, and 
2.  That consideration be given to the resources necessary to determine whether or not
management is doing a good job as related to performance measures 
Billings and Receivables 
Presenters: Ms. Kirangi 
Ms. Kirangi noted the objective of this audit as to determine if the Port has implemented effective
controls to ensure that the Billing and Accounts Receivable system is efficient, complete and
accurate. She stated that the audit scope will be the current practices used, rather than a review of
past practices.
An overview was provided of the impact this system has across the organization, giving an idea of
how much is billed within the different business units.
Ms. Kirangi reviewed audit procedures completed or in process as follows: 
Identification of potential risks facing a Billing and Accounts Receivable function 
In-depth data analysis 
Risk assessments 
Review of external auditor's working papers 

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Preliminary areas of focus were identified as follows: 
Logical separation of duties including system access 
Accounts receivable aging, including earlier issues raised regarding leases 
Credits 
Miscellaneous receipting and cash handling procedures at Pier 69 
2010 Audit Work Plan Update 
Presenter: Jack Hutchinson, Manager, Internal Audit 
Mr. Hutchinson provided a brief description of where the work plan currently stands, noting that the
original work plan was comprised of 35 separate engagements. He noted that the majority of those
engagements are at various stages of completion. He stated that, in addition, there is some
outstanding work which had not been anticipated when the 2010 work plan was initially discussed.
One of the areas as having outstanding work to be done was noted to be related to Payment Card
Industry (PCI) compliance issues, specifically at the Airport in connection with the parking system. 
Mr. Hutchinson also noted that some of the ongoing work being done by Internal Audit is with audit
work which spilled over from the 2009 work plan. 
Rudy Caluza, Director, Accounting and Financial Reporting, clarified that the Port is very aware,
and has taken responsibility with regard to the credit card industry standards. He noted that our
systems are scanned quarterly by an external party to make sure they are not vulnerable, and if
any vulnerabilities are discovered, they are brought to the attention of the ICT department to be
addressed.
Commissioner Tarleton requested that at the next meeting, she would like to see which audits are
actually on track and which ones may spill over into 2011. 
Discussion of Proposed Changes to Audit Committee Charter 
Mr. Miller noted a technical correction on page 2 of the document provided as follows:
o The independent auditors' annual audit of the Port's financial statements, as well as related
notes and management's discussion and analysis of the findings. 
CEO Yoshitani stated that due to timing issues, it may be necessary to have an additional Audit
Committee meeting in September for a review of the SAO audit findings and recommendations,
unless the Committee thinks this review needs to go before the full Commission.
Commissioner Albro raised the question of what role the Committee should play relative to the
SAO audit in order to help prevent being in a reactionary mode. 

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Mr. Miller reiterated a suggestion he raised near the beginning of his term as a Committee member
regarding establishing protocols on how to work through similar issues. He noted that in his
experience with audit committees, auditors come, with management, to the audit committee, and
have discussions that are not always available to the public, which he understands to not be an
option with this Committee. 
Commissioner Tarleton stated her belief that the full Commission needs to weigh in on establishing
these protocols, and establish a principle about how the Commission wants to interact with the
State Auditor's Office and the Commission and the CEO in the delegation of authority function. 
CEO Yoshitani noted that whatever protocol is established would need to have input from the SAO,
as they need to understand timing issues that are involved.
Commissioner Albro expressed frustration that it seems there could be a way in which the SAO,
the Port Commission and the Executive staff could have conversations about preliminary, but that
he is under the impression that the SAO is reluctant to brief the public on those findings. He noted
that at this point he has not seen any of the preliminary findings. 
Mr. Miller agreed that since the Committee does not have the authority to function in place of the
full Commission without Commission directive, and suggested that perhaps all entrance and exit
conferences with all auditors be removed from the Charter. 
Discussion followed related to public versus private discussions of preliminary audit findings, and
how the effectiveness of the Audit Committee is perceived if public discussions are only held after
the SAO holds discussions in private. 
Commissioner Tarleton suggested that a solution might be to ask that the Commission consider
directing that the Audit Committee have the authority to engage in the private preliminary
conversations. 
Commissioner Albro stated that he is in favor of modifying the Charter to empower the Committee
to meet privately with external auditors during the preliminary period of findings in the discussion
with management.
Tom Barnard, Research and Policy Analyst, noted that as a standing committee of the Port
Commission, the Audit Committee must remain in compliance with the Open Public Meetings Act,
and such proposed private discussions would fall under the category of Executive Sessions, which
have specific legal parameters. Mr. Yoshitani stated that he would check with General Counsel on
this issue. 
It was clarified that there would be further review of revisions of protocols which may be
incorporated into the Carter. 
Regarding any other proposed changes, Mr. Miller noted a minor consideration regarding Audit
Department resources, stating his belief that the Audit Committee does really not need to be

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involved in this issue unless that department was underfunded to the point where it could not
complete its work effectively. 
Following discussion, the recommendation was given that the following bullets be removed from
the document provided: 
o  Make formal recommendations to the Executive for increases in Internal Audit
Department functions and capabilities. 
o  Make formal recommendations to the Port of Seattle Commission to request increases
to the Internal Audit Department's annual budget. 
ADJOURNMENT 
There being no further business, the meeting was adjourned at 11:15 a.m. 
(A digital recording of the meeting is available on the Port's website.) 

Tom Albro 
Secretary 











Aug 3 SCM Audit Min