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 SEPTEMBER 7, 2010 
The Port of Seattle Commission Audit Committee met in a special meeting at 9:00 a.m., Tuesday,
September 7, 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 9:10 a.m. by Commissioner Gael Tarleton.
APPROVAL OF MINUTES 
Motion for approval of the minutes of the July 13, 2010 minutes, as amended and the
minutes of the August 3, 2010 meeting  Albro 
Second  Tarleton 
Motion carried by the following vote: 
In Favor: Albro, Tarleton (2) 
Mr. Miller participates as a non-voting member of the Committee 
Proposal to extend Moss Adams Audit Engagement Services for 2010 Operating Period 
Action Requested: Port Commission Audit Committee approval to seek Port Commission
authorization for the Chief Executive Officer, Chief Financial and Administrative Officer, and the
Director of Accounting and Financial Reporting, to extend the contract for Financial Statement,
Single Audit (federal grant compliance) and Passenger Facility Charge auditing services of the
Port"s 2010 operating period with Moss Adams in the amount of $577,600. 

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Presentation documents: Memorandum to CEO Yoshitani from Dan Thomas, Chief Financial and
Administrative Officer; Rudy Caluza, Director, Accounting and Financial Reporting; and Lisa Lam,
Senior Manager, Financial Reporting and Controls. Also provided was a copy of a letter and fee
proposal to Mr. Caluza from Moss Adams dated July 27, 2010. 
Presenters: Mr. Caluza and Ms. Lam.
Ms. Lam stated that today"s request was for a final extension to the Port"s contract with Moss
Adams for 2010 which includes the Financial Statement, Single Audit and Passenger Facility
Charge audit services. She provided background information on the contract, which was originally
put in place in 2006 as a three-year contract with two options to extend that contract for one year.
She noted that the services will include those audits previously noted, as well as that of the
Warehousemen"s Pension Trust Fund. 
Ms. Lam highlighted the following items regarding the Moss Adams proposal: 
Scheduled timeframe of services would begin once this item has been approved by the
Audit Committee and then has received authorization from the full Commission, which
would be in October. 
Moss Adams has always committed to delivering reports on the Financial Statement Audit
no later than April 30, a deadline which has been met by them each year. For both the
Single Audit the Passenger Facility Charge Audit, their commitment has been to provide
the finished reports no later than June 30, deadlines which have also been met or made in
advance of that date.
As part of the proposal, Moss Adams agreed to subcontract part of the audit service work
with Branch Richards, a firm which the Port supports in its Small Business Initiative. It was
noted that last year, Branch Richards provided approximately 5% of the audit work, and
that for the next year, Moss Adams has committed to subcontracting up to 10% of the
work. 
The fee for the proposed scope of work for the Moss Adams audit services will remain at a
not-to-exceed amount the same as the fees for 2009, and they have committed to reduce
their fees by 4%, barring any unusual circumstances. 
Ms. Lam confirmed that next year a new RFP (request for proposals) would be issued for these
audit services. 
Mr. Caluza stated that, subject to the Committee"s decision on this item, Moss Adams will return at
next month"s Committee meeting to provide a full briefing on their engagement services plan, as
well as to receive direction as to areas of emphasis the Committee would like to see included in
their work.
Motion for approval of the Item  Albro 
Second  Tarleton 
Motion carried by the following vote: 

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In Favor: Albro, Tarleton (2) 
Mr. Miller participates as a non-voting member of the Committee 
State Auditor's Office (SAO) 2009 Accountability Audit  Entrance Conference 
Presentation document: Report from State Auditor"s Office 
Presenters: Carol Ehlinger, Audit Manager; Tony Martinez, Assistant Audit Manager; Matt Lanier,
Auditor in Charge 
Mr. Martinez reviewed the mission of the State Auditor"s Office as well as the audit authority and
requirements of the SAO. He also noted that the scope of the audit being presented was for the
period of January 1, 2009 through December 31, 2009, and included areas that posed the highest
risk. 
Mr. Martinez noted that areas of audit included the following: 
Procurement 
Disbursements 
Conflict of interest 
Insurance (new Port policy regarding insurance on privately moored boats) 
Revenue and receivables 
Loss reporting 
Contract compliance 
He stated that at the completion of the audit, an accountability report will be prepared and
distributed. 
Mr. Martinez noted that a separate area of consideration is citizen hotline concerns, and one which
is currently being looked at is the use of Port facilities by the U.S. Navy. 
Mr. Martinez also noted that part of what the SAO team does prior to beginning their field work is to
review the work done by Moss Adams to make sure they are satisfied with the work they do and
agree with their conclusions and opinion. 
Mr. Martinez noted that the cost of the SAO audit is estimated to be approximately $54,165, plus
travel expenses.
Mr. Martinez stated that the SAO will also perform the accountability audit of the Port Industrial
Development Corporation (IDC), noting that this is done every three years. This audit will be for
the period of January 1, 2006 through December 31, 2009, and the cost is estimated to be $3,144. 


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Responding to a question from Commission Albro regarding the period of audit of the IDC, Ms.
Ehlinger clarified that there had been a typo in the document, and the audit will actually be for the
three-year period of 2007  2009. 
Presentations by Internal Audit Department 
Ms. Kirangi stated that the Internal Audit Department would be presenting today on two separate
items, as noted below, and a computer slide presentation related to both was provided. 
Review of Portwide Marketing Activities 
Presentation document: Report titled "Functional Review of Port-wide Marketing Activities  
Current Practices" 
Presenter: Bill Fovargue, Internal Auditor 
Mr. Fovargue commented on what a functional audit involves, in that it includes reviewing a
specific activity which crosses organizational lines, which in this case involved eleven separate
organizational units. He stated that a common definition for marketing was developed since there
were so many auditees involved, and there was agreement that marketing, for this audit, is defined
as the processes and activities involved in promoting facilities and/or services of the Port. He
noted that the scope of the audit was for current marketing practices in 2010. 
Mr. Fovarge noted that Promotional Hosting was specifically excluded from the scope of this audit,
as the SAO audits these expenditures yearly. He also noted that the SAO has commended the
Port for their compliance in this area. 
Mr. Fovargue stated that the audit objectives included assessing efficiency and effectiveness as
well as reviewing performance metrics.
Mr. Fovargue stated that all groups agreed that it would be helpful in their work to have a marketing
component included as a part their strategies. He also noted that it was also recommended that
the various business units meet together on occasion to discuss best practices on more of a portwide
basis.
Mr. Fovarge noted that this had been a clean audit, with no significant issues found. 
Update on Internal Audit 2010 Work Plan 
Presenter: Jack Hutchinson, Manager, Internal Audit 
Mr. Hutchinson noted that of the 35 audits approved for 2010 by the Audit Committee, 9 have been
completed as of today and 6 are in stages of being wrapped up. Of the 20 remaining, he stated
that 12 are in various stages of completion and the majority of those are related to
concessionaires. Eight audits have not yet been started, but staff hopes to get to those by the end
of the year.

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TUESDAY, SEPTEMBER 7, 2010                        P. 5 

Responding to Commissioner Tarleton"s question as to how many of the audits not yet begun are
truly doable in 2010 and which ones should be reconsidered for the 2011 workplan, Mr. Hutchinson
stated that although it is difficult to estimate how many of these can be done, three of the eight are
basically follow-ups to prior audit issues, are quite achievable. Regarding the remaining five, he
reiterated that it is difficult to be certain. 
Mr. Miller referred to comments made earlier regarding reporting of suspected losses. Regarding
the Aviation Maintenance inventory follow-up that is being done, he raised the question of whether
or not routine "shrink" is considered as suspected loss, which requires reporting to the SAO. Ms.
Kirangi stated that normal "shrinkage" is excluded from reporting.She noted that suspected loss
would be items such as equipment or computers, rather than small, less significant items. 
Commissioner Tarleton proposed that in addition to the follow-up reporting that Mr. Hutchinson
described, staff address, by the end of the year, those areas that might be up for recompetition, a
lease renegotiation, or an option year extension or things similar in nature. She noted that she is
specifically interested in the crane rental and the ABM contract; however, if these are not up for
renewal in 2011, it is OK to not address them at this time. 
Commissioner Tarleton also suggested that in the future, it may be better to have the Internal Audit
workplan update mid-year. 
Final Approval of Changes to Audit Committee Charter (Charter) 
Presentation document: Working documents titled "Port of Seattle Audit Committee Charter" 
Presenter: Tom Barnard, Commission Research and Policy Analyst 
Mr. Barnard stated that the version being presented today incorporated suggestions from previous
discussions on the topic, and noted that there are at least two issues which need to be discussed
at this point. One of these is an issue which was raised in an email from Commissioner Tarleton
suggesting a paragraph be added to the Charter which would explain "why" the Committee does
what it does, as opposed to just the "what." The second issue is the State Auditor"s Office (SAO)
performance audits and how those will be dealt with by the Committee.
Commissioner Tarleton read the following suggested language to be added at the beginning of the
Charter, which she noted would address an issue raised by Mr. Miller at the July Committee
meeting: 
"The Audit Committee of the Port of Seattle Commission has the principal responsibility to identify
risks that may affect the institution"s ability to fulfill its mission as an economic engine for King
County. As a standing committee, the Audit Committee oversees internal audits of the financial
transactions and operational practices of the Port of Seattle. In order to exercise its oversight
authority, the Committee directs the Internal Auditor and Port CEO to conduct internal audits and
provide findings in public to the Audit Committee in order to help manage and mitigate identified

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risk. The Committee assists the Seattle Port Commission in fulfilling its oversight responsibilities
for:.," and at this point the language would proceed as currently written.
Commissioner Albro stated that he believes in the "why," there needs to be additional information
included related to performance assessment, perhaps in the first sentence as follows: "has the
principle responsibility to assess performance and identify risks". Further discussion followed. 
CEO Yoshitani commented on the first sentence, suggesting the responsibility as noted really
belongs to the full Commission, rather than to the Audit Committee. 
Mr. Miller noted that it might be important to somehow highlight that fact that the Committee is
directly involved with Internal Audit, but not with external financial or performance audits.
Commissioner Tarleton stated that within this particular Charter, it is probably not possible to
resolve the issue of the Committee"s responsibility of the external audits" functions and oversight. 
Commissioner Albro commented on distinguishing between and external audit which is directly
procured from an external audit which is done "to us" by someone else"s determination, such as the
SAO. 
Commissioner Tarleton raised the question of whether the SAO should present entrance and exit
conferences to the Audit Committee or to the full Commission. 
Mr. Barnard commented that the possibility of the Committee holding Executive Sessions to
discuss parts of external audit results had also been raised, and after being reviewed by the legal
department, it was concluded that this would not be allowed.
Mr. Barnard stated that in drafting revisions to the Charter, a section was removed regarding SAO
entrance and exit conferences, and was replaced with a new bullet under the page two section of
"Review with the Port"s External Auditors:., "Any performance or accountability audits
performed on the Port of Seattle. This will include a review of final audi t findings and
recommendations including management"s response and analysis." 
There was some disagreement on the Committee as to whether or not to include this proposed
language. CEO Yoshitani commented on the importance of being able to discuss audit results
which may be in error, prior to them being presented to the public. He stated that he believes more
discussion about this is warranted.
Commissioner Albro noted that the Charter is still a work in progress and there is a need to allow
for some flexibility and at the same time recognize that the Internal Audit function is working. He
also commented on a degree of frustration by the fact that the SAO wants to be the agency which
releases their audit findings to the public, while at the same time, with the Port being subject to the
Open Public Meetings Act, there is no way to engage in the preliminary findings of the SAO, which
then raises the concern raised earlier of possible inaccuracies.


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Commissioner Albro raised the question of what the appropriate lines of reporting for Internal Audit
might be in order to best assure the public"s interest. This raised discussion of the current
structure, which has the Internal Audit function with a dual reporting structure to both the CEO and
the Commission president jointly. He proposed that the reporting structure should be changed,
and that given the function and the responsibilities of the internal auditor, he suggests that this
should line up more with the public side of the enterprise. He made the suggestion that, on page
one of the proposed revised Charter, under the section of "Duties", the following change be made: 
"The Audit Committee will 
Review with Oversee the Director of Internal Audit Department and review the plans,
activities, staffing, and organizational structure.." 
Mr. Yoshitani stated that he has no problem if the reporting structure is changed, but also noted he
had had some concern that the audit function could overwhelm the staff, and commented that our
principle role and responsibility is to be an economic engine, rather than to be audited. At the
same time, he did comment on the importance of the audit function. He spoke about the need to
have balance between all of the work which is done by staff, and the audit function.
Mr. Barnard commented on the current heavy workload of the Internal Audit Department, and the
importance of not creating a work overload for that department. 
Mr. Miler stated that among the many models of internal audit function, a dual reporting model is
one that is accepted, as is a model of reporting to the governing body or some component thereof. 
Commissioner Tarleton commented on the importance of the audit function maintaining a level of
independence. She also stated her appreciation that more than one model for reporting is
acceptable, and that she understood earlier comments by Commissioner Albro related to the
reporting structure. She also noted some concern of part-time Commissioners overseeing a fulltime
function. 
Commissioner Tarleton stated that she would like to see this topic discussed in public with the full
Commission. Commissioner Albro concurred, and noted his belief that more wordsmithing needs
to be done before the Charter is finalized. He also noted that he is mindful of staff limitations, and
agreed with Commissioner Tarleton that independence in auditing is key, and is vital in being able
to trust information that is received. 
Commissioner Tarleton stated her support of the redline version of the document which was
presented, and asked that Mr. Barnard wordsmith the opening paragraph, taking into account
comments made at the meeting. Regarding the section on duties and the reporting structure, she
suggested that a note be placed at the end of the section, stating that Commissioner Albro
proposes a discussion on the reporting structure of the internal audit function as part of a public
discussion with the Commission. 
Mr. Barnard noted that although the Charter would not be approved at this meeting, the next step
in the process would be to incorporate changes as discussed and suggested, and then go to the

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full Commission for their approval. At that time, the Commission could discuss anything not fully
resolved, and then would approve the Charter. 
Laurie Tish, Moss Adams, called attention to an section of the redline document, which refers to
the composition of the Audit Committee, and suggested the following added language be added for
clarification: "Each committee member will be independent of Port management and any external
audit firm currently providing services to the Port ." 
Mr. Barnard noted an additional edit which may be needed in this section providing additional
clarification of Committee members being independent of Port management. 
Commissioner Albro suggested that two versions of the Charter be prepared for review; one with
his proposed edits, and one without. 
ADJOURNMENT 
There being no further business, the meeting was adjourned at 10:50 a.m. 
(A digital recording of the meeting is available on the Port"s website.) 

Tom Albro 
Commissioner 










Sept 7 SCM Audit Min