PORT OF SEATTLE 
MEMORANDUM 
DATE:    August 8, 2016 
TO:     Audit Committee 

FROM:    Joyce Kirangi, Internal Audit Director 
SUBJECT:  Capital Projects Audit Engagement Update 
The Audit Committee oversees the Internal Audit Department's annual budget and
staffing level. The 2016 Internal Audit budget approved by the Commission earlier this
year had funding for only one capital project audit, the completion of the runway
16C/34C reconstruction project. The interim audit report on the 2015 construction was
submitted in May. 
We propose to add the following continuous audits to the Internal Audit schedule, which
would cover approximately 68% of the budgeted capital projects. 
Proposed Aviation Project      Reasoning            Est. Audit Duration 
Completion of the runway 16C-   Impacts all airlines       Through 2017 
34C Reconstruction 
International arrivals facility      Impacts all international     Through 2020 or
(IAF)                      airlines              beyond 
NorthSTAR (NSAT)         Impacts aviation largest   To be determined 
(includes the expansion of the north       customer 
satellite) 
Baggage                Impacts all airlines       To be determined 
optimization/replacement 
There are approximately 90 capital construction projects underway as of December31st 
2015, with the bulk of the projects being in Aviation. Th e current 2016 - 2020 aviation
capital program totals over $2 billion. 
Aviation Division Capital Budget 
(in millions) 
2016    2017    2018    2019    2020   Total 
$360   $457   $454   $416   $363   $2,050 
Source: 2016 Capital Budget 
We have obtained a broad understanding of the Port capital program, which encompasses
many capital activities and projects. Some of the capital program costs will be incurred
internally by the Port, and other costs will be incurred by contractors, subcontractors,
consultants, and vendors-. The complexity of this capital program presents inherent risk
exposures related to efficiency, effectiveness, cost, and compliance. In order to mitigate
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these risks, Internal Audit plans to implement a long-term audit program, which will
allow us to proactively audit various aspects of the capital program. This will include
auditing contractors/consultants for compliance and other outside parties as necessary.
We will also audit the effectiveness of the Port processes over various aspects of this
capital program. 
We analyzed the 90 capital projects budgeted by applying a risk assessment methodology
to date reported by the Capital Development Division. With this methodology, we rated 
the risk of each project. Out of the 90 projects analyzed, we proposed to audit 4 of the
high risk projects that makes up 68% of the total capital projects budgeted. These projects
all directly impact the airfield, ramps, baggage system, and/or gates. 
Proposed Audit Coverage of Bugeted Capital Projects 
2,500
Total Budgeted
Millions  2,000
RW16C/34C Design and
68% 
1,500                                        Reconstruction
Baggage
100% 
1,000
NorthStar
500
IAF
-
Proposed Audits        Total Budgeted
Source: Capital Improvement Projects (CIP) 2nd quarter report 2016 
For these projects, we will perform risk based audits that include procedures to evaluate: 
effectiveness of the Port's processes and controls; 
compliance of contractors/consultants; and 
any other areas highlighted by detailed risk assessments. 

Internal Audit is requesting additional staffing and an additional one-time budget
item for the 2016 budget. 
1.     Additional Staffing 
In prior years, the continuous capital program audits were not part of the Internal Audit
universe and/or work plan. Therefore, additional capital program audits in 2016 and
beyond will require additional FTEs. 
These budgeted capital projects are long-term and mission critical for the Port. To
effectively audit these projects proactively, we require additional full time employees as
they move through the project life cycle. There will also be additional capital projects, as
the Sustainable Airport Master Plan (SAMP) is executed. 

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The Internal Audit Department staffing level of six auditors has not changed for the last
five years. We are requesting two senior auditors and one staff auditor. The annual cost
of salary and benefits is about $405,000. For the remaining months in 2016, the projected
costs of salary, benefits, and specialized training is $145,000 for these new position. Our
2016 operating budget for the department is approximately $1.5 million. With this
request for additional staffing level, our annual budget would be approximately $1.9 
million. 
Consideration of Alternatives to FTEs 
In addition to the requested FTEs, we considered the options of outsourcing these audit
services or shifting FTEs from other projects. P lease see the table below for a summary
of the options examined. We believe it will be more effective to hire and retain the
knowledge in-house. 
Annual
Estimated                              Option
Option     Cost      Staffing    Pros         Cons        Viability 
FTEs      $405,000    2 Sr.      Maintain      High learning  Preferred 
Auditors &    knowledge and   curve 
1 Auditor      experience 
Institutional
knowledge 
retained 
Contracting   $800,000    2 Sr.        Expertise       Lack of      Not
Auditors &                instructional   preferred
1 Auditor                   knowledge    due to cost 
retained 
Shifting     $0         1 Sr.        Maintain       Understaffed   Not viable 
FTEs               Auditor      knowledge and  High learning
experience       curve 
Less staff
other audits 

2.     Additional One-Time Budget Request 
At the request of CDD executive management, we are proposing a contract audit of the
capital project management process. The audit will assess project management
organizational maturity, develop  a detailed roadmap, and assist the Port in the
implementation of a plan to improve the efficiency of capital project management
processes. 
This audit intends to benchmark Sea-Tac's capital project management processes to
comparable US airports. We are requesting approval to add this to our 2016 Audit Plan.
We anticipate the cost to not exceed $83,000. 

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