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INTERNAL AUDIT BRIEFING PRESENTED TO THE PORT OF SEATTLE AUDIT COMMITTEE AND MR. TED FICK, CEO JOYCE KIRANGI, CPA, CGMA DIRECTOR, INTERNAL AUDIT THURSDAY, MAY 07, 2015 AGENDA INTERNAL AUDIT Audit Report 1. Lease and Concession Audits Flying Food 2. Operational Audits Comprehensive Operational Audit/Departmental Audit Ground Transportation Survey and Mapping Limited Operational Audit None 3. Third-Party Audit None Briefing/Update None LEASE AND CONCESSION AUDIT INTERNAL AUDIT FLYING FOOD BACKGROUND Flying Food Group, LLC, (FFG) was founded in Chicago in 1983, at which time it served one airline out of one kitchen at Midway Airport. Today, FFG produces over 100 million meals annually from its network of 18 US kitchens, which stretch from Honolulu to New York City. Customers include over 70 of the world's leading airline customersprimarily internationalplus key retail partners, including over 3,000 US Starbucks. The agreement with the Port of Seattle originated in 1988. It spans a term of 30 years. At the end of the lease term in 2018, there is provision for two, five-year options, at the Port's discretion. The agreement requires a monthly concession payment of 7% of gross sales. FINANCIAL HIGHLIGHTS KEY FINANCIAL RESULTS FOR FLYING FOOD GROUP AGREEMENT YEAR REPORTED GROSS SALES CONCESSION PAID 1 2011 $ 12,670,003 $ 859,683 2012 13,056,391 913,947 2013 12,776,481 894,353 TOTAL $ 38,502,875 $ 2,667,983 Data Source: PeopleSoft Financials LEASE AND CONCESSION AUDIT INTERNAL AUDIT FLYING FOOD AUDIT OBJECTIVES AND SCOPE The purpose of the audit was to determine whether: The reported concession fees were complete, properly calculated, and remitted timely to the Port. The lessee complied with significant provisions of the Lease and Concession Agreement, as amended. We reviewed information for the period January 1, 2011 December 31, 2013. LEASE AND CONCESSION AUDIT INTERNAL AUDIT FLYING FOOD AUDIT RESULT The reported concession fees were materially complete, properly calculated, and remitted timely to the Port. The lessee materially complied with significant provisions of the Lease and Concession Agreement, as amended, except for failing to meet the required timeline for submission of the annual report. There was one reportable finding: 1. Flying Food did not submit the annual report by the due date. COMPREHENSIVE OPERATIONAL AUDIT INTERNAL AUDIT GROUND TRANSPORTATION BACKGROUND The Ground Transportation Department at Seattle-Tacoma International Airport is a department of 15+ FTEs. The Department is responsible for managing a variety of ground transportation operators consisting of taxis, limousines, courtesy vehicles, airporters, charter buses, shuttle buses, crew vans and parcel carriers. In 2014, there were some 2.4 million outbound trips from the airport to various destinations. The Department processed over $8 million in transportation fees (non-aeronautical revenue) in 2014. FINANCIAL HIGHLIGHTS Department Revenues - 2014 Actual Type Revenue Charge Method Taxi - Yellow Cab $3,637,214 concession agreement Courtesy cars/vans; crew vans 2,437,657 per trip On-call limos 943,112 concession agreement Pre-arranged limo 513,583 annual permit Shared ride van 227,108 per trip Charter bus 179,261 per trip Airporters 108,646 per trip Belled-in taxi 56,212 annual permit Parcel carrier 21,538 annual permit Other 172,951 TOTAL $ 8,297,282 Data Source: PeopleSoft Financials COMPREHENSIVE OPERATIONAL AUDIT INTERNAL AUDIT GROUND TRANSPORTATION AUDIT OBJECTIVES AND SCOPE The purpose audit was to determine whether management controls are adequate to ensure that: all applicable tariffs are accurately and completely recorded concession revenue is accurately and completely recorded. We reviewed information for the period January 1, 2013 December 31, 2014. COMPREHENSIVE OPERATIONAL AUDIT INTERNAL AUDIT GROUND TRANSPORTATION AUDIT RESULT The Ground Transportation Department has adequate controls to ensure all applicable tariffs and concession revenue are accurately and completely recorded. No Reportable Findings. COMPREHENSIVE OPERATIONAL AUDIT INTERNAL AUDIT SURVEY AND MAPPING BACKGROUND The Survey and Mapping Services Department is part of the Engineering Management Services group within the Port of Seattle's Capital Development Division. The Department provides survey services including construction layout, utility locates, lease line lay out, etc. to all Port divisions. The Survey and Mapping Services is a department of about 15 FTEs with an annual operating budget (before capital charges and transfers) of approximately $1.9 million. Almost all (~94%) of the department expenses are in salaries, wage, and benefits. The department has experienced a sharp increase in overtime activity in recent years as construction at the Aviation Division expands. It was, therefore, important to assess whether the department has established effective controls to handle the increased overtime activity. FINANCIAL HIGHLIGHTS Department Expenses Before Capital Charges and Transfers Account Description 2013 2014 Salaries, Wages, and Benefits $ 1,478,322 $ 1,701,963 Travel & Other Employee Expenses 16,691 22,558 Other 3,705 (622) Intra-department Allocations 68,673 64,408 TOTAL $ 1,567,391 $ 1,788,307 Data Source: Data Source: PeopleSoft Financials COMPREHENSIVE OPERATIONAL AUDIT INTERNAL AUDIT SURVEY AND MAPPING AUDIT OBJECTIVES AND SCOPE The purpose of the audit was to determine whether management controls are adequate to ensure: Non-regular payroll (2nd/3rd shift, and overtime) compensation is proper. Travel expenses are appropriate in compliance with the Port policy AC-1 and AC-2. We reviewed information for the period January 1, 2013 December 31, 2014. COMPREHENSIVE OPERATIONAL AUDIT INTERNAL AUDIT SURVEY AND MAPPING AUDIT RESULT Management controls are not adequate to mitigate the risks related to non-regular hours and travel expenses. There was one reportable finding: 1. The department controls for overtime and travel expenses are not adequate.
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