PORT OF SEATTLE 
MEMORANDUM 

COMMISSION AGENDA                   Item No.        6b 
Date of Meeting    December 11, 2012 
DATE:      December 5, 2012 
TO:         Tay Yoshitani, Chief Executive Officer 
FROM:     Tom Barnard, Research and Policy Analyst 
SUBJECT:   Audit Committee and Internal Audit Department Charters and update for 2012 

ACTION REQUESTED: 
Request the Port of Seattle Commission to approve the Audit Committee Charter and the Internal
Audit Department Charter 
SYNOPSIS:
The Port of Seattle Audit Committee has reviewed these documents and requests approval from
the Port of Seattle Commission for a revised Audit Committee Charter, as well as approval of an
Internal Audit Department Charter. Both Charters are reviewed below. 
In addition, the Audit Committee is required to present a periodic review of its accomplishments 
to the Commission. The period covered for this briefing is from January 2012 through December 
2012. 
That review will cover the following activities: 
Highlights of twenty-one Internal Audit reports reviewed by the Audit Committee,
including the potential recovery of $1.6 million from lease and concession audits 
Other work reviewed by the Audit Committee 
AUDIT COMMITTEE CHARTERS FOR COMMISSION APPROVAL 
As part of proposed changes to the program and work of the Audit Committee, Commission
approval is being sought on the following documents: 
Internal Audit Department Charter 
In August 2012, the Internal Audit Department underwent a peer review by the Association of
Local Government Auditors (ALGA), which was reviewed by the Audit Committee at its
September 11, 2012, meeting. The Internal Audit Department was found to be in full compliance

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 5, 2012 
Page 2 of 5 
with Government Auditing Standards issued by the Comptroller General of the United States.
The Internal Audit Department has been conducting audits under these standards.  These are
commonly known as the "yellow book" standards, and are used as the standard for government
audit  departments.   The  department  was  also  found  to  be  substantially  compliant  with
International Standards for the Professional Practice of Internal Auditing issued by Institute of
Internal Auditors, commonly referred to as the "red book" standards, which are commonly used
in the private sector. Although the Internal Audit Department did not conduct audits under these
standards, the peer review was performed at the request of the Audit Committee who wished to
use the results as a tool for better understanding the audit function.
A recommendation was made by the peer review team that the Internal Audit Department be
compliant with both sets of standards, or become an "orange book" shop. Such shops operate on
a more accountable overall standard of auditing. G iven both the already high level of Audit
Department proficiency and the limited effort it would take to achieve the "orange book" 
standards, the Audit Committee and Internal Audit Department agreed to make this change. As
part of meeting those standards, the Internal Audit Department needed to obtain Commission
approval for its charter, as mandated by "red book" standards. The Audit Committee has
discussed the charter and recommended for approval by full Commission at its December 4,
2012 meeting. It should be noted that the Internal Audit Department has had a substantially
similar charter that it has followed internally prior to this.
Revised Internal Audit Charter
Once the Internal Audit Charter language was reviewed, there remained the task of insuring that
the Audit Committee Charter was brought into alignment with it. In reviewing that document, it
became apparent that some terminology needed to be revised for greater accuracy and clarity.
The major change to the Charter was to clarify the language on oversight by the Audit
Committee over the Internal Audit Department. This includes: 
Formally approve the Director of Internal Audits annual audit plan. The annual plan
includes which operations, departments, vendors, agreements, and leases are to be
audited during the coming year. 
Review the Internal Audit Department staffing needs. 
Review and recommend Commission the Internal Audit Department's annual budget to
the Commission. 
Make recommendations to the Commission on the appointment, replacement or
dismissal of the Internal Audit Director or any external auditors. 
It should be noted also that there was a further alignment made with the Commission by-laws,
through passage of Resolution No. 3672, on December 4, 2012. The Resolution called for an

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 5, 2012 
Page 3 of 5 
addition to Article II, Section 1, as Clause K, the following sub-section , which reads:
"Approve the Audit Committee Charter and the Internal Audit Department Charter." 
AUDIT COMMITTEE ACHIEVEMENTS FOR JANUARY 2012 - DECEMBER 2012: 
Internal Audit conducts an annual risk assessment of Port activities at various levels to prepare a
work plan for the upcoming year. Following approval of the work plan by the Audit Committee,
Internal Audit conducts audits throughout the year. Audits are risk-based and designed to provide
value through an independent and objective review in the areas of Controls, Governance, Risk
Assessment, and Compliance. 
The Audit Committee reviewed twenty-one audit reports prepared by the Internal Audit Manager
during the January-December 2012 period, which covered nine meetings of the Audit
Committee. These include: 
Ten Lease and Concession Audits, including: 
o  Cruise Terminals Of America (CTA) 
o  Emerald Cove Catering (Lease And Concession) 
o  Simply Wheelz Rent-A-Car 
o  Republic Parking At Pier66 
o  Airport Management Services (Hudson) 
o  National Rent-A-Car 
o  Budget Rent-A-Car 
o  Avis Rent-A-Car 
o  Alamo Rent-A-Car 
o  Doug Fox Parking 
Five Comprehensive Operational Audits, including: 
o  Risk Management 
o  Real Estate Division Portfolio Management 
o  Noise Program 
o  Ground Transportation 
o  Air Terminal Operations 
Six Limited Operational Audits, including: 
o  ABM Janitorial Contract

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 5, 2012 
Page 4 of 5 
o  Procurement Card Policy 
o  Delegation Of Authority 
o  Corp. Cost Allocation 
o  Compliance Cost Of CPO Series Policies/Procedure 
o  3Rd Party Administration 
In performing these audits, the Internal Audit Department recommended to management the
recovery of over $1.6 million from the following lease and concession reviews. The se 
suggested recoveries represent revenues to the Port that would have continued to be missing
each year, had it not been for the Internal Audit reviews. 
Airport Management Services 
Alamo Rent-A-Car 
Cruise Terminals Of America 
Doug Fox Parking 
Simply Wheelz Rent-A-Car 
Republic Parking At Pier66 
The Audit Committee also reviewed: 
Two external audits, including the Comprehensive Annual Financial Review (CAFR)
Audit for 2011, and a State Auditor's Office (SAO) accountability audit. 
An entrance conference for an external consultant to conduct the Enterprise Technology
Performance and Risk Assessment engagement, which will provide a detailed 3-year IT
audit plan for the Internal Audit Department to carry out.
Finally, the Audit Committee structure was strengthened by adding an alternate member, to be
present in the event that a Commissioner serving on the Committee is unable to attend, as two
Commissioners are needed to constitute a quorum. 
BACKGROUND: 
The Audit Committee was created to "represent the Commission and have review and oversight 
authority on matters relating to the Port's auditing process and procedures." Its main tasks are to: 
Review and recommend to the Commission the independent auditors to be selected to
audit the financial statements, the federal grant and Passenger Facilities Charge programs
of the Port of Seattle, and other audit services;

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 5, 2012 
Page 5 of 5 
Meet with independent auditors and financial management to review proposed audits for
the  current  year  and  review  such  audits  at  their  completion,  including  any
recommendations of the independent auditor; 
Review the adequacy and effectiveness of the accounting and financial controls of the
Port of Seattle, and recommend improvement of such internal controls or establish new
controls, assisted by the independent auditors, the Internal Audit Manager, and Port staff;
and 
Perform oversight over periodic independent performance audits to be conducted on the
Port of Seattle, and report the results of such audits to the Commission when completed. 
OTHER DOCUMENTS ASSOCIATED WITH THIS BRIEFING: 
Internal Audit Department Charter 
Audit Committee Charter