Internal Audit Briefing 

Presented to the Port of Seattle 
Audit Committee and Tay Yoshitani, CEO 

Joyce Kirangi, CPA 
Director, Internal Audit 
June 12, 2012

Agenda 
Audit Report 
1.  Lease and Concession Audits 
Airport Management Services 
2.  Operational Audits 
Central Processing System 
None 
Comprehensive Operational Audit 
None 
Limited Operational Audit 
Delegation of Authority 
Corporate Cost Allocations 
3rd Party Audit 
None 
Briefing/Updates 
1.  2012 Work Status

Lease and Concession Audit 
Airport Management Services 

Background 
On January 28, 2003, the Port of Seattle entered into a lease and concession
agreement with Hudson News Company, d/b/a Hudson News Group, for operation of
Retail Concessions at Seattle-Tacoma International Airport. In July of 2004, with
consent from the Port of Seattle, Hudson News Group assigned all its lease rights to
Airport Management Services, LLC. 
Hudson operates 20+ different concession locations under the lease, including 4
specialty locations. The lease provides four different categories of retail merchandise
with a different concession rate ranging from 11.5% to 26.5%. The agreement
generates annually approximately $7 million in non-utility revenues to the Port. 
2009      2010       2011 
Revenue     $7,054,411  $6,973,595   $7,559,343

Lease and Concession Audit 
Airport Management Services 

Audit Objectives 
The purpose of the audit was to determine compliance with: 
1.   Complete reporting of sales subject to gross receipts 
2. Complete reporting of "Retail Display Allowances" in the report of
gross receipts 
3.  Compliance with significant provisions of the agreement including the
certified CPA reports 
We reviewed information for the period May, 1 2008, through April 30, 2010.

Lease and Concession Audit 
Airport Management Services 

Audit Result 
Three Finding 
Underreported Concession of Retail Display Allowances (RDAs) 
$297,679 
Concession Overpayment on Certain Specialty Goods 
$116,336 
Underreporting of Receipts related to Promotional and Marketing 
$74,916

Limited Operational Audit 
Delegation of Authority 

Background 
Resolution 3605 delegates specific authority to the CEO for day-to-day operation of the Port. Currently, under
Resolution 3605, the CEO may authorize projects, contracts and agreements with a value up to $300,000.
Projects, contracts and agreements with an amount greater than $300,000 require Commission authorization.
There are additional specific provisions related to change orders and amendments to contracts and
agreements. The delegation of authority is not limited to contracting and procurement. It also includes
provisions for real property agreements, legal services, accounting activities, equal opportunity, risk
management and other Port operations. In November 2009, the Commission adopted Resolution 3628, which
amended certain sections of Resolution 3605. 
The table below arranges 2010 and 2011 contracts by type and amount with the current Commission
authorization threshold of $300,000: 
Fixed Price
Interlocal,    Major              Blanket
Contracts/                     Service            Small Works
Interagency, Construction          Vendor
Goods and                Agreements          Contracts 
MOA, MOU  Contracts         Contracts 
Services 
< $300,000    16%       10%       0%       11%       17%       100% 
2010 
> $300,000    84%       90%      100%      89%       83%        0% 
< $300,000    21%       100%       0%       15%       9%       100% 
2011 
> $300,000    79%       0%       100%      85%       91%        0% 
Source: PeopleSoft

Limited Operational Audit 
Delegation of Authority 

Audit Objectives 
The purpose of the audit was: 
1.   To determine whether the delegation of authority under Resolution 3605 is
efficient and effective 
2.  To determine whether management has adequate controls and has
complied with the requirements of Resolution 3605 
3.  To determine whether the requirements of Resolution 3605 continue to be
commensurate with the risks 
4.  To determine whether there have been any unintended consequences due
to Resolution 3605 
We reviewed information for the period January, 1 2010, through December 31,
2011.

Limited Operational Audit 
Delegation of Authority 

Audit Result 
No Finding

Limited Operational Audit 
Corporate Cost Allocations 

Background 
The Port of Seattle is organized into five divisions/groups. Three are operating divisions that 
generate revenue, and two provide support services to the operating divisions. The service 
support  costs  are  allocated  to  the  operating  divisions  to  appropriately  reflect  full  costs 
associated with generating operating revenues. Thus, a true cost of operating revenue should 
include service support costs. 
The Port distributes all of the net operating costs of the service support groups in accordance 
with  the  Cost  Allocation  Policy  through  any  combination  of  the  following  allocation 
methodologies: 
2011 Budget $73.3 Allocation & Direct Charges                Sequential Application of the Current Cost Allocation Methodology 

14%                          Corporate Operating Expenses 
32%                54% 
Direct Charges, if available 
Special Allocations, if available 
Default Allocations 
Special      Default      Direct Charge

Limited Operational Audit 
Corp Cost Allocations 

Audit Objectives 
The purpose of the audit was to determine whether : 
1.   The Port Corporate costs are allocated to the operating divisions based on a
reasonable and cost effective basis. 
Specifically, we determined whether: 
The current default allocation formula is reasonable. 
The selection of the default formula by corporate departments is reasonable and in
accordance with the Operating Cost Allocation Policy. 
The special allocation formula by corporate departments is reasonable,
supportable, and in accordance with the Operating Cost Allocation Policy. 
Direct Charges by corporate departments are in accordance with the Direct Charge
Policy. 
We reviewed information for the period January 1, 2011 through December 31, 2011.

Limited Operational Audit 
Corp Cost Allocations 

Audit Result 
No Finding

Briefing/Updates 


IT and Performance Risk Assessment RFP 
3 companies for the Best and Final Offer (BAFO) process 
ALGA Peer Review 
Tentatively scheduled for August 

2012 Work Plan Status