01 Presentation to TCWG
Presentation to the Port of Seattle Audit Committee Agenda Results of 2011 Audit Reports issued Internal Control Matters May 15, 2012 Areas of Audit Effort Required Communication Other Communication 1 Reports Issued Report on financial statements Unqualified opinion on the financial statements, which encompass separate statements of the Enterprise Fund and the Warehousemen's Pension Trust Fund Audit and report on Schedule of Net Revenues Available for Revenue Bond Debt Service Audit and report on Schedule of Passenger Facility Charges (PFC's), receipts and expenditures and related internal controls Audit and report on Federal Financial Assistance Programs and related internal controls and compliance in accordance with Federal OMB Circular A-133 (Single Audit) 2 Internal Control Matters No material weaknesses or significant deficiencies in internal controls identified Report on Internal Controls in accordance with Government Auditing Standards SAO finding pertaining to Aviation High School was posted Observations for process improvements Timely closing of construction projects Minor discrepancies in federal grant reporting for the Law Enforcement Officer (LEO) Reimbursement Agreement Program Information technology matter Routine review of segregation of duties of system and database administrators 3 Areas of Audit Effort Internal control environment Understand and test the design and implementation of key controls surrounding all significant financial statement accounts and administrative processes and compliance requirements Assess information technology general controls and certain application controls Test sample of transactions of the capital assets related systems, payroll, cash disbursements and procurement systems, and leases Treasury and investment, debt, cash, budget, third party transactions, environmental remediation liability, and financial close and reporting cycles tested through observations, inquiries and walkthroughs of each system and controls Management estimates Environmental remediation liability, legal and insurance contingencies/ recoveries, depreciation, allowance for doubtful accounts, grant receivables, self insurance liabilities, actuarial valuations for the Warehousemen's Pension Trust amounts and disclosures 4 Areas of Audit Effort - continued Revenue recognition Operating revenue analysis using business indicators such as landed weight, enplanements, gate usage, crane movements, and boat counts Ad valorem tax levy, investment income, PFC, CFC, and federal grants Consideration of the collectability of related receivables Signatory lease and operating agreement Revenue requirements for landing fees and terminal rents according to the agreement Cost elements - debt service allocation and operating and maintenance expense Accounting for leases Airport concessions and fuel system, Seaport, and Real Estate leases Testing of lease terms, payments and appropriate accounting treatment and disclosures 5 Areas of Audit Effort - continued Bonds and related accounts Arbitrage liability, capitalized interest, discounts and premiums, new debt issuance, debt repayments, compliance with covenants, and audit of Net Revenue Schedule Capital assets Consideration of capitalization policies and potential impairment as well as testing of additions, retirements, overhead application, capitalized interest, depreciation Net assets Consideration of classification for unrestricted, restricted, and invested in capital assets, net of related debt Warehousemen's Pension Trust Fund Separate materiality and procedures 6 Areas of Audit Effort - continued Administration of federal awards and related administrative controls and compliance Total federal expenditures of $22.7 million Two major programs Airport Improvement Program - $19.5 million LEO Reimbursement Agreement Program - $1.0 million Tested major programs for compliance with OMB-Circular A-133 and grant specific requirements No findings of noncompliance or questioned costs noted Passenger Facility Charge (PFC) Program Audit Schedules of Passenger Facility Charge Program Receipts and Expenditures Tested internal controls and compliance with PFC requirements No findings of noncompliance or questioned costs noted 7 Required Communications Auditor and Management responsibilities for financial statements under Generally Accepted Auditing Standards Auditor: To form and express an opinion about whether the financial statements are fairly presented; to plan and perform the audit in accordance with generally accepted auditing standards and Government Auditing Standards Our audit does not relieve management and the Commission of its responsibilities Audit was performed according to the planned scope Significant accounting policies Summarized in Note 1 to the financial statements Certain Fuel Hydrant activities were reclassified to 'non-operating' rather than 'operating' Financial Statement disclosures were consistent, clear and understandable There were no proposed or passed audit adjustments 8 Required Communications Representations were requested and received from management Disagreements with management (none) Consultation with other independent auditors (none of which we are aware) Difficulties encountered during the audit (none) Illegal acts (none noted) Ability to continue as a going concern (no disclosure necessary) Consideration of fraud in a financial statement audit Procedures performed: Journal entry testing Interviews of personnel Moss Adams is independent with respect to the Port of Seattle 9 Other Communications All significant audit issues and new accounting pronouncements were addressed early in the audit process Weekly meetings were held between Moss Adams and Port management and staff throughout the audit term The audits progressed on time and in an orderly fashion All Port personnel were courteous, responsive and fulfilled all of our requests in a timely manner As planned, Branch Richards & Co. personnel were an integral part of our audit team. Approximately ten percent of our audit hours are contributed by this small business firm on an annual basis 10
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