Internal Audit Briefing
Presented to the Port of Seattle
Audit Committee and Tay Yoshitani, CEO
Joyce Kirangi, CPA
Director, Internal Audit
August 3, 2010

Agenda
Audit Planning Updates
Capital Improvement Program (CIP)
Billings/Receivables
2010 Audit Work Plan - Progress Update

Audit Planning Updates
Capital Improvement Program (CIP)
Audit Objectives
1.To determine if the Port has effectively managed its Capital
Improvement Program (CIP) in order to minimize costs and increase
efficiency related to planning, design, procurement and construction,
and close-out of its capital projects.
2. Assess the Port's efforts to address significant recommendations
from the 2007 SAO performance audit.

Audit Planning Updates
Capital Improvement Program (CIP)    continued
Audit Scope
The Washington State Auditor's Office (SAO) conducted an audit of
the Port's construction management practices and issued its report in
December of 2007. The audit report contained a number of findings,
and the CEO responded to the audit report by implementing many
policy changes including department re-alignment and re-organization.
Based on the time frame of the SAO audit report and the
implementation of Port changes, the scope of our audit will be 2009.
We believe the implemented policies and procedures should have
taken effect and matured prior to 2009.

Audit Planning Updates
Capital Improvement Program (CIP)    continued
Background
The Port Capital Development Division (CDD) oversees Port wide
procurement and construction services and is comprised of the
following groups: Airport Project Management, Seaport Project
Management, Engineering Services, Port Construction Services,
and the Central Procurement Office (Construction Contract
Services, Service Agreements, Procurement Services)

Audit Planning Updates
Capital Improvement Program (CIP)    continued
Financial Highlights
Approximate breakdown of all project costs in millions by division.

Division      2008     2009
Corporate          $ 14      $ 10
Aviation            $ 237      $ 207
Seaport           $ 112      $ 76
Real Estate          $ 21      $ 75
Total               $ 384      $ 368
Source: PeopleSoft

Audit Planning Updates
Capital Improvement Program (CIP)    continued
Audit procedures Completed or in Progress
Consideration of the 2007 SAO performance audit issues and
Port's response
Interviews with Capital Development Division (CDD) key
personnel
Document procedural practices and conduct walk-through
In-depth data analysis
Risk assessments

Audit Planning Updates
Capital Improvement Program (CIP)    continued
Preliminary Areas of Focus
Procurement of professional and personal services for Port's
defined categories I & II, including compliance with the CPO
requirements
Change Orders  evidence of documentation and due diligence
over cost estimates, negotiation, monitoring, and approval.
Consider change and impact on the original scope of work.
Performance measures - assess established performance
measures for reasonableness, practicality, and effectiveness in
measuring intended outcomes

Audit Planning Updates
Capital Improvement Program (CIP)    continued
Preliminary Areas of Focus (continued)
Contract payments:
Professional and Personal Services  adequate support
and review of contract payment requests
Small Works  adequate support and review of contract
payment requests, including allowable labor and material;
and overhead markups
Major Construction - adequate support for percentage of
completion, subcontract markups, etc.,

Audit Planning Updates
Billings and Receivables
Audit Objective
To determine if the Port has implemented effective controls to ensure that the
Billing and Accounts Receivable system is efficient, complete, and accurate.
Audit Scope
Current Practices

Audit Planning Updates
Billings and Receivables          continued
Financial Highlights
BUSINESS_UNIT      2008     2009
LEASS       289,514,650 301,448,768
LEASM       84,334,802 83,843,897
CORPS      65,747,487 63,765,425
CONT        21,907,981 17,450,720
AIRFD        14,592,234  4,381,729
GRACC       9,914,653  9,564,153
SHILS         8,010,704  8,681,757
CORPM      4,320,106  6,928,789
CARGP       3,265,438  3,467,587
FTPP         2,490,656  2,572,405
GRPIN        1,453,602  1,419,827
IDACC          570,174   489,982
HIM           431,144   432,144
MIC           192,624   153,305
FTZ            10,000       0
HOUSE         3,600    6,400
BHRBM              44,867
Grand Total       506,759,855 504,651,757

Audit Planning Updates
Billings and Receivables          continued
Audit procedures Completed or in Progress
Identification of potential risks facing a Billing and Accounts
Receivable function.
Control identification based on interviews with key personnel and
a complete understanding of the procedures.
In-depth data analysis.
Risk assessments.
Review external auditor's working papers.

Audit Planning Updates
Billings and Receivables          continued
Preliminary Areas of Focus
Logical separation of duties including system access
Account Receivable Aging
Credits
Pier 69 miscellaneous receipting and cash handling

2010 Audit Work Plan
Progress Update
2010 Audit Work Plan - Progress Update
Audit Committee Approved 2010 Audits
" 35 individual engagements
Completed and In-Progress Audits
" 23 audits ( 65%) of the approved audits
" Non-scheduled reviews
Payment Card Industry (PCI) compliance over credit card
information
Completed five 2009 audits in the 1st Quarter of 2010