Office of Social Responsibility Audit

Port of Seattle

Internal Audit Report

Office of Social Responsibility
Department Audit

Audit Period January 1, 2008 through December 31, 2008




Issue Date: July 7, 2009
Report No.: 2009-10

Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008

Table of Contents

Internal Auditor's Report .............................................................................................................................................. 3 
Executive Summary ....................................................................................................................................................... 4 
Background...................................................................................................................................................................... 5 
Audit Objective................................................................................................................................................................ 5 
Scope of the Audit.......................................................................................................................................................... 5 
Audit Approach ............................................................................................................................................................... 6 
Conclusion ....................................................................................................................................................................... 6 
Schedule of Findings and Recommendations ........................................................................................................ 7 
1) Noncompliance with Port policies and procedures. 













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Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008

Internal Auditor's Report
We have completed an audit of the disbursement activities for the Office of Social Responsibility. The
purpose of the audit was to identify and assess the controls related to disbursements to determine
whether:
1. Disbursement practices are in compliance with Port policies and procedures and applicable
State Regulations.
2. Management employs effective monitoring to prevent inappropriate disbursements.
3. Port's policies and procedures are effective in preventing unauthorized disbursements.
We reviewed information relating to fiscal year 2008.
We conducted the audit using due professional care. We planned and performed the audit to obtain
reasonable assurance that department controls relating to disbursements are adequate and operating
as intended.
Although no significant instances of unauthorized disbursements were noted, management was not
effective in ensuring the department's compliance with established Port policies and procedures.
We extend our appreciation to the Office of Social Responsibility for their assistance and cooperation
during the audit.


Joyce Kirangi, CPA
Internal Audit Manager






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Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008

Executive Summary

Audit Scope and Objective The purpose of the audit was to identify and assess the controls related
to disbursements to determine whether 1) disbursement practices are in compliance with Port policies
and procedures and applicable State Regulations, 2) management employs effective monitoring to
prevent inappropriate disbursements, and 3) Port's policies and procedures are effective in preventing
unauthorized disbursements.
We reviewed information relating to fiscal year 2008.
Background  The Office of Social Responsibility was established in January 2008 to manage the
Port's small business initiative and other existing programs, expand outreach efforts, and develop new
projects such as transitioning military veterans into the workplace and getting surplus cruise ship
supplies and equipment to needy residents. During 2008 the department slowly grew to a total of six full
time employees.
Audit Result Summary Although no significant instances of unauthorized disbursements were
noted, management was not effective in ensuring the department's compliance with established Port
policies and procedures.










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Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008

Background
The Port's Office of Social Responsibility engages with community and internal stakeholders to inspire
commitment and assure that all Port business actions are conducted within a framework of socially
responsible values such as fairness, inclusion, openness and economic development for all. The
department was created in January of 2008 and has grown to include six full time employees. The
Office of Social Responsibility oversees the following Port programs:
Small Business Program
National Urban Fellows
Port Jobs
Ship to Shelter
Veterans Fellowship
The department does not generate revenue and their operating expenses for 2008 are as follows:
2008
Common
GL Category                   Exp     Size
Salaries & Benefits                 754,217      73%
Equipment                    26,353      3%
Worker's Comp                  2,024      0%
Telecommunications               3,752      0%
Travel & Other Employee            41,256      4%
Supplies & Stock                   7,372      1%
Outside Services                  87,870      9%
Promotional Expense              17,710      2%
General Expenses                85,173      8%
Grand Total                  $1,025,727   100.00%
Source: Responsibility Report
Audit Objective
The audit objective was to identify and assess the controls related to disbursements to determine
whether 1) disbursement practices are in compliance with Port policies and procedures and applicable
State Regulations, 2) management employs effective monitoring to prevent inappropriate
disbursements, and 3) Port's policies and procedures are effective in preventing unauthorized
disbursements.
Scope of the Audit
The scope of this audit included disbursement information related to fiscal year 2008.

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Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008
Audit Approach
We performed the following audit procedures:
We obtained an understanding of the department's operations and its environment.
We reviewed applicable state and local laws, rules, and regulations, as well as Port policies,
procedures, and guidelines.
We obtained and analyzed financial data and other relevant information to assess risk.
We tested data and supporting documentation to determine completeness and accountability
including compliance.
Conclusion
The Port's policies and procedures are adequately designed to prevent unauthorized disbursements;
however, their effectiveness is dependent upon compliance by Port management. The Office of
Social Responsibility's controls over disbursements are inadequate to ensure proper compliance with
Port policies and procedures. During the period under audit, management's monitoring practices was
not effective in preventing potential inappropriate disbursements.











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Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008

Schedule of Findings and Recommendations
1) Noncompliance with Port policies and procedures.
Noncompliance with established policies and procedures can lead to an undesirable tone-at-the-top.
This tone can be construed by staff members as a general lack of value for Port policies, which in-turn
could lead to unauthorized or fraudulent disbursements. Noncompliance with Port policies could also
be a violation of State law, as most Port polices/procedures are based on applicable State rules and
regulations. The potential negative image associated with noncompliance could be detrimental to a
department whose mission is centered on responsible values.
Proper disbursement activities are documented in the following policies, procedures, and guidance
memos:
AC-1 Procedure - Travel Planning, Fund Advances, and Port Credit Cards for Official Business
or Travel
AC-2 Procedure - Acceptable Business or Travel Expenses and How to Obtain Reimbursement
AC-4 Policy - Promotional Hosting; Trade/Business and Community Development Expenses
PUR-1a Procedure - Acquisition of Goods & Services
PUR-1b Procedure - Acquisition of Goods & Services  Quotations
PUR-1c Procedure - Acquisition of Goods & Services - Bids and Proposals
PUR-1d Procedure - Acquisition of Goods & Services - S-Type Vendor Contracts
PUR-1e Procedure - Acquisition of Goods & Services - Request for Check
PUR-2 Procedure - Consultant Procedures (Which has since been replaced by CPO-1 Policy -
Procedures for Personal and Professional Services.)
Promotional Hosting - Guidance on What It Is and Its Requirements
We noted that the Office of Social Responsibility's disbursement practices are not in compliance with
Port policies and procedures. This is evidenced by the volume of exceptions discovered. Specifically,
we examined 115 account entries and noted 36 exceptions.
Some of the exceptions noted included:
Nine disbursements related to Trade and Community Development that were not properly preapproved
by General Counsel. (Five of which were also coded to the wrong account.)
Four disbursements in which an improper payment method was used. (All four were also coded
to the wrong account.)
Six receipts that were missing, not properly itemized, or excluded from the applicable expense
report.
One p-card disbursement that was made with an unauthorized vendor.
We also noted that the available documentation did not always identify the direct benefit of each
promotional hosting disbursement, as required by the State Auditor's office. Management was able to
justify each incident; however, the documentation did not clearly identify how the disbursement was
going to influence business at the Port.
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Internal Audit Report
Office of Social Responsibility
Audit Period January 1, 2008  December 31, 2008

The department seems to lack the knowledge and attention to detail necessary to follow all Port policies
and procedures. As the final approver of all transactions, management should also be well versed with
the requirements established by the Port. The department does not have a complete understanding of
all disbursement requirements, and additionally their current knowledge base has been applied
inconsistently and sporadically.
Recommendation
We recommend that management strengthen their controls, related to disbursements, to ensure that
the entire department has the knowledge base necessary to comply with Port policies, procedures, and
guidelines. Each disbursement should contain adequate documentation to clearly identify its benefit to
the Port.
Department Response
The Office of Social Responsibility (OSR) completely concurs with the findings and recommendations.
For background, this is a new department established in January, 2008, with a Director hired who was
new to the Port. The new Director did not have the proper training and orientation to the numerous
policies and procedures cited above, and the OSR Manager also lacked proper knowledge of some of
the procedures. The first administrative staff for OSR was hired in September, 2008. A year of change
also included a new Central Procurement Office (CPO) with new procedures. All in all, this contributed
to some of the inconsistency in adhering to and knowledge of these Port policies and procedures.
OSR intends to strengthen controls to ensure that the entire department has the knowledge necessary
to comply with Port policies, procedures, and guidelines including but not limited to those cited above.
The plans include:
Management review of each of the major policies and procedures relating to disbursements and
procurements.
Administrative staff review of the major policies and procedures and drafting a summary of the
major highlights in an easy reference format.
Meet with entire OSR team to review the major policies and procedures and a sign-off form for
each team member to sign.
Additional checks and balances on disbursements and procurements between OSR Manager
and Administrative Specialist staff to double-check for accuracy.
Additional form to attach to disbursements to accommodate the additional required
explanations.
More direct involvement by the Director through regular meetings with the Manager and
Administrative Specialist to ensure that procedures are being properly followed.
It would be the OSR Director's expectation that if another audit were conducted a year from now, that
there would be no exceptions found.


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