Audit Moss Adams 2008 Results AC Pres
Presentation to the Port of Seattle Audit Committee Results of 2008 Audit May 5, 2009 1 Reports to be Issued Report on financial statements Unqualified opinion on the financial statements Opinion covers separate statements of the Enterprise Fund and the Warehousemen's Pension Trust Fund Report date is April 30, 2009 Audit and report on Schedule of Net Revenues Available for Revenue Bond Debt Service Same date as financial statements Audit and report on Schedule of Passenger Facility Charges (PFC's), receipts and expenditures and related internal controls One finding of noncompliance noted Audit and report on Federal Financial Assistance Programs and related internal controls and compliance in accordance with Federal OMB Circular A-133 (Single Audit) To be completed in May 2009 No material instances of noncompliance noted to-date Letter of recommendations and observations No material weaknesses in internal controls identified Observations and recommendations noted 2 Areas of Audit Effort Internal control environment Understand the design and implementation of key controls surrounding all significant financial statement accounts and business processes Understand the design and implementation of controls over compliance requirements Assess information technology general controls and application controls Test sample transactions of the capital assets related systems, payroll, cash disbursements, leases, and environmental reserve Treasury and investment, debt, cash, budget, third party transactions and financial close and reporting cycles tested through observations, inquiries and walkthroughs Management estimates Pollution remediation obligation accruals, legal and insurance reserves, allowance for doubtful accounts, grant-in-aid receivables, arbitrage liabilities, actuarial valuations for OPEB liability and for the Warehousemen Pension Trust amounts and disclosures Bonds and related accounts Arbitrage liability, capitalized interest, discounts and premiums, new debt issuance, debt refunding, and compliance with covenants 3 Areas of Audit Effort - continued Revenue recognition Operating revenue analysis using business indicators such as landed weight, enplanements, crane movements, and boat counts Ad valorem tax levy, investment income, CFC, PFC, 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 4 Areas of Audit Effort - continued Net assets Consideration of classification for unrestricted, restricted, and invested in capital assets, net of related debt Capital assets Consideration of capitalization policies and potential impairment as well as testing of additions, retirements, overhead application, depreciation Implementation of Government Accounting Standard Statement No. 49, Pollution Remediation Obligations Consideration of policies and procedures, estimate for liability and related recoveries, and financial statement disclosures Consideration of components for large environmental sites 5 Areas of Audit Effort - continued Administration of federal awards and related administrative controls One additional major program added for a total of three Total expenditures $46,748,591 Airport Improvement Program - $37,184,650 TSA Memorandum of Agreement - $2,084,578 Port Security Grant - $1,630,000 Test major programs for compliance with OMB-Circular A-133 requirements Passenger Facility Charge (PFC) Program Audit Review the Schedules of Passenger Facility Charge Program Receipts and Expenditures Test for compliance with PFC requirements on a sample basis We noted one instance of noncompliance 6 Letter of Recommendations Annual inventory of capital assets should include the oldest depreciating assets Several observations related to implementation of GASB 49: Methodology for estimating "bracket costs" should be consistently applied Support documentation of the rationale behind estimating multi-year probabilities and for reducing the estimate should be retained Support documentation of the rationale behind environmental costs meeting the capitalization criteria should be retained Specific policies and procedures pertaining to asbestos remediation should be further refined Information technology observations Administration of federal awards Enhance written policy and procedures to include monitoring the existence and completeness of federally-funded equipment and property Document review of Noise Program Third Party reports prior to submission 7 Federal Awards Findings and Questioned Costs There are no questioned costs noted to date for Single Audit or PFC program Current year findings Single Audit No material findings of noncompliance to-date PFC Program Audit One finding identified Omission of refunds to an airline from the fourth quarter report Status of prior year findings Single Audit One finding noted in the prior year Selection process for professional services was not appropriately documented in the corresponding contract files as is required by federal regulations The Port has cured the incomplete contract files by documenting the selection process. Additionally, the Port has developed and implemented a central depository of complete sets of contract documents including all supporting documentation PFC No findings in the prior year 8 New Authoritative Literature New accounting pronouncement effective in 2008 GASB 49, Accounting and Financial Reporting for Pollution Remediation Obligations The Port re-measured environmental liability and restated beginning net assets by $4.7 million Approximately $11 million charged to expense in 2008 FASB 157, Fair Value Instruments. The Port expanded investments and debt financial statement disclosures Upcoming accounting pronouncements GASB 51, Accounting and Financial Reporting for Intangible Assets will likely not have a material impact (2010) GASB 53, Accounting and Financial Reporting for Derivative Instruments will likely not have a material impact (2010) 9 Required Communications Auditor's responsibility under Generally Accepted Auditing Standards Significant accounting policies Management judgments and accounting estimates Posted audit adjustments (none) Passed audit adjustments (none) A letter of representation was provided to management Disagreements with management (none) Consultations with other independent accountants (none) Major issues discussed with management prior to selection (none) Difficulties encountered during the audit (none) Moss Adams is independent with respect to the Port of Seattle All Port personnel, throughout all departments, encountered in the performance of our audit were courteous, responsive, and fulfilled all of our requests in a timely manner 10
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