INTERNAL AUDIT REPORT
LEASE AND CONCESSION AGREEMENT AUDIT

DUFRY NORTH AMERICA, LLC

August 1, 2014  July 31, 2016

ISSUE DATE: September 1, 2017
REPORT NO. 2017-13

EXECUTIVE SUMMARY 
AUDIT OBJECTIVES AND SCOPE

The purpose of this audit was to determine whether:
Port management monitoring controls were effective.
Dufry North America, LLC complied with significant terms in the lease and concession
agreement.
We reviewed and analyzed records for the Agreement period August 1, 2014  July 31, 2016.

BACKGROUND

Effective July 2013, the Port of Seattle (Port) entered into a Lease and Concession Agreement with
Dufry North America, LLC (Dufry) to operate duty free and duty paid stores at the Seattle-Tacoma
International Airport. 
For the concession rights and privileges, Dufry pays the Port a Minimum Annual Guarantee (MAG) and a
percentage fee (including a contract rent of 7%). The MAG is payable in advance, on or before the first
day of each month. Dufry provides the Port with detailed statements of gross sales for the preceding
month and simultaneously pays the Port a percentage fee for that preceding month less the monthly
MAG already paid for that month. 

AUDIT RESULT 
Port management monitoring controls were effective.
Dufry generally complied with significant terms in the lease and concession agreement. 






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INTERNAL AUDIT 
August 1, 2014  July 31, 2016

TABLE OF CONTENTS 


EXECUTIVE SUMMARY .................................................................................................... i
TRANSMITTAL LETTER ................................................................................................... 1
BACKGROUND ............................................................................................................ 2
FINANCIAL HIGHLIGHTS ................................................................................................. 2
AUDIT SCOPE AND METHODOLOGY .................................................................................... 3
CONCLUSION.............................................................................................................. 3












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TRANSMITTAL LETTER 

Audit Committee
Port of Seattle
Seattle, Washington

We have completed the audit of the Lease and Concession Agreement #AIR001661 between the Port of
Seattle and Dufry North America, LLC. We reviewed information for the period August 1, 2014  July
31, 2016. 
We conducted the audit in accordance with Generally Accepted Government Auditing Standards and
the International Standards for the Professional Practice of Internal Auditing. Those standards require
that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
We extend our appreciation to the management and staff of the Airport Dining and Retail Department,
Dufry North America, LLC and Accounting & Financial Reporting for their assistance and cooperation
during the audit.




Glenn Fernandes, CPA
Director, Internal Audit

AUDIT TEAM                      RESPONSIBLE MANAGEMENT TEAM
Ritika Marwaha, CPA, Senior Auditor        Jim Schone, Director AV Business Development 
Dan Chase, CPA, Audit Manager -          Scott Van-Horn, Sr. Business Manager  Airport Dining &
Acting                                    Retail
Rudy Caluza, Director Accounting and Financial Reporting



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INTERNAL AUDIT 
August 1, 2014  July 31, 2016

BACKGROUND

Effective July 2013, the Port of Seattle (Port) entered into a Lease and Concession Agreement with
Dufry North America, LLC (Dufry) to operate duty free and duty paid stores at the Seattle-Tacoma
International Airport.
Dufry is a leading global travel retailer with operations in 63 countries. Dufry operates approximately
2,200 duty free and duty paid shops located at airports, cruise liners, seaports, and other touristic
locations. Dufry operates three stores at Seattle Tacoma International Airport located in the South
Satellite, Central Terminal, and Concourse A. These three locations represent approximately 7,000
square feet of retail space. 
For the concession rights and privileges, Dufry pays the Port a Minimum Annual Guarantee (MAG) and a
percentage fee (including a contract rent of 7%). The MAG is payable in advance, on or before the first
day of each month. Dufry provides the Port with statements of gross sales for the preceding month and
simultaneously pays the Port a percentage fee, if necessary, for that preceding month less the monthly
MAG already paid for that month. Percentage fees are paid to the extent the percentage fee is higher
than the monthly MAG payment according to the following schedule:
Gross Sales                                             Percentage of Gross Sales
Gross Sales < $10,000,000                                28.0 %
Gross Sales > $10,000,000 but < $15,000,000              36.0 %
Gross Sales > $15,000,000                                37.0 %

FINANCIAL HIGHLIGHTS

DUFRY NORTH AMERICA, LLC 
AGREEMENT PERIOD           REPORTED GROSS   MINIMUM ANNAUL    PERCENTAGE FEE
REVENUES*        GUARENTEE
August 1, 2014  July 31, 2015           $21,155,550            $6,000,000        $6,877,554
August 1, 2015  July 31, 2016            19,706,617             6,000,000         6,341,448
TOTAL     $40,862,167       $12,000,000     $13,219,002
Data Source: PeopleSoft Financials & Propworks
* Certified Annual Report of Gross Sales  Dufry



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INTERNAL AUDIT 
August 1, 2014  July 31, 2016

AUDIT SCOPE AND METHODOLOGY 

Internal Audit reviewed information for the period August 1, 2014  July 31, 2016, utilizing a risk-based
approach from planning to examination. We gathered information through document requests,
research, interview, observations, and data analysis.
We applied detailed audit procedures to areas with the highest likelihood of significant negative impact
as follows:
Reviewed the lease agreement to identify significant provisions. 
Performed analytical procedures which included comparing the monthly concession billings
to enplaned passengers.
Traced detailed revenue transactions to Dufry's trial balance to assess the completeness of
information.
Analyzed Port records to determine the timeliness of MAG and concession/percentage fee
payments.
Determined whether Port management had established monitoring controls to ensure
compliance with the key lease provisions.
Verified compliance with significant terms in the lease and concession agreement including:
Insurance and surety
Monthly and annual reporting 

CONCLUSION 
Port management monitoring controls were effective.
Dufry generally complied with significant terms in the lease and concession agreement. 






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