Transportation Network Companies


APRIL 1, 2016  MARCH 31, 2017 

ISSUE DATE: February 08, 2018 
REPORT NO. 2017-22

Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 


EXECUTIVE SUMMARY ................................................................................................................................................. 3 
AUDIT SCOPE AND METHODOLOGY ............................................................................................................................ 6 
SCHEDULE OF FINDINGS AND RECOMMENDATIONS ............................................................................................... 7 
APPENDIX A: RISK RATINGS .................................................................................................................................. 11 
APPENDIX B: (Exhibit 1) Various Rules, Regulations & Policies for TNC Operators. ........................................ 12 
APPENDIX B: (Exhibit 2) Testing Results ............................................................................................................. 13 
APPENDIX B: (Exhibit 3) Ground Transportation Monitoring ............................................................................. 14 


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 

Internal Audit (IA) completed an audit of Lyft, Rasier, LLC (Uber), and Wingz, collectively referred to as
Transportation Network Companies (TNCs) for the period April 1, 2016  March 31, 2017. The objective of
this audit was to determine whether TNCs complied with key terms of the Concession Agreement, including
the accuracy and completeness of revenue paid to the Port. 
We concluded that TNC revenue paid to the Port was materially complete, accurate, and remitted timely. We
also concluded that the TNCs generally complied with key terms in the contract. We noted two exceptions
that are discussed below: 
1.   Uber provided IA with a list of drivers that operate at the airport. When  IA meshed this with available trip
information  by  month,  we  noted  some  discrepancies. Uber    recalculated  trip  activity  based  on
discrepancies noted, and through this process, Uber "self-identified" an underpayment of revenue of 
2.   TNCs are growing faster than expected and many of the TNC drivers did not display or present a valid
King County Decal, a for-hire permit, or the TNC Trade Dress (Uber, Lyft or Wingz Logo). During the time
of our audit, King County was behind on issuing Decals and permits, however, drivers appeared to lack a
sense of urgency to pick up and display this information. 
This was a result of a relatively new program for the Port of Seattle with higher than expected growth
rates. As the program evolves, the TNCs, in partnership with Port management, need to assure that their
drivers are following local requirements.  The Port also needs to design stricter measures to assure that
drivers follow the terms of the Concession Agreement and display and/or possess valid documentation. 
We extend our appreciation to Port management and staff including Airport Operations, Aviation Commercial
Management, and Accounting and Financial Reporting. We also thank the TNCs for their assistance and
cooperation during the audit. 

Glenn Fernandes, CPA 
Director, Internal Audit 
Lance Lyttle, Managing Director Aviation 
Michael Ehl, Director Airport Operations 
Jim Schone, Director AV Commercial Management 
Jeff Hoevet, Senior Manager Airport Operations 
Jeffrey Wolf, Manager AV Business Dev & Analysis 
Linda Nelson, Manager, AV Finance & Budget 


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 
Lyft and Rasier, LLC (Uber) entered into a pilot program with the Port on March 31, 2016 and Wingz entered into a 
pilot program on April 4, 2016. The agreements expired on March 31, 2017 and all three are now operating on a
month to month agreement. The agreements allow Lyft, Uber, and Wingz, collectively known as Transportation
Network Companies (TNCs), to pick up and deliver passengers at the airport.  During the audit period, TNCs paid 
the Port $5.00 per outbound trip or passenger pickup. As of late 2017, the fee was raised to $6.00 per trip. 
TNCs connect riders and drivers through a mobile application. TNC platforms sometimes referred to as ridesharing,
connect passengers with drivers using their personal or non-commercial vehicle. The  mobile application has
functionality to provide the requestor, or person receiving the ride, with an estimated pick up time, manages the
payment process, and provides customers an opportunity to evaluate the driver. 
A "Geo-Fence" (see figure below) was established around the perimeter of the airport. The Geo-Fence interacts with
a Global Positioning System to record TNC trip activity. 


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 
The Port implemented a two way system for tracking TNC activity. First, a live feed of event information is provided
to the Port for vehicles within a defined geographical area. Second, TNCs upload monthly data to a SharePoint site.
This monthly file documents trip activity and is used for billing. The system also provides a mobile application for
ground transportation staff to receive a live feed of vehicle activity.  This mobile application is used by ground
transportation staff, as a secondary control, to report their observation of vehicles entering the pickup area. This
helps validate whether observed vehicles are materially consistent with the self-reported monthly trip activity. 


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 


We conducted this 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.
The period audited was April 2016  March 2017. We utilized a risk-based audit approach from the planning
phase to testing  phase of our audit. We  gathered information through document requests, research, 
interviews, observations, and analytical procedures. We assessed significant risks and identified controls to
mitigate those risks. Our audit included the following procedures: 

Compliance with Contractual Requirements & Laws 
To gain an understanding of the Port's processes, industry regulations and TNC Operations we: 
Documented Port management's processes 
Interviewed King County and City of Seattle personnel, about enforcement of TNC regulations, and 
gained general industry knowledge 
Interviewed external parties, including other airports and cities, to benchmark Port operations 
To validate compliance with significant terms of the operating agreement, we reviewed: 
Permitting (King County and City of Seattle) 
E-KPI requirements and related calculations 

Revenue Completeness & Accuracy 
To assess whether TNC reported per-trip fees were complete, properly calculated, and remitted timely, we: 
Randomly observed outbound TNC activity to assess reasonableness of reporting 
Analyzed and recalculated per-trip fees (with available data) 
Reviewed Port records to verify timeliness of concession payments 
Observed 74 TNC vehicles and verified that the application was enabled and captured as trip activity 

Indemnity & Insurance Requirements 
To verify that insurance requirements were met, we reviewed: 
Insurance documentation 



Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 

During the course of our audit, we requested and received a list of drivers that operate at the airport. When we
meshed this with available trip information by month, we noted some discrepancies. We brought these to Uber's
attention and requested certain records from Uber's systems. Uber was hesitant to provide us with the requested
data, and instead analyzed their own data and recalculated the number of trips during the audit period. This
resulted in Uber's owing the Port $30,045 for 6,009 trips. Uber then provided us with the trip details from their
analysis. The majority of these discrepancies were for the period April 2016 through September 2016, when the per
trip fee was $5. 
In our testing of trip count data from Wingz, Internal Audit identified $1,250 in underreported revenue. Wingz 
could not explain the cause of the discrepancy. 

We recommend Port Management: 
Assure that Uber pays the Port the $30,015 as promised and seek collection of $1,250 from Wingz. 
Strengthen "right to audit" language in future contracts with all TNC operators, focusing on timeliness,
comprehensiveness and penalties when failing to comply. 

Management Response/Action: 
Aviation staff agrees with the Audit team's recommendation to seek recovery of underreported revenue. Staff
will pursue collection of the $30,045 from Uber and $1,250 from Wingz. 
As identified as part of the implementation of the TNC Pilot Agreement, self-reported data (by TNCs) as the
basis of trip fees would have limitations associated with verification by Port staff. Due to these limitations, and as
noted by the Audit team (see page 5 above), Port staff worked closely with Information Communications &
Technology (ICT) to develop a trip auditing system utilizing an iPad application system used by Ground
Transportation (GT) staff. As part of this system, the Port's Business Intelligence team also developed a random
sampling schedule that would provide statistically significant samples of TNC pick-up trip data, collected by GT
staff. The collection of data occurs regularly and at each month end, Business Intelligence staff analyze the trip
count data and compare it to actual data as reported by TNCs. 
The chart below shows the "match" rates between data collected by GT staff and self-reported data from the


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 

As indicated by the chart, typical monthly match rates ranged between 85-90% for most of 2017. Three primary
reasons that the match rates are not closer to 100% include: 
1)   Turnover of TNC vehicles/drivers is very high. New drivers/vehicles are continuously getting permitted and
accessing the Airport for pick-up trips. Many of these new entrants have vehicles with temporary license
plates. When permanent plates arrive and drivers replace the temporary plates with permanent plates, TNC
companies are often delayed in updating their database/systems with the new plate information. When Port
GT staff collects real-time trip info with permanent plate info, yet TNCs report at month-end the temporary
plate info, the result is a "non-match." 
2)   As mentioned, GT staff collects data at random times, and for certain time increments (e.g.- one hour). Due
to the potential time delays associated with GPS data and the real-time systems, data collected close to the
start and finish of time increments can lead to non-matches. An example would be GT staff collecting data
associated with a pick-up at 11:59am, and due to slight data transfer delays with the TNC systems, at
month-end the TNC reports the pick-up time at 12:01pm, leading to a non-match when analyzed by
Business Intelligence. 
3)   TNC drivers utilize their application to indicate when they have picked up a passenger. This information is
then sent to the TNCs. Often, drivers will send notification before or after the actual pick-up (e.g.- a TNC
driver may pick up his/her passenger and then several minutes later send the notification while en route to
the destination). When this occurs, typically it results in a non-match. 
The process outlined above and resulting match rates shown in the chart are an attempt by Port staff to
continuously monitor the self-reported data from the TNCs to ensure accurate reporting of trips and fees. Port
staff continues to evaluate other monitoring methodologies and technologies, including the use of RFID stickers
on TNC vehicles. 
Port staff also agrees with the Audit team's recommendation to strengthen audit language. This change can
either be done through an amendment to the current Pilot Agreement and/or implemented as part of a new
Agreement yet to be negotiated. Port staff will look to the Audit team to provide any and all audit language
associated with an update. 


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 

TNC Drivers are required by various Regulations and the Pilot Program Operating Agreement to: 
1.   Display a King County Decal on their windshield 
2.   Hold a valid for-hire permit 
3.   Properly display the TNC Trade Dress (Uber, Lyft, or Wingz Logo) 
Our testing and observations found that a significant number of drivers did not display or have available, the above
mentioned three items (see Appendix B, Exhibit 2). A part of the lack of compliance was because King County was
significantly behind in issuing decals and permits. As of 12/31/2017 King County has indicated that they are now
caught up on issuance of windshield decals, but it is up to the driver to pick these up and display them. King County 
has also indicated that they now have a 710 day turnaround on for-hire permit approvals. Ground Transportation 
periodically issues citations to drivers for noncompliance with the above requirements; however, a continued sense
of importance to meeting these contractual requirements needs to be reinforced with the TNC Drivers. 

We recommend Port Management: 
Work with TNC companies to continue to stress the importance of drivers adhering to these elements of
the concession agreement 
Continue to utilize the current process of issuing citations, but also consider other measures that might
prevent vehicles, that do not adhere to contract requirements, from servicing airport customers 

Management Response/Action: 
Port staff agrees with the Audit team's recommendation to continue to stress the importance of adhering to
licensing and permitting requirements as laid out in the TNC Pilot Agreement. Staff has been proactive in
working with all stakeholders, including TNCs, King County, and the City of Seattle in creating a working group
to address delays in permitting and licensing. Due to the previous back-log of TNC decals from King County,
Staff had developed a system in which information associated with vehicles that had been cited (and sometimes
fined) was sent to King County for verification of driver/vehicle licensing. In addition, staff continues to work with
each TNC to communicate to newly licensed drivers, the importance of physically picking up their licenses and
decals from King County in a timely manner. 
In response to the Audit team's second recommendation, staff will continue to consider alternatives that will help
ensure that only drivers and vehicles that have proper licensing and decals access Port property. In early
January, Port staff communicated with TNCs regarding consistent enforcement of credentials. Enhanced
enforcement is underway (February 1, 2018) in agreement from King County. 


Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 


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Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 

Findings identified during the course of the audit are assigned a risk rating, as outlined in the table below.
The risk rating is based on the financial, operational, compliance or reputational impact the issue
identified has on the Port.  Items deemed "Low Risk" will be considered "Exit Items" and will not be
brought to the final report. 
Rating        Financial         Internal Controls         Compliance           Public        Commission/
Large financial
impact                                    Noncompliance
High probability       Important 
with applicable
Missing, or inadequate                         for external audit
Remiss in                                 Federal, State,
HIGH                       key internal controls                        issues and/or      Requires
responsibilities                                   and Local Laws,
negative public      immediate
of being a                                    or Port Policies 
perception          attention 
custodian of
public trust 
Partial controls             Inconsistent          Potential for         important 
compliance with      external audit
MEDIUM                  Not adequate to identify    Federal, State,     issues and/or     May or may
financial impact 
noncompliance or       and Local Laws,     negative public      not require
misappropriation timely      or Port Policies         perception         immediate
Internal controls in place                            Low probability         Lower
complies with
but not consistently                             for external audit     significance 
Federal, State and
Low financial       efficient or effective                              issues and/or
LOW/                                         Local Laws or Port
impact                                                         negative public       May not
Exit Items                                                  Policies, but some
Implementing/enhancing                         perception          require
controls could prevent                                                 immediate
future problems                                                    attention 
Efficiency     An efficiency opportunity is where controls are functioning as intended; however, a modification would
Opportunity                                   make the process more efficient 

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Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 
APPENDIX B: (Exhibit 1) Various Rules, Regulations & Policies for TNC Operators. 
The TNC Pilot Program Operating Agreements states: 
Section 2: "Operator and Operator's operations must, at all times, be in compliance with State of
Washington, King County, City of Seattle and City of SeaTac laws and regulations, as applicable." 
Section 3: "Operator shall comply with the Terms and Conditions of this Pilot Program Agreement
and the Operating Instructions applicable to the Operator and its particular class of service" 
Section 4: "Operator shall also comply with the then-current Port tariffs, rules and regulations, and
procedures and directives pertaining to the Operation of vehicles at the Airport" 

The City of Seattle and King County Codes 6.310 and 6.64 respectively, state: 
"A decal must be affixed to the windshield of the TNC vehicle 
Must hold a valid for-hire permit and operate a licensed for-hire or a TNC with a vehicle
endorsement  it is unlawful for any person to drive a TNC endorsed vehicle without first having
obtained a valid for-hire driver's license 
Drivers violate the law if they drive for a TNC without picking up a for-hire permit and decal within 30
days from the date of King County notification to the TNC" 

RCW 46.72.020 states: 
No for hire operator shall cause operation of a for hire vehicle upon any highway of this state without
first obtaining a permit from the director of licensing, except for those for hire operators regulated by
cities or counties in accordance with chapter 81.72 RCW. Application for a permit shall be made on
forms provided by the director and shall include (1) the name and address of the owner or owners, and
if a corporation, the names and addresses of the principal officers thereof; (2) city, town or locality in
which any vehicle will be operated; (3) name and motor number of any vehicle to be operated; (4) the
endorsement of a city official authorizing an operator under a law or ordinance requiring a license; and
(5) such other information as the director may require. 

Port of Seattle Transportation Requirements  Airport Operations  Ground Transportation, Operating
Instructions Handbook states: 
TRANSPORTATION REQUIREMENTS  "Driver shall strictly comply with the following
transportation requirements as well as those outlined in the SeaTac Airport Ground Transportation
Operating Agreement and Rules & Instructions directives" 
B. Always properly display TNC Trade Dress 

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Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 
APPENDIX B: (Exhibit 2) Testing Results 
On August 10, 2017, the audit team performed live observations on the third-floor of the Airport parking
garage where TNC drivers pick up their customers. The audit team randomly observed vehicles to 
determine whether they displayed: a current for-hire permit, a King County Decal, and the appropriate trade
dress. The results of our observations are highlighted below. 

Display of for-hire permit: 
In 95.9% of cases tested, the For-Hire Permit was not available and was not adequately displayed while
the vehicle was on the TNC app. Additionally, two out three permits on display, were expired. (See table-
1 for details) 
Table - 1 
TNC                            Present                  Absent                 % Absent 
UBER                         2*                    40                  95.2% 
LYFT                           1                     16                   94.1% 
Unknown TNC                   0                    15                 100.0% 
Total                                 3                         71                      95.9% 

Decal affixed to the windshield: 
In 44.6% of observed vehicle , the City of Seattle/King County decal was not affixed to the windshield.
(See table-2 for details) 
Table - 2 
Decal                 W/O                % Decal 
TNC                                          Affixed                Decal                Lacked 
UBER                                  22                20              47.6% 
LYFT                                     6                 11               64.7% 
Unknown TNC                             13                2               13.3% 
Total                                            41                    33                  44.6% 

Display Trade Dress: 
Out of 74 vehicles observed, 15 vehicles or 20.3% did not display the TNC Trade Dress(Uber, Lyft or
Wingz emblem) while the drivers were on a TNC platform at the airport. (See table-3 for more details) 
Table - 3 
Company / Trade Dress                 Vehicle Count                           % 
Uber                                          42                             56.8% 
Lyft                                                     17                                   23.0% 
Wingz                                        0                             0.0% 
No Trade Dress Displayed                       15                             20.3% 
Total                                              74                               100.0% 
Lack of compliance by the TNC Operators, in the above areas, has resulted in Port management putting
forth excessive efforts to monitor TNC vehicles and write citations for violations. 

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Transportation Network Companies                                                        INTERNAL AUDIT 
4/01/2016  3/31/2017 
APPENDIX B: (Exhibit 3) Ground Transportation Monitoring 
Business Intelligence (BI) assists GT by using a stratified random selection to come up with an 
observation schedule that is not more than one hour per observation and four times per day. GT
Controllers perform an increment of 60 minutes of observations either at the staging area or at the Port
parking garage on the third-floor, and issues a citation to any driver that is not in compliance with the
The TNC citations issuance analysis showed GT issued 511 citations for various reasons. The increase
in citations in 2017 was primarily due to a significant increase in TNC drivers. Table-1 highlights citations
for three key areas. 
Decal       Permit        Trade Dress       Others 
Period                                                                        Total 
Lacked                    Violation 
04/01/2016 - 12/31/2016              0            4                14              126        144 
01/01/2017 - 10/31/2017             86           55               25              201        367 
Total No. of Citations                86           59                39              327        511 
Percentage of Total               16.8%       11.5%            7.6%            64%      100% 
Source: Citation system 

The Port has also implemented a process whereby violations are sent to King County on a weekly basis to
ascertain whether the violation was due to King Count's backlog, a paperwork error, or a true violation. The
results of King County's response are reflected in table-2. 
# Vehicle                           Unable to                               Authorized Driver                    Authorized Vehicle     Permit
KC                      Validate
Period                        Yes         No                        Yes         No       Expired 
Validation                              Driver 
June - 17          15            12           3                            11           4            4 
July - 17            34            31            3                             28            6             2 
Aug. - 17           43            37           4              2             34            9 
Total              92           80          10            2             73          19           6 
Percentage                 87.0%     10.9%        2.2%        79.3%      20.7%      6.5% 

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