INTERNAL AUDIT REPORT 
LIMITED CONTRACT COMPLIANCE 
BEECHER’S HANDMADE CHEESE 

JANUARY 2014 – DECEMBER 2017 

ISSUE DATE: May 3, 2018 
REPORT NO. 2018-01

         Beecher’s Handmade Cheese                                                         INTERNAL AUDIT 
January 2014 – December 2017 


TABLE OF CONTENTS 

EXECUTIVE SUMMARY ................................................................................................................................................. 3 
BACKGROUND .............................................................................................................................................................. 4 
AUDIT SCOPE AND METHODOLOGY ........................................................................................................................... 5 
SCHEDULE OF FINDINGS AND RECOMMENDATIONS............................................................................................... 6 
APPENDIX A: RISK RATINGS ........................................................................................................................................ 7 












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         Beecher’s Handmade Cheese 
January 2014 – December 2017 
EXECUTIVE SUMMARY 
Internal Audit (IA) completed an audit of the Lease and Concession Agreement (Agreement) between
Beecher’s Handmade Cheese (Beecher’s) and the Port of Seattle (Port) for the period January 1, 2014
through December 31, 2017. The audit was performed to  verify compliance with key terms in the
Agreement, including the completeness and accuracy of concession fees paid to the Port. 
The original Agreement between Beecher’s and the Port was executed April 3, 2012, for the right to
operate a food and beverage concession at the Airport. The Agreement required the Lessee to pay the
Port a Minimum Annual Guarantee (MAG) equal to eighty-five percent (85%) of the total amount paid by
the Lessee for the previous year. 
We concluded that surety and street pricing requirements were achieved. However, we identified one 
medium rated issue, related to assessing the accuracy of revenue. This issue is discussed in more detail
on page six. 
1)  The Agreement requires the Lessee, in part, to maintain records for a period of three years. However,
the daily point of sale data was not provided to Internal Audit in its original format; rather, an excel
document was provided. Cash register z-tapes, in their original format, are necessary to obtain
reasonable assurance to conclude on the accuracy of concession revenue. 
We extend our appreciation to Port management and staff of the Aviation Commercial Management
Department for their assistance and cooperation during the audit. 


Glenn Fernandes, CPA 
Director, Internal Audit 



RESPONSIBLE MANAGEMENT TEAM 
Lance Lyttle, Managing Director Aviation 
Jim Schone, Director, Aviation Commercial Management 
Dawn Hunter, Senior Manager, Airport Dining and Retail 
Khalia Moore, Senior Business Manager, Airport Dining and Retail 


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         Beecher’s Handmade Cheese 
January 2014 – December 2017 
BACKGROUND 

Beecher’s Handmade Cheese (Beecher’s) is headquartered in Seattle and operates four cafés offering an
assortment of fresh sandwiches, soups, salads, and cheeses. Beecher’s has three locations in the Seattle
area and one location in New York. 
The original Agreement between Beecher’s and the Port was executed April 3, 2012 for the right to
operate a food and beverage concession at the Airport. The Agreement required the Lessee to pay the
Port a Minimum Annual Guarantee (MAG) equal to eighty-five percent (85%) of the total amount paid by
the Lessee for the previous year. 
In addition to the MAG, the Agreement required the Lessee to pay a twelve percent (12%) concession 
fee, to the extent the percentage fee was higher than the monthly MAG payment. Beecher’s is required to
provide the Port with detailed statements of gross sales for the preceding month and a certified annual
statement, of monthly gross sales, at the end of each year. The concession revenues from Beecher’s 
have consistently exceeded the MAG. 
The table below reflects the total concession revenue earned by the Port through the audit period. 
BEECHER'S HANDMADE CHEESE 
Year                                               Gross Sales     Concession Revenue
2014                                                        $3,712,924                    $445,551 
2015                                                         4,461,175                    535,341 
2016                                                         5,748,587                     689,831 
2017                                                         6,903,741                    828,449 
TOTAL                                                 $20,826,427                $2,499,172 
* Data Source: PROPworks 
The agreement also states that, at the Airport, the Lessee shall not charge prices for any menu items,
products or services that exceed “Street Prices”. Street prices are prices charged by companies with the
same trade name, commonly recognized by the public. 







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         Beecher’s Handmade Cheese 
January 2014 – December 2017 
AUDIT SCOPE AND METHODOLOGY 
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 January 2014 – December 2017. After identifying significant provisions in
the Agreement, we performed the following audit procedures: 
Revenue Completeness and Accuracy 
• Daily sales detail (z-tapes) were not available for most of the audit timeframe, accordingly,
when not available, we agreed the provided Excel spreadsheet to the monthly profit and loss
sales report, and to the general ledger. 
• Agreed recalculated concession fees to amounts reported to the Port. 
• Verified the accuracy of the concession fee by agreeing the percentage rate applied to the
revenue category and agreeing to the fees invoiced. 
• Obtained and reviewed documentation supporting the tenant’s annual certification of gross
sales. 
• Agreed provided sales data to monthly bank statements. Certain information on Beecher’s 
bank statements was redacted, thereby preventing us from obtaining sufficient assurance
from this procedure. 
Surety Deposit 
• Recalculated annual surety deposits per the lease agreement. 
• Validated that surety deposits were received timely, at the beginning of each lease year. 
Street Pricing 
• Obtained 2017 street pricing documentation. 
• Discussed street pricing analysis with the Airport Dining and Retail department. 
• Agreed airport prices to the Pike Place Market location to verify ‘street pricing’ compliance. 







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         Beecher’s Handmade Cheese 
January 2014 – December 2017 
SCHEDULE OF FINDINGS AND RECOMMENDATIONS 
1) RATING: MEDIUM
The Agreement requires the Lessee, in part, to maintain records for a period of three years.
However, the daily point of sale data was not provided to Internal Audit in its original format; 
rather, an excel document was provided. Cash register z-tapes, in their original format, are
necessary to obtain reasonable assurance to conclude on the accuracy of concession revenue. 
In the fourth quarter of 2017, Beecher’s implemented a new point of sale system. Subsequent to the
implementation, Beecher’s did maintain original sales data. This allowed Internal Audit to successfully
perform revenue validation procedures for the month of November 2017. This additional step provided us
with reasonable assurance that revenue was accurately reported for the fourth quarter of 2017. 
For the period prior to implementation, Beecher’s did not retain the original receipt data to evidence their
daily  sales.  Excel  reports  that  display  information,  although  unlikely,  can  be  manipulated  or  can
inadvertently remove data, thus compromising the completeness and accuracy of the report. Therefore,
relying on reports that capture information downloaded from another source does not provide the same
level of assurance as does obtaining source data in its original form. 
Section 7.1 of the Agreement also reflects that the Lessee will establish and maintain an accounting
system, including all books of accounts and records, that are “reasonably satisfactory to the Port for the
determination of any Rent or other computations, or both, which may be necessary or essential in
carrying out the terms of this Agreement…for a period of at least three (3) years.” 
This position is also consistent with the Internal Revenue Service record retention guidance, which
requires cash register z-tapes and detailed x-tapes to perform their examinations. 
Recommendation 
Incorporate specific language into future Agreements that explicitly requires the original daily cash
register data (z-tapes or x-tapes). 
ADR management also suggested they would proactively communicate with Beecher’s, and more
broadly, all airport concessionaire’s, the importance of maintaining original source data. 
Management Response/Action 
Due to unusual circumstances, Beecher’s was unable to provide original documentation to support their
reported sales. While the documentation was not in its original format as required, Beecher’s did go to
extensive measures to provide backup documentation to support the numbers provided to the Port.
Additionally, there were no major discrepancies between what was submitted in previous years and what
was able to be verified by the Port. Airport Dining and Retail staff has communicated with Beecher’s
senior management about the requirement in their lease to provide sales documentation in its original
format and have requested that they provide that documentation along with their 2018 certified annual
sales report. 
DUE DATE: 12/31/2018 

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         Beecher’s Handmade Cheese 
January 2014 – December 2017 

APPENDIX A: RISK RATINGS 
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. 
Port Commission/
Rating        Financial         Internal Controls         Compliance           Public 
Management 
Large financial
impact                                    Noncompliance
High probability
with applicable                               Important 
Missing, or inadequate                         for external audit
Remiss in                                 Federal, State,
HIGH                       key internal controls                        issues and/or
responsibilities                                   and Local Laws,                           Requires immediate
negative public
of being a                                    or Port Policies                               attention 
perception 
custodian of
public trust 
Partial controls             Inconsistent          Potential for      Relatively important 
compliance with      external audit
Moderate
MEDIUM                  Not adequate to identify    Federal, State,     issues and/or     May or may not
financial impact 
noncompliance or       and Local Laws,     negative public     require immediate
misappropriation timely      or Port Policies         perception            attention 
Generally
Internal controls in place                            Low probability
complies with
but not consistently                             for external audit
Federal, State and                       Lower significance 
Low financial       efficient or effective                              issues and/or
LOW/                                         Local Laws or Port
impact                                                         negative public
Exit Items                                                  Policies, but some                         May not require
Implementing/enhancing                         perception 
minor                          immediate attention 
controls could prevent
discrepancies
future problems 
exist 
Efficiency    An efficiency opportunity is where controls are functioning as intended; however, a modification would make
Opportunity                                      the process more efficient 







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