Attachment Customer Facility for Audit Meeting held Oct 21, 2014 1:00PM at Pier 69

Customer Facility

INTERNAL AUDIT REPORT

Customer Facility Charge (CFC) Compliance
Limited Operational Audit

January 1, 2012-July 31, 2014

ISSUE DATE: OCTOBER 21, 2014
REPORT NO. 2014-16

CUSTOMER FACILITY CHARGE (CFC) INTERNAL AUDIT
COMPLIANCE AUDIT
January 1, 2012-July 31, 2014
TABLE OF CONTENTS

TRANSMITTAL LETTER ............................................................................................................................. 3
EXECUTIVE SUMMARY ............................................................................................................................. 4
BACKGROUND .......................................................................................................................................... 5
FINANCIAL HIGHLIGHTS ......................................................................................................................... 5
AUDIT SCOPE AND METHODOLOGY ........................................................................................................ 6
CONCLUSION ........................................................................................................................................... 6

CUSTOMER FACILITY CHARGE (CFC) INTERNAL AUDIT
COMPLIANCE AUDIT
January 1, 2012-July 31, 2014
TRANSMITTAL LETTER
Audit Committee
Port of Seattle
Seattle, Washington
We have completed a compliance audit of the Customer Facility Charge (CFC). We reviewed
information for the period January 1, 2012-July 31, 2014.
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 Aviation Finance & Budget Department
for their assistance and cooperation during the audit.

Joyce Kirangi, CPA, CGMA
Internal Audit, Director

AUDIT TEAM RESPONSIBLE MANAGEMENT TEAM
Brian Nancekivell, Senior Auditor Borgan Anderson, Director
Jack Hutchinson, Audit Manager Linda Nelson, Manager

CUSTOMER FACILITY CHARGE (CFC) INTERNAL AUDIT
COMPLIANCE AUDIT
January 1, 2012-July 31, 2014
EXECUTIVE SUMMARY

AUDIT OBJECTIVES AND SCOPE
The purpose of the audit was:
? To determine whether management controls for operating costs are adequate to ensure
compliance with the Revised Code of Washington (RCW) 14.08.120 in the use of the Customer
Facility Charge (CFC).

We reviewed information for the period January 1, 2012 July 31, 2014. Details of our audit's scope
and methodology are on page 6.

BACKGROUND
The Customer Facility Charge (CFC) is a user fee paid only by customers renting cars at the airport. Rental
car companies collect the CFC as part of each rental car agreement and remit revenue to the Port. The
revenue is used to cover all rental car facility expenses, which include but are not limited to costs
associated with the common use busing operations and debt service on the bonds that financed the
construction. The Port has been collecting the CFC fee since 2006, and the current fee is $6 per day. The
Port has the authority to increase the CFC, to meet its ongoing operating and maintenance costs.
Per the RCW 14.08.120, the CFC may only be used for the authorized costs such as:
Financing, designing, constructing, operating and maintaining the consolidated rental car facilities.
Common use transportation equipment and facilities.
The Port collects approximately $30 million annually and incurs roughly $26 million in operating and debt
service expenditures. Any excess revenue, after operating and maintenance cost is accumulated in a CFC
fund to finance future capital costs such as bus replacements.

AUDIT RESULT
Port management has implemented adequate controls to ensure compliance with the Revised Code of
Washington (RCW) 14.08.120 in the use of the Customer Facility Charge (CFC).

CUSTOMER FACILITY CHARGE (CFC) INTERNAL AUDIT
COMPLIANCE AUDIT
January 1, 2012-July 31, 2014
BACKGROUND
In July 2005, Senate Bill 5584 was passed authorizing municipal airports to levy a Customer Facility Charge
(CFC) on rental car customers at the airports. The purpose of the fee at the Port of Seattle was to finance
the design, construction, and operation of a consolidated rental car facility and a common use busing
system to shuttle passengers between the facility and the airport terminal. The CFC is a user fee paid only
by customers renting cars at the airport. Rental car companies collect the CFC as part of each rental car
agreement. The rental car companies remit the fee monthly to the Port. The fee covers costs associated
with the facility, the common use busing operations, and the debt service on the bonds issued to finance
the construction of the facility. The Port has been collecting the CFC since 2006. The current CFC rate is $6
per day, and the Port has the authority to increase the rate to meet its costs related to the rental car
facility operation.
Per RCW 14.08.120 (7), the CFC may only be used "for the purposes of financing, designing, constructing,
operating, and maintaining the consolidated rental car facilities and common use transportation equipment
and facilities which are used to transport the customer between the consolidated car rental facilities and
other airport facilities.". In addition, the agreements between the Port and the rental car companies: 1)
place further limitations on the use of the CFC, 2) provide for an annual review of CFC collected and
remitted to the Port, and 3) require an independent audit every five years during the life of the
agreements.
The Port financed the consolidated rental car facility with revenue bonds of $310 million issued in 2009.
The facility was completed in 2012.
The Port collects approximately $30 million annually and incurs roughly $26 million in operating and debt
service expenditures. Any excess revenue, after operating and maintenance cost, is accumulated in a CFC
fund to finance future capital costs such as bus replacements.
FINANCIAL HIGHLIGHTS
CFC Sources and Uses of Funds (in thousands)
2012 2013
Sources of Funds
CFC Collections $ 30,016 $31,549
Interest Earnings 191 104
Total Sources of Funds $ 30,207 $31,653
Uses of Funds
Debt Service $ 19,689 $19,667
Operating Costs 6,145 6,363
Project Expenditures (capital) 17,122 2,512
Total Uses of Funds $ 42,956 $28,542
Net Funds $(12,749) $ 3,111
Prior Year Fund Balance $ 25,383 $12,634
Ending CFC Fund Balance $12,634 $15,745
Data Source: Aviation Finance & Budget

CUSTOMER FACILITY CHARGE (CFC) INTERNAL AUDIT
COMPLIANCE AUDIT
January 1, 2012-July 31, 2014

AUDIT SCOPE AND METHODOLOGY
We reviewed information for the period January 1, 2012 - July 31, 2014. We utilized a risk-based audit
approach from planning to testing. We gathered information through research, interviews,
observations, and data analysis in order to obtain a complete understanding of the operating expenses
related to the rental facility and common use transportation equipment and facilities. We assessed
significant risks and identified controls to mitigate those risks. We evaluated whether the controls were
functioning as intended.
During the audit period, there were scheduled, non-recurring capital expenditures related to the
completion of the rental car facility construction and common use busing facilities. We focused on the
higher risk variable operating costs which will be recurring over many future years.
We applied additional detailed audit procedures to areas with the highest likelihood of significant
negative impact as follows.
To determine whether management controls for operating costs are adequate to ensure compliance
with RCW 14.08.120 in the use of the Customer Facility Charge:
Port Management Reconciliation Processes:
? We reviewed the reconciliation processes currently in place with Aviation Finance & Budget,
which is a management control implemented to ensure complete and reasonable
reconciliation of revenues and expenses.
? We reviewed the processes to reclassify CFC revenues and to reimburse the Aviation
Development Fund (ADF) fund for CFC qualified operating expenses.
CFC revenues are monthly classified between non-operating revenue for debt service and
operating revenue for the remainder. Most operating expenses of departments are initially
charged to the ADF fund. The CFC fund, on a monthly basis, reimburses the ADF fund for
CFC qualified operating expenses.
? We reviewed the 2012 and 2013 reconciliations for completeness and reasonableness.
Port Department Management Processes
? We tested a risk-based sample of individual departments charging operating expenses to the
CFC. We reviewed the department controls to ensure the appropriateness of the charges.
The testing included payroll and vouchers from various departments.
? Facility, Fleet, Systems & Grounds ? AV Maintenance Asset Mgt & Logistics
? AV Electric & Electronic Sys ? Marine Maintenance
? Construction Services

CONCLUSION

Port management has implemented adequate controls to ensure compliance with the Revised Code of
Washington (RCW) 14.08.120 in the use of the Customer Facility Charge (CFC).

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