Internal Audit Briefing
Internal Audit Internal Audit Briefing Presented to the Port of Seattle Audit Committee and Tay Yoshitani, CEO Joyce Kirangi, CPA, CGMA Director, Internal Audit May 20, 2014 Agenda Audit Report 1. Lease and Concession Audits None 2. Operational Audits Central Processing System None Comprehensive Operational Audit /Departmental Audit Airport Public Parking Operation Aviation Building Department Limited Operational Audit Fire and Police Payroll Process Review Police Forfeiture Funds Tuition Reimbursement Program 3rd Party Audit None Briefing/Updates CPO Efficiency Review by an Independent Consultant Comprehensive Operational Audit Airport Public Parking Operation Our audit focused on the management established monitoring controls over parking receipting operations based on system reports and other information. Review of Established Management Controls: (these are controls outside a system application) Safeguarding and accountability of collected parking receipts Establish policies and procedure over parking receipting operation Management monitoring and review of daily system output reports Supervisor approval of exception parking transactions Evidence of management verification and review of exception parking transactions Documentation and audit trail -- evidence of management review Review and reconciliation of collected parking fee receipts to system generated reports Reconciliation of bank deposits to supporting records Etc. Comprehensive Operational Audit Airport Public Parking Operation Background The Port of Seattle owns and operates the Seattle-Tacoma International Airport (STIA) parking garage. The Landside Operations Department runs the day-to-day operation using an automated parking revenue system to process parking transactions and to report parking revenue. Revenue from parking operations is a significant portion of Port revenue, bringing in approximately $50 million per year; this is the single largest Portoperated revenue stream. Credit cards are the most common method of payment comprising of almost 95% of total parking receipts in 2012 and 2013. Public Parking Receipts 2012 2013 Payment Type Receipts Percentage Receipts Percentage Cash $2,925,112 5.5% $2,874,971 5.2% Credit Card $50,725,355 94.5% $52,655,053 94.8% Total $53,650,467 $55,530,023 Source: Parking Revenue System Comprehensive Operational Audit Airport Public Parking Operation Audit Objectives The purpose of the audit was to determine whether: 1. Established management controls are adequate to ensure: Parking exception transactions are properly reviewed, approved, and documented Recorded cash and credit card transactions are reconciled to bank deposits Parking fees are charged in compliance with Commission- approved tariff rates 2. To determine whether the parking revenue system completely captures a record of each vehicle exiting the parking garage. We reviewed Airport Public Parking Garage information for the period January 1, 2013 April 11, 2014. Comprehensive Operational Audit Airport Public Parking Operation Audit Result No Reportable Condition /Finding Management controls are adequate to ensure that exception transactions are properly reviewed, approved and documented, recorded cash and credit card transactions are reconciled to bank deposits, and parking fees are charged in accordance with the Commission-approved tariff. The tube-counting devices captured 99.2% of the vehicles exiting the garage when compared to the vehicle records captured in the parking revenue system. Comprehensive Operational Audit Aviation Building Department Background The Aviation Building Department formed in 1997, by an interlocal agreement between the Port of Seattle and the City of SeaTac. The agreement allows the Port to administer and issue permits for all Port of Seattle projects located within the city limits. The Department collects permit fees for building and mechanical plan reviews for tenant construction projects at the airport. The Department employs five FTEs, three of whom are field and plan review inspectors. The Department utilizes an internally developed Permit Tracking System (ABD system) for billing and collecting fees. AVIATION BUILDING DEPARTMENT PERMIT REVENUES AND EXPENSES PERMIT TYPE 2011 2012 2013 Building Permit and Plan Review Fee Revenue $137,291 $208,541 $191,230 Salaries and Benefits Expense 639,634 654,502 554,886 Other Expense 26,935 37,515 28,219 TOTAL $803,860 $900,558 $774,335 Data Source: PeopleSoft Financials Comprehensive Operational Audit Aviation Building Department Audit Objectives The purpose of the audit was to determine whether Port management controls are adequate to ensure: 1. Permit and plan review fee receipts were complete, properly recorded and deposited timely and intact. 2. Inspections and/or plan reviews outside normal business hours were properly authorized and billed. 3. Department expenditures were properly authorized and for legitimate business purposes. We reviewed information for the period January 1, 2011 - December 31, 2013. Comprehensive Operational Audit Aviation Building Department Audit Result Management monitoring controls are not adequate to mitigate the risks related to the complete, properly recorded, timely, and intact deposit of permit and plan review fee receipts, proper authorization and billing of after-hour inspection services, and properly authorized and legitimate expenditures. One Reportable Condition/Finding The aviation building department's management controls are not adequate to mitigate the risks associated with the absence of the separation of duties. Limited Operational Audit Fire and Police Payroll Process Review Background Pay and benefits are the most significant expense for Fire and Police. Due to the union agreements, there is significant complexity in the departments' payroll processes as compared to salaried, non-represented Port employees. PORT FIRE AND POLICE SALARIES, WAGES, AND BENEFITS - 2013 FIRE DEPARTMENT Actual Salaries, Wages, and Benefits $11.8 M Total Represented Employees (Local 1257) Fire Fighters 67 Total Employees* -- 73 POLICE DEPARTMENT Actual Salaries, Wages, and Benefits $20.1 M Represented Employees (Local 117)** Officers 76 Sergeants 16 Dispatch 16 Communication Specialist 8 Non-Sworn Supervisors 3 Commanders 5 TOTAL REPRESENTED 124 Total Employees* -- 131 Data Source: PeopleSoft Financials Data Note: *As of December 31, 2012 **Each labor group has a separate agreement under Local 117 Limited Operational Audit Fire and Police Payroll Process Review Audit Objectives The purpose of the audit was to determine whether Fire and Police management has implemented adequate controls to ensure: 1. Actual pay and benefits meet the terms of the union agreements and applicable state laws and regulations. 2. Payroll records at Fire and Police Departments are accurate and complete. We reviewed information for the period from January 1, 2012 - August 31, 2013. We audited only represented employees. Limited Operational Audit Fire and Police Payroll Process Review Audit Result Fire and Police Departments have implemented adequate controls to ensure their actual pay and benefits are reasonably accurate and complete. However, the management of other Port departments involved in pay and benefits administration processes has not designed or implemented adequate inter-department communication controls to ensure that actual pay and benefits administration processes fully meet the terms of the union agreements. Although the known errors/oversights have not been financially significant, there have been numerous errors and omissions that have impacted a number of employees over prolonged periods. One Reportable Condition/Finding More formalized communications and coordination efforts are required among port departments in order to successfully implement labor agreements. Limited Operational Audit Police Forfeiture Funds Background Police participates in seizure and forfeiture programs to control illegal narcotics. The Department has participated in the federal and Valley Narcotics Enforcement Team (VNET) programs as far back as 2005. The state program began in late 2009. When seizures occur, the seizures are held in trust until there is a legal order to return the seized item or money to the party from which it was seized or to release the item or money to the seizing agency. PORT OF SEATTLE POLICE DEPARTMENT FORFEITURE REVENUES Source of Forfeiture Revenues 2010 2011 2012 2013 TOTAL Federal $177,893 $25,603 $0 $29,323 $232,819 Valley Narcotics Enforcement Team 81,000 50,000 0 0 131,000 State 271,449 189,339 98,790 56,438 616,016 TOTAL $530,342 $264,942 $98,790 $85,761 $979,835 Data Source: PeopleSoft Financials Limited Operational Audit Police Forfeiture Funds Audit Objectives The purpose of the audit was to determine whether management controls over Police Forfeiture Funds are adequate to ensure: 1. Seized property is properly processed in accordance with state law from point of seizure to point of forfeiture. 2. Forfeited property is properly accounted for. 3. Expenditures of forfeited property are in compliance with federal, state, and local laws regarding: a. Allowability of expenditures of forfeiture funds. b. Timely and accurate reporting of activity of forfeited funds. c. Time period within which forfeited funds are to be expended. We reviewed information for the period January 1, 2010 December 31, 2013. Limited Operational Audit Police Forfeiture Funds Audit Result Management controls over Police Forfeiture Funds are adequate to ensure seized property is properly processed, forfeited property is properly accounted for, reports are timely and accurate, and funds are expended within mandated time period. However, controls are not adequate to ensure expenditures of forfeited funds are allowable. One Reportable Condition/Finding The police department did not comply with the applicable legal requirements for the use of forfeiture funds. Limited Operational Audit Tuition Reimbursement Program (HR -12) Background The Employee Learning and Development Policy (HR-12) provides for college tuition reimbursement funded and administered by HRD. Employees must submit a request one year prior to anticipated enrollment. The employee's manager, department director, and division director must approve the employee's request. Annually, a committee reviews all employee requests and scores them based on available budget. The HRD Director provides final approval of the committee's recommendations. TUITION REIMBURSEMENT PROGRAM FINANCIAL HIGHLIGHTS NUMBER OF BUDGETED ACTUAL FISCAL YEAR PARTICIPANTS EXPENDITURES EXPENDITURES 2012 27 $150,000 $130,878 2013 21 180,000 148,268 TOTAL 48 $330,000 $279,146 Data Source: Human Resources Department, PeopleSoft Financials Limited Operational Audit Tuition Reimbursement Program (HR -12) Audit Objectives The purpose of the audit was to determine whether management has implemented adequate controls to ensure compliance with the Employee Learning and Development Policy (HR-12). We reviewed information for the period January 1, 2012 - December 31, 2013. Limited Operational Audit Tuition Reimbursement Program (HR -12) Audit Result No Reportable Condition /Finding Management has implemented adequate controls to ensure compliance with the Employee Learning and Development Policy. Briefing / Updates CPO Efficiency Review by an Independent Consultant Mobius Industries was awarded the contract, and the work began on 3/3/2014. The review is scheduled to be complete no later than 6/30/2014. To date, it is about 60% complete, schedule-wise.
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