INTERNAL AUDIT REPORT 

LIMITED OPERATIONAL AUDIT 
FIRE AND POLICE DEPARTMENTS' PAY AND BENEFITS ADMINISTRATION 

JANUARY 1, 2012  AUGUST 31, 2013 




ISSUE DATE: MAY 20, 2014 
REPORT NO. 2014-05

INTERNAL AUDIT REPORT 
FIRE AND POLICE DEPARTMENTS' PAY AND BENEFITS ADMINISTRATION 
JANUARY 1, 2012  AUGUST 31, 2013 

TABLE OF CONTENTS 

Transmittal letter ........................................................................................................................ 3 
Executive Summary ..................................................................................................................... 4 
Background ................................................................................................................................. 5 
Financial Highlights .................................................................................................................... 6 
Audit Scope and Methodology ...................................................................................................... 6 
Conclusion .................................................................................................................................. 7 
Schedule Of Findings And Recommendations ............................................................................... 8 
1. MORE FORMALIZED COMMUNICATIONS AND COORDINATION EFFORTS ARE REQUIRED
AMONG PORT DEPARTMENTS IN ORDER TO SUCCESSFULLY IMPLEMENT LABOR
AGREEMENTS. 









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TRANSMITTAL LETTER 

Audit Committee 
Port of Seattle 
Seattle, Washington 

We have completed an audit of Fire and Police Departments' Pay and Benefits Administration. 
We reviewed information relating to the period from January 1, 2012  August 31, 2013.
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 Port management and staff of the Fire & Police
Departments, as well as Accounting & Financial Reporting  (AFR), Human Resources  & 
Development, and Labor Relations, for their assistance and cooperation during the audit. 


Joyce Kirangi, CPA, CGMA 
Director, Internal Audit 
AUDIT TEAM                        RESPONSIBLE MANAGEMENT TEAM 
Brian Nancekivell, Senior Auditor         Dan Thomas, Chief Financial and Administrative Officer 
Jack Hutchinson, Audit Manager         Wendy Reiter, Director 
Aviation Security and Emergency Preparedness 





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FIRE AND POLICE DEPARTMENTS' PAY AND BENEFITS ADMINISTRATION 
JANUARY 1, 2012  AUGUST 31, 2013 

EXECUTIVE SUMMARY 
Audit Scope and ObjectivesAUDIT SCOPE AND 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. 
The scope of our audit covered the period from January 1, 2012 - August 31, 2013. We
audited only represented employees. 
Background        BACKGROUND
The audit focused on the Fire and Police Departments' Pay and Benefits Administration. 
However, other Port departments -- Labor Relations, Human Resources, and Payroll -- have an
impact on the overall pay and benefits administration processes, because they provide
information  and/or  input  employee  information  into  the  PeopleSoft  Human  Capital
Management (HCM) system.
The Port's Police Department provides law enforcement and crime prevention services to
both the airport and seaport facilities. Its 131 employees are almost all represented by the
Teamsters Local Union #117 under 6 labor agreements. 
The Port's Fire Department provides aircraft rescue firefighting and emergency services at
the airport. Most of its 73 employees are represented by the Firefighters Local Union #1257. 
Pay and benefits are the most significant expense for both departments. Per the  labor
agreements, union employees are entitled to numerous pay rates and benefits based on their
duties, shifts, specialties, overtime, longevity, education, etc. These provisions present
significant complexity in the pay and benefits administration processes, as compared to
salaried, non-represented Port employees. 
Audit Result Summary                 AUDIT RESULT SUMMARY
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, as discussed in Finding 1. 

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Background BACKGROUND 
The audit focused on the Fire and Police Departments' Pay and Benefits Administration.
However, other Port departments -- Labor Relations, Human Resources, and Payroll -- have an
impact on the overall pay and benefits administration processes, because they provide
information and/or input employee data into the PeopleSoft Human Capital Management
(HCM) system.
The Port's Police Department provides law enforcement and crime prevention services to
both the airport and seaport facilities. Its 131 employees are almost all represented by the
Teamsters Local Union #117, under 6 labor agreements by the type of position. 
The Port's Fire Department provides aircraft rescue firefighting and emergency services at
the airport. Most of its 73 employees are represented by the Firefighters Local Union #1257. 
Pay and benefits are the most significant expense for both departments. Per the agreements,
union employees are entitled to numerous pay rates and benefits, based on their duties,
shifts, specialties, overtime, longevity, education, etc. These provisions present significant
complexity in the payroll process as compared to salaried, non-represented Port employees. 
Both departments use a commercial software application, TeleStaff, to schedule employee
time. Actual employee time is recorded bi-weekly into a PeopleSoft module, Human Capital
Management (HCM), for processing and compensation. 
As stated, multiple Port departments are involved in overall pay and benefits administration,
as follows: 
Labor Relations negotiates labor agreements and manages union relationships. 
Fire and Police Departments input employee hours and details of duty assignments. 
Human Resources and Development (HRD) inputs employee information, the various
pay rates applicable to a group of employees, and some of the deduction rates. HRD
also processes payments for employer-provided benefits. 
Accounting and Financial Reporting (AFR) inputs pay amounts specific to an individual
and some of the deduction rates for calculating any retroactive pay changes. AFR also 
processes the bi-weekly payroll. 
Information & Communications Technology (ICT) maintains the PeopleSoft Human
Capital  Management  module,  performing  routine  maintenance  and  facilitating
software updates. 




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Financial Highlights FINANCIAL HIGHLIGHTS 
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 
Audit Scope and Methodology AUDIT SCOPE AND METHODOLOGY 
We reviewed information for the period from January 1, 2012 - August 31, 2013. We utilized a
risk-based  audit  approach  from  planning  to  testing.  We  gathered  information  through
document reviews, interviews, observations, and analytical procedures, in order to obtain a
complete understanding of operations related to the Fire and Police Departments' Pay and 
Benefits Administration. We assessed significant risks and identified controls to mitigate those
risks. We evaluated whether the controls were functioning as intended. 
We applied additional detailed audit procedures to areas with the highest likelihood of
significant negative impact as follows: 
1.  To determine whether management implemented adequate controls to ensure that actual
pay and benefits administration processes meet the terms of the union agreements and
applicable state laws and regulations. 
Due to the nature of the union agreements, compliance efforts involve a number of Port
departments -- Labor Relations, Human Resources, and AFR Payroll -- which have an
impact on the overall pay and benefits administration processes for Fire and Police. These
departments are collectively referred to as "other departments" in the procedure
descriptions.    The  Police  and  Fire  Departments  are  referred  to  as  "operating
departments." 

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We reviewed all union agreements in detail to identify pay and benefit types and any
terms and conditions that could be subject to interpretation. 
We reviewed applicable processes in the operating departments, as well as processes
in  other  departments,  specific  to  the  operating  departments'  pay  and  benefit
administration processes (e.g., calculation and processing of retroactive pay). 
We analyzed errors/issues previously identified by management in other departments 
for complete and timely processing. 
We tested a risk-based sample (based on an analysis of the pay codes, in order to
sample as many pay types as possible) of 20 firefighters and 30 police officers for 3 
pay periods, to determine whether: 
o   Base pay rates, positions, and eligibility for various pay premiums were accurate. 
o   Reported hours agreed to scheduled hours. 
o   Premium rates were accurate and agreed to re-calculated applicable pay. 
o   Employee deductions for medical, union, and optional legal fund dues were
accurate. 
o   Processes for calculating and paying employer contributions for employee benefit
plans were adequate and contributions were accurate. 
2.  To determine whether management implemented adequate controls to ensure that the
pay and benefits administration records at Fire & Police were accurate and complete. 
We observed and performed walkthroughs of a complete departmental bi-weekly
payroll process and verified the reconciliation of recorded time in PeopleSoft HCM
module to recorded time in TeleStaff. 
We reviewed access controls in TeleStaff for appropriate controls over authorization of
overtime. 
We reviewed personnel files for the above sample of employees to verify position,
education, and longevity. 
Conclusion CONCLUSION 
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, as discussed in Finding 1. 



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SCHEDULE OF FINDINGS AND RECOMMENDATIONS 
1.  MORE FORMALIZED COMMUNICATIONS AND COORDINATION EFFORTS ARE REQUIRED
AMONG PORT DEPARTMENTS IN ORDER TO SUCCESSFULLY IMPLEMENT LABOR
AGREEMENTS. 
The union agreements for Fire (1 agreement) and Police (6 agreements) are typically for a
two-year  period,  and  the  agreements  are  subject  to  prolonged  negotiations.  Final
agreements are often signed well after the start of the agreement term. These protracted 
negotiations necessitate retroactive payroll changes for the affected employees. The 
negotiated labor agreements have many complex terms and conditions that affect payroll 
processing. For example, there are approximately 180 agreement-related earnings codes
available for the Police payroll. These earnings codes include patrol, longevity, education,
and specialty pays,  etc. Additionally, there are  multiple benefit  contributions and
deductions payable by the Port and employees. 
Several  Port  departments  are  involved  in  administering  the  pay  and  benefits  and
implementing changes  to the union agreements. The multiple process participants, 
combined with the complexity inherent in these union agreements, require clearly defined
processes  and  well-coordinated  efforts,  in  order  to  ensure  complete  and  accurate
application of agreed-upon labor terms and conditions. Further, if advance assessment of
the  PeopleSoft  HCM  system  processing  capabilities  were  considered  before  labor
negotiations, this assessment could minimize labor agreement complexities and their 
implementation, thereby reducing the risk of errors.
We observed the following inadequacies in pay and benefits administration processes 
related to the implementation of labor agreements: 
Ad-hoc  and  inadequately  documented  plans,  procedures,  and  schedules  of
implementation meetings. 
Unclear roles and responsibilities among the various Port departments involved. 
Unclear  overall  process  owners  to  ensure  clear  accountability  over  effective
implementation. 
Lack of advance assessment of the PeopleSoft HCM system processing capabilities. 
As a result of an inadequate implementation process, there have been errors, weak
oversight, processing inconsistencies, and possible misunderstandings, as follows: 
A.     Union Agreement implementation errors and weak oversight 
The AFR Payroll Department has identified several implementation errors in the past that
have impacted numerous employees over prolonged periods. For example: 
Police Officers:  The work schedules changed in 2009, but the change was not
implemented  in the system. As a result, vacations were over -accrued until
recognized in July 2013. The correction is still in progress.

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Police Dispatchers: The employee share of premiums effective for March 2013 was 
not properly deducted in accordance with the 2012 agreement. The correction is
still in progress. 
Police Specialists: The cost sharing of premiums for Retiree Welfare Trust Benefits
was agreed to in 2009, but not discovered until 2011, resulting in overpayments to
employees. 
B.     Inconsistent payroll processing 
The Port uses the PeopleSoft HCM system to automatically process pay and benefits on a
bi-weekly schedule. We observed that the frequency of Fire and Police allowances, 
deductions, and Port contributions does not consistently conform to the Port's bi-weekly
pay periods. For example, a monthly deduction in union agreements cannot be deducted
monthly  because of the Port's bi-weekly pay period.  To comply with the monthly
deduction, additional work has to be performed. These are not errors, but opportunities to
reduce pay and benefits administration processing complexity. 
For example, the monthly/quarterly clothing allowance has to be individually processed, as
opposed to an automatic calculation. The following are some of the out-of-sync items: 
One-time, lump-sum payment - paid on the first full pay period in January. 
Clothing/cleaning allowance  paid monthly or quarterly, depending on position. 
Union dues and team legal participation - paid monthly. 
Long-Term Disability  deduction from each employee's second monthly paycheck. 
C.     Unclear labor agreement terminology 
There are several areas where the labor agreement provisions may be subject to varying
interpretations. These  are  not  errors  but  opportunities  to  reduce  any  potential
misunderstandings and grievances. 
Date of Hire: Employees are eligible for premiums for longevity, based on the date
of hire. The date of hire could be interpreted as: 1) an original hire date at the
Port, 2) a date of entry into the department, or 3) a date of entry into the current
position. There was a grievance regarding this issue, which has subsequently been
resolved. 
Premium Stacking: The Police Officers' agreement states: "Officers are entitled to
receive only the two (2) highest specialty/assignment premiums for which they are
eligible; however, the patrol shift premium is excluded from this 'stacking
premium'." The agreement does not clarify whether this limitation applies to a
shift, a day, or a pay period. Officers can and do perform more than one
specialty/assignment in a day and pay period. 
Benefit Amounts: Some benefits are not clearly defined: 
o   Police Life Insurance - Eligible employees are "covered for an amount of life
insurance equal to forty percent (40%) of his/her annualized pay rate", but
the annualized pay rate, as defined, is subject to interpretation. It could be a
base pay rate only or include premiums, of which there are many types.
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o   Eye Care  "The Port shall pay up to twenty-five dollars ($25.00) towards the
AWC Vision Service Plan." The contribution frequency is not specified. 
o   Fire Life Insurance and AD&D  "provided on the Association of Washington
Cities Plan C." The contribution frequency and amounts are not specified. 
A complete implementation process involving all applicable departments could effectively
mitigate the risk of errors, omissions, misunderstandings, and inconsistent processes in
compliance with the union agreements. Further, advance consideration of the current
PeopleSoft HCM system processing capabilities could lead to reduced complexities in the
labor agreements, if such an assessment were done before negotiations.

Recommendation 
We recommend Port management: 
Develop and implement a union agreement implementation process involving all
interested parties. 
Clearly define the roles and responsibilities of all parties. 
Assign process owners for each pay and benefit administration process/activity. 
Management Response 
Thank you for Internal Audit's review of the pay and benefits administration process for the
Fire and Police departments.   Port management is committed to ensure accurate and
complete pay and benefits, which are compliant with the union agreements.  This response
reflects the collective insight from the Fire and Police departments, Labor Relations, Human
Resources  &  Development,  Accounting  &  Financial  Reporting,  the  Continuous  Process
Improvement Office. 
We strive to be error free, each pay cycle, and work to make it a priority to have accurate
pay and benefits administration for all Port employees. It is worth noting, and as mentioned
in the audit report, that the Police and Fire departments' collective bargaining agreements
are very complex, the most complex at the Port.  The complexity of these agreements is
driven by the nature of the work performed by employees in these departments, as well as
industry standard ways of structuring their pay and benefits. Through time, this has created
challenges in administering pay and benefits error free in certain instances.  Nevertheless,
Port management has been and will continue to be proactive to mitigate exposures. 
Port management has fully documented and tracked Port-wide pay/benefits administration
errors since 2009, which facilitates the ongoing visibility and corrective action to resolve
irregularities. We acknowledge the issues noted in the audit report, as they are among those
identified by Port management as contained in our comprehensive tracking log provided to
the auditor.  With the objective of taking progressive steps to understand the process
challenges that cause pay/benefits administration errors, and to implement a new or
improved process that ensures timeliness and accuracy of pay and benefits for union
employees, two initiatives were undertaken.  A Union Benefits Task Force comprised of
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leadership from Labor Relations, Human Resources & Development (HRD), and Accounting &
Financial Reporting (AFR), was formed in late 2013 to focus on ensuring timely payments and
accurate administration of benefits for union employees. Also in 2013, HRD began examining
the HRD processes for implementing new provisions of collective bargaining agreements and
included Labor Relations and AFR Payroll staff.  The work identified opportunities and
resulted in improved communications between these three groups.  This collective team
provided the focus necessary to effect immediate improvements until a formal Executive
priority Continuous Improvement Project (CPI) was initiated early this year 2014. 
By April 2014, notable progress has been made on this CPI focus, including completion of the
Value  Stream  Mapping  (VSM)  phase  that  provided  detailed  awareness  of  the  Port's
pay/benefits administration processes, including those for Fire and Police, and identification
of key opportunities for process improvements and standardization.  This time intensive
endeavor also includes full participation by the directors of Labor Relations, HRD and AFR.
The next phase will follow in early May 2014 where process improvement initiatives and
solutions will be decided upon for implementation. 
Through this CPI focus, Port management has completed a comprehensive review and
identified  process  challenges,  their  root  cause,  and  improvements.    These  include
opportunities to reduce complexities in the union collective bargaining agreements (CBA),
refine the CBA implementation timelines and inter-department coordination, leverage the
PeopleSoft HCM system technology more to automate pay/benefits data analysis and quality
assurance controls, and further clarify roles between Port departments broadly that are
involved  with  administering  pay  and  benefits.   This  focus  includes  further  engaging
stakeholder departments for input, participation and decision making as we progress. 
Port management expects to complete an implementation plan and start the process
improvement initiatives beginning summer 2014. This will build upon the work that has been
underway.  Some steps have already been proactively implemented, which also address
points noted in the audit including:  correcting the three errors noted in the audit report;
CBA pre-negotiation meetings prior to the bargaining process to identify key refinements to
improve processes;  CBA pre-implementation meetings involving Labor Relations, HRD, AFR
and  stakeholder  departments  to  ensure  consistent  understanding  and  accurate
implementation;  further clarifying roles and improving communications between groups;
and enhancing the usefulness of the errors tracking log.  Additionally, the Fire Department
has proactively implemented notable process improvements including new reports through
the Telestaff system to reduce manually entered data; an employee validation processes for
Personal Action forms; a validation process within Telestaff to reduce correction memos; a
department audit twice per year to validate rates of pay for accuracy; and progress towards
eliminating paper slips for premium pay, acting pay and vacation/sick leave.
With regard to the recommendation/findings, it would also be helpful to receive more
clarity on which Port department(s) they are focused on so that process improvements can be
implemented at the appropriate level with the appropriate stakeholders. 
Sincere appreciation is expressed to the Internal Audit team for their professionalism and
the valued insight provided on the Port's pay and benefits administration process. 
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