Internal Audit Briefing 

Presented to the Port of Seattle 
Audit Committee and Tay Yoshitani, CEO 

Joyce Kirangi, CPA 
Director, Internal Audit 
December 4, 2012

Agenda 
Audit Report 
1.   Lease and Concession Audits 
None 
None 
2.   Operational Audits 
Central Processing System 
None 
Comprehensive Operational Audit 
None 
Limited Operational Audit 
Third-Party Administration of Self-Insured Medical and Dental 
Compliance Cost of Central Procurement Office (CPO) Policies and Procedures 
3rd Party Audit 
None 
Briefing/Updates 
1.   Risk-Based Audit Approach  Real Estate Portfolio Dept. Audit 
2.   Proposed 2013 Internal Audit Work Plan

Comprehensive Operational Audit 
Third-Party Administration of Self-Insured Medical and Dental 

Background 
On May 11, 2010, the Commission adopted Resolution 3636, which authorized the
self-insured medical and dental program. On November 5, 2010, the Port
submitted its application to the state of Washington to become a self-insured
public employer, which was approved. 
The Port's self-insured medical and dental program began January 1, 2011, at
which time the Port transitioned from a fully insured medical and dental program
to a self-insured medical and dental program. 
The Port's self-insured program was administered in 2011 and 2012, by Premera 
Blue Cross (medical) and Washington Dental Services (dental). In 2012, the Port
conducted a competitive process for third-party administration of the medical
and dental self-insured programs for 2013, awarding the administration to: 
Medical  Cigna 
Dental  WDS

Comprehensive Operational Audit 
Third-Party Administration of Self-Insured Medical and Dental 

Audit Objectives 
The purpose of the audit was to determine whether: 
1.    Port management controls are adequate to ensure: 
Proper processing and verification of claims billings 
Proper processing and verification of administrative fee billings 
Claims paid are valid and for eligible parties 
Proper validation of dependents receiving medical and dental benefits 
Compliance with legal requirements 
2.   Port management has complied with legal requirements related to annual
reporting to the state 
We reviewed information for the period January 1, 2011, through June 30, 2012.

Comprehensive Operational Audit 
Third-Party Administration of Self-Insured Medical and Dental 

Highlights and Accomplishments 
The self-insured medical and dental programs have resulted in decreased health
care payments (claims and other related payments) by $1 million (from 2010 to
2011). 
In 2012, the Port competitively bid third-party administration, which is projected to
result in savings of $750,000 in 2013. 
The self-insured medical and dental programs have allowed the Port greater
flexibility in plan design and the coverage it provides to employees, and which also
will facilitate compliance with federal health care reforms enacted in 2010.
Through self-insurance, the Port has greater access to aggregated claims data that
may be used to more effectively manage the program and support employee
health.
Starting in 2013, self-insurance will allow the program to more fully integrate
elements of the Port's own wellness program with the health-care program to
contain health-care payments. 
The first claims audit is expected to be conducted during 2013.
Personal health information is protected under the Health Insurance Portability
and Accountability Act (HIPAA).

Comprehensive Operational Audit 
Third-Party Administration of Self-Insured Medical and Dental 

Audit Result 
Two Findings 
o The Port's oversight of the self-insured medical and dental program
can be improved. 
o The Port's process for determining eligibility of dependents to be
covered by the Port's insurance benefit plans can be improved.

Comprehensive Operational Audit 
Compliance Cost of 
Central Procurement Office (CPO) 
Policies and Procedures 
Background 
The CPO oversees the following types of procurements: 
Service Agreements  contracts for personal and professional consulting services 
Major Public Works  contracts that are initially estimated to be in excess of
$300,000 
Small Works  contracts that are initially estimated to be less than or equal to
$300,000 
Fixed Price Goods and Service Contracts  contracts for recurring purchases of
goods and services with pre-established terms and conditions 
Blanket Vendor Contracts  contracts for recurring purchases from a vendor in
varying frequency and quantity 
One-time purchases  non-recurring purchases of goods and services

Comprehensive Operational Audit 
Compliance Cost of 
Central Procurement Office (CPO) 
Policies and Procedures 
Audit Objectives 
The purpose of the audit was to determine whether the Central Procurement
Office (CPO) has sufficient controls to reasonably ensure: 
1.    CPO processes related to service agreement procurement are efficient,
specifically: 
Whether CPO-1 policy has significantly more requirements than state law. 
Whether the CPO's controls provide an objective measure of the efficiency
of the service agreement procurement process. 
2.   The Port is in compliance with requirements that prohibit splitting contracts
and purchases to avoid requirements related to: 
Service Agreements 
Purchases of Goods and Services 
We reviewed information for the period 2008 through 2012.

Comprehensive Operational Audit 
Compliance Cost of 
Central Procurement Office (CPO) 
Policies and Procedures 
Highlights and Accomplishments 
Developed the Procurement and Roster Management System (PRMS) to maintain
consultant rosters and advertise Port contracting opportunities. 
Engaged with the Continuous Process Improvement (CPI) initiative to develop a
consensus evaluation process to shorten the evaluation timeline for service
agreements. 
Formed advisory committees of stakeholders to share information regarding
procurement policies and procedures 
Established an acquisition planning process to develop procurement strategy early
in the process.

Comprehensive Operational Audit 
Compliance Cost of 
Central Procurement Office (CPO) 
Policies and Procedures 
Audit Result 
One Finding 
o The Central Procurement Office's controls could be improved to
provide an objective measure of the efficiency of the service
agreement procurement process.

Briefing/Updates 


Risk-Based Audit Approach  Real Estate Portfolio Dept. Audit 
Proposed 2013 Internal Audit Work Plan 
See Attached