Port
of Seattle

Memorandum

Date:    August 4, 2009

To:      Audit Committee & Tay Yoshitani, Chief Executive Officer

From:   Jack Hutchinson, Manager Internal Audit

Subject: Internal Auditor's Report on Avis, Budget & Hertz Audits

We have completed audits of RentACar lease agreements with Avis, Budget and Hertz for the
24month period ending October 2008. The internal Audit Department contracted with a regional
independent CPA firm, Branch, Richards & Co, PS, to perform agreedupon procedures for the
following objectives:

0   To determine  whether the  lessees  properly  calculated,  reported  and  paid  the  correct
amount of concession fees in accordance with the terms and conditions of the agreement.
.   To determine whether the lessees properly collected and remitted the correct amount of
Customer Facility Charges (CFC) to the Port.

Based upon the detailed testing conducted, nothing came to our attention to suggest the rental
agreement revenues were not captured by the Iessees' reporting systems. Moreover the CFC
charges appeared to have been collected and paid to the Port in accordance with the lease
agreements.

Specific findings on the concession fee for each lessee are as follows:

0   Avis Rent A Car System, Inc. had unreported revenue and reporting errors that resulted in
additional concession fees of $17,485.

0   Budget Rent A Car System, Inc. had unreported some revenue, but the underpayment did
not  result  in  additional  concession  because  the  Minimum  Annual  Guarantee  (MAG)
exceeded the concession fee.

.   Hertz Corporation  had  unallowable deductions and  unreported  concessionable  revenue
that resulted in additional concession fees of $7,392.

Below are a series of tables on the audit history, including the current audit cycle, with noted gross
discrepancies for Avis, Budget, and Hertz. The information is presented to provide a context for the
current audit findings, as well as to communicate potential issues in future lease management.

Note for the tables:
1)  The tables contain GROSS discrepancies discovered during the audit.
2)  Outstanding and applied credits/refunds must be considered to link the noted discrepancies
to financial recoveries.

11/0110/03   11/031004   11/04-10/06   11/07-10/08
Avis                             (24 months)    (12 months)    (24 months)    (24 months)
Avis incremental Discount              518,745        236,287        236,991        329,912
Drop fee (one way fee)                   99,167         47,153
GPS                                                         364,148

Misc. adj.                                                                                    (66,609)
Vehicle Licensing Fee                                                 746,617
Other                                                26,308
617,912       309,748       983,608       627,451

While the total discrepancy appears to be declining from the previous audit, the underlying issue
driving  the  discrepancy  appears  not  to  have  been  resolved.  The  lessee  continues  to  take
disallowed discounts, and we found a new fee that was not included as part of concessionable
revenue.

11/04 -10-05    11/05 -10-06   11/07  10/08
Budget                       (12 months)   (12 months)   (24 months)
Budget Incremental Discount           43,029                       179,422
Surcharge                          147,798
Vehicle Licensing Fee                                 237,379

Other                                                               15,409
190,827       237,379        194,831

No financial recoveries were suggested in the current audit as the MAG exceeded a revenue-
based concession. However, the lessee appears to be taking disallowed discount which may
become an issue if/when the lease agreement structure is modified or changed.

11/0110/03   11/03-10-04   11/04-10/06   11/0710/08
Hertz                           (24 months)    (12 months)    (24 months)    (24 months)
Commercial Discount                1,540,989       787,734       448,142
Local Rental Deduction               1,950,430        924,782      4,334,782        611,358

Rev. Adjustment                                      121,195

Offsite Rev. (w/i 3mile radius)                                                             (17,786)
Refueling Charges                                                   600,117
Other                                                 8,540         31,837         1,596
3,491,419      1,842,251      5,414,878        595,168

The single largest issue of past audits,  local rental deduction, appears to have been resolved.
While the lessee was  still taking the deduction  during the current audit period,  it completely
stopped at/around October 2007 when a settlement was reached for prior audit discrepancies. The
current audit revealed that there were a couple of undisclosed (thus not reported) offsite rental
facilities  within  the  3-mile  radius  in 2097/agreement year.  However the  lessee  corrected  the
condition in 2008 agreement year.    2000

We extend our appreciation to the management and staff of the Aviation Business Development
and Accounting Financial Reporting (AFR) for their assistance and cooperation during the audit.

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