INTERNAL AUDIT REPORT 
LIMITED CONTRACT COMPLIANCE 
ANTON AIRFOOD OF SEATTLE, INC. 

APRIL 1, 2016 – MARCH 31, 2019 

ISSUE DATE: JUNE 21, 2019 
REPORT NO. 2019-07 




INTERNAL AUDIT



Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY ........................................................................................................................................... 3 
BACKGROUND ........................................................................................................................................................ 4 
AUDIT SCOPE AND METHODOLOGY ..................................................................................................................... 5 
SCHEDULE OF FINDINGS AND RECOMMENDATIONS......................................................................................... 6 
APPENDIX A: RISK RATINGS .................................................................................................................................. 8 















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           Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 
EXECUTIVE SUMMARY 
Internal Audit (IA) completed an audit of the Seattle-Tacoma International Airport (Airport) Restaurant
Lease Agreement (Agreement) between Anton Airfood of Seattle, Inc. (Anton) and the Port of Seattle
(Port). Anton, which is managed by Host International, Inc. (Host), operated Anthony’s Restaurant and
Anthony’s Fish Bar in the airport’s central terminal. The lease expired March 31, 2019. 
The period audited was April 1, 2016 through March 31, 2019. The audit was performed to determine
whether Anton complied with significant provisions of the Agreement including whether reported gross
revenues and percentage rent paid to the Port were complete and accurate. 
Our audit identified the following two issues: 
1. (High) - The Agreement requires the Lessee, in part, maintain records for a period of three years.
Anton did not provide a complete chart of accounts, the daily point of sales data, cash register z-tapes
and guest checks in its original format resulting in a scope limitation. Accordingly, Internal Audit was
unable to obtain sufficient and appropriate audit evidence to provide reasonable assurance of the
accuracy and completeness of concession revenue. 
2. (Medium) - Anton did not report $42,022.90 in gross revenue in January 2019. According to Host, a
new item was added to the menu which prevented the daily sales data from uploading to the general
ledger. As a result, $5,420.46 in additional percentage fees is due to the Port. 
The issues are discussed in more detail on page six. 
We extend our appreciation to management and staff of the Aviation Commercial Management
Department  and the Accounting and Financial Reporting Department for their assistance and
cooperation during the audit. 


Glenn Fernandes, CPA 
Director, Internal Audit 



RESPONSIBLE MANAGEMENT TEAM 
Dawn Hunter, Senior Manager, Airport Dining & Retail 
Linda Nelson, Manager, Aviation Finance & Budget 
Jim Schone, Director, Aviation Commercial Management 

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           Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 

BACKGROUND 

Anton Airfood operated Anthony’s Restaurant and Anthony’s Fish Bar in the airport’s central terminal.
The lease expired March 31, 2019. 
In March 2003, the Port entered into a Lease Agreement with Anton. The Agreement sets a fixed
Minimum Rent and requires additional Percentage Rent from gross sales of food and beverage, as
well as any other sales. The lessee contributes an amount of 0.5% of the monthly Gross Receipts
(capped at $24,000 per agreement year) as marketing fee to fund the Marketing Program. 
Effective July 2015, concession fees were established at 8.0% of gross sales, up to the first $5 million
of annual gross sales, 10.0% between $5 million to $10 million and 12.0% above $10 million. The Port
and Lessee agree the first 7.0% of the Gross Receipts paid shall be Contract Rent for use of the
premise. Excise tax of 12.84% is calculated, based on the contract rent, and is added to the
concession fee. 
The monthly concession fee is due on or before the fifteenth day of each succeeding month. For each
Agreement Year, an Annual Report of Gross Receipts for the preceding Agreement Year must be
certified by a Chief Financial Officer and/or Chief Executive Officer of the Lessee and submitted to the
Port within 60 days of each Agreement Year-end. 
The table below reflects the total concession revenue reported to the Port during the audit period: 
Year                                          Gross Revenue            Percentage Fees Paid 
April 2016 – March 2017                             $18,153,082                        $2,065,530 
April 2017 – March 2018                             $19,342,935                        $2,219,007 
April 2018 – March 2019                             $20,096,378                        $2,316,192 
Total                                                     $57,592,395                           $6,600,729 
Source: AFR YE files, PeopleSoft, Anton’s certified revenue reports. 
Percentage Fees Paid, in above table, are calculated based on agreement year. 






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           Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 

AUDIT SCOPE AND METHODOLOGY 

We conducted this 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 the evidence
obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. 
The period audited was April 2016 through March 2019. After identifying the significant provisions in
the Agreement, we performed the following audit procedures: 
Revenue Completeness, Accuracy, Timeliness 
• Reconciled all revenues reported to the Port, to the Lessee’s general ledger, and to revenue
reports certified by Anton’s CFO. 
• Reviewed the Certified Statement of Gross Revenues for compliance with timely and complete
submission requirements. 
• Verified timeliness of payments for all months in the audit period. 












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           Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 
SCHEDULE OF FINDINGS AND RECOMMENDATIONS 
1) RATING: HIGH 
The Agreement requires the Lessee, in part, maintain records for a period of three years. Anton
did not provide a complete chart of accounts, the daily point of sale data, cash register z-tapes
and guest checks in its original format resulting in a scope limitation. Accordingly, Internal
Audit was unable to obtain sufficient and appropriate audit evidence to provide reasonable
assurance of the accuracy and completeness of concession revenue. 
Section 7 of the Agreement reflects the “Lessee shall retain all accounting records, including cash
register tapes and guest checks, for not less than (3) years after the close of the applicable
Agreement Year or until the close of any ongoing audit thereof being conducted by, or on behalf of, the
Port, whichever shall last occur.” 
Anton did not provide a complete chart of accounts nor retain original receipt data to evidence their
daily sales. Excel reports that display information, although unlikely, can be manipulated. Data can be 
inadvertently removed, thus compromising the completeness and accuracy of the report. Relying on
reports that capture information downloaded from another source, therefore, does not provide the
same level of assurance as does obtaining data in its original form (i.e. guest checks). 
We escalated the issue to Host’s Vice President of Business Development who appreciated our
position and requested Host’s accounting team provide a PDF document hoping it would illustrate that
it couldn’t be modified. However, like excel downloads, these documents could also be modified,
simply be right clicking and selecting “Edit Text & Images.” 
This position is also consistent with the Internal Revenue Service record retention guidance which
requires cash register z-tapes and detailed z-tapes to perform their examinations. 
As a result, Internal Audit was unable to trace source data (i.e. guest checks) to revenue that had
been reported to the Port during the scope period. We were also unable to validate, other than verbal
descriptions provided by Host, check numbers that were missing from a sequential listing. 
Recommendations: 
Management should proactively communicate contractual lease requirements with concessionaires
and periodically review concessionaire documentation to ensure lease and revenue compliance. 
Management Response/Action Plan 
Management agrees with this finding. Airport Dining and Retail staff continues to work with Host and
Internal Audit staff to resolve this specific issue and will emphasize to all ADR tenants, the need to
maintain accounting records for three (3) years so as to avoid this problem in the future. 



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           Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 

2) RATING: MEDIUM
Anton did not report $42,022.90 in gross revenue in January 2019. According to Host, a new
item was added to the menu which prevented the daily sales data from uploading to the general
ledger. As a result, $5,420.46 in additional percentage fees is due to the Port. 
Host initially communicated that the error had been identified and corrected in February 2019 and as a
result, no additional monies were owed. Host also indicated that they would provide supporting
documentation to evidence the correction, however no documentation was provided. 
In the absence of supporting documentation, Internal Audit analyzed the daily sales for February 2019
and did not identify any dates showing a significant increase in revenue.
As a result, we engaged the Port’s Airport Dining and Retail Management team and Host’s, Vice
President of Business Development. We again asked for the documentation which they indicated they
would provide. Subsequent to the meeting, Host communicated that the error had not been corrected
and agreed that the additional monies were due.
The table below reflects the calculation of the $5,420 owed: 
Period (2019)           Difference        Concession fees     Excise Tax*   Percentage Fees due 
(12%) 
January                  $42,023                 $5,042           $378                 $5,420 
Data Source: PeopleSoft Financials, Peoplesoft Financials, and Anton records. 
* Excise tax of 12.84% is calculated based on contract rent, which is the first 7% of Gross Receipts. 
Recommendations: 
1. Seek and recover $5,420.46 in underpaid Percentage Fees. 
2. Assess the applicability of a one-time late charge and any accrued interest. 

Management Response/Action Plan: 
Management was unaware of the problem affecting the daily sales data uploading to the general
ledger until this audit. ADR staff will request that an invoice be sent to Host for the monies owed
including interest and late fees. Also, ADR staff will implement a system requiring all ADR tenants to 
provide formal documentation of such problems in the future at the time of occurrence in the form of a
certified  letter  to  the  ADR  Senior  Manager  detailing  such  discrepancies  for  inclusion  in  the
correspondence file. 




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           Anton Airfood of Seattle, Inc. 
April 2016 – March 2019 
APPENDIX A: RISK RATINGS 
Findings identified during the course of the audit are assigned a risk rating, as outlined in the table below.
The risk rating is based on the financial, operational, compliance or reputational impact the issue identified
has on the Port. Items deemed “Low Risk” will be considered “Exit Items” and will not be brought to the final
report. 
Port Commission/
Rating        Financial         Internal Controls         Compliance           Public 
Management 
Large financial
impact                                    Noncompliance
High probability
with applicable                               Important 
Missing, or inadequate                         for external audit
Remiss in                                 Federal, State,
HIGH                       key internal controls                        issues and/or
responsibilities                                   and Local Laws,                           Requires immediate
negative public
of being a                                    or Port Policies                               attention 
perception 
custodian of
public trust 
Partial controls             Inconsistent          Potential for      Relatively important 
compliance with      external audit
Moderate
MEDIUM                  Not adequate to identify    Federal, State,     issues and/or     May or may not
financial impact 
noncompliance or       and Local Laws,     negative public     require immediate
misappropriation timely      or Port Policies         perception            attention 
Generally,
Internal controls in place                            Low probability
complies with
but not consistently                             for external audit
Federal, State and                       Lower significance 
Low financial       efficient or effective                              issues and/or
LOW/                                         Local Laws or Port
impact                                                         negative public
Exit Items                                                  Policies, but some                         May not require
Implementing/enhancing                         perception 
minor                          immediate attention 
controls could prevent
discrepancies
future problems 
exist 
Efficiency    An efficiency opportunity is where controls are functioning as intended; however, a modification would make
Opportunity                                      the process more efficient 







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