Equipment Acquisition, Monitoring and Disposal Operational Audit Report


Operational Audit 
Equipment Acquisition, Monitoring and Disposal 

January 2015  December 2019 

Issue Date: March 11, 2020 
Report No. 2020-03 


Equipment Acquisition, Monitoring and Disposal 


Executive Summary ................................................................................................................................................ 3 
Background ............................................................................................................................................................. 4 
Audit Scope and Methodology ............................................................................................................................... 5 
Schedule of Findings and Recommendations ....................................................................................................... 6 
Appendix A: Risk Ratings ..................................................................................................................................... 10 


Equipment Acquisition, Monitoring and Disposal 
Executive Summary 
Internal Audit completed an audit of the acquisition, monitoring and disposal of equipment at the Port of
Seattle's fire department for the period January 1, 2015 through December 31, 2019. The purpose of
this audit was to follow up on a hotline complaint regarding the misappropriation of equipment and to
assess the adequacy and effectiveness of internal controls over asset management. 
(Low) Our work found that in several instances the disposal of certain assets did not follow Port policy 
AC-13, however, the value of these assets was de minimis and could have been due to a general
unfamiliarity with the policy. The details of the complaint and Internal Audit's conclusion on each item
is further detailed in the table on page six of this report. 
(Medium) We also noted an opportunity for the fire department to work with Finance to enhance their 
tracking and disposal of small and attractive assets to assure that they comply with Port Policy AC-14. 
The policy provides guidance and Port requirements for management of small and attractive Assets.
This issue is further discussed beginning on page eight of this report. 
We extend our appreciation to fire department management and staff for their cooperation during the

Glenn Fernandes, CPA 
Director, Internal Audit 

Responsible Management Team 
Laurel Dunphy, Director Airport Operations 
Randy Krause, Fire Chief 


Equipment Acquisition, Monitoring and Disposal 
As a government agency, the Port has an obligation to demonstrate public accountability for its
operations and purchases. Every asset purchased, including small and attractive assets need to be 1)
purchased for a valid business purpose, 2) tracked and safeguarded to assure continued usefulness for
its intended purpose, and 3) properly disposed of. 
Small and attractive assets, as implied by the name, are generally "small" in size and purchase price
(i.e., $5,000), and "attractive" as a degree of susceptibility to misuse (e.g., personal uses). In addition to
this inherently higher risk of theft or misuse, there are other reasons such as legal compliance, grantfunding
, potential liability and safety, etc., for a structured system of accountability. There are two Port
Policies, Policy AC-13, Disposition of Property, and Policy AC-14, Small and Attractive Assets that
address these assets. 
The current agency system for purchasing, safeguarding, tracking and disposing of small and attractive
assets is a decentralized process. Individual departments and their respective assigned custodians are
responsible for: tracking and reporting small and attractive assets on an annual basis, certifying their
existence, and assuring that the asset databases are accurate. Policy AC-13 requires that small and
attractive assets are marked and identified, inventoried, and physically counted annually. The inventory
count must be reconciled to inventory records and any discrepancies must be investigated by the
controlling department/division and documented with annual inventory listings. 
The fire department primarily utilized MS Excel to maintain an inventory listing of assets. The inventory
list was not standardized or updated regularly and did not contain critical information such as date of
acquisition, description of asset, location, disposal date, serial number, asset number, etc. Without a
detailed inventory list, it is difficult for departments to maintain an adequate system to monitor assets
with a high risk of theft. 
During our audit, we learned that the fire department encountered difficulty in understanding the
requirements of the Policies. The Port's finance department has been tasked with updating the policies
with clearer expectations. The new policies are in draft form awaiting executive approval. After the new
policies are approved, Finance is planning on providing training to departments Port-wide. The new
policies and training may help in decreasing the potential for misunderstanding of requirements and
thereby may strengthen the monitoring process across the Port. 


Equipment Acquisition, Monitoring and Disposal 
Audit Scope and Methodology 
We conducted the engagement 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 conduct an engagement to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our engagement objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on our
engagement objectives. 
The period audited was January 2015 through December 2019 and included the following procedures: 
Equipment Acquisition and Monitoring 
Obtained an understanding of the fire department's processes over acquisition, receipting,
inventory and monitoring of equipment. 
Selected assets that were of a higher risk of theft and misappropriation (generators, small tools,
ladders, and large dollar value) and those reported to Internal Audit through the hotline. 
Traced selected assets to inventory control sheets and verified those through observation. 
Equipment Disposal 
Obtained an understanding of the fire department's process over disposal of equipment through
inquiry and observation of inventory control sheets and disposition forms. 
Traced known assets that were not in the Department's possession to proper disposition forms. 


Equipment Acquisition, Monitoring and Disposal 
Schedule of Findings and Recommendations 
1)  Rating: Low 
The following table summarizes the allegations that were brought to our attention and the results of our
testing. Our conclusions were based on the information provided to us during the course of our audit. 
Allegation                        Audit Testing                        Conclusion 
Excess aluminum rods were  This was a Port Construction Services  The tent kit that was purchased
kept at the west side aircraft  (PCS) project. We reviewed charges to  did   not   include   additional
rescue and firefighting tent  the project in PeopleSoft and contacted  aluminum bars. 
after the tent was erected in  the Manager of PCS who was onsite
2015/2016.  These   excess  during the entire project. 
beams disappeared without
any record of where they
Employees were authorized  We interviewed fire department staff and  The wall lockers were given
to take surplus wall lockers   management.                               away to employees. 
Policy AC-13 was not followed. 
The value of the lockers was 
P-card purchases were not  We judgmentally selected seven assets,   All seven assets were
properly made and accounted  that were purchased with procurement  accounted for. 
for.                                  cards,   and   posed  a  higher  risk  of
misappropriation or loss. 
Six  aluminum  tables  were  We reviewed and noted that a disposition  The tables were not forwarded
removed   from   the   fire  form for three aluminum tables was filled  to  the  Port's  Distribution
department for disposal but  out, but not uploaded to the SharePoint  Center for proper surplus, and
were never received by the  site. The form listed the aluminum tables  Department staff were unable
Distribution Center.              as   scrap,   with   no   residual   value.  to locate the tables during our
However, the tables could have been  audit. 
recycled or sent to auction. 
Policy AC-13 was not followed. 
The recycle value of the tables 
was minimal. 
Seven ladders were donated  We contacted the organization and they  One ladder was donated. 
to Northwest Disaster Search  confirmed that only one old disassembled
Policy AC-13 was not
Dogs.                        ladder  was  donated  in  2018.   We
interviewed  fire  department  staff,  and
they verified that the Assistant Fire Chief   The value of the disassembled
pulled out one ladder from the dumpster  ladder was de minimis. 
at  the  Port's  distribution  center  and
loaded  it  in  his  truck  to  donate  to
Northwest Disaster Search Dogs. 
Equipment was donated to     We conducted multiple meetings with fire  Only old and retired bunker
Peru that might include         department staff to get an understanding   gear was donated.
equipment purchased         of what was donated to Peru. 
Policy AC-13 was not
through federal grant money. 
The value of the bunker gear
was de minimis. 


Equipment Acquisition, Monitoring and Disposal 

Port Policy AC-13 provides guidance on the proper procedures to dispose of assets that no longer
serve a useful purpose for the Port. Additionally, the policy states that, "surplus property must NOT be
sold/transferred to any Port Commissioner or Port employee or to members of their immediate
families, unless specific approval of the Port Commission is obtained." 
Going forward, the fire department should follow Port Policy AC-13 when disposing of equipment. 
Disposition forms should be filled out, signed and uploaded to the SharePoint Site. 
Management Response/Action Plan: 
Beginning immediately the Fire Department will follow Port Policy AC-13 and fill out, sign, and upload
appropriate forms into the SharePoint Site regarding dispositioning, transferring, or surplus equipment. 


Equipment Acquisition, Monitoring and Disposal 
2) Rating: Medium 
The fire department has an opportunity to enhance their tracking of small and attractive assets. 
The existing processes were not adequate to assure that these assets were properly accounted
for, tagged, tracked, periodically reconciled, and disposed of per Port policy. 
The Department's system for monitoring assets was assigned to managers within each division (i.e. one
person was assigned to the monitoring of bunker gear). Individual department/divisions and their
respective managers were principally responsible for each asset from purchase to disposal. 
Port Policy AC-14, "Small and Attractive Assets Policy" establishes expectations and provides guidance
regarding the inventorying, tracking and disposal of assets. Furthermore, Draft Port Policy EF-1 provides
further guidance as to what is a small and attractive asset. Policy AC-14 says: 
"Each Port department must designate a custodian to be responsible for maintaining (additions and
deactivation) the small and attractive assets tracking database, tagging assets, and conducting periodic
physical inventories to verify assets existence." 
While the fire department has recently assigned an individual to be the custodian of small and attractive
assets in substance, the process is still decentralized, thereby creating an opportunity to enhance these 
We selected 25 small and attractive assets from the Port's asset management system, PeopleSoft. We
verified the existence of most of those assets, with a few exceptions. These exceptions were purchased
beyond our record retention period, and accordingly invoices for those assets were not available. 
We also noted that disposition forms were rarely filled out and/or uploaded to the SharePoint site. Since
2016, the SharePoint site had only nine disposition forms, none of which were for the exceptions.
Additionally, we noted that neither the tool room or training supply room were properly secured to limit
1.  As required by Port Policy AC-14, the fire department should designate a custodian to be responsible
for maintaining its small and attractive assets tracking database (additions and deactivations),
tagging assets and conducting annual physical inventories to verify the existence and proper
disposal of assets. The fire department should also leverage off the draft EF-1 & 2 policies as
2.  The tool room and training supply room should be properly secured to limit access to only authorized
Management Response/Action Plan: 
Effective immediately, the Administration Team will take over the responsibility of "custodian" and will
be responsible for maintaining small and attractive assets database (additions and deactivations),
tagging of assets and coordinating annual physical inventories for accountability of assets and proper
disposal of such assets. Once EF-1 & 2 are released, the Fire Department will ensure system is
established and followed per these policies.
A database will be established for small & attractive assets by June 1, 2020. Once the database is
established existing assets will be loaded into the database and as new assets are acquired they will
be put into the database for monitoring and tracking. 


Equipment Acquisition, Monitoring and Disposal 

The tool room and training supply room will be secured with limited access by June 1, 2020. 
Policies, procedures or guidance documents will be written in support of this process improvement and
comply with EF- 1 & 2 and will provide clear guidance for personnel regarding purchasing, accounting
for, and dispositioning of small and attractive assets.


Equipment Acquisition, Monitoring and Disposal 
Appendix A: Risk Ratings 
Findings identified during the audit are assigned a risk rating, as outlined in the table below. Only one
of the criteria needs to be met for a finding to be rated High, Medium, or Low. Findings rated Low will be
evaluated and may or may not be reflected in the final report. 
Financial      Internal                                               Commission/
Rating                                   Compliance      Public 
Stewardship  Controls                                         Management 
High probability
Missing or not                       for external audit   Requires
with Laws, Port
High       Significant     followed                          issues and / or     immediate
negative public     attention 
Partial              Potential for
Partial controls 
compliance with   external audit
Medium   Moderate                  Laws, Port       issues and / or
Not functioning                                          attention 
Policies             negative public
Contracts          perception 
Functioning as
Low probability
intended but     Mostly complies                       Does not
for external audit
could be        with Laws, Port                       require
Low      Minimal                                    issues and/or
enhanced to     Policies,                            immediate
negative public
improve        Contracts                           attention 

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