INTERNAL AUDIT REPORT 
Limited Contract Compliance Audit 
Fireworks Galleries, LLC 

November 2017  December 2019 

Issue Date: July 16, 2020 
Report No. 2020-09 




INTERNAL AUDIT

Fireworks Galleries, LLC 
November 2017  December 2019 

TABLE OF CONTENTS 

Executive Summary ................................................................................................................................................ 3 
Background ............................................................................................................................................................. 4 
Audit Scope and Methodology ............................................................................................................................... 5 
Appendix A: Risk Ratings ....................................................................................................................................... 6 














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Fireworks Galleries, LLC 
November 2017  December 2019 
Executive Summary 
Internal Audit (IA) completed an audit of the Seattle-Tacoma International Airport Lease and Concession
Agreement (Agreement) between Fireworks Galleries, LLC (Fireworks) and the Port of Seattle (Port).
Fireworks pays the Port approximately $1.1 million in annual concession fees. 
The period audited was November 2017 through December 2019. The audit was performed to determine
whether Fireworks complied with significant provisions in the Agreement including whether reported
gross revenues and percentage fees were complete and accurate. 
We concluded that Fireworks materially complied with the significant terms of the Agreement. 
No issues were identified requiring a management response. 
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 
Rudy Caluza, Director, Accounting and Financial Reporting 
Dawn Hunter, Senior Manager, Airport Dining & Retail 
Linda Nelson, Assistant Director, Financial Reporting Revenue Services 
Jim Schone, Director, Aviation Business Development 

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Fireworks Galleries, LLC 
November 2017  December 2019 
Background 
In September of 2016, the Port entered into an Agreement with Fireworks to operate in two locations:
The Central Terminal and Concourse D. The terms of the Agreement provide for a Minimum Annual
Guarantee (MAG) equal to 85% of the total amount paid to the Port from the previous agreement year.
The MAG is payable, in advance, on or before the first day of each month. Additionally, the Agreement
requires payment of a Percentage Fee equal to a percentage of gross revenue, provided the fee is
higher than the MAG. The Percentage Fee is due on or before the fifteenth day of each succeeding
month, according to the following schedule: 
Annual Gross Revenue                                        Percentage (%) of Gross Sales 
Central Terminal 
$1 to < $2,000,000                                                                       11% 
$2,000,000 to < $4,000,000                                                              12% 
Over $4,000,000                                                                     13% 
Concourse D 
Annual Gross Sales                                                                   11% 
Within 90 days after the close of each Agreement Year, Fireworks is required to provide the Port an
annual report reflecting the amount of Gross Sales for the preceding Agreement Year. The annual report
shall be accompanied by a signed certificate by an independent Certified Public Accountant or Fireworks
Chief Financial Officer or Chief Executive Officer. The certificate specifically states, a) he/she examined
the annual report, b) the examination included such tests that were considered necessary or appropriate
under the circumstances, c) the information was presented fairly, and d) conforms with and was
computed in compliance with the definitions set forth in the Agreement. 
The table below reflects the gross concession revenue and percentage fees billed: 
Agreement Year                                  Gross Revenue           Percentage Fees 
November 2017  December 2017                      $1,452,937                 $180,147 
January 2018  December 2018                          8,339,114                 1,115,064 
January 2019  December 2019                          8,813,696                 1,174,443 
Total                                                                  $18,605,747                     $2,469,654 
Data Source: PeopleSoft Financials, AFR YE documents 





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Fireworks Galleries, LLC 
November 2017  December 2019 
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 November 2017 through December 2019 and included the following procedures: 
Revenue Completeness, Accuracy, Timeliness 
Agreed monthly revenue reports provided to the Port, to Fireworks' general ledger. 
Validated that the annual report was submitted and signed by an independent CPA, Chief
Financial Officer or Chief Executive Officer from Fireworks. 
Reviewed the Agreement definition of Gross Sales, including exclusions, and reviewed
Fireworks records such as the chart of accounts, revenue reports, and general ledger, to
determine the completeness of prior years' reporting. 
Recalculated the MAG and Percentage Fees to verify accuracy. 
Verified timeliness of payments for all months in the audit period. 
Surety Compliance 
Reviewed Fireworks' Rent Security Deposit for compliance with the Lease Agreement, Port of
Seattle Policy (Port RE-2) and Washington State Law (RCW 53.08.085). 











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Fireworks Galleries, LLC 
November 2017  December 2019 

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
Non-compliance
Missing or not                       for external audit   Requires
with Laws, Port
High       Significant     followed                          issues and / or     immediate
Policies, 
negative public     attention 
Contracts 
perception 
Partial              Potential for
Partial controls 
compliance with   external audit
Requires
Medium   Moderate                  Laws, Port       issues and / or
Not functioning                                          attention 
Policies             negative public
effectively 
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 
perception 
efficiency 










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