Financial Stewardship                    Accountability                       Transparency
Port of Seattle Audit Committee
Internal Audit Update
Glenn Fernandes - Director, Internal Audit
Special Session
January 21, 2021
Remote Meeting
9:30 AM – 11:30 AM
Slide 12, revised on February 17, 2021
Operational Excellence                    Governance

    Continued Discussion on the Following Audits
1. Ground Transportation – Taxi Cabs
➢Follow-Up on Reconciliation of App & AVI System

2. Delegation of Authority
➢Continuation of Discussion from the December 10, 2020
Audit Committee Meeting

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    Ground Transportation – Taxi Cabs
Before a taxi-cab joins the line to pick                            As the vehicle exits the parking garage,
up a customer, the App on the driver’s                         the Automatic Vehicle Identification
smartphone is manually scanned by                         (AVI) system records the trip.
ABM. This generates a trip charge to
the driver.



For illustration purposes only – picture not exact replica of
SeaTac parking garage system.



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     Ground Transportation – Taxi Cabs
Follow-up testing of reconciliations

➢ The reconciliation process to identify and resolve differences between the Port’s
Automated Vehicle Identification (AVI) system and the in-house phone billing
application (App) needs to be enhanced and performed on a timely basis.
➢ Both the AVI system and App. are technology-based tools that, when functioning
as intended, should produce little to no variance, which will indicate that vehicles
are being billed accurately.

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    Management Response
The Ground Transportation (GT) team has a system in place to consistently perform
monthly reconciliations/comparisons of the Taxi App’s trip activity and the AVI
system trip activity. That process continues to be refined and streamlined as the
Pilot Program advances.
While we aspire to a 100% match and reconciliation, the process of recording trip
activity requires a manual scan of each vehicle accessing the Taxi curb in the airport
garage. Challenges remain with the Taxi App and the AVI system recording
equivalent numbers of trips. The Taxi App records revenue-generating trips only, as
manually scanned by an ABM employee and has risk for human error (missed scan,
double scan etc.), while the AVI system reports ALL exits from the Airport.
DUE DATE: Completed       (Full response in Audit Report No. 2020-16)

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    Scope and Methodology
Attribute tests for the 14 month-period beginning October 2019 and ending November 2020:

Attribute Test                     Result
1) Did the reconciliation exist?                           Yes
2) Were differences identified?                        Yes
3) Were the differences explained and resolved?*     No

* Differences exist where the App count is higher than the AVI count and also where the AVI count is
higher than the App count. Ground Transportation is in the process of understanding and resolving
these differences. Internal Audit will follow up on this and report back to the Audit Committee.

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     Delegation of Authority
➢This audit employed a unique approach. While Internal Audit (IA)
conducted the audit using protocols consistent with Internal Audit
Standards, IA partnered with the Strategic Initiatives Department so
that any recommendations resulting from the audit could then be
implemented leveraging the knowledge and insight gained from the
audit experience.
➢John Okamoto, under the direction of the Port’s Chief Operating Officer,
Dave Soike, provided outside expertise and perspective. Mr. Okamoto
serves on the Executive Review Panel and provides recommendations to
the ED and the Commission related to the International Arrivals Facility.
➢No Internal Control Deficiencies were noted.
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        1) Efficiency Opportunity
➢In March 2010, the Port’s Delegation of Authority limit was
established at $300,000. The limit requires Commission
approval for expenditures that exceed $300,000. Re-evaluating
the limit using a risk-based approach could result in increasing
the limit, thereby allowing the Commission to maintain a more
strategic focus while providing greater autonomy for the
Executive Director and staff to carry out day-to-day business.

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    Management Response - Remarks by John Okamoto
• View from independent eyes from an elected official, and senior executive
responsible for delivery of “mega-projects.”
• Clean audit affirms the Port has created a culture of compliance since 2007.
• BUT, with an unintended consequence of significant administrative inefficiencies
and opportunity cost for Commission policy focus.
• Audit highlights opportunity to achieve efficiencies as compared to other public
agencies and allow Commission to focus in on more critical issues.
• Risks of lifting the $300k delegation of authority can be managed by affirming
existing policy controls adopted by the Commission, implementing appropriate
administrative controls, enhancing public transparency of project status and
changes, and continued Commission oversight through sub-committees and
identification of high priority projects.
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    Management Response – Delegation of Audit Results
• Test of a 1.5-year period demonstrates the delegation system is
performing well and as designed
• Delegations can be complex, yet testing demonstrates guidance
documents clearly laid out and being followed by staff
• An efficiency opportunity was identified
– What kind of efficiency
– How to best identify an appropriate adjustment

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    Management Response – Efficiency Opportunity
• Delegation level was set 10 years ago. Since then, the capital
construction and consulting have grown tremendously.
Delegation Level           Who Approves What                    Benefit
If $300,000                 Commission Action – 98%                Status Quo
Executive Director   - 2%
If $1,000,000               Commission Action - 95%                Saves 28 actions per year.
Added Commission time for
strategy and mission focus.
Executive Director  -   5%                Added Staff Efficiency (Microsoft
and cart examples)
If 10,000,000               Commission Action -  69%               Saves 68 actions per year. Added
Commission time for strategy and
mission focus.
Executive Director  -  31%               Added Staff Efficiency
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    Management Response - Comparator Agencies
AGENCY           DELEGATION                  5 YEAR CAPITAL BUDGET
King County           No limit – within bi-annual budget   $5 B
City Seattle              No limit – within bi-annual budget    $5.2 B
UW           15,000,000              $3.7 B
Sound Transit          5,000,000                           $14 B*
Port of Seattle           300,000                               $3.4 B
NWSA           300,000                   $440 M
San Fran. Int. Airport    1,000,000                              $4.8 B
* Per Sound Transit Development Plan (2020-2025) from the 2019 Annual Report, which was adopted by the Board of Directors on September 24, 2020.
Staff will research, gather data, and analyze, to find best balance with
transparency and process checks and balances (procedures and control
mechanisms).
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    Management Response - Objectives and Values for Staff Approach
Objectives:
• Find best balance for efficient delegation level(s) while ensuring
transparency and governance that best matches the Port’s Business.
• Efficiency for Commission, staff and partners
Values:
• Free Commission time for strategies and mission priorities, while
delegating lesser risk items to Executive Director.
• Find transparent means to assure Commission awareness and
involvement commensurate with delegation (quarterly briefs, action
items, monthly reports, dashboards, 1:1’s, ED briefs, and others).
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    Management Response – Staff Approach – Six Areas in Work Plan
• Establish Multi-departmental & Business Unit Team
• Transparency Reporting
- What Port does not
- What other agencies do
- “Voice of customers” – Commission
• Efficiency – Develop efficient check and balances vs. delegation
• Delegation level – Propose options, weigh risks, and test vs.
transparency and efficiency
• Identify Optimum Recommendation(s)
• Update Commission at the end of Q1, 2021
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