Commission Meetings

INTERNAL AUDIT REPORT 




Limited Contract Compliance Audit 
In-Ter-Space Services, Inc. DBA Clear Channel Airports 

January 1, 2019 – December 31, 2021 

Issue Date: May 26, 2022 
Report No. 2022 - 07

           In-Ter-Space Services, Inc. DBA Clear Channel Airports 


TABLE OF CONTENTS 

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













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           In-Ter-Space Services, Inc. DBA Clear Channel Airports 
Executive Summary 
Internal Audit (IA) completed an audit of the Lease Agreement (Agreement) between In-Ter-Space
Services, Inc. DBA Clear Channel Airports (In-Ter-Space Services) for the period January 2019 through 
December 2021, for a promotional and advertising services concession, in the Seattle Tacoma
International Airport (SEA). The audit was performed to determine whether In-Ter-Space Services 
complied with significant provisions of the Agreement, including whether reported revenues and
percentage fees, were complete and accurate. 
In-Ter-Space Services generates revenue primarily from the sale of advertising space on printed and
digital, out-of-home advertising displays, which may be sold as individual units or as a network package.
These contracts typically cover periods of a few weeks to one year, although there are some with longer
terms. Revenues from the sale of advertising space on displays is generally recognized ratably over the
term of the contract, during which the advertisement is displayed. The company also generates revenue
from production and creative services, which are distinct from the advertising display service. This
revenue is recognized at the point in time when the company installs the advertising copy at the display
site. 
In June 2020, in order to promote financial stability of the airport dining and retail tenants during
pandemic, the Port of Seattle (Port) Commission authorized the temporary suspension (elimination) of 
the Minimum Annual Guarantee (MAG) payments, for March through December 2020. In-Ter-Space
Services was also given Percentage Fees and applicable leasehold taxes deferrals, for the period of
April 2020 through June 2020. The deferred amounts were all repaid by In-Ter-Space Services, before
March 31, 2021, without accrual of interest. Additionally, per the Rent Relief Agreement under the
Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA), In-Ter-Space
Services received $449,072.51 as its pro-rated share of the grant, as a rent credit in 2021. 
We concluded In-Ter Space Services had 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 Airport Dining and Retail, Aviation Finance and
Budget, Accounting and Financial Reporting, and In-Ter-Space Services 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, Aviation Chief Operating Officer 
Lisa Lam, Assistant Director, Financial Reporting Revenue Services 
Khalia Moore, Senior Business Manager, Airport Dining and Retail 
Linda Nelson, Senior Manager, Aviation Finance and Budget 
Jeff Wolf, Director, Aviation Commercial Management 


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In-Ter-Space Services, Inc. DBA Clear Channel Airports 
Background 
The Port entered into a renewed ten-year Lease Agreement, effective August 1, 2017, with In-Ter-Space
Services, Inc. DBA Clear Channel Airports (In-Ter-Space Services), for a promotional and advertising
services concession at Seattle Tacoma International Airport (SEA). Clear Channel Airports is a brand
division of Clear Channel Outdoor Holdings, Inc. (NYSE: CCO). CCO is one of the world's largest
outdoor advertising companies with a diverse portfolio of approximately 500,000 print and digital displays
in 26 countries, reaching millions of people monthly. A growing digital platform includes more than
17,000 digital displays in international markets and more than 3,700 digital displays, including more than
1,500 digital billboards, in the United States.1
Per the Agreement, In-Ter-Space Services is required to pay a Minimum Annual Guarantee (MAG) equal
to 85% of the total amount paid for the previous agreement year, in equal monthly payments payable
on or before the first day of each month. Additionally, the Agreement requires payment of a Percentage
Fee, based on a percentage of gross revenue, provided the fee is higher than the MAG. The Percentage
Fee is equal to 67 percent of gross sales, of which the first seven percent is specified as Contract Rent,
and is due on or before the fifteenth day of each following month. 
The table below reflects gross concession revenue and percentage fees billed: 
Agreement Year 
(January – December)            Gross Revenue ($)          Percentage Fees ($)   Contract Rent ($) 
2019                            10,607,239                    6,364,343            742,507 
2020                             6,168,792                    3,701,275            431,815 
2021                             5,259,048                    3,155,428            368,133 
Total                                  22,035,079                       13,221,046            1,542,455 
Source: In-Ter-Space Services Monthly Revenue Reports & Annual Statement of Gross Receipt Audit Reports by Buckno
LIsicky & Company; PeopleSoft Financials, and AFR Concession documents 
Gross receipts are defined in the Agreement as any and all monies paid or payable to In-Ter-Space 
Services, by or on account of sales made or services rendered from the operation of advertising space
at SEA, with certain exclusions: commissions paid, discounts actually made to advertising customers,
reimbursements received for actual out-of-pocket costs, and any sales or excise taxes collected. 







1 May 23, 2022, https://investor.clearchannel.com/home/default.aspx, includes 1,700 digital displays in Airports. 

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           In-Ter-Space Services, Inc. DBA Clear Channel Airports 
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. 
In some cases, we used a judgmental method to determine the samples selected for our audit test work.
In those cases, the results of the work cannot be projected to the population as a whole, as we did not
select a random sample. 
The period audited was January 2019 through December 2021 and included the following procedures: 
Concession Fees Completeness, Accuracy, and Timeliness 
• Reviewed  relevant documents (e.g., Commission records, Port’s Rent Deferral  program, 
CRRSAA grant agreements, billing adjustment worksheets, etc.) to gain understanding of the
changes to the requirements for MAG and Percentage Fee payments, due to COVID-19. 
• Tested the tenant’s billing and payments for all months in the audit period, to determine whether
the MAG payments and percentage fees were billed and paid accurately, completely, and timely. 
• Reconciled revenues reported to the Port, to the tenant’s General Ledger, Profit and Loss 
reports, independently audited revenue schedules, and the tenant’s Quattro billing/business 
activity data. 
• Analyzed deductions to determine whether they were properly classified and correctly
deducted from gross revenues, as reflected in the Agreement. 
• Tested a sample of installation services revenue deductions, to verify the accuracy of the
deducted amounts, per the Agreement provision. 
Surety and Insurance Compliance 
• Reviewed the tenant’s rent security amount, bonded by an insurance company, for compliance
with the Agreement, Port Policy (Port RE-2), and Washington State Law (RCW 53.08.085). 
• Reviewed the tenant’s Certificates of Insurance for compliance with the Agreement terms. 







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           In-Ter-Space Services, Inc. DBA Clear Channel Airports 
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 
Moderate
Partial
Partial controls                        probability for
compliance with
external audit       Requires
Medium   Moderate                  Laws, Port
Not functioning                      issues and / or      attention 
Policies 
effectively                               negative public
Contracts 
perception 
Low probability
Functioning as   Mostly complies                       Does not
for external audit
intended but     with Laws, Port                        require
Low      Minimal                                   issues and/or
could be        Policies,                             immediate
negative public
enhanced       Contracts                          attention 
perception 











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