9. Attachment
Doug Fox Audit Report
INTERNAL AUDIT REPORT Limited Contract Compliance Audit ATZ, Inc. dba Doug Fox Parking July 2019 – June 2022 Issue Date: May 30, 2023 Report No. 2023-07 ATZ Inc. dba Doug Fox Parking July 2019 – June 2022 TABLE OF CONTENTS Executive Summary ................................................................................................................................................ 3 Background ............................................................................................................................................................. 4 Audit Scope and Methodology ............................................................................................................................... 5 Appendix A: Risk Ratings ....................................................................................................................................... 6 2 ATZ Inc. dba Doug Fox Parking July 2019 – June 2022 Executive Summary Internal Audit (IA) completed an audit of the Lease and Concession Agreement (Agreement) between ATZ Inc. dba Doug Fox Parking (Doug Fox) and the Port of Seattle (Port). The period audited was July 1, 2019, through June 30, 2022. The audit was performed to determine whether Doug Fox reported Concession Fees were complete, properly calculated, and remitted timely to the Port. We concluded that Doug Fox had materially complied with the terms of Agreement, specifically that concession fees were accurate, complete, and remitted timely to the Port. No issues were identified requiring a management response. Through their reconciliation process, Doug Fox identified $633 in cancellation fees that were over reported in January and March of 2020. Although the amount identified was nominal, the associated credit back to Doug Fox, had not been processed because of various factors including COVID-19. After being identified by this audit, the Port processed and applied the necessary credit to Doug Fox’s account. We extend our appreciation to management and staff of the Aviation Commercial Management and Accounting & Financial Reporting (AFR) Departments for their assistance and cooperation during the audit. Glenn Fernandes, CPA Director, Internal Audit Responsible Management Team Rudy Caluza, Director, Accounting and Financial Reporting Lisa Lam, Assistant Director, Accounting and Financial Reporting Geoff Foster, Aviation Property Manager Lance Lyttle, Managing Director Aviation Jeff Wolf, Senior Manager, Aviation Business Development 3 ATZ Inc. dba Doug Fox Parking July 2019 – June 2022 Background ATZ Inc. dba Doug Fox Parking (Doug Fox) is the closest parking lot to Sea-Tac Airport that offers fully attended and secure parking 24 hours a day. The Port of Seattle (Port) entered into a Lease and Concession Agreeement (Agreement) with Doug Fox on July 30, 2013. Per the Agreement and applicable amendment(s), Doug Fox is required to pay a Minimum Annual Guarantee (MAG) of $2,000,000 during the extension term, in equal monthly payments payable on or before the first day of each month equating to approximately $166,666.67. However, as a result of the COVID-19 pandemic, the Exceptional Circumstances provision within the Agreement was amended. Effective April 1, 2021, if the total numbers of enplaned passengers for any calendar month decreases by more than 20% percent from the same month of the prior year, MAG payment due for the next month shall automatically be adjusted downward. The Agreement also requires a Percentage Fee equal to 58% of gross revenues, provided the fee is higher than the monthly MAG. The Percentage Fee decreases to 45%, 30%, 10%, and 10%, respectively, for each of the four months comprising the Lessee Winding Down Period as well. As mentioned above, the MAG is payable in advance, on or before the first day of each month. On the other hand, the Percentage Fee, if applicable, is due within 10 days of the invoice due date. Otherwise, a late fee of 5% is imposed on the outstanding balance after the 10th day. The table below reflects the Gross Revenues and Percentage Fees billed: Agreement Year Gross Revenue ($) Percentage Fees ($) July 2019 - June 2020 4,533,893 2,289,045 July 2020 - June 2021 2,945,118 1,496,000 July 2021 - June 2022 7,083,293 2,843,024 Source: Doug Fox Monthly P&L Reports, Peoplesoft Financials, and AFR documents 4 ATZ Inc. dba Doug Fox Parking July 2019 – June 2022 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 July 2019 through June 2022 and included the following procedures: Concession Fees Completeness, Accuracy, and Timeliness • Reviewed relevant documents (e.g., Commission Records, CRRSAA Grant Agreements, Port’s Rent Deferral Program, Billing Adjustment Worksheets, etc.) to gain an understanding of the changes to the requirements for MAG and Percentage Fee payments as a result of the COVID- 19 pandemic. • Tested the tenant’s billing and payments for all months in the audit period to determine whether MAG payments and percentage fees were billed and paid completely, accurately, and timely. • Inspected and reviewed the Tenant’s monthly P&L reports to determine whether any other income line items should be included within concessionable revenue. • Agreed revenues reported to the Port to the Tenant’s monthly P&L reports. • Traced concession payments to Port records to verify payments were received timely and if not, late fees were assessed appropriately. 5 ATZ Inc. dba Doug Fox Parking July 2019 – June 2022 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 6
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