Internal Audit Report

Anton Airfood of Seattle, Inc.

Lease and Concession Compliance Audits

July 1, 2005 through June 30, 2008

Issue Date: May 5, 2009

Report No. 2009-05

Internal Audit

Anton Airfood of Seattle, Inc. (Agreement No. 374)

Audit Period: July 1, 2005 – June 30, 2008

Table of Contents

Internal Auditor’s Report ...................................................................................................... 3

Executive Summary ............................................................................................................ 4

Background ......................................................................................................................... 5

Audit Objectives .................................................................................................................. 5

Audit Scope ......................................................................................................................... 6

Audit Approach .................................................................................................................... 6

Conclusion ........................................................................................................................... 6

Internal Audit

Anton Airfood of Seattle, Inc. (Agreement No. 374)

Audit Period: July 1, 2005 – June 30, 2008

Internal Auditor’s Report

We audited the Lease and Concession Agreement between the Port of Seattle (Port) and Anton

Airfood of Seattle, Inc., for the period July 1, 2005 through June 30, 2008. The purpose of the

audit was to determine whether the lessee properly reported gross revenue and that the provisions

of the lease and the concession agreement were adequately monitored by Port management.

We conducted our audit using due professional care, and we planned and performed the audit to

obtain reasonable assurance as to whether the Port and the lessee had complied with the

provisions of the agreement.

The lessee materially complied with the terms of conditions of the agreement including, but not

limited to, the proper reporting of gross receipts and accurate/timely remittance of the concession

fees. Additionally Port management effectively monitored the agreement to ensure compliance.

We extend our appreciation to the management and staff of the Aviation Business Development

and Accounting Financial Reporting (AFR) for their assistance and cooperation during the audit.

Joyce Kirangi, CPA

Internal Audit Manger

Internal Audit

Anton Airfood of Seattle, Inc. (Agreement No. 374)

Audit Period: July 1, 2005 – June 30, 2008

Executive Summary

Audit Scope and Objective The purpose of our audit was to determine the level of compliance

with the provisions of the Anton Airfood of Seattle, Inc (Lessee) Lease and Concession Agreement

No. 374. We examined the books and records of the Lessee in order to verify reported gross

receipts and concession fees paid from July 1, 2005 through June 30, 2008. We also evaluated

Port controls in order to determine whether lease and concession contract provisions were

adequately monitored. The Aviation Business Development Department has the primary

responsibility for monitoring and implementing effective controls for the Anton Airfood lease

agreement.

Agreement Terms Lease and Concession Agreement No. 374 authorizes Anton Airfood of

Seattle, Inc. to operate a food and beverage concession at the Airport. In accordance with the

terms of the lease, the Lessee pays the Port eight percent (8%) of gross receipts for food and

beverage, alcohol beer & wine, as well as any other gross receipts from the concession.

Audit Result Summary The lessee materially complied with the terms of conditions of the

agreement including, proper reporting of gross receipts, and accurate/timely remittance of the

concession fees. Additionally Port management effectively monitored the agreement to ensure

compliance.

Internal Audit

Anton Airfood of Seattle, Inc. (Agreement No. 374)

Audit Period: July 1, 2005 – June 30, 2008

Background

The Port’s lease and concession agreement with Anton Airfood of Seattle, Inc. authorizes the

Lessee to operate an Anthony’s branded restaurant pursuant to an agreement with Mad Anthony’s

Inc. Mad Anthony’s is a family owned restaurants located in the Puget Sound region.

In July of 2005, the Port of Seattle consented to the transfer of controlling interest in Anton Airfood

of Seattle, Inc. to Anton Airfood Investments, Inc.; a wholly owned subsidiary of Autogrill Group,

Inc. The Autogrill Group is a wholly owned subsidiary of Autogrill Overseas (SA). Host

International, Inc. is another subsidiary of Autogrill Overseas, SA that operates a number of food

and beverage concessions at the Sea-Tac International Airport.

The food and beverage concession agreement with the Lessee stipulates that eight percent (8%)

of gross receipts are to be paid to the Port for food and beverage, alcohol beer & wine, as well as

any other gross revenue from the concession. The agreement requires one-twelfth monthly

payments of a Minimum Annual Guarantee (MAG) due in advance by the first of each month.

The gross revenue information as reported by the Lessee to the Port for the respective lease years

under review is as follows:

Year Ended June 30 Amount

2006

$ 9,500,711

2007

10,382,424

2008

11,202,633

Total $ 31,085,768

Source: PeopleSoft and Anton Investments, Inc. reporting

Audit Objectives

We reviewed Lessee’s accounting records in order to verify that the company had:

• Properly reported its gross sales to the Port in accordance with the terms of the lease and

concession agreement.

• Properly calculated and paid the appropriate concession fee due to the Port.

• Paid its concession fee on time and in accordance with the terms of the agreement.

We also reviewed the effectiveness of the Port management’s monitoring system over the lease

agreement.

Internal Audit

Anton Airfood of Seattle, Inc. (Agreement No. 374)

Audit Period: July 1, 2005 – June 30, 2008

Audit Scope

The scope of the audit covered the period of July 1, 2005 through June 30, 2008.

Audit Approach

To achieve our audit objectives, we performed the following procedures:

• Obtained an understanding of the lease agreement and the significant compliance

requirements

• Reviewed Port internal controls and monitoring activities over lease requirements

• Obtained relevant financial data from the Lessee

• Analyzed data (internal & external) to determine completeness & compliance

Conclusion

The lessee materially complied with the terms and conditions of the agreement including, the

proper reporting of gross receipts and accurate/timely remittance of the concession fees.

Additionally Port management effectively monitored the agreement to ensure compliance.