1
Presentation to the
Port of Seattle
Audit Committee
Results of 2008 Audit
May 5, 2009
2
Reports to be Issued
Report on financial statements
• Unqualified opinion on the financial statements
• Opinion covers separate statements of the Enterprise Fund and the
Warehousemen’s Pension Trust Fund
• Report date is April 30, 2009
Audit and report on Schedule of Net Revenues Available for Revenue
Bond Debt Service
• Same date as financial statements
Audit and report on Schedule of Passenger Facility Charges (PFC’s),
receipts and expenditures and related internal controls
• One finding of noncompliance noted
Audit and report on Federal Financial Assistance Programs and related
internal controls and compliance in accordance with Federal OMB
Circular A-133 (Single Audit)
• To be completed in May 2009
• No material instances of noncompliance noted to-date
Letter of recommendations and observations
• No material weaknesses in internal controls identified
• Observations and recommendations noted
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Internal control environment
• Understand the design and implementation of key controls surrounding
all significant financial statement accounts and business processes
• Understand the design and implementation of controls over compliance
requirements
• Assess information technology general controls and application controls
• Test sample transactions of the capital assets related systems, payroll, cash
disbursements, leases, and environmental reserve
• Treasury and investment, debt, cash, budget, third party transactions and
financial close and reporting cycles tested through observations, inquiries
and walkthroughs
Management estimates
• Pollution remediation obligation accruals, legal and insurance reserves,
allowance for doubtful accounts, grant-in-aid receivables, arbitrage
liabilities, actuarial valuations for OPEB liability and for the
Warehousemen Pension Trust amounts and disclosures
Bonds and related accounts
• Arbitrage liability, capitalized interest, discounts and premiums, new debt
issuance, debt refunding, and compliance with covenants
Areas of Audit Effort
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Revenue recognition
• Operating revenue analysis using business indicators such as landed
weight, enplanements, crane movements, and boat counts
• Ad valorem tax levy, investment income, CFC, PFC, and federal grants
• Consideration of the collectability of related receivables
Signatory lease and operating agreement
• Revenue requirements for landing fees and terminal rents according to
the agreement
• Cost elements - debt service allocation and operating and maintenance
expense
Accounting for leases
• Airport concessions and fuel system, Seaport, and Real Estate leases
• Testing of lease terms, payments, and appropriate accounting treatment
and disclosures
Areas of Audit Effort - continued
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Net assets
• Consideration of classification for unrestricted, restricted, and invested
in capital assets, net of related debt
Capital assets
• Consideration of capitalization policies and potential impairment as well
as testing of additions, retirements, overhead application, depreciation
Implementation of Government Accounting Standard
Statement No. 49, Pollution Remediation Obligations
• Consideration of policies and procedures, estimate for liability and
related recoveries, and financial statement disclosures
• Consideration of components for large environmental sites
Areas of Audit Effort - continued
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Administration of federal awards and related administrative
controls
• One additional major program added for a total of three
• Total expenditures $46,748,591
• Airport Improvement Program - $37,184,650
• TSA Memorandum of Agreement - $2,084,578
• Port Security Grant - $1,630,000
• Test major programs for compliance with OMB-Circular A-133
requirements
Passenger Facility Charge (PFC) Program Audit
• Review the Schedules of Passenger Facility Charge Program Receipts and
Expenditures
• Test for compliance with PFC requirements on a sample basis
• We noted one instance of noncompliance
Areas of Audit Effort - continued
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Annual inventory of capital assets should include the oldest
depreciating assets
Several observations related to implementation of GASB 49:
• Methodology for estimating “bracket costs” should be consistently applied
• Support documentation of the rationale behind estimating multi-year
probabilities and for reducing the estimate should be retained
• Support documentation of the rationale behind environmental costs meeting
the capitalization criteria should be retained
• Specific policies and procedures pertaining to asbestos remediation should be
further refined
Information technology observations
Administration of federal awards
• Enhance written policy and procedures to include monitoring the existence
and completeness of federally-funded equipment and property
• Document review of Noise Program Third Party reports prior to submission
Letter of Recommendations
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There are no questioned costs noted to date for Single Audit or
PFC program
Current year findings
• Single Audit – No material findings of noncompliance to-date
• PFC Program Audit – One finding identified
• Omission of refunds to an airline from the fourth quarter report
Status of prior year findings
• Single Audit – One finding noted in the prior year
• Selection process for professional services was not appropriately
documented in the corresponding contract files as is required by
federal regulations
• The Port has cured the incomplete contract files by documenting the
selection process. Additionally, the Port has developed and
implemented a central depository of complete sets of contract
documents including all supporting documentation
• PFC – No findings in the prior year
Federal Awards – Findings and
Questioned Costs
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New accounting pronouncement effective in 2008
• GASB 49, Accounting and Financial Reporting for Pollution Remediation
Obligations
• The Port re-measured environmental liability and restated
beginning net assets by $4.7 million
• Approximately $11 million charged to expense in 2008
• FASB 157, Fair Value Instruments. The Port expanded investments and
debt financial statement disclosures
Upcoming accounting pronouncements
• GASB 51, Accounting and Financial Reporting for Intangible Assets will likely
not have a material impact (2010)
• GASB 53, Accounting and Financial Reporting for Derivative Instruments will
likely not have a material impact (2010)
New Authoritative Literature
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Auditor’s responsibility under Generally Accepted Auditing Standards
Significant accounting policies
Management judgments and accounting estimates
Posted audit adjustments (none)
Passed audit adjustments (none)
A letter of representation was provided to management
Disagreements with management (none)
Consultations with other independent accountants (none)
Major issues discussed with management prior to selection (none)
Difficulties encountered during the audit (none)
Moss Adams is independent with respect to the Port of Seattle
All Port personnel, throughout all departments, encountered in the performance of
our audit were courteous, responsive, and fulfilled all of our requests in a timely
manner
Required Communications