PORT OF SEATTLE

MEMORANDUM

COMMISSION AGENDA

Item No.

Date of Meeting

September 17, 2009

DATE: September 9, 2009

TO: Tay Yoshitani, Chief Executive Officer

FROM: Dan Thomas, Chief Financial Officer

Rudy Caluza, Director, Accounting & Financial Reporting

SUBJECT: To extend the contract for the Financial Statement, Single Audit (federal grant

compliance) and Passenger Facility Charge auditing services of the Port’s 2009

operating period with Moss Adams

REQUESTED ACTION:

Request Port Commission authorization for the Chief Executive Officer to extend the contract

for Financial Statement, Single Audit (federal grant compliance) and Passenger Facility Charge

auditing services of the Port’s 2009 operating period with Moss Adams in the amount of

$577,600.

BACKGROUND

Annual independent audits are required for the financial statements of the Port and the

Warehousemen’s Pension Trust Fund for purposes of obtaining an independent auditors opinion

as to the fairness in presentation of the financial results and position, and independent audits are

required of the Port’s administration of federal grants and Passenger Facility Charge (PFC)

revenues in accordance with applicable regulations.

Pursuant to a formal request for proposal (RFP) process conducted by the Port in 2006, the Port

Commission approved on July 25, 2006 award of the contract for audit services to Moss Adams.

The term of audit services contained in the RFP is for fiscal years ending December 31, 2006,

2007 and 2008, along with an opportunity to extend another two years. This action exercises the

first of the two year extensions to cover the 2009 audit period.

The fee for the 2009 audit services is $577,600, which is a reduction of 5% or $30,400 from the

previous 2008 audit services engagement of $608,000. Moss Adams is honoring the Port’s 2009

“Contracts Cost Saving” priority, which calls for negotiating up to a 5% contract cost reduction.

Tay Yoshitani, Chief Executive Officer

September 9, 2009

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Fiscal transparency and accountability, and retaining public trust, are priorities of the Port

Commission that lead to the Port continuing to engage both the State Auditor’s Office (SAO)

and a national independent Certified Public Accounting (CPA) firm to conduct the various

separate key audits of the Port. The SAO conducts Public Accountability/Legal Compliance and

Performance audits thereby, allowing the Port to benefit from the depth of expertise of the SAO

to conduct such audits of public agencies. A national independent CPA firm conducts the

Financial Statement audit, Single Audit (federal grants regulatory compliance) and PFC audit

(Federal Aviation Administration regulatory compliance) thereby, enabling the Port to leverage

the depth of expertise that such CPA firms bring in auditing large and complex proprietary

enterprises such as the Port. This combined breadth of audit resources assures the public the

most effective pool of expertise and audit rigor. The nation’s top largest airports and seaports

also have independent CPA firms conduct their financial statement audits as well.

Moss Adams is the nation’s 11

largest firm, largest based in the western half of the U.S., and

largest Seattle-based CPA firm. In addition to its many municipal enterprise clientele nationally,

Moss Adams’ large enterprise clientele in our region include City of Seattle – Seattle Public

Utilities, City of Tacoma – Tacoma Public Utilities, Snohomish and Clark County public utility

districts, and the Washington State Housing Finance Commission.

To ensure timely reporting to the public and to its bondholders, the Port holds our independent

CPA firm contractually accountable to complete their audit and issue the independent auditor

opinion on the Port’s financial statements by April 30

of each year, which then enables the Port

to issue its financial statements by the first week of May. The CPA firm is also required to

complete and issue both the Single Audit and PFC audit reports by June 30

of each year. This

assurance and consistency in timely reporting to the public and bondholders enables the Port to

affirm its commitment to fiscal transparency and accountability, and retaining public trust.

Furthermore, the Port must timely issue its financial statements and report on financial

results/condition within strict deadlines to comply with Department of Ecology pollution

remediation financial assurance requirements for T91 and various bond covenants.

Moss Adams will need to work under rigid timelines with Audit Planning during Sept-Oct which

encompass risk assessments, prepared-by-client schedules required of the Port, and interviews of

key Port leadership; Interim Audit Fieldwork during Oct-Dec which encompass internal controls

& significant accounts testing and audit procedures for federal awards administration; Year-end

Audit Fieldwork during Feb-March which encompass the audit of Port’s financial statements and

testing the Schedule of Federal Awards; and then internal quality assurance & concurring

partner review during April.

Tay Yoshitani, Chief Executive Officer

September 9, 2009

Page - 3

FINANCIAL IMPLICATIONS

The fee for the 2009 audit services is $577,600, which is a reduction of 5% from the previous

2008 audit services engagement of $608,000. Moss Adams is honoring the Port’s 2009

“Contracts Cost Saving” priority, which calls for negotiating up to a 5% contract cost reduction.

Based on Inside Public Accounting’s August 2009, “Top 100 Accounting Firms” industry

research, the audit fee growth rate for the U.S. Western Region is 6.8% for 2009. To the

contrary, Moss Adams has agreed to a 5% reduction.

SOURCE OF FUNDS

The fee for the 2009 audit services, which is conducted during latter 2009 and first half of 2010,

is included in the Accounting & Financial Reporting (AFR) department’s 2009 approved and

2010 proposed operating budgets, and in capital budgets as appropriate. The funding sources are

approximately 55% and 45%, respectively.