Presentation to the

Port of Seattle

Audit Committee

Results of 2010 Audit

May 3, 2011

Reports 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 of April 22, 2011

• Delivered by April 29, 2011

 Audit and report on Schedule of Net Revenues Available for Revenue

Bond Debt Service

• Report dated the same date as financial statement opinion

• Delivered by April 29, 2011

 Audit and report on Schedule of Passenger Facility Charges (PFC’s),

receipts and expenditures and related internal controls

• Reports dated the same date as financial statement opinion

• Final draft completed by April 29, 2011

 Audit and report on Federal Financial Assistance Programs and related

internal controls and compliance in accordance with Federal OMB

Circular A-133 (Single Audit)

• Reports dated the same date as financial statement opinion

• Final draft completed by April 29, 2011

 No material weaknesses in internal controls identified

 Observations for business process improvements

• More robust review of quarterly PFC reports received from

the airlines

• East Marginal Way Program quarterly progress reports

should be retained upon submission

• Information technology matters

− No new matters identified

 Finding of non-compliance

• Verification of suspended/debarred parties on back-funded

Federal claims was not performed

• No questioned costs noted

Internal Control Matters

 Internal control environment

• Understand and test the design and implementation of key controls

surrounding all significant financial statement accounts and administrative

processes and compliance requirements

• Assess information technology general controls and certain application

controls

• Test sample of transactions of the capital assets related systems, payroll,

cash disbursements and procurement systems, and leases

• Treasury and investment, debt, cash, budget, third party transactions,

environmental liability, and financial close and reporting cycles tested

through observations, inquiries and walkthroughs of each system and

controls

 Management estimates

• Environmental and pollution remediation obligation accruals, legal and

insurance reserves, depreciation, allowance for doubtful accounts, grant

receivables, arbitrage liabilities, actuarial valuations for the

Warehousemen’s Pension Trust amounts and disclosures

Areas of Audit Effort

 Revenue recognition

• Operating revenue analysis using business indicators such as landed

weight, enplanements, gate usage, crane movements, and boat counts

• Ad valorem tax levy, investment income, PFC, CFC, 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

 Bonds and related accounts

• Arbitrage liability, capitalized interest, discounts and premiums, new

debt issuance, debt repayments, compliance with covenants, and audit

of Net Revenue Schedule

 Capital assets

• Consideration of capitalization policies and potential impairment as well

as testing of additions, retirements, overhead application, capitalized

interest, depreciation

 Net assets

• Consideration of classification for unrestricted, restricted, and invested

in capital assets, net of related debt

 Warehousemen’s Pension Trust Fund

• Separate materiality and procedures

Areas of Audit Effort - continued

 Administration of federal awards and related administrative

controls and compliance

• Total federal expenditures of $37.5 million

• Two major programs

− Airport Improvement Program - $30.2 million

− East Marginal Way Grade Separation Program - $3.7 million

• Tested major programs for compliance with OMB-Circular A-133 and

grant specific requirements

• One finding noted related to Excluded Party List System (EPLS)

verification on back-funded claims

 Passenger Facility Charge (PFC) Program Audit

• Schedules of Passenger Facility Charge Program Receipts and

Expenditures

• Tested internal controls and compliance with PFC requirements

• No findings noted

Areas of Audit Effort - continued

 Auditor and Management responsibilities for financial statements

under Generally Accepted Auditing Standards

• Auditor: To form and express an opinion about whether the financial

statements are fairly presented; to plan and perform the audit in accordance

with generally accepted auditing standards and Government Auditing

Standards

• Our audit does not relieve management and the Board of its responsibilities

 Audit was performed according to the planned scope

 Significant accounting policies

• Summarized in Note 1 to the financial statements

• Consistent with the prior years

 Management judgments and accounting estimates

• Environmental expenses and related accruals

• Litigated and non-litigated loss contingencies

• Capitalized interest

• Depreciation

• Allowances for doubtful accounts

• Grant receivables

Required Communications

 Financial Statement disclosures were consistent, clear and

understandable

 Audit Adjustments

• There were no proposed or passed adjustments

 Representations were requested of management

 Disagreements with management (none)

 Consultation with other independent auditors (none of which we

are aware)

 Difficulties encountered during the audit (none)

 Illegal acts (none noted)

 Ability to continue as a going concern (no additional disclosure

necessary)

 Consideration of fraud in a financial statement audit

• Procedures performed:

• Journal entry testing

• Interviews of personnel

 Moss Adams is independent with respect to the Port of Seattle

Required Communications

 All significant audit issues and new accounting pronouncements

were addressed early in the audit process

 Weekly meetings were held between Moss Adams and Port

management and staff throughout the audit term

 The audits progressed on time and in an orderly fashion

 All Port personnel were courteous, responsive and fulfilled all of

our requests in a timely manner

 As planned, Branch Richards & Co. personnel were an integral

part of our audit team. Approximately 7% of our audit hours

were contributed by this small business firm

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