An audio recording of the meeting proceedings and meeting materials are available on the Port of

2011, in the Commission Chambers at Pier 69, 2711 Alaskan Way, Seattle, Washington.

Committee members Commissioner Albro, Commissioner Holland, Christina Gehrke, and Alternate

Member Commissioner Tarleton were present, as well as Tay Yoshitani, Chief Executive Officer;

Vickie Rawlins, Workplace Responsibility Officer, Susan L. Coskey, Jd, MBA, Principal, Bright

Spring Consulting, Joyce Kirangi, Internal Audit Department Director; Jack Hutchinson, Internal

Audit Manager; Laurie Tish, Moss Adams; Tom Barnard, Research and Policy Analyst; and

Katherine Blair, Commission Records Specialist.

Call to Order:

The committee special meeting was called to order at 8:31 a.m. by Commissioner Albro.

Ms. Rawlins noted that concerns were brought forth by a former employee to the Legal department

regarding a Commissioner’s credit card use. The Legal department ensured that disallowed

charges were repaid and the Port credit card was no longer in use. At that time, the Commission

directed the Legal department to oversee an outside review of alleged misuse and credit card use

by all Commissioners, which had been conducted by Ms. Coskey. Ms. Rawlins commented that

under normal circumstances, concerns regarding Commission ethics or compliance would be

forwarded to the Ethics Board; however, the Ethics Board is currently inoperative. She stated the

purpose of the review was to examine the identified concerns for the purpose of collecting all

relevant facts and identifying appropriate standards to the extent necessary to enable the

Commission to assess the credibility and seriousness of the concerns and determine appropriate

clarified that her use of the term “Commission staff” refers to anyone who supports the

Commission.

Ms. Coskey stated that there is a state constitutional provision against lending public credit to

private individuals for private benefit, as well as Port policies that address appropriate use of credit

promptly repaid. This Commissioner had asserted not knowing the policy; however, Ms. Coskey

stated there were opportunities for the policy to be made clear. Although the Port policies regarding

credit card use where available to the Commissioners, she reported the review demonstrates a

need for a more effective method for communicating that information to the Commission. The

second Commissioner that stood out commonly charged personal expenses related to other Port of

Seattle expenses. These personal expenses were generally promptly repaid.

The second set of issues relate to the improper use of Port resources. She stated there was an

inappropriate cell phone photograph found on a Port cell phone. Ms. Coskey stated there is no

policy to address consequences for a Commissioner who violates policy. She also noted there was

noted that a Commissioner asked Port staff to cover a class the Commissioner was teaching at a

local community college. She described an instance in which a Commissioner utilized Commission

staff to help make travel arrangements to support unpaid board work outside of Port Commission

business. Ms. Coskey stated there is no mechanism to evaluate whether this was an inappropriate

use of Port resources nor is there an advisory council for the Commissioner to seek an opinion.

Ms. Coskey noted that the Ethics Board referenced in Resolution No. 3583 is an investigative

board and not an advisory council.

Current practice demonstrates the need for an advisory council. Ms. Coskey noted there is no

standard practice for when an opinion should be sought and who should give the opinion. She

accountable;

the Commission;

Ms. Coskey stated that all Commissioners agreed there needs to be some kind of mechanism in

place to address ethics concerns. But she clarified that just having an external mechanism is not

enough, and that there are internal structural and operational deficiencies, in terms of policies and

become ethics issues.

Ms. Coskey replied to Commissioner Albro’s question about next steps that she is waiting for

further instruction from the Commission on how to proceed. In response to Commissioner

Tarleton’s question about best practices, Ms. Coskey noted that in her experience the best practice

for an elected body is to set clear expectations and guidelines. Those expectations and guidelines

should be created in the context of the Port’s goals. Ms. Coskey cautioned against using best

practices of other organizations and instead focusing on what is most appropriate for the Port.

Ms. Coskey replied to Commissioner Tarleton that it is important for the Commission to decide

approved.

Comprehensive Operational Audit – Central Processing System: Asset Management:

Mr. Hutchinson submitted comprehensive operational audit report for the central processing

system: asset management, covering the period of January 1, 2010, to July 31, 2011. The purpose

of the audit was to assess controls and determine the following:

completely;

Hutchinson clarified that Maximo is not used for items that are part of the Central Processing Asset

Management system that was the focus of the audit.

Discussion on Lease and Concession Audits: Briefing on Ports Internal Audit survey:

Ms. Kirangi noted that the Internal Audit department sent a survey to other internal audit

departments that audit port and airport authorities that asked two questions:

2012 Proposed Internal Audit Budget:

Ms. Kirangi presented the 2012 Internal Audit budget to the Committee noting there are two one-

time items in the budget that include:

In response to Ms. Gehrke, Ms. Kirangi clarified that the outside services shown in the budget are

for the ethics and compliance hotline. Ms. Kirangi replied to Ms. Gehrke’s question regarding staff

In response to Mr. Barnard, Commissioner Albro clarified that the motion is intended to

demonstrate to the Commission that the Committee perceives the Internal Audit budget to be

sufficient for the Internal Audit department to accomplish the work for 2012. The Internal Audit

budget goes with the recommendation of the Audit Committee.

2011 Work Plan Update

Ms. Kirangi stated that at the first meeting in December staff will provide a ranking of the risk areas

and propose items for inclusion in the 2012 Internal Audit department work plan. The work plan will

to fill a senior auditor position that has been vacant since August, which accounts for the two un-

started audits.

Briefing on Peer Review: Association of Local Government Auditors-Recommendation and

Scope of Work:

Ms. Kirangi stated that the Internal Audit Department was established in 2008. The Generally

Accepted Government Auditing Standards (GAGAS) require that audit organizations receive an

Internal Audit department peer review process, including how often the peer review should occur,

what the expectations are for a peer review, and clearly defining the roles of the Committee and

the Commission.

Ms. Gehrke noted certain elements of a Red Book audit might be helpful in a peer review, including

the following:

the Yellow Book, but is in the Red Book. For the peer review it is acceptable to choose items from

each book to review.

Commissioner Albro requested inclusion in the peer review scope of work of appropriate elements

from the Red Book with the expectation to approve the scope of work at the next Committee

meeting.

Lease and Concession Audits

At the request of Commissioner Albro, Mr. Hutchinson submitted written audit reports for the lease

Port.

amended.

Commissioner Tarleton suggested consideration of Audit Committee charter revisions to

accommodate receipt of multiple clean audit reports. Commissioner Albro concurred.

exists whether or not there is an audit;

Ms. Tish noted that the scope and approach of the audit are based on the risk assessment.

Commissioner Albro noted that the purpose of the audit is to represent the fairness of the

presentation of financial information to the public and bond holders, therefore financial matters are

the focus.

In response to Commissioner Tarleton, Ms. Tish replied that volume has an impact, but it depends

that the materiality threshold is not disclosed; however, she stated the critical component is

revenue. Ms. Tish replied to Ms. Gehrke that in the auditing literature there is a range that is

generally allowed that can be applied to revenue, and due to the Port’s typically strong structure of

internal controls and audit lack of findings of material non-compliance or material weaknesses in

prior years, the auditors would be using the higher end of the range.

Note on Audit Committee meeting Protocols:

Mr. Barnard stated that in order to ensure a quorum and maintain the schedule of Audit Committee

meeting Commissioner Tarleton has been approved by Commission President Bryant as an

Tom Albro

Chair

Minutes approved: December 6, 2011