Sixt Rent A Car
June 2015 - December 2018
1
1
INTERNAL AUDIT
INTERNAL AUDIT REPORT
LIMITED CONTRACT COMPLIANCE
SIXT RENT A CAR
JUNE 2015 – DECEMBER 2018
ISSUE DATE: FEBRUARY 25, 2019
REPORT NO. 2019-3
Sixt Rent A Car
June 2015 - December 2018
2
2
INTERNAL AUDIT
TABLE OF CONTENTS
EXECUTIVE SUMMARY ........................................................................................................................................... 3
BACKGROUND ........................................................................................................................................................ 4
AUDIT SCOPE AND METHODOLOGY ..................................................................................................................... 5
SCHEDULE OF FINDINGS AND RECOMMENDATIONS......................................................................................... 6
APPENDIX A: RISK RATINGS .................................................................................................................................. 7
Sixt Rent A Car
June 2015 - December 2018
3
3
INTERNAL AUDIT
EXECUTIVE SUMMARY
Internal Audit (IA) completed an audit of the Lease Agreement (Agreement) between Sixt Rent A Car
(Sixt) and the Port of Seattle (Port) for the period June 1, 2015 through December 31, 2018. The audit
was performed to determine whether Sixt complied with significant provisions of the Agreement including
whether reported gross revenues and the Customer Facility Charges (CFC) paid to the Port were
complete and accurate.
We determined that Sixt underreported certain gross revenue items.
1) Sixt did not report $432,991 in incidental gross revenues, resulting in $43,299 in additional Percentage
Fees owed to the Port for the period under audit.
This issue is discussed in more detail on page six.
We extend our appreciation to management and staff of the Aviation Business Development Department,
Sixt, and the Accounting and Financial Reporting Department for their assistance and cooperation during
the audit.
Glenn Fernandes, CPA
Director, Internal Audit
RESPONSIBLE MANAGEMENT TEAM
Geoffrey Foster, Aviation Property Manager
Lance Lyttle, Managing Director, Aviation
Jim Schone, Director, Aviation Business Development
Sixt Rent A Car
June 2015 - December 2018
4
4
INTERNAL AUDIT
Founded in 1912 in Munich, Germany, Sixt has grown its vehicle rental and leasing business worldwide.
Today, the Sixt brand is represented in over 105 countries with branches in over 2,200 locations. Sixt
entered the US market in 2011 with a strategy to focus and expand on strong-growth airport and
downtown stations, which included the Seattle-Tacoma International Airport location.
In December 2012, the Port entered into a Consolidated Rental Car Facility Lease Agreement
(Agreement) with Sixt. The terms of the Agreement provide for a Minimum Annual Guarantee (MAG)
equal to 85% of the total amount paid to the Port for the previous Agreement year. Additionally, the
Agreement requires a Percentage Fee equal to 10% of gross revenues, provided the fee is higher than
the monthly MAG. The MAG is payable in advance, on or before the first day of each month. The
Percentage Fee, if applicable, is due on or before the 20
th
of the following month.
The Agreement states that the Operator must collect a Customer Facility Charge (CFC) of $6 per rental
day, and remit the full amount to the Port regardless of whether or not the full amount is actually
collected.
The table below reflects total Gross Revenues, Percentage Fees, and CFC fees:
Agreement Year
Gross Revenue
Percentage Fees
CFC Fees
June 2015 – May 2016
$11,789,036
$1,178,904
$1,373,892
June 2016 – May 2017
11,905,434
1,190,543
1,227,552
June 2017 – May 2018
13,650,284
1,365,028
1,357,818
June 2018 – Dec. 2018*
11,969,600
1,196,960
1,042,020
Total
$49,314,354
$4,931,435
$5,001,282
Data Source: PeopleSoft Financials and PropWorks
*
Reflects a period of seven months that was added to scope.
BACKGROUND
Sixt Rent A Car
June 2015 - December 2018
5
5
INTERNAL AUDIT
We conducted this audit in accordance with Generally Accepted Government Auditing Standards and the
International Standards for the Professional Practice of Internal Auditing. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit objectives.
The period audited was originally from June 2015 through May 2018; during the course of our work we
expanded the period under audit, to December 2018. After identifying significant provisions in the
Agreement, we performed audit procedures that included:
Revenue Completeness and Accuracy
• Traced concession payments to Port records to verify payments were received by Agreement
dates.
• Agreed revenues reported to the Port, to the Operator’s general ledger, revenue reports, and to
the independently audited schedules.
Customer Facility Charge
• Agreed Operator’s audited CFC counts to daily transaction records.
• Reviewed checkout and return date records to assess the reasonableness of daily transactions.
Insurance and Rent Security
• Determined whether commercial general liability insurance and rent security complied with
Agreement terms.
AUDIT SCOPE AND METHODOLOGY
Sixt Rent A Car
June 2015 - December 2018
6
6
INTERNAL AUDIT
SCHEDULE OF FINDINGS AND RECOMMENDATIONS
Sixt did not report $432,991 in incidental gross revenues, resulting in $43,299 in additional
Percentage Fees owed to the Port for the period under audit.
Our analysis of the Operator’s financial records and testing of transactions, identified the following items
that were not included in Gross Revenues, when reported to the Port:
• Reservation cancellation fees
• Vehicle upkeep recovery
• Administrative fee for tolls
• Counter processing recovery
• Tickets
The Operator has acknowledged these items. The underreported revenue is reflected in the table
below.
Agreement Year
Gross Revenues
Audited
Difference
Percentage Fee
June 2015 - May 2016
$11,789,036
$11,805,856
$16,820
$1,682
June 2016 - May 2017
11,905,434
12,056,530
151,096
15,109
June 2017 - May 2018
13,650,284
13,801,722
151,438
15,144
June 2018 - Dec 2018*
11,969,600
12,083,237
113,637
11,364
Total
$49,314,354
$49,747,345
$432,991
$43,299
Data Source: PeopleSoft Financials, Propworks, and Sixt records
* Reflects a period of seven months that was added to scope.
Recommendations:
1. Seek and recover $43,299 in underpaid Percentage Fees.
2. Assess the applicability of a one-time late charge and any accrued interest.
3. Communicate with the Operator, to assure that future reported Gross Revenues include the items
listed above.
Management Response / Action Plan:
Aviation Commercial Management staff will seek to recover the underpaid Percentage Fees, together
with any applicable late fees and interest charges. Aviation Commercial Management staff will also
clearly communicate to the tenant that the revenues identified above, are not permitted exclusions
from revenue according to the Agreement. Therefore, effectively immediately, those revenue items are
required to be included in their monthly reports of gross revenues provided to the Port. Revised
reports that include these excluded gross revenues, as well as payment of any additional Percentage
Fees, will be requested for those months that have transpired since the end of the audit period.
Since gross revenue exclusions appear to be a common point of audit findings, Aviation Commercial
Management staff will reengage with all rental car tenants at the Consolidated Rental Car Facility
regarding the acceptable gross revenues exclusions. The goal of this reengagement is to reduce
similar findings concerning acceptable gross revenue exclusion during future audits.
1) RATING: MEDIUM
DUE DATE: 5/31/2019
Sixt Rent A Car
June 2015 – May 2018
7
APPENDIX A: RISK RATINGS
Findings identified during the course of the audit are assigned a risk rating, as outlined in the table below.
The risk rating is based on the financial, operational, compliance or reputational impact the issue identified
has on the Port. Items deemed “Low Risk” will be considered “Exit Items” and will not be brought to the final
report.
Rating Financial Internal Controls Compliance Public
Port Commission/
Management
HIGH
Large financial
impact
Remiss in
responsibilities
of being a
custodian of
public trust
Missing, or inadequate
key internal controls
Noncompliance
with applicable
Federal, State,
and Local Laws,
or Port Policies
High probability
for external audit
issues and/or
negative public
perception
Important
Requires immediate
attention
MEDIUM
Moderate
financial impact
Partial controls
Not adequate to identify
noncompliance or
misappropriation timely
Inconsistent
compliance with
Federal, State,
and Local Laws,
or Port Policies
Potential for
external audit
issues and/or
negative public
perception
Relatively important
May or may not
require immediate
attention
LOW/
Exit Items
Low financial
impact
Internal controls in place
but not consistently
efficient or effective
Implementing/enhancing
controls could prevent
future problems
Generally
complies with
Federal, State and
Local Laws or Port
Policies, but some
minor
discrepancies
exist
Low probability
for external audit
issues and/or
negative public
perception
Lower significance
May not require
immediate attention
Efficiency
Opportunity
An efficiency opportunity is where controls are functioning as intended; however, a modification would make
the process more efficient
