INTERNAL AUDIT
INTERNAL AUDIT REPORT
Limited Contract Compliance Audit
EAN Holdings, LLC
June 1, 2016 – May 31, 2019
Issue Date: November 26, 2019
Report No. 2019-10
EAN Holdings, LLC
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TABLE OF CONTENTS
Executive Summary ................................................................................................................................................ 3
Background ............................................................................................................................................................. 4
Audit Scope and Methodology ............................................................................................................................... 5
Schedule of Findings and Recommendations ....................................................................................................... 6
Appendix A: Risk Ratings ....................................................................................................................................... 7
EAN Holdings, LLC
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Executive Summary
Internal Audit (IA) completed an audit of the Consolidated Rental Car Facility Lease Agreement
between EAN Holdings, LLC (EAN) and the Port of Seattle (Port). In 2007, EAN, which does business
as Enterprise Rent-A-Car (Enterprise) acquired both Alamo Rent-A-Car and National Rent-A-Car. EAN
pays the Port approximately $12 million annually in percentage fees and an additional $14 million in
Customer Facitlity Charges (CFC).
The period audited was June 2016 through May 2019 and was performed to determine whether EAN
complied with significant provisions of the Agreement, including whether reported gross revenues and
percentage fees were complete and accurate.
Our audit identified one medium rated issue:
1. (Medium) – Internal Audit identified one late payment for the Percentage Fees owed for the month
of October 2016. As a result, a late fee of $6,159 is due to the Port.
This issue is discussed in more detail beginning on page six of this report.
We extend our appreciation to management and staff of the Aviation Commercial Management
Department and the Accounting and Financial Reporting Department for their assistance and
cooperation during the audit.
Glenn Fernandes, CPA
Director, Internal Audit
RESPONSIBLE MANAGEMENT TEAM
Jim Schone, Director, Aviation Commercial Management
Lance Lyttle, Managing Director, Aviation Director’s Office
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Background
In 2007, EAN Holdings, which does business as Enterprise Rent-A-Car (Enterprise) acquired Alamo
Rent-A-Car (Alamo) and National Rent-A-Car (National). As a result, Enterprise Holdings, Inc. was
formed and became the parent company of Alamo, National, and Enterprise.
In 2009, the Port of Seattle (Port) entered into a Consolidated Rental Car Facility Lease Agreement
(Agreement) with Enterprise Leasing Company, doing business as Enterprise Rent-A-Car. The Port
also entered into separate lease agreements with National and Alamo. In June 2010, the Agreements
with both Alamo and National were terminated and incorporated into the Enterprise Leasing
Agreement under Exhibit O. This ammended agreeement was between the Port and EAN Holdings,
LLC.
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 bill a daily Customer Facility Charge (CFC) of $6 on all
vehicle rental transactions, and remit the full amount to the Port, regardless of whether or not the full
amount is actually collected. The first transaction day provides a twenty five (25) hour period and a
twenty four (24) hour period for each successive day.
The table below reflects the Gross Revenues, Percentage Fees, and CFC fees:
Agreement Year
Gross Revenue
Percentage Fees
CFC Fees
June 2016 – May 2017
115,246,099
11,524,610
13,896,516
June 2017 – May 2018
117,857,108
11,785,711
13,711,296
June 2018 – May 2019
124,578,911
12,457,891
14,056,128
Total
$357,682,118
$35,768,212
$41,663,940
Data Source: PeopleSoft Financials
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Audit Scope and Methodology
We conducted the engagement 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 conduct an engagement to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on our engagement objectives.
We believe that the evidence obtained provides a reasonable basis for our findings and conclusions
based on our engagement objectives.
The period audited was June 2016 through May 2019 and included the following procedures:
Revenue Completeness and Accuracy
• Traced concession payments to Port records to verify payments were received by Agreement
dates.
• Agreed revenue reported to the Port, to the Operator’s monthly revenue reports, charge
sheets, and to independently audited schedules.
Customer Facility Charge
• Agreed Operator’s audited CFC counts to daily transaction records.
• Re-calculated checkout and return dates to assess the accuracy of CFC charges.
Compliance
• Determined whether the Concessionaire submitted an “Annual Report” for each Agreement
Year no later than 90 calendar days following the last day of each Agreement Year.
• Reviewed the Annual Report prepared by the Concessionaire and signed by the Chief
Financial Officer, or their designee, attesting the amounts shown.
• Determined if the Annual Report was audited by an independent certified public accounting firm
in accordance with GAGAS, attesting that the concession fee paid was properly calculated.
• Determined whether the Operator, through the Fuel Facility Manager, hired an independent
third party to conduct an annual Environmental Audit of the Consolidated Rental Facility.
• Determined if the results of the annual Environmental Audit were reviewed with the Port, no
later than 30 days following the commencement of each Agreement Year, and any issues were
remediated.
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Schedule of Findings and Recommendations
Internal Audit identified one late payment for the Percentage Fees owed for the month of
October 2016. As a result, a late fee of $6,159 is due to the Port.
Section 5.2 of Exhibit O states “If any payment of Concession Fees or other sum or charge
otherwise payable by Concessionaire is not received by the Port within ten (10) days of when due,
Concessionaire shall pay to the Port a late payment charge equal to five percent (5%) of the
overdue amount.”
The percentage fees for each month shall be paid on or before the twentieth (20
th
) day of the
following month. EAN paid the percentage fees for October 2016 on December 5, 2016, which is
five days after the allowed grace period of ten days. As a result, a late fee of $6,159 is due to the
Port.
The table below reflects the calculation of the $6,159 owed:
Period
Date paid
Concession Fees
Late fee (5%)
October 2016
12/05/16
$123,183
$6,159
Recommendations:
1. Seek and recover $6,159 in late fee.
Management Response/Action Plan:
Aviation Commercial Management will seek to recover the late fee for October 2016 concession fees,
which Internal Audit calculated as $6,159. Aviation Commercial Management will also reach out to the
tenant to ensure awareness that payments should be received by the due date stated in the
agreement or outstanding amounts will be subject to late fees. Currently, Port contracts have varying
terms regarding due dates and grace periods, among others, which complicates the potential for
automating the calculation of late fees. These complications contribute to the current semi-monthly
manual process, which calculates fees on prescribed dates. Thus, there is a risk of missed late fees,
such as the one identified in this audit report, due to the varying terms in the Port’s agreements.
Aviation Commercial Management will work with the Port’s Accounting and Financial Reporting
department, which runs the late fee process, to find opportunities to standardize agreement terms
when contracts are executed or renewed.
1) Rating: Medium
DUE DATE: 12/31/2019
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Appendix A: Risk Ratings
Findings identified during the audit are assigned a risk rating, as outlined in the table below. Only one
of the criteria needs to be met for a finding to be rated High, Medium, or Low. Findings rated Low will
be evaluated and may or may not be reflected in the final report.
Rating
Financial
Stewardship
Internal
Controls
Compliance Public
Commission/
Management
High Significant
Missing or not
followed
Non-compliance
with Laws, Port
Policies,
Contracts
High probability
for external audit
issues and / or
negative public
perception
Requires
immediate
attention
Medium Moderate
Partial controls
Not functioning
effectively
Partial
compliance with
Laws, Port
Policies
Contracts
Potential for
external audit
issues and / or
negative public
perception
Requires
attention
Low Minimal
Functioning as
intended but
could be
enhanced to
improve
efficiency
Mostly complies
with Laws, Port
Policies,
Contracts
Low probability
for external audit
issues and/or
negative public
perception
Does not
require
immediate
attention