Port of Seattle 2019 Engagement Service Plan December 9, 2019 Agenda o Moss Adams Service Team o Services to be Provided & Deliverables o Responsibilities (Auditor and Management) o Audit Timeline o Audit Process o Areas of Audit Emphasis o Auditing and Accounting Standards Update 2 Port of Seattle 2019 Engagement Service Plan Your 2019 Audit Service Team Leaders Team Member Responsibilities Olga A. Darlington, Olga will serve as the lead client service partner, overseeing all projects we Assurance Partner perform for the Port, and addressing any technical questions/issues with management. Tammy Erickson, Tammy will serve as the second reviewer of our reports, serving in the QC Assurance Partner role, and will consult on technical issues or key elements of the audits, as needed. Tyler Reparuk, Tyler will oversee the engagement team for all services provided to the Senior Manager Port, and will review testing performed by our team during the audits. Anna Waldren, Anna will supervise our staff in the field, and manage each of the audits we Assurance Manager perform. 3 Port of Seattle 2019 Engagement Service Plan Your 2019 Audit Service Team Leaders Team Member Responsibilities Maria Braun, Maria will supervise staff and perform audit procedures related to the IT Senior Manager Port's IT systems, including general computing controls testing. The following individuals will also serve on the Port of Seattle engagement team o Caroline Mahalitic, Senior o Connor McCauley, Experienced Staff o Michael Corrado, Experienced Staff o Fiona Deng, Branch Richards & Co., Subcontractor o Carmelle Marescot Palomino, Marescot Palomino & Associates, Subcontractor 4 Port of Seattle 2019 Engagement Service Plan Summary of Our Services and Deliverables ➢ Audit and report on financial statements for both the Enterprise Fund and the Warehousemen's Pension Trust Fund to be included in the Port's Comprehensive Annual Financial Report; ➢ Audit and report on internal control and compliance over financial reporting in accordance with Government Auditing Standards; ➢ Audit and report on compliance related to Major Federal Award Program(s), the Schedule of Expenditures of Federal Awards and related internal controls in accordance with the Uniform Grant Guidance; ➢ Audit and report on the schedule of Passenger Facility Charge (PFC) program receipts and expenditures, and related internal controls; ➢ Audit and report on the schedule of net revenues available for revenue bond debt service; ➢ Agreed Upon Procedures and report to State of Washington Department of Ecology relating to Terminal 91 Facility ➢ Agreed Upon Procedures and report to the Environmental Protection Agency relating to Terminal 117 Facility and East Waterway SRI/FS 5 Port of Seattle 2019 Engagement Service Plan Our Responsibility Under U.S. Generally Accepted Auditing Standards and Government Auditing Standards 1 3 To express our opinion on whether the consolidated financial statements prepared by management with your oversight are fairly presented, in all material respects, and in accordance with U.S. GAAP. However, our audit does not relieve you or management of your responsibilities. To consider internal control over financial reporting and internal control over compliance as a basis for designing audit procedures but not for the purpose of expressing an opinion on its effectiveness or to provide assurance concerning such internal control. 6 Port of Seattle 2019 Engagement Service Plan 2 4 To perform an audit in accordance with generally accepted auditing standards issued by the AICPA and Government Auditing Standards issued by the Comptroller General of the United States, and design the audit to obtain reasonable, rather than absolute, assurance about whether the consolidated financial statements are free of material misstatement. To communicate findings that, in our judgment, are relevant to your responsibilities in overseeing the financial reporting process and administering federal awards. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Audit Timeline 2019 AUGUST/ SEPTEMBER Planning meetings with management Audit planning and risk assessment 2020 OCTOBER JANUARY Performance of interim audit procedures and testing of internal control Assessment of IT environment and testing of system internal controls DECEMEBR Entrance meeting with Committee 7 Port of Seattle 2019 Engagement Service Plan MARCH/ APRIL Perform final audit fieldwork for the financial statements, Single Audit and PFC By APRIL 30 MAY/JUNE Final QC reviews, and finalize auditors' reports Presentation of the audit results to Audit Committee Presentation of audit results to management Perform AUP procedures as required by the EPA and Department of Ecology Audit Process - Planning and Risk Assessment • Audit risk involves the risk of material misstatement in the financial statements: o Inherent risk, control risk and detection risk; • Audit is designed to provide reasonable: o Not absolute - assurance that the financial statements are free of material misstatements; • Audit scope and approach is determined based upon results of risk assessment 8 Port of Seattle 2019 Engagement Service Plan Audit Process - Testing Procedures Internal Controls Analytical Procedures - IT General & Application Controls - Revenue and expenses - Revenue Cycle - Leases, Airlines, Grants - Accruals - Disbursement Cycle - Trends, comparisons, and expectations - Payroll Cycle - Financial Close & Reporting - Compliance with Federal Awards & PFC Audit Guide 9 Port of Seattle 2019 Engagement Service Plan Substantive Procedures - Confirm account balances - Vouch to supporting documentation - Examine objective evidence - Tests of details - Representations from attorneys and management What is Materiality? It's the amount of a misstatement that could influence the economic decisions of users, taken on the basis of the financial statements. = It's calculated using certain quantitative (total assets) and qualitative factors (covenants, expectations, or industry factors) It identifies: 1 2 3 10 Port of Seattle 2019 Engagement Service Plan Significant risk areas Nature, timing, extent, and scope of test work Findings or misstatements Areas of Audit Emphasis Internal Control Cycles Management Estimates Debt Accounting for Leases Revenue Recognition Capital Assets Net Position Classification Pension & OPEB Liabilities Environmental Remediation Liability Investments Northwest Seaport Alliance - Joint Venture Uniform Grant Guidance (Single Audit) 11 Port of Seattle 2019 Engagement Service Plan Accounting Pronouncements (GASB) - Effective for 2019 Reporting • GASB 83 - Certain Asset Retirement Obligations (effective in 2019): Addresses accounting and financial reporting for certain asset retirement obligations. • GASB 84 - Fiduciary Activities (effective in 2019): Establishes the criteria regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. • GASB 88 - Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements (effective in 2019): Defines debt for purposes of disclosure in notes to financial statements, and improves the information that is disclosed in notes related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. 12 Port of Seattle 2019 Engagement Service Plan Accounting Pronouncements (GASB) - Effective after 2019 Reporting • GASB 87 - Leases (effective 2020): Addresses the accounting change for the recognition of certain lease assets and liabilities for leases that were previously classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the underlying contract. • GASB 89 - Accounting for Interest Cost Incurred before the End of a Construction Period (effective in 2020): Establishes accounting requirements for interest cost incurred before the end of a construction period, and requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred. • GASB 91 - Conduit Debt Obligation (effective in 2021): Establishes a single method of reporting for conduit debt obligations and commitments extended by issuers, to improve the consistency of accounting and financial reporting requirements associated with conduit debt obligations. 13 Port of Seattle 2019 Engagement Service Plan Communications • What concerns, if any, does the Audit Committee have regarding the audit this year? • Are there any areas that the Audit Committee feel present heightened risk this year? • What expectations does the Audit Committee have for on-going communications from the audit team prior to the exit conference? 14 Port of Seattle 2019 Engagement Service Plan Questions? Team Contact Information Olga A. Darlington, olga.darlington@mossadams.com (425) 551-5712 Tammy Erickson, tammy.erickson@mossadams.com (509) 777-0149 Tyler Reparuk, tyler.reparuk@mossadams.com (206) 302-6431 Anna Waldren, anna.Waldren@mossadams.com (206) 302-6282 Maria Braun, maria.braun@mossadams.com (206) 302-6295 15 Port of Seattle 2019 Engagement Service Plan The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought. Assurance, tax, and consulting offered through Moss Adams LLP. Investment advisory offered through Moss Adams Wealth Advisors LLC. Investment banking offered through Moss Adams Capital LLC. 16 Port of Seattle 2019 Engagement Service Plan