INTERNAL AUDIT REPORT
Operational Audit
Federal Grant Administration – Aviation Division
January 2020 – September 2022
Issue Date: November 16, 2022
Report No. 2022 -14
Federal Grant Administration – Aviation Division
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TABLE OF CONTENTS
Executive Summary ................................................................................................................................................ 3
Background............................................................................................................................................................. 4
Audit Scope and Methodology ............................................................................................................................ 6
Appendix A: Port of Seattle - Schedule of Expenditures of Federal Awards (SEFA) .................................... 7
Appendix B: Risk Ratings ...................................................................................................................................... 8
Federal Grant Administration – Aviation Division
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Executive Summary
Internal Audit completed an audit of Federal Grant Administration within the Aviation (AV) Division for the
period January 2020 through September 2022. The audit was performed to evaluate if controls, to assure
compliance with grant requirements, were designed effectively and operating as intended. Additionally, we
assessed the awareness of grant requirements throughout the life of the grant, and in critical areas of the
grant administration.
We also reviewed and leveraged the overall risk and control assessments, and audit work and related testing
for certain areas (e.g., COVID-19 Relief grants) of the AIP grants, performed by Moss Adams, the Port of
Seattle’s (Port’s) Independent Auditor. This is required as part of the 2021 Annual Single Audit, and is
submitted to the Federal Aviation Administration (FAA).
Additionally, we performed a follow-up on our 2019 audit of the Noise Insulation Program; more specifically
on one issue related to inconsistent compliance with “Disadvantaged Business Enterprise” (DBE) and “Buy
American” requirements, by the Highline School District (HSD), a sub-recipient of AIP grants through the
Port. The Port has since strengthened monitoring controls and has provided reasonable assurance for
compliance by creating a pass-through agreement and a self-certification process with HSD, and taking some
other measures to address HSD’s accountability for those requirements.
The Airport Improvement Program (AIP) is a major federal grant program, managed by the FAA, which
provides funds to public-use airports for planning and development. Improvement projects relate to runways,
taxiways, ramps, lighting, signage, weather stations, navigational aids, land acquisition, etc. Per the Port’s
Schedule of Expenditures of Federal Awards (SEFA), as of December 31, 2021, FAA AIP funding was
$135,865,813, including COVID-19 Relief funding of $100,373,161. Such COVID-19 grants have been
administered and provided by the FAA to eligible airports, including Seattle-Tacoma International Airport,
through the existing AIP model, as a mechanism for expeditious fund distribution.
Through relevant document review and inquiries with 16 business leaders and staff, we identified monitoring
controls that were important to the current processes. These controls included the FAA Airport District Office’s
(ADO) involvement in all phases of grant administration, Port Commission’s review and approval of the
annual capital improvement plan, Port Legal’s agreement reviews, the Central Procurement Office’s (CPO)
construction contracting and procurement processes and protocols, and business leaders’ ongoing
monitoring engagement and grant coordination meetings internally and with the FAA. Finally, quality review
and tracking of grants and claims, by AV Finance & Budget (F&B) and Accounting Financial Reporting (AFR),
further strengthened controls.
Based on the work we performed, we concluded that controls were designed effectively and operating
as intended. We also concluded that key stakeholders were aware of federal grant requirements
throughout the life cycle of the AIP grants, and in the critical areas of grant administration.
We would like to thank AV F&B, AFR, CPO, AV Departments and other Departments that participated in
information gathering, for their cooperation and partnership during this audit.
Glenn Fernandes, CPA
Director, Internal Audit
Responsible Management Team
Borgan Anderson, Director, Aviation Finance & Budget
Rudy Caluza, Director, Accounting and Financial Reporting
Eileen Francisco, Director, Aviation Project Management Group
Nora Huey, Director, Central Procurement Office
Dawn Hunter, Director, Aviation Commercial Management
Federal Grant Administration – Aviation Division
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Background
The Airport Improvement Program (AIP) is a major federal grant program, managed by the FAA, which
provides funds to public-use airports for planning and development. Improvement projects relate to
runways, taxiways, ramps, lighting, signage, weather stations, navigational aids, land acquisition, and
some areas of planning. Funding for the program is provided from the Airport and Airway Trust Fund,
which receives revenue from taxes on airplane tickets sold to the public and a tax on aviation fuel. The
federal grant may cover between 75 and 95 percent of the eligible costs, depending on the type of
improvement and the size of the airport. Both commercial and general aviation airports are eligible for
AIP grants. The FAA issues guidance on grant requirements and changes via various resources,
including the AIP Handbook, Advisory Circulars, grant FAQs on their website, and grant agreement
provisions.
The Port of Seattle (Port) has typically used federal grants to fund construction projects. The AIP
supports the following “Port Century Agenda” Strategic Goals:
• Position the Puget Sound region as a premier international logistics hub.
• Advance this region as a leading tourism destination and business gateway.
Per the Port's Schedule of Expenditures of Federal Awards (SEFA), as of December 31, 2021, FAA AIP
funding was $135,865,813, including COVID-19 Relief funding of $100,373,161 (See Appendix A). New
federal laws and regulations for COVID-19 Relief grants emerged during the pandemic and impacted
the Seattle-Tacoma International Airport’s (SEA) operations and concessionaires.
The following economic relief grants have been administered and provided by the FAA to eligible
airports, including SEA, through the existing AIP model, as a mechanism for expeditious fund
distribution:
Coronavirus Aid, Relief, and Economic Security (CARES) Act
On March 27, 2020, U.S. Congress passed the CARES Act, which included $10 billion of funding to
support U.S. airports that experienced severe economic disruption caused by the COVID-19 public
health emergency. The funds were distributed to eligible airports to prevent, prepare for, and respond
to the impacts of this emergency. SEA was awarded a $192,133,000 federal grant to help lessen the
significant economic stress affecting the airport. SEA received $44,985,000 and $147,148,000 in
2021 and 2020, respectively, in awarded federal grants.
Coronavirus Response and Relief Supplemental Appropriation (CRRSA) Act
On December 27, 2020, the CRRSA Act was signed into law. It included nearly $2 billion of economic
relief for eligible U.S. airports and airport concessions. SEA received a $37,365,000 grant to lessen
the economic stress affecting the airport. SEA also received $5,355,000 of concession relief with
which it provided tenant relief from rent and other minimum annual guarantee payments to on-airport
car rental, on airport parking, and in terminal airport concessions.
American Rescue Plan (ARP) Act
On March 11, 2021, the ARP Act was signed into law providing additional relief for the pandemic. The
ARP included $8 billion of funding for U.S. airports to cover costs of operations, personnel, cleaning,
and also included additional rent relief and mitigation for other costs incurred by airport
concessionaires. SEA was granted $154,374,000 of ARP funding to lessen the economic stress
affecting the airport. SEA was also granted $21,419,000 of concession relief, which provide tenant
relief from rent and minimum annual guarantee payments to in-terminal airport concessions. As of
December 31, 2021, SEA applied and received $12,714,000 of the awarded grants with the remaining
amount allocated to 2022 and 2023.
The AV Finance & Budget (F&B) team, staffed by a full-time, dedicated Grants Program Manager plays
an integral role in the federal grant administration for the AV Division. The Accounting Financial
Federal Grant Administration – Aviation Division
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Reporting (AFR) General Accounting team is responsible for the grant reimbursement claim process,
maintains/tracks federal grants summary, and prepares the year-end SEFA. Other key stakeholders in
the federal grant administration processes for the AIP include: AV Departments - Project Management
Group, Construction Management, and Commercial Management; AFR Revenue Services; Legal;
Central Procurement Office (CPO); and External Relations – Government Affairs.
Through relevant document review and inquiries with 16 business leaders and staff, Internal Audit
identified monitoring controls that are important to the current processes, including the following:
• FAA Airport District Office’s (ADO’s) involvement in all phases of grant administration (i.e., annual
planning, application approval, progress reporting, claims/reimbursements, and close-out).
• Port Commission’s review and approval of the annual capital investment plan, budget, and status
briefings.
• Legal department’s agreement reviews.
• CPO’s construction contracting and procurement processes and protocols.
• Business leaders’ ongoing monitoring engagement and grant coordination meetings internally and
with FAA.
• Quality review and tracking of grants and claims by AV F&B, and AFR, which respectively possess
subject matter expert knowledge.
Federal Grant Administration – Aviation Division
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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 audit scope was for the Port of Seattle’s (Port’s) Aviation (AV) Division’s
administration of the grants under one major federal program – the Airport Improvement Program (AIP),
which included COVID-19 Relief funding. The AIP is administered by the Federal Aviation Administration
(FAA).
In some cases, we used a judgmental method to determine the samples selected for our audit test work.
In those cases, the result of the work is not representative of the population of a whole, as we did not
select a statistical based random sample.
We reviewed and leveraged the overall risk and control assessments, and audit work and testing, for
certain areas (e.g., COVID-19 Relief grants) of the AIP grants, performed by Moss Adams, the Port’s
Independent Auditor, as part of the 2021 Annual Single Audit.
We reviewed key requirements from the Office of Management and Budget (OMB) Compliance
Supplement for Single Audits, the Government Finance Officers Association’s grant administration best
practices publication, and the Washington State Auditor Office’s grant administration risk assessment
checklists. We identified, through our research, the following critical processes:
• Grant Programs Administration and Operation
• Financial Management of Grants
• Systems and Methods to Support Grants
• Risk Assessment and Internal Control System
• Sub-recipient Monitoring
• Continuous Communications and Information Flows
• Documentation, Reporting, and Auditing
The period audited was January 2020 through September 2022 and included the following
procedures:
Interviews & Process Walkthroughs
Interviewed 16 Port managers and staff to gain an understanding of current processes and controls,
and opportunities for improvement in the above-noted, key areas.
Document Review
Reviewed the following key documents associated with the federal grant administration:
• FAA and Single Audit Standards, Guidance, and Reports
• Port Grant Administration Process, Policies, Procedures, and Tools
• Port Commission Records and Budget Documentation
• Grant Specific Documents and Forms
In addition, we performed a follow-up on our 2019 operational audit of the Noise Insulation Program
(Report No. 2019-04); more specifically, on one issue related to inconsistent compliance with
“Disadvantage Business Enterprise” (DBE) requirements (49 U.S. Codified Federal Regulations Part
26) and the “Buy American” requirements (49 U.S. Code, §50101), by the Highline School District, a
sub-recipient of AIP grants through the Port.
Federal Grant Administration – Aviation Division
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Appendix A: Port of Seattle - Schedule of Expenditures of Federal Awards
(SEFA), as of December 31, 2021
[Source: Port of Seattle Single Audit Report for FY2021.]
Federal Grant Administration – Aviation Division
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Appendix B: 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
Public
Commission/
Management
High
Significant
Missing or not
followed
High probability
for external audit
issues and / or
negative public
perception
Requires
immediate
attention
Medium
Moderate
Partial controls
Not functioning
effectively
Moderate
probability for
external audit
issues and / or
negative public
perception
Requires
attention
Low
Minimal
Functioning as
intended but
could be
enhanced
Low probability
for external audit
issues and/or
negative public
perception
Does not
require
immediate
attention