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INTERNAL AUDIT REPORT

Limited Contract Compliance Audit

Concourse Concessions LLC

January 2024 – June 2024

Issue Date: March 5, 2025

Report No. 2025-03

Concourse Concessions LLC

TABLE OF CONTENTS

Executive Summary ............................................................................................................................................................................... 3

Background .............................................................................................................................................................................................. 4

Audit Scope and Methodology ......................................................................................................................................................... 5

Appendix A: Risk Ratings ..................................................................................................................................................................... 6

Concourse Concessions LLC

Executive Summary

Internal Audit (IA) completed a limited scope audit of the Lease and Concession Agreement (Agreement)

between Concourse Concessions LLC, and the Port of Seattle (Port). The period audited was January

1, 2024, through June 30, 2024.

The audit was performed to determine whether concession fees were complete, properly calculated,

and remitted timely to the Port.

We concluded that Concourse Concessions LLC materially complied with the terms of the

Agreement. No exceptions were identified.

We extend our appreciation to management and staff of Aviation Commercial Management and the

Accounting & Financial Reporting Departments for their assistance and cooperation during the audit.

Glenn Fernandes, CPA

Director, Internal Audit

Responsible Management Team

Lisa Lam, Director, Accounting and Financial Reporting

Khalia Moore, Assistant Director, Aviation Commercial Management

Jeff Wolf, Director, Aviation Commercial Management

Concourse Concessions LLC

Background

On March 15, 2019, The Port of Seattle (Port) entered into a lease agreement (AIR002362) with

Concourse Concessions LLC. Concourse Concessions LLC operates Caffé D’arte.

According to ExploreSEA.org:

“As the premier Northwest artisan coffee roaster, Caffé D’arte was founded in Seattle in the 1980’s [sic]

by Italian espresso master Mauro Cipolla. Along with offering award-winning coffee drinks, Caffé D’arte

features quality pastries from Macrina Bakery and Alki Bakery, and an Italian-inspired menu featuring

made-to-order pizza, grilled sandwiches, hot breakfast items, and fresh grab-to-go sandwiches and

salads, all prepared on-site every day with the highest quality.”

The Minimum Annual Guarantee (MAG) is 85% of the total paid by the concessionaire to the Port, for

the previous calendar year. The annual MAG for 2024 was $806,311.97. At the end of the lease year, a

reconcilation is performed comparing the Percentage Fees due to the Port, to the Agreement Year’s

MAG. Any amount of the Percentage Fees that fall below the MAG is due to the Port.

Percentage Fees:

15% of annual gross sales less than $3,000,000

15.5% of annual gross sales between $3,000,000 and $4,000,000

16% of annual gross sales greater than $4,000,000

The table below reflects 2024’s Gross Sales and Percentage Fees:

Period

Gross Sales

Percentage Fee

2024 January - June

$3,038,412

$455,954

2024 July - December

2,960,221

468,827

$5,998,633

$924,781

Concourse Concessions LLC

Audit Scope and Methodology

We conducted the engagement in accordance with Generally Accepted Government Auditing Standards

and the Global Internal Audit Standards. 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.

In some instances, we used judgmental sampling methods to determine the samples selected for our

audit test work. In those cases, the results of the work cannot be projected to the entire population.

The period audited was January 2024, through June 2024 and included the following procedures:

• Validated that the percentage fees were calculated correctly and in accordance with the lease

revenue thresholds

• Agreed Concessionaire’s monthly general ledger sales data to what was provided to the

Accounting & Financial Reporting Department

• Agreed point of sale summary reports to the general ledger

• Obtained the Annual Gross Sales Report from the CFO of Concourse Concessions LLC’s and

compared the report to year-end gross sales data reported to AFR

• Reviewed the Profit & Loss statements for variances

• Reviewed a random sample of invoices to determine if they were paid on time and for the full

amount charged

• Validated that concessionaire was certified through the Office of Minority and Women’s Business

Enterprises (OMWBE) and confirmed with management that they are reflected as such on the

Airport Concessions Disadvantaged Business Enterprise (ACDBE) participation report submitted

to the Federal Aviation Administration (FAA)

Concourse Concessions LLC

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

Moderate

probability for

external audit

issues and / or

negative public

perception

Requires

attention

Low Minimal

Functioning as

intended but

could be

enhanced

Mostly complies

with Laws, Port

Policies,

Contracts

Low probability

for external audit

issues and/or

negative public

perception

Does not

require

immediate

attention