INTERNAL AUDIT REPORT
Operational Audit
Accounts Receivable Management - Fishermen's Terminal
January 2024 - December 2025

Issue Date: March 04, 2026
Report No. 2026-01

This report is a matter of public record, and its distribution is not limited. Additionally, in accordance with
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Accounts Receivable Management - Fishermen's Terminal

TABLE OF CONTENTS

Executive Summary ................................................................................................................................................. 3
Background ............................................................................................................................................................. 4
Audit Scope and Methodology ............................................................................................................................... 5
Schedule of Observations and Recommendations ................................................................................................ 6
Appendix A: Risk Ratings ....................................................................................................................................... 10

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Accounts Receivable Management - Fishermen's Terminal

Executive Summary
We completed an audit of Accounts Receivable Management - Fishermen's Terminal, for the period
January 2024, through December 2025. The audit was conducted to evaluate the accounts receivable
processes, including segregation of duties, and to assess compliance with Port policies and procedures.
At the Port, the accounts receivables process is a collaborative effort between Fishermen's Terminal
and the Accounting and Financial Reporting Department (AFR). While we obtained AFR procedures for
an understanding of the collection efforts, the scope of our audit focused on Fishermen's Terminal.
Our review found that the accounts receivable processes at Fishermen's Terminal need to be
strengthened. We identified risks due to gaps in internal controls, which increase the likelihood of
undetected misappropriation, and also increase the probability that delinquent accounts will continue to
rise. To support our conclusions, we identified opportunities where internal controls could be enhanced
or further developed. These opportunities are summarized below and discussed in greater detail
beginning on page six of this report.
1. (Medium) Decisions related to delinquent accounts at Fishermen's Terminal are based on informal
discussions and undocumented commitments, rather than established criteria. This has contributed to
a significant number of accounts remaining delinquent beyond 90 days.
2. (Medium) Continued weaknesses in Segregation of Duties (SOD) undermine effectiveness of key
internal controls.
3. (Low) Credit risk assessment procedures are not performed before executing commercial and
recreational moorage agreements with lessees (boat owners).

Glenn Fernandes, CPA
Director, Internal Audit

Responsible Management Team
Delmas Whitiker, Chief Operating Officer, Maritime
Stephanie Jones-Stebbins, Managing Director, Maritime

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Accounts Receivable Management - Fishermen's Terminal

Background
Fishermen's Terminal was the first construction project for the Port of Seattle, with pile drivers
hammering the supports for the Salmon Bay docks on February 15, 1913. When the terminal opened, it
had more than 1,800 feet of moorage with space for 100 boats, a two-story warehouse, and ample space
for repairing nets.
The terminal opened in 1914 and serves as the home port for Seattle's commercial fishing fleet. Located
in Salmon Bay between the Ballard and Magnolia neighborhoods, FT was originally conceived of as
both a general cargo facility and a dedicated home port for the fishermen of the region who fished the
Northwest and Alaskan waters, and later became the epicenter of the fishing and maritime industries.

Fishermen's Terminal in 1914
Today, Fishermen's Terminal serves more than 700 vessels and provides short-term and long-term
freshwater mooring for both fishing and commercial vessels, as well as pleasure craft. The facility also
includes 227,000 square feet of office, retail, restaurant, and warehouse space.

Fishermen's Terminal Today

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Accounts Receivable Management - Fishermen's Terminal

Audit Scope and Methodology
We conducted this performance audit in accordance with Generally Accepted Government Auditing
Standards and The Institute of Internal Auditors' Global Internal Audit Standards. These 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 the
evidence obtained meets this requirement and supports our audit objectives.
We used a risk-based, judgmental approach to select items for testing. As a result, the findings reflect
only the items tested and should not be interpreted as representative of, or extrapolated to, the entire
population.
The period audited was January 2024, through December 2025 and included the following procedures:
Governance, Compliance and Internal Control
• Obtained and reviewed Accounts Receivable (AR) related policies and procedures
• Interviewed management to understand AR related roles, responsibilities, and oversight
• Identified key AR responsibilities, including billing, cash receipt processing, adjustments, and
reconciliations
• Assessed segregation of duties within the AR function
• Verified whether user access reviews, for the financial system, were performed
Accounts Receivable Monitoring and Aging
• Walked through the AR process, including payment receipt, deposit, and posting to Accounts
Receivable
• Obtained and analyzed AR aging reports for the audit period
• Reviewed collection and escalation procedures for delinquent accounts to evaluate consistency
and effectiveness of collection efforts
• Verified management review and assess reasonableness of aging classifications
Credits and Write-offs
• Selected a sample of credits to verify approvals and documentation
• Obtained AR aging reports, to verify that write-offs were processed in accordance with
established policies

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Accounts Receivable Management - Fishermen's Terminal

Schedule of Observations and Recommendations
1) Rating: Medium
Decisions related to delinquent accounts at Fishermen's Terminal are based on informal
discussions and undocumented commitments, rather than established criteria. This has
contributed to a significant number of accounts remaining delinquent beyond 90 days.
The outstanding balance of accounts receivable at Fishermen's Terminal (FT) was $599,857 on
December 31, 2023, and increased to $1,588,723 as of December 31, 2025. Notably, on June 30, 2024,
the accounts receivable balance was $556,569 and more than tripled to $1,742,931 six months later, on
December 31, 2024. This increase coincided with a period during which the Port experienced a cyberattack in August 2024, that disrupted the ability to generate and distribute invoices. During this time, the
Port directed tenants to continue making payments consistent with their prior billing amounts and
communicated that late fees would not be assessed until a specified date. Despite this guidance, some
tenants did not remit payments, which contributed to the significant increase in outstanding accounts
receivable balances.
As of December 31, 2025, 55% of the accounts receivable balance is aged beyond 90 days, including
$717,367 or 45% in the 180 days past due category. Refer to the table below for a detail breakdown.

Litigation
Collections
Dispute
Pending/open
Total

0-30
$396,010
$768
$574
$148,693
$546,044

31-60
$1,184
$861
$87,376
$89,421

Days Past Due
61-90
91-180
$189
$237
$80,740
$81,166

$236
$524
$153,966
$154,725

Over 180
$136,671
$21,658
$2,166
$556,872
$717,367

Total
$532,681
$24,035
$4,361
$1,027,646
$1,588,723

According to Accounting Policy AC-15a (Write-Off of Uncollectible Receivables), "The Accounting &
Financial Reporting (AFR) Department, Accounts Receivable operations has written procedures in place
to ensure that past due receivables are administered promptly and in a manner that is cost-effective for
the overall collection program." Port of Seattle Accounts Receivable Procedures state, "Collection efforts
begin at 30 days" and "dunning letters are system generated 25 days from due date. Collectors will send
second letter at 30-59 days from date of invoices, final demand letter 60-89 days from date of invoice.
Accounts or items sent to collection agency may be transferred 30 days from date of notice or at the
discretion of the collector. If debtor does not respond to payment demand, the account will be placed for
collections with a third-party collector." If the account remains uncollectible after 180 days, after
attempting all standard account collection procedures, the account may be written off, subject to
authorization.
While FT performs early-stage customer outreach and engages in follow-up discussions regarding
outstanding balances, formal documentation of escalation criteria and related decision-making is not
consistently established in a standardized procedure aligned with AFR policy. Although AFR policy
outlines criteria for referral to third-party collections, in practice, escalation decisions often involve
collaboration between FT and AFR rather than referral once criteria are met. Customer discussions and
payment arrangements are not consistently documented in a standardized format or governed by clearly
defined escalation thresholds.

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Accounts Receivable Management - Fishermen's Terminal

Based on discussions with AFR, decisions regarding whether and how collection actions are executed
are frequently influenced by operational considerations. This has resulted in deviations from the
standard collection process outlined in policy.
For example, we were informed of an instance in which a customer account was assigned to a thirdparty collection agency. An FT employee subsequently contacted the agency to request that the account
be returned to the Port. The collection agency appropriately contacted AFR to confirm the request, and
AFR instructed the agency to retain the account. While AFR ultimately maintained authority over the
decision, this instance highlights the need for clearer communication protocols, defined escalation
procedures, and well-established boundaries between operational and financial oversight roles.
Recommendations:
FT should formalize written standard operating procedures (SOPs) for accounts receivable monitoring
and escalation, that align with AFR policy. The SOPs should define clear escalation thresholds,
require standardized documentation of customer communications and payment arrangements, and
clarify roles between FT and AFR. Any deviation from established escalation criteria should require
documented secondary managerial approval.
Management Response/Action Plan:
FT Management will create and establish recommended SOPs to be operationalized within 6 months.
In reference to the employee who called collections, there will be overall retraining to all FT staff of
acceptable steps in these processes.

DUE DATE: 02/15/2027

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Accounts Receivable Management - Fishermen's Terminal

2) Rating: Medium
Continued weaknesses in Segregation of Duties (SOD) undermine effectiveness of key internal
controls.
Weaknesses in SOD continue to exist in key business processes. The concept of SOD is having more
than one person required to complete a task. As an internal control, its primary objective is to prevent
fraud and errors.
In a prior audit (March 2023), management's response stated "the program is informal and needs to
be strengthened. This has resulted in underbilling and a sizable accounts receivables balance." The
response also states, "Commercial Fishing will work to create a structure that will accomplish a
separation of duties to ensure integrity in the revenue management function." However, we continue to
observe weaknesses in SOD. Below are some examples:
1. Five individuals at FT have system administrator roles within the Marina Vessel Management
System (MVMS), that allow modification of customer data without documented secondary reviews.
Such privileged access should be limited to only those with a business need.
2. Employees who support moorage utilization also assist with collections and billing adjustments.
Having these responsibilities combined makes it more challenging to optimize both revenue growth
and risk management.
Recommendations:
1. Assign moorage promotion, billing adjustments, and collection activities at FT to separate individuals
or teams, to reduce conflicts of interest. If segregation is not feasible, implement additional
compensating controls such as managerial secondary reviews or periodic independent oversight.
2. Regularly review access rights to ensure only authorized staff can modify customer or financial data.
Management Response/Action Plan:
Currently if any adjustments are made, MVMS was built to save ALL changes with (who, what and
when), therefore the concern of audit item #1 about "data without documented secondary review" is
inaccurate. There is visibility of changes. IN MVMS 2.0 there are changes that will be made on
authorizations for staff (this was affected during cyber attack and was put on hold until 2.0 work on
system began).
Item #2, due to the nature of our business and small team the assisting with collections and billing is
not assisting, it is review of changes (but they do not actually do the changes), so that it does not sit
with one person (which was the issue in the last audit), therefore putting less risk of having only one
person doing this work. This step has been considered a high level of customer service for the team
because they are able to understand dynamics of our customers and adjust and manage as needed.
There will be more periodic independent oversight as suggested.

DUE DATE: 06/15/2026

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Accounts Receivable Management - Fishermen's Terminal

3) Rating: Low
Credit risk assessment procedures are not performed before executing commercial and
recreational moorage agreements with lessees (boat owners).
Evaluating the lessee's ability to pay, increases the chance that the Port could recover money if an
account becomes uncollectible. These steps could include proof of insurance, security deposit, first and
last month's rent, and collateral evaluation.
Recommendations:
Management should assess which due diligence steps could be implemented within existing resources
to reduce financial exposure.
Management Response/Action Plan:
FT tariff #6 required proof of required certain maritime insurance, proof of current registration, and
seaworthiness or proof of Coast Guard Inspection. There will be a re-set and re-training with FT
business staff on ensuring these are annually updated.

DUE DATE: 02/15/2027

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Accounts Receivable Management - Fishermen's Terminal

Appendix A: Risk Ratings
Observations 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 an observation to be rated High, Medium, or Low. Low rated
observations will be evaluated and may or may not be reflected in the final report.
Rating

High

Financial/
Operational
Impact

Internal
Controls

Compliance

Significant

Missing or
partial
controls

Non-compliance
with Laws, Port
Policies,
Contracts

Partial
controls
Medium

Low

Moderate

Minimal

Not
functioning
effectively
Functioning
as intended
but could be
enhanced

Partial
compliance with
Laws, Port
Policies
Contracts
Mostly complies
with Laws, Port
Policies,
Contracts

10

Public
High probability
for external audit
issues and / or
negative public
perception
Moderate
probability for
external audit
issues and / or
negative public
perception
Low probability
for external audit
issues and/or
negative public
perception

Commission/
Management
Requires
immediate
attention

Requires
attention

Does not
require
immediate
attention