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INTERNAL AUDIT REPORT

Capital Project Audit

Capital Project Prioritization Process

April 2025-April 2026

Issue Date: May 20, 2026

Report No. 2026-08

Project Prioritization

TABLE OF CONTENTS

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

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

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

Schedule of Observations and Recommendations ................................................................................................ 6

Management Response and Action Plan ............................................................................................................... 7

Appendix: Risk Rating s ............................................................................................................................................ 8

Project Prioritization

Executive Summary

We completed an audit of the Port of Seattle’s (Port) Capital Project Prioritization Process for the period

April 2025 through April 2026. The objective was to evaluate how the Port prioritizes capital projects by

assessing the adequacy and effectiveness of capital project evaluation and planning processes within

the Aviation and Waterfront Project Management (Maritime) divisions, including the identification and

management of related risks. The audit also identified best practices and opportunities for improvement.

The Aviation division engaged external consultants in 2025 to assess its capital governance processes

and has implemented several key process improvements, which we verified. The Maritime division

stated that it is actively reviewing its procedures and developing enhancements. Both divisions should

be acknowledged for their commitment to strengthening governance and for management’s support of

these initiatives.

Controls within the Aviation division operated effectively and aligned with established policies and

procedures. However, in the Maritime division, we identified opportunities to enhance or further develop

internal controls. These opportunities are summarized below and discussed in detail beginning on page

six of this report.

1. (Low) Maritime does not have a formal documented process for project intake, prioritization, or

approval within the Capital Improvement Plan. This makes it more susceptible to inconsistent

decision making, undocumented or poorly supported capital planning decisions, and misalignment

with strategic priorities.

It is important to formalize and document Maritime’s project prioritization process. As the Port continues

to grow and expand its operations, a documented process will help assure alignment with the Port’s

strategic priorities and will also mitigate risk.

We also identified opportunities to improve processes related to updating intake forms and explicit

Capital Improvement Plan alignment with the Century Agenda Key Performance Indicators (KPIs) and

Executive Director Priorities; these observations were communicated separately to Port management.

Glenn Fernandes, CPA

Director, Internal Audit

Responsible Management Team

Karen Goon, Deputy Executive Director

Wendy Reiter, Managing Director, Aviation

Eileen Francisco, Director AV Project Management Group

Stephanie Jones Stebbins, Managing Director, Maritime

Tin Nguyen, Chief Development Office, Maritime, Maritime Planning and Project Management

Janice Zahn, Chief Engineer, Engineering General Services

Project Prioritization

Background

The Port generates more than $1 billion in annual operating revenues, incurs approximately $700 million

in operating and maintenance expenses, and invests approximately $1 billion in long-term infrastructure

projects annually. The Port is organized into three primary operating divisions: Aviation, Maritime, and

the Economic Development Division. Capital projects are delivered through the Aviation and Maritime

divisions. Assets previously acquired by the Economic Development Division have been reassigned to

Maritime for Capital Improvement Plan (CIP) purposes, and each division prepares a CIP on a five-year

planning cycle.

Aviation

The Aviation division’s 2026-2031 CIP outlines planned investment at Seattle-Tacoma International

Airport (SEA) and categorizes more than 81 projects into High, Medium, and Low priority levels, with an

estimated project cost of approximately $7.5 billion. Major projects include the South Concourse

Evolution, Concourse A Building Expansion, SEA Gateway, C Concourse Expansion, and the SEA

Underground (STS) System Replacement.

Aviation has maintained a project prioritization framework since 2016. In 2025, the division engaged

external consultants to assess its capital governance structure and subsequently implemented several

key process improvements, which were verified during the audit.

Maritime

The Maritime division delivers capital projects supporting multiple lines of business, including Cruise,

Elliot Bay Fishing & Commercial Operations, Recreational Boating, Portfolio Management, and Marine

Maintenance. Maritime’s 2026-2030 CIP includes over 170 large capital projects with an estimated value

of $610 million. Major ongoing projects include T117 Restoration, T91 NW Fender Replacement, T91

Berths 6 & 8, Fishermen’s Terminal Maritime Innovation Center, Terminal 91 Uplands, P66 Shore

Power, and T106 Customs and Border Protection Office and Facility Renovation.

During the audit, Maritime stated that it is actively reviewing and updating its CIP procedures, with

planned implementation later this year. Since the work remains in progress, we were unable to verify

the revised procedures during the audit.

Project Prioritization

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 April 2025, through April 2026 and included applying the following procedures

to the Aviation and Maritime operating divisions for large capital projects over $300,000:

Evaluate the Port’s intake and prioritization processes and related internal controls

• Interviewed personnel to understand the intake workflow and prioritization methodology

• Reviewed a sample of seven Aviation projects and five Maritime projects from each division’s

Project Intake portal

• Conducted walkthroughs of CIP development to confirm key steps and controls were in place

and reviewed key documents, including:

o Aviation’s CIP 2026-2031

o Maritime’s CIP 2026-2030

o Aviation Investment Committee agendas and minutes

o Commission meeting agendas and minutes (2025)

• Assessed alignment of CIP submissions with the Executive Director Priorities for 2026 and the

Century Agenda KPIs

Assess the accuracy, consistency, and governance of project scoring and approval

• Evaluated whether scoring assumptions were reasonable, documented, reviewed, and approved

• Reviewed a sample of seven aviation and four Maritime projects from each division’s CIP

• Reperformed scoring for sampled projects to verify accuracy and consistency

• Traced sample projects from the CIP to scoring approval documentation

Evaluate internal controls supporting risk monitoring and prioritization

• Reviewed the backlog/queue and assessed how new or emerging risks influence prioritization

decisions

• Identified best practices, opportunities to enhance controls, and improve overall governance

Project Prioritization

Schedule of Observations and Recommendations

Maritime does not have a formal documented process for project intake, prioritization, or

approval within the Capital Improvement Plan (CIP). This makes it more susceptible to

inconsistent decision making, undocumented or poorly supported capital planning decisions,

and misalignment with strategic priorities.

Intake Process:

Our evaluation of Maritime’s intake process found that sampled projects included completed intake

forms with appropriate supporting documentation and met the criteria for Large Capital Projects. Each

intake also had a documented disposition, and the projects aligned with the Century Agenda KPIs,

Executive Director Priorities and broader strategic plans.

Although the intake workflow is performed consistently in practice, Maritime does not have a

documented Standard Operating Procedure (SOP) governing intake or prioritization process. The

absence of formal procedures reduces standardization across multiple lines of business and may lead

to errors, inefficiencies, or delays.

Scoring and Approval Process:

We determined that Maritime’s scoring and approval process provides an informal structure for

approvals; however, key governance elements are absent. The division does not have a formal scoring

methodology, approval decisions are not documented in a standardized manner (relying instead on

notes in the Division Review), and no written policies or procedures exist to govern scoring or approval

activities.

Key controls:

We evaluated Maritime’s project prioritization processes and identified several gaps related to the

absence of written policies, procedures, and a formalized process framework. While an informal process

exists, including risk monitoring, key process steps are not defined nor standardized. As a result, there

is no documented guidance governing the overall CIP project prioritization process.

These weaknesses reduce transparency, consistency and oversight, increasing operation risk. In

addition, aging infrastructure and broader economic instability heighten the need for a formalized

evaluation, prioritization, and approval framework to effectively mitigate emerging risks.

Recommendations:

To enhance transparency and accountability, Maritime should develop a formalized CIP governance

framework, including: a documented project intake process; a standardized scoring methodology; formal

approval requirement; and end-to-end policies and SOPs outlining roles, responsibilities, scoring

criteria, and documentation standards.

Rating: Low

OPPORTUNITY

Project Prioritization

Management Response and Action Plan

Maritime management acknowledges this low audit finding and is in the process of strengthening our

CIP governance structure and documentation with SOPs for planning and CIP development.

During our annual Maritime capital planning, we utilize a formal intake process to gather project needs

across the division. This intake process has been in use for small projects (below $300K) since 2018

and for large projects ($300K+) since 2022. Although the intake process has been formalized over the

years, we recognize the need to document the process along with our CIP development process.

We also agree with the need to strengthen our prioritization with consistent processes. Due to the

multiple business lines and competing diverse needs across the Seaport, a scoring system for

prioritization may not be appropriate for addressing this gap. As part of strengthening our CIP

governance structure, we will evaluate and implement a prioritization process that best allocates highest

needs with limited capital capacity.

DUE DATE: 12/31/2027

Project Prioritization

Appendix : 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

Financial/

Operational

Impact

Internal

Controls

Compliance

Public

Commission/

Management

High

Significant

Missing or

partial

controls

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