INTERNAL AUDIT REPORT Operational Audit Procurement - Personal Service Agreements January 2023 - March 2026 Issue Date: May 20, 2026 Report No. 2026-06 This report is a matter of public record, and its distribution is not limited. Additionally, in accordance with the Americans with Disabilities Act, this document is available in alternative formats on our website. Procurement - Personal Service Agreements TABLE OF CONTENTS Executive Summary ................................................................................................................................................. 3 Background ............................................................................................................................................................. 4 Audit Scope and Methodology ............................................................................................................................... 5 Appendix A: Risk Ratings ......................................................................................................................................... 6 2 Procurement - Personal Service Agreements Executive Summary We completed an audit of the Port of Seattle (Port's) Central Procurement Office's (CPO) Procurement process, specifically relating to Personal Service Agreements, for the period January 2023, through March 2026. The audit was conducted to test the overall compliance of CPO with its own internal policies and procedures, with local state laws and regulations, and with the industry's best practices. As a recipient of public funds, the Port has a duty to assure that spending is aligned with its overall mission and goals while being fiscally responsible. Each year, as the Port continues to grow and evolve, it also continues to enter into a multitude of service agreements with external consultants and vendors to address various concerns and needs. As such, the Port's CPO continues to be a crucial key department responsible for leading the effort regarding these procurement processes, assuring they are carried out efficiently and in compliance with Port policies and federal/state regulations. We concluded that Port management, monitoring, compliance, and internal controls, relating to Personal Service Agreements, aligned with established policies and procedures. We did not identify any issues that warranted reporting. We extend our appreciation to Port management and staff for their assistance and cooperation during this audit. Glenn Fernandes, CPA Director, Internal Audit Responsible Management Team Karen Goon, Deputy Executive Director Sofia Mayo, Director Central Procurement Office 3 Procurement - Personal Service Agreements Background The Port's CPO aims to "deliver innovative, responsible procurement solutions through transparent engagement and a predictable process." The department is comprised of four different teams: Purchasing, Public Works, Service Agreements (Personal and Professional Services), and Planning & Analytics. For this particular audit, Internal Audit (IA) focused on Service Agreements, specifically Personal Services. The Service Agreements team is responsible for procuring and managing all consultant services, assuring that the procurements are completed efficiently and transparently while complying with Port policies, procedures, and federal/state requirements. Personal services, per RCW 53.19, encompass any "professional or technical expertise provided by a consultant to accomplish a specific study, project, task, or other work," except Architectural and Engineering (A&E) Services, which are specifically addressed by RCW 39.80. Each service agreement is a contract between the Port and an external consultant and can be tailored and contain very specific terms. All agreements will include the following: contract price, duration, scope of work (background, tasks, deliverables, schedule), insurance requirements, and fee schedule. Depending on the contract category, there are different requirements related to required approvals and the overall competitive solicitation process. As noted in the table below, there are three different categories: Category I $49,999 and under Category II $50,000 to $199,999 Category III $200,000 and above Commission/Executive Director (ED) Approval Not Required Not Required Required at $300,000+ Competition Requirement Not Required Competitive Selection Contract Amount Selection Process Competitive Selection Best Value: Consider overall Qualifications first, then consider price if firms/vendors are equally qualified. IA obtained a full listing from CPO of all personal service agreements from January 2023 to March 2026, noting the following breakdown: Category Cat I Cat II Cat III Total Count 138 67 124 329 Once the contract is executed and signed by all parties, the responsibility of managing the contract transfers from CPO to the respective Project Manager (PM). However, CPO will continue to monitor agreements for any amendments/modifications, contract expiration dates, and missing or expiring insurance. 4 Procurement - Personal Service Agreements 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 2023, through March 2026 and included the following procedures: Inquiries • Conducted inquiries with CPO employees to gain an understanding of: o The overall procurement process related to personal service agreements o How potential conflicts of interest between CPO and external consultants/vendors are addressed o How contract prices are determined, benchmarked, and agreed upon Document Review • Obtained and reviewed key documents, including: o CPO Internal Policies and Standard Operating Procedures (SOPs): ▪ CPO-1 Policy for Consulting Services ▪ CC-02 Consultant Ethics and Conflict of Interest ▪ SOP & Checklist (for Category I, II, and III) ▪ Negotiation/ Action Summary Template o Municipal Research and Services Center (MRSC) Contracting for Services: Guidelines for Local Governments in Washington State o Personal Services Contracting Manual for Washington Ports, by MRSC and Washington Public Ports Association o Contracting for Services - A National State Auditors Association (NSAA) Best Practices Document Validation • Compliance Testing: o Obtained a full listing of personal service agreements for the audit period o Haphazardly selected five agreements (two for Category III, two for Category II, and one for Category I) to test compliance, in accordance with significant clauses from the following: ▪ Internal policies and SOPs, as noted above ▪ State Laws and Regulations, specifically RCW 53.19 Personal Service Contracts ▪ Industry best practices, per the NSAA Best Practices Document 5 Procurement - Personal Service Agreements 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 6 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