Financial Stewardship Accountability Transparency Port of Seattle Audit Committee Internal Audit Update Glenn Fernandes - Director, Internal Audit September 3, 2026 P69 Commission Chambers 11:00 AM - 12:30 PM Operational Excellence Governance Internal Audit Organization Structure Glenn Fernandes Director Saylor Nygaard Sr. Administrative Assistant Manager Internal Audit Spencer Bright Manager Internal Audit - Capital Ritika Marwaha Nikita Goyal Darcey Axon Brent Layman Sr. Internal Auditor Sr. Internal Auditor Sr. IT Auditor Nicole Uy Jenilee Finley Sr. Internal Auditor Sr. Internal Auditor Dan Chase Manager Internal Audit - IT Jarrett Perkins Internal Auditor 2 Item #4 Report Title Public Art Program Timekeeping - Maritime Accounts Receivable Management - Fisherman's Terminal Airport Dining & Retail - Street Pricing1 Procurement - Personal Service Agreements FMLA 3rd Party Administration2 South King County and Port Communities Fund C Concourse Expansion Main Terminal Low Voltage Post IAF Airline Realignment Planewear Tenant Reimbursement Agreement (CT-09) Capital Project Prioritization Process Data Centers & Supporting Technology Facilities Baggage Conveyor Systems Payment Card Industry (PCI) Assessment Sixt Rent A Car, LLC HIS HCL SEA FB, LLC Marmot Mountain, LLC DBA Exofficio 2026 AUDIT PLAN STATUS Type Performance Performance Performance Performance Performance Performance Performance Performance - Capital Performance - Capital Performance - Capital Performance - Capital Performance - Capital IT IT IT Limited Contract Compliance Limited Contract Compliance Limited Contract Compliance 1. Airport Dining & Retail ACDBE program was renamed to focus on Street Pricing 2. This audit will be removed from the 2026 Audit Plan as the identified risk was deemed mitigated Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Complete In Process KEY On Hold Not Started 3 Internal Audit Capital GC/CM Continuous Audits Item #4  RCW 39.10.385 requires an independent audit  Auditor provides the Audit Committee with annual updates and final reports upon completion of each project Capital GC/CM Continuous Audits Auditor Main Terminal Low Voltage System Upgrade R.L. Townsend Post IAF Airline Realignment R.L. Townsend C Concourse Expansion Project R.L. Townsend Primary Fire Station Continuing Operations Preservation Project - MC/CM Cost-of-Record Port Internal Audit Baggage Optimization Phase 3 Fort Hill Concourse Low Voltage Upgrade Port Internal Audit South Concourse Evolution Talson Main Terminal Improvement Program Contract Anticipated in 2026 Concourse HVAC Improvement/Renewal Program Contract Anticipated in 2026 4 Updated 2026 Audit Plan Limited Contract Compliance • Sixt Rent A Car, LLC • HIS HCL SEA FB, LLC • Marmot Mountain, LLC DBA ExOfficio Item #4 Performance • Public Art Program • Timekeeping - Maritime • Accounts Receivable Management - Fishermen's Terminal • Procurement - Personal Service Agreements • South King County and Port Communities Fund • Airport Dining & Retail Street Pricing¹ • FMLA 3rd Party Administration2 Performance - Capital Information Technology C Concourse Expansion Main Terminal Low Voltage Post IAF Airline Realignment Planewear Tenant Reimbursement Agreement (CT-09) • Capital Project Prioritization Process • Data Centers & Supporting Technology Facilities • Baggage Conveyor Systems • Payment Card Industry (PCI) Assessment • • • • 1. Airport Dining & Retail ACDBE program was renamed to focus on Street Pricing 2. This audit will be removed from the 2026 Audit Plan as the identified risk was deemed mitigated 5 Item #5 2027 Baseline Budget Overview Line Org/Node Name 2025 2026 2027 26 Bud to 27 26 Bud to 27 Account Description Budget Budget Budget Bud Change Bud Var 1 Salaries and Benefits $2,193,568 $2,374,793 $2,525,032 $150,239 6.33% 2 Equipment Expense 563 0 0 0 0.00% 3 Supplies & Stock 1,000 1,035 1,035 0 0.04% 4 Outside Services 2,095 2,265 14,585 12,320 543.93% 5 Travel & Other Employee Exp 60,812 60,511 47,860 (12,651) (20.91%) 6 Promotional Expenses 0 0 0 0 0.00% 7 General Expenses 505 825 755 (70) (8.48%) 8 Other Expenses 8,004 8,343 8,813 470 5.63% 9 Total Charges To Capital 0 0 0 0 0.00% Non Payroll Subtotal $72,979 $72,979 $73,048 $69 0.1% Total $2,266,547 $2,447,772 $2,598,080 $150,308 6.1% 6 Item #5 2026 YTD Actuals Org/Node Name Line Account Description 2025 2025 1H 2026 1H 2026 1H 26 Bud to 1H 26 Act 1H 26 Bud to 1H 26 Act Budget Actuals Budget Actuals Bud Change Bud Change 2.8% 1 Salaries and Benefits $2,193,568 $2,089,639 $1,173,291 $1,140,790 $32,501 2 Equipment Expense 563 5,273 0 767 (767) 3 Supplies & Stock 1,000 1,007 527 532 (5) (0.9%) 4 Outside Services 2,095 1,435 2,265 580 1,685 74.4% 5 Travel & Other Employee Exp 60,812 58,802 52,959 26,335 26,624 50.3% 6 Promotional Expenses 0 0 0 0 0 7 General Expenses 505 (98,235) 825 0 825 100.0% 8 Other Expenses 8,004 8,526 4,172 3,667 504 12.1% 9 Total Charges To Capital 0 0 0 0 0 Non Payroll Subtotal $72,979 $(23,192) $60,748 $31,881 $28,866 47.5% Total $2,266,547 $2,066,447 $1,234,038 $1,172,671 $61,367 5.0% 7 (Capitalized) 2027 Outside Services Item #5 GC/CM Audit Costs (Outside Services) are directly capitalized to each project and are not reflected in the expense budget. Below is a summary of GC/CM spending for informational purposes. Project Firm Post IAF Airline Realignment RL Townsend South Concourse Evolution Talson Solutions Industrial Wastewater Treatment Plant (Heavy Civil GC/CM) Not Selected Baggage Optimization 3 Fort Hill & Associates Concourse HVAC Improvement Renewal/Replacement Program (CHIRRP) Not Selected Terminal 25 South Restoration (Heavy Civil GC/CM) Not Selected Main Terminal Improvement Program Not Selected Total Construction Project Lifecycle Cost Estimate Audit Estimate Audit Work $45MM 1B $82KIn Process expected completion 2027 634KIn Process expected completion 2032 150MM 300MM 118KExpected timeline 2027 - 2030 217KIn Process expected completion 2027 200MM 140KExpected timeline 2027 - 2033 Pending Acquisition Plan; budgets not - established 499KExpected timeline 2027 - 2034 $1.69MM 520MM $2.2B 8 Internal Audit Charter Updates Item #6 The Internal Audit Charter was last updated in September 2020 Global Internal Audit Standards (GIAS) require that we review the charter annually As approved by the Audit Committee, the Internal Audit Charter has been updated to reflect: Use of the GIAS as the professional standards followed Changes / updates to the GIAS from the 2024 refresh Updates due to the 2026 Topical Requirements  The Audit Committee Charter will be updated to reflect adoption of GIAS 9 Audits Completed in Third Quarter - 2026 Items #7-9 1) Primary Fire Station Continuing Operations Preservation Project - MC/CM Cost-of-Record (Primary Fire Station Project - MC/CM Cost-of-Record) 2) Sixt Rent A Car, LLC 3) Marmot Mountain, LLC DBA ExOfficio 10 Primary Fire Station Project - MC/CM Cost-of-Record Item #7  Project Objective: Deliver improvements at Fire Station 1 using GC/CM delivery  Scope: November 2024 through March 2026  Hoffman General Contractor/Construction Manager (GC/CM) final contract: $15.8MM  State law permits alternative subcontractor selection for subcontracts more than $3MM under the GC/CM project delivery method  Independent audit is required to confirm proper cost accrual 11 Primary Fire Station Project - MC/CM Cost-of-Record Item #7  Hermanson Company, LLC selected as the Mechanical Contractor/Construction Manager (MC/CM): Guaranteed Maximum Price (GMP) of $4.6MM; $4.1MM billed to date  External consultant originally contracted to perform monthly review of MC/CM's documentation; Internal Audit (IA) took over cost review for compliance and accuracy  Port Construction Management's team reviewed GC/CM's costs monthly 12 Item #7 Primary Fire Station Project - MC/CM Cost-of-Record Cost Category Labor Billed Tested JCL¹ Difference Questioned $1,139,978 $1,144,752 $4,774 $132,495 Specified General Conditions 970,687 970,687 - - MC/CM Fee 258,146 258,146 - - Other 29,672 29,672 - 22,255 Equipment 662,000 662,000 - - Subcontractors 840,608 855,608 15,000 - Material 179,108 179,254 146 16,475 $4,080,199 $4,100,119 $19,920 $171,225 Total ¹ The MC/CM Fee is not included in the Job Cost Ledger (JCL), instead our testing recalculated it to the Continuation Sheet without exception. 13 Primary Fire Station Project - MC/CM Cost-of-Record Item #7 Labor MC/CM reimbursed for direct labor and burden; labor rates set at project start and updated semiannually Port required labor rate updates for state unemployment and worker's comp, but did not obtain them; IA obtained tax rate notices directly from MC/CM Agreement requires wage rates paid to laborers/mechanics to meet or exceed applicable wage determinations 14 Primary Fire Station Project - MC/CM Cost-of-Record Labor (cont.)  Tradespersons were paid standard base rates; Port billed at "occupied space" premium rates  Federal Unemployment Tax Act (FUTA) Rate billed on average $0.46/hr. vs. correct $0.03/hr.  State Unemployment Tax Act (SUTA) calculation did not apply annual maximum thresholds  Total questioned costs: $131K (including fee) Name Trade (Fieldwork) A.B. J.B.G. I.B. W.A.D. A.M.D. A.M.D. G.I.E. T.L.E. A.G. B.E.H. S.P.K. E.P.K. M.A.K. A.L. Z.L. T.L.L. E.A.L. M.M. J.M.M M.R.N. Q.A.S. Sheet Metal Plumbers & Pipe Fitters Sheet Metal Sheet Metal Sheet Metal Sheet Metal Plumbers & Pipe Fitters Sheet Metal Sheet Metal Plumbers & Pipe Fitters Plumbers & Pipe Fitters Plumbers & Pipe Fitters Plumbers & Pipe Fitters Plumbers & Pipe Fitters Plumbers & Pipe Fitters Sheet Metal Plumbers & Pipe Fitters Sheet Metal Plumbers & Pipe Fitters Sheet Metal Plumbers & Pipe Fitters Classification Reported Total Billed Hours Expected Amount Using Labor Rates Paid Foreman 24.50 $3,614.73 $3,154.20 Apprentice 3 378.00 34,535.12 30,933.16 Journeyman 16.00 2,113.44 1,841.60 Apprentice 2 12.00 1,064.88 849.48 Lead Foreman 3.00 469.77 379.65 Lead Foreman 3.00 469.77 379.65 Apprentice 3 346.00 1,554.20 28,306.44 Journeyman 510.00 68,926.50 60,072.90 Foreman 674.00 99,228.12 84,783.78 Apprentice 2 10.00 1,083.92 814.50 Foreman 8.00 1,190.96 1,028.08 Journeyman 350.00 48,923.00 42,980.00 Foreman 785.00 119,575.15 102,606.99 Lead Foreman 86.00 13,394.50 11,589.36 Foreman 102.00 15,546.84 13,338.54 Foreman 44.00 6,491.76 5,688.32 Journeyman 714.00 99,775.56 87,662.00 Foreman 1,243.00 180,947.46 154,620.94 Gen Foreman 507.00 81,648.15 70,341.18 Apprentice 6 810.00 79,446.46 69,144.04 Lead Foreman 36.00 5,607.00 4,851.36 Totals 6,658.50 $895,137.52 $774,986.52 Item #7 Questioned Costs $460.53 3,601.96 271.84 215.40 90.12 90.12 3,247.76 8,853.60 14,444.34 269.42 162.88 5,943.00 16,968.16 1,805.14 2,208.30 803.44 12,113.56 26,326.52 11,306.97 10,302.42 755.64 $120,151.00 10,813.59 $130,964.59 Fee (9%) Total Questioned Costs 15 Primary Fire Station Project - MC/CM Cost-of-Record Item #7 Labor (cont.)  Two SHOP workers billed at higher rates than approved; questioned costs: $1.5K (including fee) Name Trade Classification (Fieldwork) Reported Hours Rate Billed Total Billed Approved Rate Expected Amount Questioned Costs SHOP Detailer M.F.N. Plumbers & PipeFitters Foreman 51.00 $154.44 $7,876.44 $131.44 $6,703.44 $1,173.00 M.N. SHOP Sheet Metal Material Handler 2.50 143.03 357.58 67.13 167.83 189.75 M.N. SHOP Sheet Metal Material Handler 5.00 75.43 377.15 67.13 335.65 41.50 Totals 58.50 $7,206.92 $1,404.25 $8,611.17 126.38 Fee (9%) $1,530.63 Total Questioned Costs 16 Primary Fire Station Project - MC/CM Cost-of-Record "Other"  Costs outside standard categories totaled $29K  Several unallowable costs reimbursed; should have been classified as SGCs or fee  Warehouse storage fees lacked required supporting documentation  Questioned costs: $22K (includes applicable sales tax and fee) Cost Category-OTHER Billed Tested Small Tools, equipment, Truck Rental, etc. (includes sales tax): Vehicle Monthly Rental: Office Supplies, PPE, Consumables, Incidentals etc. (includes sales tax): Warehouse Storage: Returned Tool Billed but not credited (Includes sales tax): Total $29,672 Item #7 Questioned 12,863 1 ,423 933 4,538 660 - $29,672 $20,417 1,838 $22,255 Fee: 9% Total Questioned Costs 17 Primary Fire Station Project - MC/CM Cost-of-Record Item #7 Material  Total material billed: $179K  Unallowable items identified; should have been part of SGCs or part of the fee  Items lacked adequate supporting documentation  Total questioned costs: $16K (including fee) Cost Category- MATERIAL Tested Questioned Billed $179,254 $179,254 - Small Tools, equipment (includes sales tax): Office Supplies, PPE, Consumables, Incidentals etc. (includes sales tax): Lack of Supporting Documentation: Total $179,254 7,937 4,469 2,709 $179,254 $15,115 1,360 $16,475 Fee: 9% Total Questioned Costs 18 Recommendations Item #7 This was a cost-of-record review (not a formal internal controls assessment under professional audit standards). Most documentation was sufficient; specific recommendations provided for future projects.  The Port approves billable labor rates using its Master Labor Rate Template, and when higher rates are requested, it must document the justification and add review steps during Pay Application processing to verify contractors are paying the increased wage. 19 Recommendations (cont.) Item #7 Update SUTA and FUTA formulas on the Master Labor Rate Template. Obtain Tax Rate Notices and compare them to the rates listed on the Master Labor Rate Template to ensure accuracy. Obtain a detailed list of contractor Shop Burden items before approving billable rates. Pre-approve proposed rental and storage rates and review itemized documentation for components such as Shop Burden. 20 Management Response Item #7  Management to discuss in person. 21 Sixt Rent A Car, LLC Item #8  Limited Contract Compliance audit  Review period - January 2023 to December 2025  Assessed percentage fees and Customer Facility Charges (CFC) 22 Sixt Rent A Car, LLC Item #8  Tested three months of CFC data, totaling over 10K transactions  Identified over $4K not remitted to the Port  Extrapolates to approximately $48K over a 36-month period 23 Marmot Mountain, LLC dba ExOfficio Item #9 This is a Limited Contract Compliance audit. No issues were identified by Internal Audit and therefore, this audit is not being presented during this meeting. However, the final audit report (No. 2026-05) is made available on the Port's website. 24 Committee Comments Item #10 25