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Port of Seattle Audit

Port of Seattle Audit

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Published by KING 5 News

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Categories:Business/Law, Finance
Published by: KING 5 News on Dec 10, 2012
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07/10/2013

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Washington State Auditor’s Office
 5
Schedule of Audit Findings and Responses
Port of SeattleKing CountyDecember 4, 2012
1.
The Port’s internal controls were inadequate to ensure all credit card
transactions at the parking garage were processed, resulting in lostrevenue of $394,982.SUMMARY
The Port’s Landside Operations division manages Seattle
-
Tacoma International Airport’s
(Sea-Tac) onsite parking garage. It collected approximately $49,367,630 in parking feesin 2011 and $37,251,336 from January through September 2012. Credit cards are usedto pay approximately 75 percent of parking fees.On June 26, 2012, a parking garage customer called Landside Opera
tion’s customer 
service to report that a parking fee did not appear on a credit card statement. This wasthe second call in two weeks the Port had received regarding this issue. Landside
researched the customer’s claims and found the receipting system fa
iled to process allcredit card payments. It determined the issue was isolated to one parking garage exit
lane’s credit card processor.
When it found the possible loss in July 2012, the Port
immediately secured the system’s hardware and software data and
began aninvestigation into the issue.The Port found the receipting system failed to process approximately 10,514 parking feecredit card transactions, totaling $387,986 from January through August 2012. Duringthis period, the Port did not have internal controls in place to ensure all credit cardtransactions were processed.
We reviewed the Port’s work and found it had correctly
calculated the loss during this period.
The Port’s investigation also identified 864 failed credit card transactions in 2
011.However, the Port did not calculate the amount associated with these failed transactions.
On August 8, 2012, the Port reported to the State Auditor’s Office that the malfunctioning
credit card processing system had led to a loss of revenue at the parking garage.
We reviewed the Port’s investigation to determine if it was complete, had calculated the
loss correctly and if the Port established procedures to prevent and detect future creditcard losses.We found the Port did not identify the full amount of the loss. We found no evidence tosuggest the credit card processing failures were isolated to 2011 and 2012. The Porthas not yet identified the cause of the incidents. We also found the Port did notadequately test the installation of the new parking garage receipting equipment toensure it was receipting all credit card transactions.
 
 
Washington State Auditor’s Office
 6
Port management appears committed to determining the cause of the credit cardprocessing failure and to pursuing recovery of lost amounts from the vendor if possible.We commend the Port for this action.Between June and August 2012, Landside installed a new receipting parking system.To safeguard public funds, the Port has initiated development of internal controls for monitoring credit card transactions in the new system. Although the new procedures arenot fully in use, they appear to identify credit card exception transactions includingoverbillings and failed payment processing. However, the reconciliation procedures donot include procedures for determining the cause of any identified exception(s).In addition, the Port lost $6,997 in revenue when the new receipting system failed toprocess credit card transactions properly. We believe this amount could be higher byabout 50 percent. Further, we note the new system still is not accurately processing allcredit card transactions or does not process them at all, does not always operate andoverbills customers.
RECOMMENDATION
To ensure the Port adequately safeguards public resources, we recommend the Port:
Adopt a formal risk assessment process that includes credit card transactions atall Port locations where they are accepted and establish internal controls toensure complete receipt of revenues.
Include accounting management in planning phases of all revenue-receiptingsystems to ensure system capabilities meet reconciliation requirements.
Follow recently developed receipting procedures at Sea-Tac parking garage anddetermine the cause for all irregular transactions when they are identified.
Continue to pursue the cause of old system failures and recover losses, if possible.
Determine the cause of new system failures and recover losses from the vendor,if possible.
Ensure the new system accurately processes all credit card transactions.We also recommend the Port take appropriate steps to recover the loss from responsibleparties.We further recommend the Port calculate the total revenue lost, including those due tocredit card payment failures detected in 2011, and investigate the potential amount lostin prior years.When performing our audit we considered the following requirements:RCW 43.09.185: Loss of public funds
Illegal activity
Report to state auditor's office.
 
 
Washington State Auditor’s Office
 7
Budget Accounting and Reporting System 
(BARS) Manual, Part 3, Accounting,Chapter 1, Accounting Principles and General Procedures, Section B, Internal Control.The Port provides the following information related to the findings of this audit:
The Port’ 
s parking revenue controls system consists of two parts 
 –
one that tracks all the 
traffic in and out of the Airport’s parking garage and another that processes credit card 
charges at the exit lanes and transmits them to the banking system. In June 2012, the Port implemented an upgraded parking revenue controls system. During this process,an as-yet-unidentified error associated with the old system meant certain credit card transactions were not processed. The Port failed to discover the loss because the old parking revenue control system failed to balance completed parking transactions in one part of the system with processed credit card transactions in another.Upon learning of these failures, the Port immediately took steps to fully assess the nature and extent of the problem. The Port confirmed that the problem was primarily limited to June 2012, during the migration to the new system. Nonetheless, the Port expanded its review for similar discrepancies to include all of 2011 and 2012. This review identified additional discrepancies but also determined that the June 2012 time period accounted for an estimated $350k of the $387k in failed credit card transactions in 2012. The Port has estimated the discrepancies during 2011 to be about $39k total.The Port has worked with the parking revenue control system vendor, Scheidt &Bachmann, to conduct a root cause analysis to determine the cause of the failure, but that analysis so far has been inconclusive. As a result, the Port has elevated the matter internally and intends to retain a qualified technical forensics examiner in an effort to determine why the failure occurred. To protect the integrity of the original data, the Port has secured the hardware and system data and is providing only copies of the data set 
to support the Port’s investigation.
 The Port is also applying the lessons learned from the loss associated with the old system in the testing, configuration and acceptance of the new parking revenue control system. This effort involves the Po 
rt’s subject matter experts in accounting, audit,
information technology, project management and Aviation parking operations and system maintenance, to ensure the accurate, auditable processing of all credit card transactions. The Port has designed a reconciliation model and recently implemented a daily balancing protocol. Currently this work is being done manually, but steps are currently underway to automate exception reporting between the system and transactions processed through the banking system. This will immediately and automatically identify any discrepancies and facilitate their resolution on a daily basis.The SAO also noted that, due to internet connectivity failures for this point-of-sale system, the Port experienced additional, unrelated losses. To mitigate any future exposure to connectivity risks, the Port is moving to redundant, dedicated T1telecommunications lines with failover mechanisms.Finally, the SAO made reference to isolated systems issues during cutover and testing of the new system that implicated the reliable functioning and accurate processing of transactions by that system. The Port has kept a complete post go-live accounting of all system performance issues and continues to pursue their resolution with the vendor.

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