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HomeMy WebLinkAbout1996-12-10; City Council; 13947; APPROVAL OF CONSULTANT AGREEMENT WITH HILTON FARNKOPF AND HOBSON AND APPROPRIATION OF FUNDSE % a 4 z I- o 2 a d z 3 0 0 ClTa OF CARLSBAD - AGENOQ BILL ",i AB # IT.4 Y-7 T1TLE:APPROVAL OF CONSULTANT AGREEMENT DE$ MTG. 12.- /0-% WITH HILTON FARNKOPF & HOBSON CITY DEPT. CSD AND APPROPRIATION OF FUNDS CITY RECOMMENDED ACTION: Adopt Resolution No. 56- qzo authorizing the City Manager to execute a consult agreement with Hilton Farnkopf & Hobson to review the fiscal year 1995-96 financial re City's authorized solid waste handler, Coast Waste Management and appropriating $1 5,C retained earnings in the Solid Waste Enterprise Fund Miscellaneous Professional Service ITEM EXPLANATION At the June 25, 1996 meeting, City Council adopted reduced solid waste services rat understanding that the rate consultant, Hilton Farnkopf & Hobson (HFH) would retur months to review Coast Waste Management's (CWM) audited financial records to e amount of disposal savings CWM achieved by utilizing more cost effective disposal 01 budget for the Solid Waste Enterprise Fund had already been submitted at the t recommendation, and did not include sufficient funds to conduct the review. HFH has submitted a proposal to complete the recommended work at a cost of $24 exceeds the current appropriation of $1 5,000 in the Miscellaneous Professional Servict An appropriation of an additional $15,000 will be adequate to cover the cost of the revie\ professional services during the year. FISCAL IMPACT The Solid Waste Enterprise Fund began the fiscal year 1996-97 with an $88,198 balanc in retained earnings. Staff anticipates revenue of $160,000 during the year, with e currently appropriated at $103,331. An additional $1 5,000 appropriation will leave earnings balance of approximately $130,000 at June 30, 1997. EXHIBITS 1. Resolution No. 9d- YaO 2. Consultant Services Agreement with Hilton Farnkopf & Hobson 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 16 19 20 21 22 23 24 25 26 27 28 0 0 RESOLUTION NO. 9 6 - 4 2 0 A RESOLUT16N 6F THE CITY COUNCIL OF THE CITY OF CARLSBAD CALIFORNIA, APPROPRIATING $1 5,000 FROM THE RETAINEC EARNINGS IN THE SOLID WASTE ENTERPRISE FUNC MISCELLANEOUS PROFESSIONAL SERVICES ACCOUNT ANC AUTHORIZING EXECUTION OF A CONSULTANT SERVICE: AGREEMENT WITH HILTON FARNKOPF 8 HOBSON WHEREAS, the City Council has determined it is in the City’s best interest with a financial review proposed by Hilton Famkopf & Hobson of its authorized handler, Coast Waste Management; and WHEREAS, adequate funds are not appropriated in the Solid Waste Ente budget to conduct the proposed financial review; and WHEREAS, adequate funds are available in the retained earnings of the $ Enterprise Fund; NOW, THEREFORE, BE IT RESOLVED, BY THE City Council of the City as follows: 1. The above recitations are true and correct. 2. The Professional Services Agreement between the City of Carlsbad Famkopf & Hobson attached hereto is hereby approved. 3. The City Manager is hereby authorized to execute said Agreement on b City. 4. The Finance Director is hereby authorized to appropriate $15,000 from 1 earnings in the Solid Waste Enterprise Fund Miscellaneous Professior account. I Ill Ill Ill Ill I// Ill Ill 1 2 3 4 5 6 7 a 9 10 0 0 PASSED, APPROVED AND ADOPTED by the City Council of the City of Car regular meeting held on the 10th day of December , 1996, by the following vo AYES: Council Members Lewis, Nygaard, Kulchin, Hall and Finnil NOES: None ABSENT: None ATTEST: 11 12 13 14 15 16 17 lL2Lk&L%A+ ALETHA L. RAUTENKRANZ, City Clerk (SEAL) 20 21 22 23 24 25 26 27 28 2 0 0 AGREEMENT THIS AGREEMENT, made and entered into as of the 20th day of JANUAR 1997 YXES, by and between the CITY OF CARLSBAD, a municipal corporation, hereinafter refem as "City", and HILTON FARNKOPF 8 HOBSOrJ hereinafter referred to as 'Contractor." RECITALS City requires the services of a qualified contractor to review the 199596 audited final records of the City's authorized solid waste services handler, Coast Waste Management, and Contractor possesses the necessary skills and qualifications to provide the. services reqi by City; NOW, THEREFORE, in consideration of these recitals and the mutual coven contained herein, City and Contractor agree as follows: 1. CONTRACTOR'S OBLIGATIONS Contractor shall provide the services required to complete the project in accordance the attached Proposed Agreement submitted by Contractor and dated October 1 1, 1996. 2. CITY OBLIGATIONS City shall provide appropriate direction and serve as a liaison to Contractor. 3. PROGRESS AND COMPLETION The work under this agreement will begin within ten (10) days after receipt of notificz to proceed by City and be completed within 180 days of that date. Extensions of time ma! granted if requested by Contractor and agreed to in writing by the Community Servi Director. The Community Services Director will give allowance for documented substantiated unforeseeable and unavoidable delays not caused by a lack of foresight on the I of Contractor, or delays caused by City inaction or other agencies' lack of timely action. 4. FEES TO BE PAID TO CONTRACTOR The total fee payable for the services to be performed shall not exceed $24,430. other compensation for services will be allowed except those items covered by suppleme agreements per Paragraph 8. "Changes in Work." City resetves the right to withhold a Incremental payments, if applicable, should be made as outlined in attached Exhibit percent (10%) retention until the project has been accepted by City. 5. DURATION OF AGREEMENT This agreement shall extend for a period of six months from date thereof. - agreement may be extended by the Community Services Director for additional one mo 1 rev. 8/26. 0 0 periods or parts thereof, based upon a review of satisfactory performance and City's needs. plIdi€?E !2hd pft3~9f& QKf&Rbi6ns in wdhg indicating effective date and length of the exten ag fee m e n t . 6, PAYMENT OF FEES Payment of approved items on the invoice shall be mailed to the Contractor withir days of receipt of the invoice. 7. FINAL SUBMISSIONS Within fifteen days of completion and approval of the project, Contractor shall delive City all final documents, which shall be appropriately signed. 8. CHANGES IN WORK If, in the course of the contract, changes seem merited by Contractor or City, and infon consultations with the other party indicate that a change in the conditions of the agreemen warranted, Contractor or City may request a change in agreement. Such changes shall processed by City in the following manner: A letter outlining the required changes shall forwarded to City by Contractor to inform them of the proposed changes along with a statem of estimated changes in charges or time schedule. A Standard Amendment to Agreement st be prepared by City and approved by City according to the procedures described in Carist Municipal Code Section 3.28.472. Such Amendment to Agreement shall not render ineffective invalidate unaffected portions of the agreement. 9. COVENANTS AGAINST CONTINGENT FEES Contractor warrants that their firm has not employed or retained any company or persc other than a bona fide employee working for Contractor, to solicit or secure this agreement, i that Contractor has not paid or agreed to pay any company or person, other than a bona f employee, any fee, commission, percentage, brokerage fee, gift, or any other consideratr contingent upon, or resulting from, the award or making of this agreement. For breach violation of this warranty, City shall have the right to annul this agreement without liability, or, its discretion, to deduct from the agreement price or consideration, or otherwise recover, the f amount of such fee, commission, percentage, brokerage fees, gift, or contingent fee. 10. NONDISCRIMINATION CLAUSE Contractor shall comply with the state and federal laws regarding nondiscrimination. 11. TERMINATION OF CONTRACT In the event of Contractor's failure to prosecute, deliver, or perform the work as providt for in this agreement, the City Manager may terminate this agreement for nonperformance I notifying Contractor by certified mail of the termination of the Contractor. Contractor, thereupo 2 rev 8/2W 0 0 has five (5) working days to deliver said documents owned by the City and all work in progres the Community Services Director. The Community Services Director shall makc determination of fact based upon the documents delivered to City of the percentage of v which Contractor has performed which is usable and of worth to City in having the agreen completed. Based upon that finding as reported to the City Manager, the Manager s determine the final payment of the agreement. This agreement may be terminated by either party upon tendering thirty (30) days wril notice to the other party. In the event of such suspension or termination, upon request of C Contractor shall assemble the work product and put same in order for proper filing and clos and deliver said product to City. In the event of termination, Contractor shall be paid for \FU performed to the termination date; however, the total shall not exceed the lump sum fee paya under paragraph 4. The City Manager shall make the final determination as to the portions tasks completed and the compensation to be made. 12. DISPUTES If a dispute should arise regarding the performance of work under this agreement, following procedure shall be used to resolve any question of fact or interpretation not otherw settled by agreement between parties. Such questions, if they become identified as a part 0' dispute among persons operating under the provisions of this agreement, shall be reduced writing by the principal of Contractor or City Community Sewices Director. A copy of su documented dispute shall be forwarded to both parties involved along with recommend methods of resolution which would be of benefit to both parties. The City Community Servic Director or principal receiving the letter shall reply to the letter along with a recommend method of resolution within ten (10) days. If the resolution thus obtained is unsatisfactory to tl aggrieved party, a letter outlining the dispute shall be forwarded to the City Council for thl resolution through the Office of the City Manager. The City Council may then opt to consider tl directed solution to the problem. In such cases, the action of the City Council shall be bindii upon the parties involved, although nothing in this procedure shall prohibit the parties seekii remedies available to them at law. 13. CLAlMS AND LAWSUITS Contractor agrees that any contract claim submitted to City must be asserted as part the contract process as set forth in this agreement and not in anticipation of litigation or conjunction with litigation. Contractor acknowledges that if a false claim is submitted to City, may be considered fraud and Contractor may be subject to criminal prosecution. Contract1 acknowledges that California Government Code sections 12650 et seq , the False Claims A( 3 rev 8/26/9 0 0 provides for civil penalties where a person knowingly submits a false claim to a public enti These provisions include false claims made with deliberate ignorance of the false informatior in reckless disregard of the truth or falsity of information. If the City of Carisbad seeks to rem penalties pursuant to the False Claims Act, it is entitled to recover its litigation costs, incluc attorneys fees. Contractor acknowledges that the filing of a false claim may subject Contrac to an administrative debarment proceeding wherein Contractor may be prevented to act a Contractor on any public work or improvement for a period of up to five years. Contra( acknowledges debarment by another jurisdiction is grounds for the City of Carlsbad to disquz Contractor from the selection process. $$&(Initial) 3.32.028 pertaining to false claims are incorporated herein by reference.@ (Initial) The provisions of Carlsbad Municipal Code sections 3.32.025, 3.32.026, 3.32.027 i 14. STATUS OF THE CONTRACTOR Contractor shall perform the services provided for herein in Contractor's own way as independent contractor and in pursuit of Contractor's independent calling, and not as employee of City. Contractor shall be under control of City only as to the result to accomplished, but shall consult with City as provided for in the request for proposal. 1 persons used by Contractor to provide services under this agreement shall not be conside employees of City for any purposes whatsoever. The Contractor is an independent contractor of City. The payment made to Contrac pursuant to the agreement shall be the full and complete compensation to which Contractor entitled. City shall not make any federal or state tax withholdings on behalf of Contractor hisher employees or subcontractors. City shall not be required to pay any work€ compensation insurance or unemployment contributions on behalf of Contractor or his/t employees or subcontractors. Contractor agrees to indemnify City within 30 days for any ti retirement contribution, social security, overtime payment, unemployment payment or woke compensation payment which City may be required to make on behalf of Contractor or E employee or subcontractor of Contractor for work done under this agreement or su indemnification amount may be deducted by City from any balance owing to Contractor. Contractor shall be aware of the requirements of the Immigration Reform and Control j of 1986 and shall comply with those requirements, including, but not limited to, venfymg I eligibility for employment of all agents, employees, subcontractors and consultants that a included in this agreement. 15. CONFORMITY TO LEGAL REQUIREMENTS Contractor shall cause all drawings and specifications to conform to all applicat requirements of law: federal, state and local. Contractor shall provide all necessary SUppOrtii 4 rev. 81261: 0 0 documents, to be filed with any agencies whose approval is necessary. City will provide copies of the approved plans to any other agencies. 16. OWNERSHIP OF DOCUMENTS All plans, studies, sketches, drawings, reports, and specifications as ,herein required I the property of City, whether the work for which they are made be executed or not. In the evc this agreement is terminated, all documents, plans, specifications, drawings, reports, and stud1 shall be delivered forthwith to City. Contractor shall have the right to make one (1) copy of t plans for his/her records. 17. REPRODUCTION RIGHTS Contractor agrees that all copyn'ghts which arise from creation of the work pursuant this contract shall be vested in City and hereby agrees to relinquish all claims to such copyngl in favor of City. 18. HOLD HARMLESS AGREEMENT Contractor agrees to indemnify and hold harmless the City of Carlsbad and its office! officials, employees and volunteers from and against all claims, damages, losses and expenst including attorney fees arising out of the performance of the work described herein caused whole or in part by any willful misconduct or negligent act or omission of Contractor, a subcontractor, anyone directly or indirectly employed by any of them or anyone for whose ac any of them may be liable, except where caused by the active negligence, Sole negligence, willful misconduct of the City of Carisbad. Contractor shall at its own expense, upon written request by City, defend any such suit action brought against City, its officers, officials, employees and volunteers. Contractor indemnification of City shall not be limited by any prior or subsequent declaration by Contract( 19. ASSIGNMENT OF CONTRACT Contractor shall not assign this agreement or any part thereof or any monies dl - thereunder without the prior written consent of City. 20. SUBCONTRACTING If Contractor shall subcontract any of the work to be performed under this agreement L Contractor, Contractor shall be fully responsible to City for the acts and omissions of Contractor subcontractor and of the persons either directly or indirectly employed by the subcontractor, 2 Contractor is for the acts and omissions of persons directly employed by Contractor. Nothir contained in this agreement shall create any contractual relationship between any subcontract( of Contractor and City. Contractor shall bind every subcontractor and every subcontractor of 5 rev. 8/26/91 0 0 subcontractor by the terms of this agreement applicable to Contractor's work unless specific noted to the contrary in the subcontract in question approved in writing by City. 21. PROHIBITED INTEREST No official of City who is authorized in such capacity on behalf of City to negotiate, mi accept, or approve, or take part in negotiating, making, accepting, or approving of agreement, shall become directly or indirectly interested personally in this agreement or in part thereof. No officer or employee of City who is authorized in such capacity and on behal City to exercise any executive, supehrisary, or similar functions in connection with performance of this agreement shall become directly or indirectly interested personally in agreement or any part thereof. 22. VERBAL AGREEMENT OR CONVERSATION No verbal agreement or conversation with any officer, agent, or employee of City, ei' before, during or after the execution of this agreement, shall affect or modify any of the term: obligations herein contained nor entitle the Contractor to any additional payment whatsoc under the terms of this agreement. 23. SUCCESSORS OR ASSIGNS Subject to the provisions of Paragraph 18, "Hold Harmless Agreement," all ter conditions, and provisions hereof shall inure to and shall bind each of the parties hereto, each of their respective heirs, executors, administrators, successors, and assigns. 24. EFFECTIVE DATE This agreement shall be effective on and from the day and year first written above. 25. CONFLICT OF INTEREST City has determined, using the guidelines of the Political Reform Act and City's conflic interest code, that Contractor will not be required to file a conflict of interest statement a requirement of this agreement. However, Contractor hereby acknowledges that contractor the legal responsibility for complying with the Political Reform Act and nothing in this agreerr releases Contractor from this responsibility. 26. INSURANCE Contractor shall obtain and maintain for the duration of the agreement and any anc amendments insurance against claims for injuries to persons or damage to property which r arise out of or in connection with performance of the work hereunder by Contractor, his age representatives, employees or subcontractors. Said insurance shall be obtained from insurance carrier admitted and authorized to do business in the State of California. . insurance carrier is required to have a current Best's Key Rating of not less than "A-:V" and s rev 8/26 6 0 e meet the City's policy for insurance as stated in Resolution No. 91403. A. Coveraqes and Limits. Contractor shall maintain the types of coverages and minimum limits indici herein, unless a lower amount is approved by the City Attorney or City Manager: 1. Comprehensive General Liability Insurance. $1,000,000 combined sin limit per occurrence for bodily injury, personal injury and property damage. If the submi policies contain aggregate limits, general aggregate limits shall apply separately to the \ under this contract or the general aggregate shall be twice the required per occurrence limit Automobile Liability (if the use of an automobile is involved for Contract work for the City). $1,000,000 combined single-limit per accident for bodily injury and prop damage. 2. 3. Workers' Compensation and Employets Liability. Workers' Compensa limits as required by the Labor Code of the State of California and Employer's Liability limit $1,000,000 per accident for bodily injury. 4. Professional Liability. Errors and omissions liability appropriate to contractor's profession with limits of not less than $1,000,000 per claim. Coverage shall maintained for a period of five years following the date of completion of the work. E. Additional Provisions Contractor shall ensure that the policies of insurance required under agreement contain, or are endorsed to contain, the following provisions. 1. City shall be named as an additional insured on all policies excluc 2. Contractor shall furnish certificates of insurance to City bei 3. Contractor shall obtain occurrence coverage, excluding Professio This insurance shall be in force during the life of the agreement and i extension thereof and shall not be canceled without 30 days prior written notice to City sent certified mail. Workers' Compensation and Professional Liability. commencement of work. Liability which shall be written as claims-made coverage. 4. 5. If Contractor fails to maintain any of the insurance coverages requi herein, then City will have the option to declare Contractor in breach, or may purch: replacement insurance or pay the premiums that are due on existing policies in order that required coverages may be maintained. Contractor is responsible for any payments made City to obtain or maintain such insurance and City may collect the same from Contractor deduct the amount paid from any sums due Contractor under this agreement. 7 rev 81261 a 0 27. RESPONSIBLE PARTIES The name of the persons who are authorized to give written notices or to receive m'i notice on behalf of City and on behalf of Contractor in connection with the foregoing are follows: For City: Title Name Address For Contractor: Title President Name Robert D. Hilton Address Hilton FarnkoDf & Hobson. 1 2201 Walnut Ave. Suite 281 F'r-p-+_ f-n Sll+ 28. BUSINESS LlCENSE Contractor shall obtain and maintain a City of Carlsbad Business License for the dural of the agreement. 29. ENTIRE AGREEMENT This agreement, together with any other written document referred to or contempla herein, embody the entire agreement and understanding between the parties relating to subject matter hereof. Neither this agreement nor any provision hereof may be amend modified, waived or discharged except by an instrument in writing executed by the party agai which enforcement of such amendment, waiver or discharge is sought. Ill Ill Ill Ill Ill Ill If/ Ill Ill Ill Ill Ill 8 rev. 8/261! 0 0 Executed by Contractor this day of ,19 CONSULTANT: HILTON FARi\lKOPF & HOBSON, LLC , ATTEST: Robert D. Hilton, Presid-ent llLQztLk 7%+ ALETHA L. RAUTENKRANZ City Clerk January 20, 1997 DATE Jo’,-rl 5. --- 1: <-ani, Cm;c2t’yiT (print name/title) (Proper notarial acknowledgment of execution by Contractor must be attached.) (President or vice-president and secretary or assistant secretary must sign for corporations only one officer signs, the carporation must attach a resolution certified by the secretary assistant secretary under corporate seat empowering that officer to bind the corporation.) APPROVED AS TO FORM: RONALD R. BALL CityAttomey, ; ’ / ,I’ BY .&d/+qGyA, i /’ DepuG City Attorney J rev 8/26/ 9 1 }ss. &&A 1 STATE OF CALIFORNIA COUNTY OF ~n~,~~~. z&qLt/l& mote personally appeared /3 , personally knowi (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(: subscribed to the within instrument and acknowledged to me that heisheithey executed th in hisiheritheir authorized capacity(ies), and that by hisiheritheir signature(s) on the instrun person(s) or the entity upon behalf of which the person(s) acted, executed the instrume WITNESS my hand and official seal. Signature 7, -A 7Pad (This area for official notarial seal1 Title of Document Date of Document Other signatures not acknowledged No. of Pages 30C First American Title In } }ss. Lmw& } STATE OF CALIFORNIA COUNTY OF z-Lt;l 'A h&PCl 12). Fmw?kopF On "'/*i/d;;me. personally appeared 1 pekonaily knowr (or proved to me on the basis of satisfactory.evidence) to be the person(s) whose name(s subscribed to the within instrument and acknowledged to me that heisheithey executed tht in his/her/their authorized capacity(ies) I and that by hislheritheir signature(s) on the instrum person(s) or the entity upon behalf of which the person(s) acted, executed the instrumet WITNESS my hand and official seal. ()& /4?&L& Signature Fl c I- , e r-z--FF--F.--,,-F rl-*'L i-s jy.: ycELO . , __- ~ c ,''A. #!057434 ~ L '.,#'..?$ :.C.!<,<. - :;,L,:L:*!A - u - -::Tw~LL. L:-:>;::..-:3tik-% Lx,-4La VWCTT;?. Llr-. I.,< ,n. iwc) ? ~ (This area for official notarial seal) Title of Document Date of Document Other signatures not acknowledged No. of Pages 300t First American Tltle Ins e HILTON FARNKOPF W Municipal Management Advisov Services to __ -... --_.. .__-._.._.. ____ ~ ___-._.... - ......-------.- ---- @ .. . .. .- - - . 2201 Walnut Avenue, Suitc 280 Tclcphone: 510/713-3270 Fax: 5 l0/7 1 3- 1294 Fremont, California 94538-2334 Newp October 11,1996 Mr. Jim Hagaman City of Carlsbad 405 Oak Avenue Carlsbad, California 92008 Administrative Services/Projects Manager Proposed Agreement to Review Coast Waste Management's Fiscal 1996 Revenue and Expenses Dear Mr. Hagaman: This proposed Agreement documents the background, objectives, approach, SCOI limitations, fees, and other terms and conditions of the consulting services that Hilton Famkopf & Hobson (HF&H) will provide to the City of Carlsbad (City). Background The City arranges for refuse collection service for its residential, commercial, an( rolloff customers through an exclusive franchise agreement with Coast Waste Management (CWM). The agreement grants the City the right to set the rates th CWM charges its customers in the City. The City has historically set rates intended to reimburse CWM for its reasonable necessary operating costs plus a profit margm of 9%. In 1992, the City adopted a 1 index method (developed by HF&H) to periodically adjust refuse rates. The rate index determined the portion of rates that were attributable to changes in CWM' various costs (e.g., labor, equipment, disposal, etc.). At the time, the County of S Diego (County) charged a disposal tipping fee of $23 per ton. In the fall of 1994, due to several external political and economic factors, CWM a the City were faced with the prospect of paying $74 per ton for disposal at Countj landfills. CWM then began transporting and disposing its waste outside the CO~ landfill system, and the City used the rate index to set rates based on a disposal C( of $55 per ton. The City and CWM both expected that setting rates based on $55 per ton would genclrilte revenues for CWM that exceeded the company's operating costs and ag upon profit. This was done to foster rate stability in an uncertain disposal G 0 0 @ - HmoN FAmKow d HowN Mr. Jim Hagaman October 11,1996 Page 2 environment. The City and CWM intended to account for the excess revenues i set them aside for future uses such as mitigating rate increases or investing in nt disposal solutions. In October 1995, the County lowered its tipping fee to $47.50 and CWM discontin transporting its waste outside the County. Shortly thereafter, HF&H reviewed CWM’s actual revenues and expenses in the City (based on CWM’s unaudited financial statements) and estimated that CWMs excess revenues were approximately $548,000 for fiscal 1995. We also reviewed the company’s projecte revenues and expenses for the fiscal 1996 and found that CWMs excess revenue projected to be approximately $423,000. In July 1996, the County committed to lowering its tipping fees to $40 per ton for years, and the City reduced its refuse collection rates to a level that corresponded the County’s new tipping fee, thereby ending the generation of excess revenues. City also required that CWM prepare audited financial statements and submit tl- to the City each year beginning with its financial statements for fiscal 1996. Engagement Objectives The City desires to quantify the actual excess revenue amount resulting from its policy of setting rates higher than CWMs cost of service during fiscal 1995 and IS The City has available to it several alternative uses for the excess revenues (e.g., capital improvements, stabilization of future rates, special projects, etc.) and nee( this information to best evaluate those alternatives. Although the $548,000 surplus amount for fiscal 1995 was based on unaudited financial statements, the City may not be in a position to determine a more relial estimate. CWM has stated that it is not able to retroactively provide audited financial statements for fiscal 1995. Further, the cost of retroactively preparing audited financial statements for that year and reviewing cost allocations based 01 those statements may outweigh the potential increase or decrease in the surplus amount that was calculated based on the unaudited financial statements. 0 r ,I cd t J dI c 0 0 @ - HmoN FmNKoPF & HoBsoN Mr. Jim Hagaman October 11,1996 Page 3 However, CWM’s actual revenue surplus for fiscal 1996 may differ materiqliy fF( its projected results. Therefore, the City’s objective for this engagement is to: determine the amount of revenue that exceeded CWM’s reasonable operating c( and allowed profit in the City based on its audited financial statements for fiscal 1996. Approach We intend to achieve this objective by reviewing a revenue and cost allocation spreadsheet prepared by CWM. We propose that CWM allocate its audited reve and expenses for fiscal 1996 between its operations inside and outside the City, a~ among its customer classes (i-e., residential, commercial, and rolloff). We will evaluate the reasonableness of CWM’s allocated costs, adjust them as appropriat and determine its revenue surplus for fiscal 1996. Scope of Work The scope of our work will be comprised of the tasks described below. We have outlined the level of effort and cost associated with each task in Exhibit 1. Task 1 - Initiate Proiect It is our hope that we can initiate this project (Le., agree on the scope, terms, fees and schedule, etc.) at our meeting with City staff scheduled for Monday, September 30, 1996. We will not bill the City for our cost of attending that meeti nor is it included in our proposed fees. However, we will bill the City at our standard hourly rates described in Task 5 for any additional meetings not describ in our scope of work. In addition to our meeting with the City, we will meet once with CWM to discu: the objectives of the project and to outline the format and content of the revenu and cost allocation spreadsheet that CWM will prepare. We will discuss the timeframe within which CWM expects to complete the spreadsheet, and report 1 results of our meeting to the City. We have included our cost of this meeting in fee estimate. .. C‘,C ri: tJ , + r e 0 @ - - HIL-roN FmmoPF 6r HoBsoN Mr. Jim Hagaman October 11,1996 Page 4 Task 2 - Review Revenue and Cost Allocation Smeadsheet We will review the spreadsheet for completeness, accuracy, and consistency wit our previous discussions with CWM. We will verify CWM's reconciliation of 1 spreadsheet to its audited financial statements for fiscal 1996. We will compare CWM's actual revenue and expenses for fiscal 1996 based on ii audited financial statements with its projected revenue and expenses for fiscal 1 which were based on its unaudited financial statements for fiscal 1995. We will obtain from CWM explanations and supporting documentation for any signific variances between its projected and actual results, and evaluate the reasonablen of those variances. We will analyze the reasonableness of CWM's revenue and cost allocations by calculating certain financial and operational ratios. We will compare those ratic between inside and outside the City as well as compare them with industry aveI with which we are familiar. We will perform detailed testing of significant operational statistics used to allocate costs (Le., routes, tons) to verify the reliabil of CWM's cost allocations. We will perform limited detailed testing of selected major revenue and cost categories and those categories with significant varianct evaluate the reasonableness and necessity of CWM's reported revenue and expenses. We will prepare workpapers documenting our review. Based on OUI review and analysis, we will calculate the amount of revenue that exceeded CM operating costs and allowed profit in the City. We will also recalculate the requ rate adjustments as of July 1, 1996,and compare them to the actual rate adjustmc that were implemented by the City. If we propose any adjustments to CWM's reported revenues and expenses, we \ review them with CWM prior to preparing our draft report. Task 3 - Communicate Results We will submit to the City and CWM a draft report accompanied by exhibits describing our work and our findings. We will receive written comments regar the draft report, and prepare our final report. We will present our findings onct City staff or to the City Council. ,. I LJ " 0 0 @ - - HiLmN FmNKom 6r HoBsoN Mr. Jim Hagaman October 11,1996 Page 5 Task 4 - Project ManaEement We will administer the project, conduct internal quality reviews, and compile ( project work papers at the engagement's conclusion. Task 5 - Suecial Proiects The City has requested us to provide hourly consulting rates for future tasks re1 to solid waste that we may perform on an ad hoc basis. We will perform those t as directed by the City for the hourly fees shown on the billing rate schedule shc in Exhibit 2. We will obtain the City's approval in writing prior to performing a of these tasks. Limitations Our review will be substantially different in scope than an examination done in accordance with generally accepted auditing standards, the objective of which is expression of an opinion regarding the financial statements taken as a whole. Accordingly, we will not express such an opinion. Our review will entail only limited detailed testing of source documents, howe CWM's external auditors will perform extensive detailed testing of the companj source documents in preparing the audited financial statements. Our review of the allocations of cost and revenue are intended for use by the Cit Carlsbad (which is in a position to understand the purpose of their preparation ( the limitations of their use) only and their use by any other person or for any ot purpose is not intended. The scope of our work will be limited to reviewing CWM's revenues and expen for fiscal 1996. We do not intend to review any projections of 1997 operating res Staffing I will be the Project Director for this engagement. David Davis will be the Projec Manager, and he may delegate certain tasks to qualified staff to minimize fees. - .,I< ec <J "*L#e! m 0 @ T mxoN FARNKoPF k mBmN Mr. Jim Hagaman October 11,1996 Page 6 Fees and Schedule The estimated cost to perform Tasks 1 through 4 is $24,430 based on the tasks anc level of effort shown in the attached workplan shown in Exhibit 1. Payment is d within 30 days of invoicing, and a late fee of 1% per month may be added to bala more than 30 days past due. CWM's accounting firm has estimated it would complete draft audited financial statements (which will be essentially complete except for CWM's accrued liabilig the City for excess revenues) by early November 1996, and complete the cost allocation spreadsheet by mid to late November. Assuming we receive the cost allocation spreadsheet in late November, we expect to deliver our draft report by January 10, 1997. We will produce our final report within seven days of receivin written comments from City staff regarding our draft report. This schedule is ba: on receiving all necessary data from CWM in the format requested in a timeIy manner. * * * Thank you for the opportunity to offer our services to the City of Carlsbad. If the terms and conditions of this proposal are acceptable to the City, please execute th Agreement by signing below and returning a copy to us. If you have any questio: please call David Davis at 714/251-8628, or me at 510/713-3270. Very truly yours, *4+ Robert D. Hilton, CMC President Attachments: Exhibit 1 - Project Workplan Exhibit 2 - Billing Rate Schedule I agree to the scope, terms, conditions, and fees of $24,430 as documented in the above Agreement. Approved by: , on this __ day of , 1' (signature) * CI ,' .C t) :.a:,. w RDH DLD SBP DM Toti 1.0 Initiate Project 1.1 Meet with the City to initlate project. 0 0 c 1.2 Meet with CWM to discuss allocatlon spreadsheet 4 2 t Subtotal Task 1 Hours. 0 4 0 2 t Subtotal Task 1 Fees $0 $480 $0 $110 $59C 2.0 Review AlIocation Spreadsheet 2.1 Reveiw for completeness, accuracy, and consistency 2 4 6 2.2 Agree to audited financial statements. 1 4 5 2.3 Perform variance analysis. 4 24 2E 2.4 Perform selected detailed teshng and analysis. 12 32 44 2.6 Calculate revenue surplus and rate adjustment. 2 10 12 2.5 Prepare and document adjustments. 4 8 24 36 Subtotal Task 2 Hours 4 29 98 0 131 $0 $13,080 Subtotal Task 2 Fees 9780 $3,480 $8,820 3.0 Communicate Results 3.1 Prepare draft exhibits and report 3 24 10 8 45 3.2 Prepare final exhibits and report. 1 2 6 8 17 3.3 Present results to City staff or City Council. 4 4 8 Subtotal Task 3 Hours. 8 30 16 16 70 Subtotal Task 3 Fees. $1,560 $3,600 $1,440 $880 $7,480 4.0 Project Administration 4.1 Prepare workpapers 6 6 Subtotal Task 4 Hours 4 8 6 0 18 Subtotal Task 4 Fees 8780 $960 $540 SO 82,280 4.2 Manage project 4 8 12 5.0 Special Projects Subtotal Task 5 Hours 0 0 0 0 0 Subtotal Task 5 Fees $0 150 $0 $0 $0 Total Project Hours. 16 71 120 18 225 Hourly Rate. 8195 $120 $90 555 N/A Total Professional Fees. 93.120 $8,520 $10,800 5990 $23,430 Out-of-Pocket Expenses $1,000 Total Fees & Expenses $24,430 3. Prepare cost allocation spreadsheet. 4. Perform detailed testing on cost allocation spreadsheet and calculate revenue surplus. Prepare draft report. 5. Provide written comments on draft report. 6. Prepare find report. November 22,1996 GL&T* January 10,1997 HF&H January 24,1997 City February 28,1997 HF&H