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HomeMy WebLinkAbout21 - GASB Statement 34Council Agenda Item No. 21 June 26, 2001 CITY OF NEWPORT BEACH ADMINISTRATIVE SERVICES DEPARTMENT Resource Management • Fiscal Services • M.I.S. • Revenue • Accounting June 26, 2001 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dennis C. Danner, Administrative Services Director ! SUBJECT: GOVERMENTAL ACCOUNTING STANDARD BOARD (GASB) STATEMENT NO. 34 - Professional Services Contract RECOMMENDED ACTION Award a professional services contract to Conrad Business Services, Inc. in the amount of $42,000 to assist the City with implementation of the infrastructure valuation and reporting component of GASB 34. BACKGROUND As previously described in several newsletters, the City is required to implement the controversial new accounting standard, GASB Statement No. 34 effective fiscal year beginning after June 30, 2001. This new accounting standard expands the current financial reporting requirements to include aspects of commercial accounting standards and Securities Exchange Commission (SEC) compliance requirements governing publicly traded companies. In large part, the expanded reporting requirements affect only the format and content of our annual financial reports but do not affect the operational or day -to -day accounting. However, the infrastructure component and most controversial feature of the new reporting model does involve new accounting and valuation procedures. Effective July 1, 2001, the City will start accounting for new infrastructure (i.e. roads, storm drains, sidewalks, bridges, piers, bulkheads, jetties etc.) additions and deletions. In addition, the City will be required to retroactively value, record, and depreciate existing infrastructure (going back at least twenty years) including the historical cost of acquired road and street right -of -way (going back to date of incorporation). Prior to this accounting standard, state and local governments have not been required to report infrastructure assets and right -of- way. DISCUSSION The process of valuing the past twenty years of existing infrastructure is quite a daunting task. All infrastructure assets must first be identified and then grouped into appropriate network and subsystem categories. All infrastructure will then be valued at their current replacement value and then trended back to an approximated original construction price GASB Statement No. 34 Page 2 using appropriate indexes. Using network averages of age, quantity and cost, the inception -to -date accumulated depreciation will then be calculated on each asset class based on an estimated useful life. Although these calculations are not too complicated, the difficulty will be the variation of the details and the methodology of filling in the blanks when records are limited. Careful consideration must also be applied to the category groupings so that once the valuation is complete, staff will have a reasonable systematic method in keeping the valuation up to date with new infrastructure additions, reconstruction and deletions. We've met with our auditors and various departments of the City to explore various valuation and accounting options. Even though we believe our City to have more sophisticated information system resources available to us than most cities, we have concluded that the infrastructure valuation process will be a momentous and time - consuming task. Per Council Policy F -15, the City is required to go out to bid for audit services at least once every six years. Most recently, Conrad and Associates, LLP won that bid effective fiscal year 2000 -01 and we have been quite pleased with their efforts. We have solicited a proposal from our auditors to assist us in this effort. Conrad Business Services, Inc, the consulting branch of Conrad and Associates, LLP, responded with a proposal to complete the entire infrastructure valuation project for $42,000. Utilizing our auditors for this sort of project is appealing in that we are assured that the valuation methodology will be consistent with our auditors needs as well. Considering the task at hand and the scope of services proposed, we also believe their bid to be very reasonably priced. Therefore, it is our recommendation that Council award a professional services agreement to Conrad Business Services for $42,000. Funds are available for this project from a previous budget amendment of $40,000 with the remaining funds available from the current budget (Account 0650 - 8076). It is anticipated that City staff will complete all other aspects of GASB 34 during the normal annual reporting process. PROFESSIONAL SERVICES AGREEMENT THIS AGREEMENT, entered into this 26th day of June, 2001, by and between CITY OF NEWPORT BEACH, a Municipal Corporation (hereinafter referred to as "City "), and CONRAD BUSINESS SERVICES, INC whose address is 1100 Main Street, Suite C, Irvine, California, 92614, (hereinafter referred to as "CONSULTANT "), is made with reference to the following: RECITALS A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. City is required implement Governmental Accounting Standards Board (GASB) Statement 34. C. City desires to retain CONSULTANT to assist in the implementation of GASB 34 implementation consistent with the terms and conditions contained in this Agreement. D. The principal members of CONSULTANT, are for purpose of this Agreement, Marc Davis, Carol Jacobs and Jim Miller. E. City has solicited and received a proposal from CONSULTANT, has reviewed the previous experience and evaluated the expertise of CONSULTANT, and desires to contract with CONSULTANT under the terms of conditions provided in this Agreement. NOW, THEREFORE, it is mutually agreed by and between the undersigned Parties as follows: 1. TERM The term of this Agreement shall commence on the first day of July 2001, and shall terminate upon completion of the project no later than the thirty -first day of December 2001, unless terminated earlier as set forth in Section 26. 2. SERVICES TO BE PERFORMED CONSULTANT shall diligently perform all the duties set forth in the scope of services, attached hereto as Exhibit "A" and incorporated herein by reference. 1 3. COMPENSATION TO CONSULTANT City shall pay CONSULTANT for the services in accordance with the provisions of this Section. No rate changes shall be made during the term of this Agreement without prior written approval of City. CONSULTANT's compensation for all work performed in accordance with this Agreement shall not exceed the total contract price of $42,000.00. 3.1 CONSULTANT's contract price is inclusive of all travel and out -of- pocket expenses. 3.2 CONSULTANT shall submit monthly invoices to City payable by City within thirty (30) days of receipt of invoice subject to the approval of City and based upon the following: progress payments will be made on percentage - complete basis in relation to the CONSULTANT's fixed contract price. Interim billing shall not cover a period of not less than a calendar month. 3.3 CONSULTANT shall not receive any compensation for extra work without prior written authorization of City. 3.4 City shall reimburse CONSULTANT only for those costs or expenses which have been specifically approved in this Agreement, or specifically approved in advance by City. 3.5 Notwithstanding any other paragraph or provision of this Agreement, beginning on the effective date of this Agreement, City may withhold payment of $7,500 as approved retention pending delivery of the CONSULTANT'S final report. 4. STANDARD OF CARE 4.1 All of the services shall be performed by CONSULTANT or under CONSULTANT's supervision. CONSULTANT represents that it possesses the professional and technical personnel required to perform the services required by this Agreement, and that it will perform all services in a manner commensurate with the community professional standards. All services shall be performed by qualified and experienced personnel who are not employed by City nor have any conflicting contractual relationship with City. CONSULTANT represents and warrants to City that it has or shall obtain all licenses, permits, qualifications and approvals required of its profession. CONSULTANT further represents and warrants that it shall keep in effect all such licenses, permits and other approvals during the term of this Agreement. 4.2 CONSULTANT shall not be responsible for delay, nor shall CONSULTANT be responsible for damages or be in default or deemed to be in default by reason of strikes, lockouts, accidents, or acts of God, or the failure of City to furnish timely information or to approve or disapprove CONSULTANT's work promptly, or delay li"_ or faulty performance by City, contractors, or governmental agencies, or any other delays beyond CONSULTANT's control or without CONSULTANT's fault. 5. INDEPENDENT PARTIES City retains CONSULTANT on an independent contractor basis and CONSULTANT is not an employee of City. The manner and means of conducting the work are under the control of CONSULTANT, except to the extent they are limited by statute, rule or regulation and the expressed terms of this Agreement. Nothing in this Agreement shall be deemed to constitute CONSULTANT or any of CONSULTANT's employees or agents, to be the agents or employees of City. CONSULTANT shall have the responsibility for and control over the details in means of performing the work provided that CONSULTANT is in compliance with the terms of this Agreement. Anything in this Agreement which may appear to give City the right to direct CONSULTANT as to the details of the performance of the services or to exercise a measure of control over CONSULTANT shall mean that CONSULTANT shall follow the desires of City only with respect to the results of the services. 6. COOPERATION CONSULTANT agrees to work closely and cooperate fully with City's designated Project Administrator, and any other agencies that may have jurisdiction or interest in the work to be performed. City agrees to cooperate with the CONSULTANT on this project. 7. PROJECT MANAGER CONSULTANT shall assign the Project to an Engagement Manager and Project Manager, who shall coordinate all phases of the project. The Engagement Manager and Project Manager shall be available to City at all reasonable times during the Project term. CONSULTANT has designated Marc Davis to be its Engagement Manager and Carol Jacobs to be the Project Manager. CONSULTANT'S list of key personnel for this project is identified in Exhibit "B ". CONSULTANT shall not remove or reassign any personnel designated in this Section or assign any new or replacement person to the Project without the prior written consent of City. City's approval shall not be unreasonably withheld with respect to removal or assignment of non -key personnel. CONSULTANT, at the sole discretion of City, shall remove from the project any of its personnel assigned to the performance of services upon written request of City. CONSULTANT warrants that it will continuously furnish the necessary personnel to complete the Project on a timely basis as contemplated by this Agreement. 8. TIME OF PERFORMANCE Time is of the essence in the performance of the services under this Agreement and the services shall be performed by CONSULTANT in accordance with the schedule V specified in Exhibit "A" and may start work on or after July, 1, 2001 but no later than September 15, 2001. The failure by CONSULTANT to strictly adhere to the schedule may result in termination of this Agreement by City, and the assessment of damages against CONSULTANT for delay. Notwithstanding the foregoing, CONSULTANT shall not be responsible for delays which are due to causes beyond CONSULTANT's reasonable control. However, in the case of any such delay in the services to be provided for the Project, each party hereby agrees to provide notice to the other party so that all delays can be addressed. 8.1 CONSULTANT shall submit all requests for extensions of time for performance in writing to the Project Administrator not later than ten (10) calendar days after the start of the condition which purportedly causes a delay, and not later than the date upon which performance is due. The Project Administrator shall review all such requests and may grant reasonable time extensions for unforeseeable delays, which are beyond CONSULTANT's control. 8.2 For all time periods not specifically set forth herein, CONSULTANT shall respond in the most expedient and appropriate manner under the circumstances, by either telephone, fax, hand delivery or mail. 9. CITY POLICY CONSULTANT will discuss and review all matters relating to policy and Project direction with the Project Administrator in advance of all critical decision points in order to ensure that the Project proceeds in a manner consistent with City goals and policies. 10. CONFORMANCE TO APPLICABLE REQUIREMENT All work prepared by CONSULTANT shall conform to applicable city, county, state and federal law, policies, rules, regulations and permit requirements and be subject to approval of the Project Administrator and City. 11. PROGRESS CONSULTANT is responsible to keep the Project Administrator and /or his /her duly authorized designee informed on a regular basis regarding the status and progress of the Project work, activities performed and planned, and any meetings that have been scheduled or are desired. 12. HOLD HARMLESS CONSULTANT shall indemnify, defend, save and hold harmless City, its City Council, boards and commissions, officers and employees from and against any and all loss, damages, liability, claims, allegations of liability, suits, costs and expenses for damages of any nature whatsoever, including, but not limited to, bodily injury, death, personal injury, property damages, or any other claims arising from any and all 0 negligence acts or omissions of CONSULTANT, its employees, agents or subcontractors in the performance of services or work conducted or performed pursuant to this Agreement, excepting only the sole negligence or willful misconduct of City, its officers or employees, and shall include attorneys' fees and all other costs incurred in defending any such claim. 13. INSURANCE Without limiting CONSULTANT's indemnification of City, and prior to commencement of work, CONSULTANT shall obtain and provide and maintain at its own expense during the term of this Agreement policy or policies of liability insurance of the type and amounts described below and satisfactory to City. Certification of all required policies shall be signed by a person authorized by that insurer to bind coverage on its behalf and must be filed with City prior to exercising any right or performing any work pursuant to this Agreement. Except workers compensation and errors and omissions, all insurance policies shall add City, its elected officials, officers, agents, representatives and employees as additional insured for all liability arising from CONSULTANT's services as described herein. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders' Rating of A (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Bests Key Rating Guide unless otherwise approved by the City Risk Manager. A. Worker's compensation insurance covering all employees and principals of CONSULTANT, per the laws of the State of California. B. Commercial general liability insurance covering third party liability risks, including without limitation, contractual liability, in a minimum amount of $1 million combined single limit per occurrence for bodily injury, personal injury and property damage. If commercial general liability insurance or other form with a general aggregate is used, either the general aggregate shall apply separately to this Project, or the general aggregate limit shall be twice the occurrence limit. C. Commercial auto liability and property insurance covering any owned and rented vehicles of CONSULTANT in a minimum amount of $1 million combined single limit per accident for bodily injury and property damage. D. Professional errors and omissions insurance which covers the services to be performed in connection with this Agreement in the minimum amount of One Million Dollars ($1,000,000.00). Said policy or policies shall be endorsed to state that coverage shall not be canceled by either party, except after thirty (30) days' prior notice has been given in 5 writing to City. CONSULTANT shall give City prompt and timely notice of claim made or suit instituted arising out of CONSULTANT's operation hereunder. CONSULTANT shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the work. CONSULTANT agrees that, in the event of loss due to any of the perils for which it has agreed to provide comprehensive general and automotive liability insurance, CONSULTANT shall look solely to its insurance for recovery. CONSULTANT hereby grants to City, on behalf of any insurer providing comprehensive general and automotive liability insurance to either CONSULTANT or City with respect to the services of CONSULTANT herein, a waiver of any right of subrogation which any such insurer of said CONSULTANT may acquire against City by virtue of the payment of any loss under such insurance. 14. PROHIBITION AGAINST TRANSFERS CONSULTANT shall not assign, sublease, hypothecate or transfer this Agreement or any for the services to be performed under this Agreement, directly or indirectly, by operation of law or otherwise without prior written consent of City. Any attempt to do so without consent of City shall be null and void. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of CONSULTANT, or of the interest of any general partner or joint venturer or syndicate member or cotenant if CONSULTANT is a partnership or joint- venture or syndicate or cotenancy, which shall result in changing the control of CONSULTANT, shall be construed as an assignment of this Agreement. Control means fifty percent (50 %) or more of the voting power, or twenty -five percent (25 %) or more of the assets of the corporation, partnership or joint- venture. 15. OWNERSHIP OF DOCUMENTS All working papers and reports created in connection with the completion of the Project are the property of the City. All working papers and reports will remain the property of the City. 16. CONFIDENTIALITY The information, which results from the services in this Agreement, is to be kept confidential unless the release of information is authorized by City. R 17. CITY'S RESPONSIBILITIES In order to assist CONSULTANT in the execution of his responsibilities under this Agreement, City agrees to provide the following: A. Identify a City Liaison who has the authority to make decisions regarding Project assumptions. B. Have various staff available for questions as the project progresses. 18. ADMINISTRATION This Agreement will be administered by the Administrative Services Department. Dan Matusiewicz, Accounting Manager shall be considered the Project Administrator and shall have the authority act for City under this Agreement. The Project Administrator and /or his /her authorized designee shall represent City in all matters pertaining to the services to be rendered pursuant to this Agreement. 19. RECORDS CONSULTANT shall keep records and invoices in connection with the work to be performed under this Agreement. CONSULTANT shall maintain complete and accurate records with respect to the costs incurred under this Agreement. All such records shall be clearly identifiable. CONSULTANT shall allow a representative of City to examine, audit and make transcripts or copies of such records during normal business hours. CONSULTANT shall allow inspection of all work, data, documents, proceedings and activities related to the Agreement for a period of three (3) years from the date of final payment under this Agreement. 20. WITHHOLDINGS City may withhold payment of any disputed sums until satisfaction of the dispute with respect to such payment. Such withholding shall not be deemed to constitute a failure to pay according to the terms of this Agreement. CONSULTANT shall not discontinue work as a result of such withholding. CONSULTANT shall have an immediate right to appeal to the City Manager or his designee with respect to such disputed sums. CONSULTANT shall be entitled to receive interest on any withheld sums at the rate of seven percent (7 %) per annum from the date of withholding of any amounts found to have been improperly withheld. 21. ERRORS AND OMISSIONS In the event of errors or omissions that are due to the negligence or professional inexperience of CONSULTANT which result in expense to City greater than would have resulted if there were not errors or omissions in the work accomplished by CONSULTANT, the additional expense shall be borne by CONSULTANT. Nothing in VA this paragraph is intended to limit City's rights under any other sections of this Agreement. 22. CITY'S RIGHT TO EMPLOY OTHER CONSULTANT(S) City reserves the right to employ other CONSULTANT(S) or accountants in connection with this Project. 23. CONFLICTS OF INTEREST A. The CONSULTANT or its employees may be subject to the provisions of the California Political Reform Act of 1974 (the "Act "), which (1) requires such persons to disclose financial interest that may foreseeably be materially affected by the work performed under this Agreement, and (2) prohibits such persons from making, or participating in making decisions that will foreseeably financially affect such interest. B. If subject to the Act, CONSULTANT shall conform to all requirements of the Act. Failure to do so constitutes a material breach and is grounds for termination of this Agreement by City. CONSULTANT shall indemnify and hold harmless City for any and all claims for damages resulting from CONSULTANT's violation of this Section. 24. SUBCONSULTANT AND ASSIGNMENT A. Except as specifically authorized under this Agreement, the services included in this Agreement shall not be assigned, transferred, contracted or subcontracted without prior written approval of City. 25. NOTICES All notices, demands, requests or approvals to be given under this Agreement shall be given in writing and conclusively shall be deemed served when delivered personally or on the third business day after the deposit thereof in the United States mail, postage prepaid, first class mail, addressed as hereinafter provided. All notices, demands, requests or approvals from CONSULTANT to City shall be addressed to City at: Administrative Services Department City of Newport Beach 3300 Newport Boulevard P. O. Box 1768 Newport Beach, CA, 92658 -8915 (949) 644 -3126 Fax 644 -3339 K All notices, demands, requests or approvals from City to CONSULTANT shall be addressed to CONSULTANT at: CONRAD BUSINESS SERVICES, INC. 1100 Main Street, Suite C Irvine, California 92614 (949) 474 - 2020.x217 Fax 263 -5520 Attn: Marc Davis. Vice President 26. TERMINATION In the event either part hereto fails or refuses to perform any of the provisions hereof at the time and in the manner required hereunder, that party shall be deemed in default in the performance of this Agreement. If such default is not cured within a period of two (2) days, or if more than two (2) days are reasonably required to cure the default and the defaulting party fails to give adequate assurance of due performance within two (2) days after receipt of written notice of default, specifying the nature of such default and the steps necessary to cure such default, the nondefaulting party may terminate the Agreement forthwith by giving to the defaulting party written notice thereof. 26.1 Notwithstanding the above, City shall have the option, at its sole discretion and without cause, of terminating this Agreement at any time by giving seven (7) days' prior written notice to CONSULTANT as provided herein. Upon termination of this Agreement, City shall pay to the CONSULTANT that portion of compensation specified in this Agreement that is earned and unpaid prior to the effective date of termination. 27. COMPLIANCES CONSULTANT shall comply with all laws, state or federal and all ordinances, rules and regulations enacted or issued by City. 28. WAIVER A waiver by either party of any breach, of any term, covenant or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, whether of the same or a different character. 29. INTEGRATED CONTRACT This Agreement represents the full and complete understanding of every kind or nature whatsoever between the Parties hereto, and all preliminary negotiations and agreements of whatsoever kind or nature are merged herein. No verbal agreement or implied covenant shall be held to vary the provisions herein. Any modification of this 7 Agreement will be effective only by written execution signed by both City and CONSULTANT. APPROVED AS TO FORM AND CONTENT: M Daniel Ohl, Deputy City Attorney for the City of Newport Beach ATTEST: M LaVonne Harkless City Clerk f: \users \act \shared \conrad bus srvs agreement.doc CITY OF NEWPORT BEACH A Municipal Corporation M Garold B. Adams, Mayor for the City of Newport Beach CONSULTANT Marc Davis, CPA Vice President 10 Exhibit A Century Business Services Conrad Business Services, Inc 1100 Main Street, Suite C Irvine, California 92614 Phone (949) 474 -2020 Fax (949) 263 -5520 June 6, 2001 Mr. Richard Kurth Deputy Administrative Services Director City of Newport Beach 3300 Newport Boulevard Newport Beach, California 92658 Dear Mr. Kurth: Conrad Business Services, Inc. is pleased to respond to your request for GASB 34 infrastructure valuation services. Conrad Business Services, Inc. has the expertise to assist you with implementing the infrastructure requirements of GASB 34 to ensure that you are in compliance with the new standard. We have completed infrastructure valuations for the City of Temple City, and are currently working on valuations for the cities of La Palma and La Quinta. Conrad Business Services, Inc. is proposing to provide the City of Newport beach with a complete turnkey approach to completing the infrastructure portion of the GASB 34 conversion. Under this approach, the City of Newport Beach will provide Conrad Business Services, Inc. with copies of existing infrastructure records. These records may include GIS table printouts, zoning and general plan maps, master plans and other existing inventories. We will perform the following: • Determine appropriate networks and subsystems based upon the City's needs; • Compile a listing of infrastructure assets grouped into networks and subsystems; • Determine necessary assumptions in order to address missing data; • Determine estimated useful lives; • Calculate depreciation expense and accumulated depreciation as of a specific date agreed to by the City; • Value all infrastructure assets using current replacement value and trending it back to the date of acquisition, construction or donation through the use of appropriate indexes; • Obtain a representation letter from the City agreeing to the assumptions made; • Provide the City with periodic status reports; • Provide the City with procedures for tracking additions and deletions to infrastructure assets; and CBIZ is the leading provider of Integrated business services and products to Business America. Nasdaq: CBIZ • Century Business Services. Inc. • w Xb2 corn Mr. Richard Kurth Deputy Administrative Services Director City of Newport Beach June 6, 2001 Page Two • Provide a report to the City documenting the infrastructure assets, methodology used to compile and value the assets, and assumptions made. For this option, the City will be responsible for: Identifying a City liaison who has authority to make decisions regarding assumptions; and Having various City staff available for questions as the project progresses; We anticipate that this project can be completed within 120 days from the date of contract award. We will complete this project for a total fixed fee $42,000. This fixed fee is inclusive of all travel and out - of- pocket expenses. If the foregoing is in accordance with your understanding, please sign the copy of this letter in the space provided and return it to us. Should you have any questions or need additional information, please give me a call at (949) 474 -2020 extension 223. Sincerely, Marcus D. Davis Vice President Accepted: CITY OF NEWPORT BEACH Title: Date Exhibit B CONSULTANT KEY PERSONNEL Marc Davis, Engagement Manager Carol Jacobs, Project Manager Jim Miller, Sr. Consultant