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HomeMy WebLinkAbout11327RESOLUTION NO. 11327 A RESOLUTION APPROVING AN AGREEMENT BETWEEN THE CITY OF PUEBLO, (CITY), AND SMART BUSINESS ADVISORY AND CONSULTING, LLC (SMART) TO PROVIDE ACTUARIAL AND CONSULTING SERVICES RELATED TO COMPLIANCE WITH THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 45 TO PROVIDE ACCOUNTING AND FINANCIAL REPORTING FOR THE CITY'S OTHER POST - EMPLOYMENT BENEFIT PLANS, AND AUTHORIZING THE TRANSFER OF $8,500 FROM THE CONTINGENCIES ACCOUNT THEREFOR BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The Agreement between the City of Pueblo, a Municipal Corporation, and SMART Business Advisory and Consulting Services, LLC for the rendering of professional actuarial and consulting services, a copy along with the standard terms and conditions, and Exhibit "A" relating to PERA employment, which is attached hereto, is hereby approved. SECTION 2_ Funds in the amount of $8,500 are hereby transferred from the contingencies account to the City Council's professional services account for the purpose of paying for these services. INTRODUCED July 14. 2008 BY Judy Weaver Councilperson APPROVEDf ATTEST D BY: �. � y PRESS NT'ei Cif' Council t Cs, 1132 Background Paper for Proposed RESOLUTION AGENDA ITEM # ; DATE: JULY 14, 2008 DEPARTMENT: FINANCE DEPARTMENT ROBERT F. HAIN, DIRECTOR TITLE A RESOLUTION APPROVING AN AGREEMENT BETWEEN THE CITY OF PUEBLO, (CITY), AND SMART BUSINESS ADVISORY AND CONSULTING, LLC (SMART) TO PROVIDE ACTUARIAL AND CONSULTING SERVICES RELATED TO COMPLIANCE WITH THE GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 45 TO PROVIDE ACCOUNTING AND FINANCIAL REPORTING FOR THE CITY'S OTHER POST - EMPLOYMENT BENEFIT PLANS, AND AUTHORIZING THE TRANSFER OF $8,500 FROM THE CONTINGENCIES ACCOUNT THEREFOR. ISSUE Should City Council approve an agreement between the City and SMART for the purpose of providing actuarial and consulting services relating to GASB 45 compliance? RECOMMENDATION The Staff recommendation is, Approval of Resolution BACKGROUND The Government Accounting Standards Board (GASB) has presented the government accounting world with another requirement in preparation of governmental Comprehensive Annual Financial Reports, The City of Pueblo is required to comply with this directive in the preparation of its 2008 fiscal year -end reports. The nature of these services is to actuarially estimate the current cost related to the post - employment benefits offered by the City to its employees. Although minimal, the City does provide some benefits. Police and Fire retirees are provided the opportunity to remain enrolled in the City's health insurance plan until they reach age 65. Police officer retirees may also enroll in the City's dental insurance plan until they reach age 65. Although the retirees pay the full premium cost, the imputed value of receiving insurance coverage with premiums based on the ages of a generally younger population of active employees does create a cost to the City that is not paid by the retiree. GASB 45 requires that this cost be calculated actuarially and included in the City's current year financial statements each year from 2008 forward. The objective of this service agreement is to have the Consultant do actuarial analysis and prepare the reporting needed to be included in the City's Comprehensive Annual Financial Statements in compliance with the GASB 45 reporting requirements. FINANCIAL IMPACT The fee for this service is $8,500 in 2008. Because they are only required to update the reports in 2009 SMART has agreed to charge $3,500 in the second year. Because we are required to do a new analysis every two years, SMART has agreed to do the third year for the same cost of $8,500 as charged for the first year. Funds for the 2008 services will be transferred from the contingency account into the City Council's professional services account. lid A ll i Jjp June 25, 2008 Mr. Robert Hain Director City of Pueblo 1 City Hall Place Pueblo, CO 81003 Dear Robert: We are pleased you have engaged SMART Business Advisory and Consulting, LLC ( "SMART ") to provide compensation and benefits advisory services for City of Pueblo (the "City "). This letter confirms the scope and related terms of your engagement of SMART. Scope of Services We will provide GASB 45 Actuarial Valuation services to the City as described below. SMART shall assist the City by providing actuarial valuation and consulting services related to City offered postemployment benefits other than pensions (OPEB). Specifically, SMART shall provide the following actuarial and consulting services related to compliance with GASB 45 accounting and financial reporting for the City's OPEB plans: ❑ Actuarial valuation of all OPEB plans identified; ❑ Facilitate the selection of reasonable actuarial assumptions for purposes of GASB 45 compliance; ❑ Develop annual OPEB cost and net OPEB obligation for financial reporting purposes according to GASB 45; ❑ Present results to the relevant audience within the City; and ❑ Prepare a written actuarial valuation report documenting the results under GASB 45. Specific steps necessary to satisfy the accounting and financial reporting standards of employers mandated under GASB 45 include: Data Review Utilizing accurate participant data and claims information is essential for an OPEB actuarial valuation. This task involves analyzing the relevant participant census and SMART Business Advisory and Consulting, LLC 30 North LaSalle Street I Suite 4300 1 Chicago, IL 60602 1312,849,2900 1 Fax 312.849.2929 1 www.smartgrp.com SMARTand Aem s.L Pe SWRTSw mAd maMComWi .LLChalematt &epactloemac6m. iM Ma mnpaina aeaepaale ad htlgandent bptl entitles qat aak Drypgabmsel clbma 'buimaneatla. SWTNa w Ad M- MC..W,, LLCI,Wa"naed CPAtr Mr. Robert Hain City of Pueblo June 25, 2008 Page 2 claims data for reasonableness and integrity. We will cleanse or process raw input data that we receive from the City. In order to complete this task, we will: ❑ Discuss the data collection procedures with appropriate personnel at the City; U Review plan provisions and research any alternative plans that may exist; ❑ Determine the reasonableness and integrity of the participant data: Validate the active and retiree census information, Reconcile the year over year census, and Analyze claims by retiree demographic; and ❑ Identify any errors and inconsistencies. For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans with a total membership of at least 200. The City can follow a two year actuarial valuation cycle where in year one a full actuarial valuation is completed to determine the OPEB cost and obligations and in year two the OPEB cost and obligations are estimated by rolling forward the year one valuation results. Collecting and analyzing claims and participant census data will occur every other year. Determination of Actuarial Assumptions This task involves an analysis of the actuarial assumptions (both economic and non- economic). SMART will suggest a range for each actuarial assumption. The final assumptions will be selected by the City. We will: U Analyze plan claims experience and the underlying cause of any recent premium rate fluctuations if necessary; ❑ As appropriate, provide a range of reasonable assumptions to be used in calculating the OPEB obligations; and ❑ Increase the City's understanding of the assumptions used by SMART in its actuarial valuation. In order to complete this task, we will: • Discuss the assumptions with the City and its members personnel to gain an understanding of the various issues impacting the assumptions; and • Compare those assumptions with the assumptions used by other large public organizations. Our review will provide information which will enable the City to select the appropriate actuarial assumptions as required under the GASB standards. SMART the Intelligent Choue. Mr. Robert Hain City of Pueblo June 25, 2008 Page 3 Actuarial Valuation This task incorporates the agreed upon actuarial assumptions and various actuarial methods to determine the OPEB obligations. We will: ❑ Establish an actuarial model for evaluating benefit liabilities under the substantive plan; and ❑ Calculate and measure the present value of projected benefits, normal cost, actuarial accrued liability, actuarial value of assets, etc. As stated earlier, the City can follow a two year actuarial valuation cycle where in year one a full actuarial valuation is completed to determine the OPEB cost and obligations and in year two the OPEB cost and obligations are estimated by rolling forward the year one valuation results. An actuarial valuation will occur every other year. Preparation of GASB Accounting Information This task incorporates the agreed upon actuarial assumptions and various actuarial methods to determine the OPEB obligations. We will: ❑ Calculate the annual required contribution ( "ARC "), annual OPEB cost, net OPEB obligation, etc.; and ❑ Prepare exhibits for employer financial reporting (GASB 45). Actuarial Valuation Report and Recommendations This task involves preparing an actuarial valuation report containing: LJ Executive summary of results; Exhibits containing all information relevant to satisfying disclosure requirements under GASB 45; ❑ Summary of census data; • Summary of actuarial assumptions; and • Summary of plan provisions. Other Services Not Covered by the Scope of Services. SMART can provide additional services that are outside of the current scope of work. At the City's request, SMART could provide any of the following services for an additional fee: • Recommend a policy suggesting the appropriate actions to address an increase or decrease in liabilities or expenses; • Assess program costs under GASB 45 based on factors such as: program design, current and future participant demographics, geographic and age based differences, utilization patterns; 41SMARI the Intelligent t1101ce Mr. Robert Hain City of Pueblo June 25, 2008 Page 4 • Identify funding issues and /or prepare cash flow projections; • Provide support for collective bargaining; • Review of retiree or active health care claims; ❑ Analyze alternative health care program structures with an emphasis on cost control and influencing participant behavior; and ❑ Perform a vendor search. We do not anticipate that the written tax advice provided under this engagement letter will rise to the level of a Covered Opinion as defined in §10.35 of Circular 230 ( "Covered Opinion "). Therefore, all the written tax advice provided under this engagement letter will contain the following legend: ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY SMART TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. However, if our services will rise to the level of a Covered Opinion, we will issue a separate engagement letter. Fees Our fee for this engagement will extend over a three year period and will be: Service Fixed Fee 2008 Fiscal Year $ 8,500 2009 Fiscal Year $ 3,500 2010 Fiscal Year $ 8,500 Any variability in cost would most likely stem from data issues and perhaps additional complexity of the claims history for a given plan. Generally, there will be a direct relationship between the size of the plan in terms of number of participants and the number of issues, although that is not always the case. 0ANSMART [lie Inlelligen[ (hol(e. Mr. Robert Hain City of Pueblo June 25, 2008 Page 5 SMART is proposing this fixed fee for the services described above, based upon the following assumptions: Scope of the engagement includes the participants and plans for the City's policeman and firemen. > SMART receives timely and complete information and participant data from the City. The participant data is provided to SMART in a form compatible with Microsoft EXCEL or ACCESS. y The City current year and prior year participant data has been sufficiently cleansed or processed so that it is free from errors and inconsistency. If the participant data requires a substantial amount of time for additional cleansing, such additional cleansing performed by SMART will be considered outside of the current scope of the engagement. > A full actuarial valuation is completed for the 2008 fiscal year. A roll forward of the prior year's actuarial valuation results is completed for the 2009 fiscal year. A full actuarial valuation is completed for the 2010 fiscal year. The scope of the engagement does not expand beyond the scope described in this proposal. Fees include one annual on -site meeting to discuss valuation results with appropriate members of the City. Circumstances encountered during the performance of these services that necessitate additional time or expense could cause us to be unable to deliver the services within the above fee estimate. We will notify the City of any such circumstances as they are assessed and prior to providing services to you over the fee estimate noted above. In addition to our professional fees, we are reimbursed for actual out -of- pocket expenses, such as travel related expenses for more than one annual on -site meetings. If we encounter matters that exceed the scope of this engagement letter, we will issue separate engagement letters to confirm the scope and related terms of any additional engagements. SMART. the Inielkjent Choiee- Mr. Robert Hain City of Pueblo June 25, 2008 Page 6 Standard Terms and Conditions The attached Standard Terms and Conditions are made a part of this engagement letter, and the following change is agreed to between SMART and the City: Paragraph 2 Payment of Invoices The interest rate is changed form 1'/2% per month to I% per month. Paragraph 3 Term Change thirty (30) calendar days to twenty (20) calendar days. Paragraph 7 Reliance on Advice and Disclosure Subparagraph (a) is replaced with the following: "Except as otherwise required by law, as permitted by the Engagement Letter, or as provided in Paragraph 7(b) below with respect to any proposed or completed transaction, Client acknowledges and agrees that any advice, recommendations, information or work product provided to Client by SMART in connection with this Engagement is for the use of Client, and may not be relied upon by any third party " Paragraph 8 Indemnification Subparagraph (a) is modified by adding the following to the beginning of subparagraph (a): "To the extent permitted by law," Paragraph 8 Indemnification Subparagraph (b) is replaced with the following: `In furtherance of the provisions of Paragraph 7(a) above, to the extent permitted by law, Client will indemnify, defend and hold harmless SMART from and against any and all Liabilities suffered by or asserted against SMART in connection with a third party claim to the extent resulting from such party's use or possession of or reliance upon SMART's advice, recommendations, information or work product as a result of Client's use or disclosure of such advice, recommendations, information, or work product other than as permitted by Paragraph 7(b) above. Paragraph 16 Governing Law and Severability Change Pennsylvania to Colorado. Include the following paragraphs: 21. PERA LIABILITY. SMART shall reimburse the Client for the full amount of any employer contribution required to be paid by Client to the Public Employees' Retirement Association ( "PERA ") for salary or other compensation paid to a PERA retiree performing contracted services for the Client under this Agreement. SMART shall fill out the questionnaire OADSMART the hnelligent Choice Mr. Robert Hain City of Pueblo June 25, 2008 Page 7 attached as Exhibit "A" and submit the completed form to Client as part of the signed Agreement. 22. State - Imposed Mandates Prohibiting Illegal Aliens from Performing Work (a) At or prior to the time for execution of this Contract, Contractor shall submit to the Purchasing Agent of the City its certification that it does not knowingly employ or contract with an illegal alien and that the Contractor has participated or attempted to participate in the `Basic Pilot Program" created in Public Law 208, 104` Congress, as amended and expanded in Public law 156, 108` Congress, as amended, that is administered by the United States Department of Homeland Security in order to confirm the employment eligibility of all employees who are newly hired for employment in the United States. "Basic Pilot Program" is now known as "E- Verify." (b) Contractor shall not: (1) Knowingly employ or contract with an illegal alien to perform work under this contract; (11) Enter into a contract with a subcontractor that fails to certify to Contractor that the subcontractor shall not knowingly employ or contract with an illegal alien to perform work under this contract. (c) The following state - imposed requirements apply to this contract: (I) The Contractor shall have confirmed or attempted to confirm the employment eligibility of all employees who are newly hired for employment in the United States through participation in the Basic Pilot Program and, if the Contractor is not accepted into the Basic Pilot Program prior to entering into this contract, that the Contractor shall apply to participate in the Basic Pilot Program every three months until the Contractor is accepted or this Contract has been fully completed, whichever occurs earlier. This provision shall not be required or effective if the Basic Pilot Program is discontinued. (11) The Contractor is prohibited from using the Basic Pilot Program procedures to undertake preemployment screening of job applicants while this Contract is being performed. (III) If the Contractor obtains actual knowledge that a subcontractor performing work under this contract knowingly employs or contracts with an illegal alien, the Contractor shall be required to: A. Notify the subcontractor and the Purchasing Agent of the City within three (3) days that the Contractor has actual knowledge that the subcontractor is employing or contracting with an illegal alien; and B. Terminate the subcontract with the subcontractor if within three (3) days of receiving the notice required pursuant to subparagraph SMART the Imel�yent Chore. Mr. Robert Hain City of Pueblo June 25, 2008 Page 8 (c)(III)A. above the subcontractor does not stop employing or contracting with the illegal alien; except that the Contractor shall not terminate the contract with the subcontractor if, during such three (3) days, the subcontractor provides information to establish that the subcontractor has not knowingly employed or contracted with an illegal alien. (IV) The Contractor is required to comply with any reasonable request by the Colorado Department of Labor and Employment (hereinafter referred to as "CDLE ") made in the course of an investigation that CDLE is undertaking pursuant to its authority under §8 -17.5- 102(5), C.R.S. d) Violation of this Section by the Contractor shall constitute a breach of contract and grounds for termination. In the event of such termination, the Contractor shall be liable for City's actual and consequential damages. e) As used in this Section, "Contractor" shall mean SMART and "City" shall mean "Client ". . 23. TABOR Saving Clause. Nothing herein shall constitute, nor be deemed to constitute, the creation of a debt or multi -year fiscal obligation or an obligation of future appropriations by the City Council of Pueblo, contrary to Article X, § 20 of the Colorado Constitution or any other constitutional, statutory or charter debt limitation. Notwithstanding any other provision of this Agreement, with respect to any financial obligation of Client under this Agreement for fiscal years after 2008, in the event the budget or other means of appropriations for any such year does not provide funds in sufficient amounts to discharge such obligation, the City may terminate this Agreement for such year without penalty. Before proceeding with any work during a fiscal year after 2008, it is the duty of the party contracting with City to verify that funds for its services during such year have been duly appropriated and budgeted. SMART the Inl ?Ilig ?nt C!�oire- Mr. Robert Hain City of Pueblo June 25, 2008 Page 9 Please sign the enclosed copy of this engagement letter to confirm our agreement and return it to us within 30 days. If you have any questions, please call me. Very truly yours, SMART Business Advisory and Consulting, LLC Carl R. Mowery Managing Director, Compensation & Benefits Enclosure: SMART Standard Terms and Conditions ACCEPTED City of Pu Authorized Signature 274W I , t_V 1�1 , D'00% Dat 040 SMART PIP hnelllyeni Chnice SMART BUSINESS ADVISORY AND CONSULTING, LLC ( "SMART") STANDARD TERMS AND CONDITIONS COMPENSATION AND BENEFITS SERVICES Services. It is understood and agreed that SMART's services may include advice and recommendations, but all decisions in connection with the implementation of such advice and recommendations shall be the responsi- bility of, and made by, Client. References herein to Cli- ent shall refer to the addressee of the Proposal or Engagement Letter to which these General Terms and Conditions are attached (the "Engagement Letter "). Unless provided for, SMART's services do not include representing Client in the event of a challenge by the In- ternal Revenue Service ( "IRS ") or other governmental authority, Payment of Invoices. Client agrees to pay properly submitted invoices within thirty (30) days of the invoice date, or such other date as may be specified in the En- gagement Letter. Payments not received within thirty (30) days of the invoice date shall accrue a late charge of the lesser of (i) I %: %a per month or (ii) the highest rate allowable by law, in each case compounded monthly to the extent allowable by law. Without limit- ing its rights or remedies, SMART shall have the right to halt or terminate entirely its services until payment is received on past due invoices. Term. Unless terminated sooner in accordance with its terms, this engagement shall terminate on the comple- tion of SMART's services hereunder. Either party may terminate this engagement at any time by giving written notice to the other party not less than thirty (30) calen- dar days before the effective date of termination. In the event of such notification, Client agrees to pay SMART for time charges at standard hourly rates and expenses incurred to the date of termination to the extent the amount so computed exceeds payments previously made by Client for the Engagement. 4 Ownership a) SMART Technology. SMART has created, ac- quired or otherwise has rights in, and may, in con- nection with the performance of services hereunder, employ, provide, modify, create, acquire or other- wise obtain rights in, various concepts, ideas, meth- ods, methodologies, procedures, processes, know - how, and techniques (including, without limitation, models; templates; the generalized features of the structure, sequence and organization of software; user interfaces and screen designs; general purpose consulting and software tools, utilities and routines; and logic, coherence and methods of operation of systems) (collectively, the "SMART Technology "). b) Ownership of Deliverables, Except as provided be- low, upon full and final payment to SMART here- under, the tangible items specified as deliverables or work product in the proposal, engagement letter or contract to which these terms are attached (the "De- liverables ") will become the property of Client. To the extent that any SMART Technology is contained in any of the Deliverables, SMART hereby grants Client, upon full and final payment to SMART hereunder, a royalty-free, fully paid -up, worldwide, non - exclusive license to use such SMART Technol- ogy in connection with the Deliverables. c) Ownership of SMART Property. To the extent that SMART utilizes any of its property (including, without limitation, the SMART Technology or any hardware or software of SMART) in connection with the performance of services hereunder, such property shall remain the property of SMART and, except for the license expressly granted in Paragraph 4(b), Client shall acquire no right or interest in such property. Notwithstanding anything herein to the contrary, the parties acknowledge and agree that (a) SMART will own all right, title, and interest, includ- ing, without limitation, all rights under all copyright, patent and other intellectual property laws, in and to the SMART Technology and (b) SMART may em- ploy, modify, disclose, and otherwise exploit the SMART Technology (including, without limitation, providing services or creating programming or mate- rials for other clients). SMART does not agree to any terms that may be construed as precluding or limiting in any way its right to (a) provide consult- ing or other services of any kind or nature whatso- ever to any person or entity as SMART in its sole discretion deems appropriate or (b) develop for it- self, or for others, materials that are competitive with those produced as a result of the services pro- vided hereunder, irrespective of their similarity to the Deliverables. Limitation on Warranties. THIS IS A SERVICES ENGAGEMENT. SMART WARRANTS THAT IT WILL PERFORM SERVICES HEREUNDER IN GOOD FAITH. SMART DISCLAIMS ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRAN- TIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Limitation on Damages. Except for each party's in- demnification obligations as set forth below, neither Client nor SMART shall be liable to the other for any actions, damages, claims, liabilities expenses or losses in any way arising out of or relating to the services per- formed under the Engagement Letter for an aggregate amount in excess of the fees paid by Client or owing to SMART for services rendered by SMART under the Engagement Letter. In no event shall either party be li- able for consequential, special, indirect, incidental, pu- nitive or exemplary damages, costs, expenses, or losses (including, without limitation, lost profits and opporm- 09.06.06 SMART BUSINESS ADVISORY AND CONSULTING, LLC ( "SMART ") STANDARD TERMS AND CONDITIONS COMPENSATION AND BENEFITS SERVICES nity costs). In furtherance and not in limitation of the foregoing, SMART will not be liable in respect of any decisions made by Client as a result of the performance by SMART of its services hereunder. The foregoing provisions shall apply to the fullest extent of the law, whether in contract, statute, tort (such as negligence), or otherwise. 7. Reliance on Advice and Disclosure a) Except as otherwise required by law, as permitted by the Engagement Letter, or as provided in Para- graph 7(b) below with respect to any proposed or completed transaction, Client acknowledges and agrees that any advice, recommendations, informa- tion or work product provided to Client by SMART in connection with this Engagement is for the confidential use of Client, may not be relied upon by any third party and Client will not dis- close or permit access to such advice, recommen- dations, information or work product to any third party or summarize or refer to such advice, rec- ommendations, information, or work product or to SMART's Engagement without, in each case, SMART's prior written consent. b) No provision in these terms or the Engagement Letter is or is intended to be construed as a condi- tion of confidentiality under Internal Revenue Code ( "IRC ") sections 6011, 6111, 6112 or the regulations thereunder, or under any similar or analogous provisions of the laws of a state or other jurisdiction. Client (and each employee, represen- tative, or other agent of Client) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of any transac- tion within the scope of this Engagement that re- duces or defers federal tax and all materials of any kind (including opinions and other tax analyses) that are provided to Client relating to such tax treatment and tax structure. If state or other j u- risdiction adopts provisions that are similar or analogous to those in IRC sections 6011, 6111, or 6112 or the regulations thereunder, the authoriza- tion to disclose in the preceding sentence also shall apply to any transaction within the scope of this Engagement that is subject to such provisions of that state or other jurisdiction. extent such Liabilities result from the negligence or willful misconduct of the indemnifying party. b) In furtherance of the provisions of Paragraph 7(a) above, Client will indemnify, defend and hold harmless SMART from and against any and all Li- abilities suffered by or asserted against SMART in connection with a third party claim to the extent resulting from such party's use or possession of or reliance upon SMART's advice, recommenda- tions, information or work product as a result of Client's use or disclosure of such advice, recom- mendations, information, or work product other than as permitted by Paragraph 7(b) above. c) The party entitled to indemnification (the "Indem- nified Party") shall promptly notify the party obli- gated to provide such indemnification (the "Indemnifying Party") of any claim for which the Indemnified Party seeks indemnification. The In- demnifying Party shall have the right to conduct the defense or settlement of any such claim at the Indemnifying Party's sole expense, and the In- demnified Party shall cooperate with the Indemni- fying Party. The party not conducting the defense shall nonetheless have the right to participate in such defense at its own expense. The Indemnified Party shall have the right to approve the settlement of any claim that imposes any liability or obliga- tion other than the payment of money damages. 9. Confidentiality. a) e. Indemnification. a) Each party agrees to indemnify, hold harmless and defend the other party from and against any and all b) Liabilities for physical injury to, or illness or death of, any person or persons regardless of status, and damage to or destruction of any tangible property, which the other party may sustain or incur to the With respect to this Engagement and any informa- tion supplied in connection with this Engagement and designated by the disclosing party as confiden- tial, the recipient agrees to: (i) protect the confi- dential information in a reasonable and appropriate manner or in accordance with applicable profes- sional standards; (ii) use confidential information only to perform its obligations under this Engage- ment; and (iii) reproduce confidential information only as required to perform its obligations under this Engagement. This section shall not apply to information which is (i) publicly known, (ii) al- ready known to the recipient; (iii) disclosed to a third party without restriction; (iv) independently developed; or (v) disclosed pursuant to legal re- quirement or order. Subject to the foregoing, SMART may disclose Client's confidential infor- mation to its subcontractors and affiliates. Client consents to SMART partners and employ- ees disclosing any and all of Client's information to each other for the purpose of rendering its ser- vices under this Engagement. SMART will main- tain the information provided to it in confidence within the firm and will not disclose to others Cli- 09 06.06 SMART BUSINESS ADVISORY AND CONSULTING, LLC ( "SMART ") STANDARD TERMS AND CONDITIONS COMPENSATION AND BENEFITS SERVICES ent's confidential information except with Client's consent or as required by law or permitted under the professional standards of the accounting pro- fession or in accordance with Paragraph 9(a) above. 10. Cooperation; Use of Information. a) Client agrees to cooperate with SMART in the per- formance of the services under the Engagement Let- ter and shall provide SMART with timely access to and use of Client's personnel, facilities, equipment, data and information to the extent necessary for SMART to perform the services under the Engage- ment Letter. The Engagement Letter may set forth additional obligations of Client in connection with the Engagement. Client acknowledges that Client's failure to perform these obligations could adversely affect SMART's ability to provide the services un- der the Engagement Letter. b) Client shall be responsible for the performance of its employees and agents and for the accuracy and com- pleteness of all data and information provided to SMART for purposes of the performance by SMART of its services hereunder. SMART will base its conclusions on the facts and assumptions that Client submits and will not independently verify this information. Inaccuracy or incompleteness of the in- formation Client provides could have a material ef- fect on SMART's conclusions. c) In rendering its advice, SMART may consider, for example, the applicable provisions of the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of 1974, as amended, and relevant state and foreign. statutes, the regulations thereunder, income tax treaties, and judi- cial and administrative interpretations thereof. These authorities are subject to change, retroactively and /or prospectively, and any such changes could af- fect the validity of SMART's advice. SMART will not update its advice for subsequent changes or modifications to the law and regulations, or to judi- cial and administrative interpretations thereof, unless Client separately engages SMART to do so in writ- ing after such changes or modifications. d) If the Engagement involves tax planning matters the potential benefits of which are no longer possible to achieve because of legislative, regulatory, or other administrative change or judicial decision, Client's sole remedy is the right to terminate this Engage- ment in accordance with Paragraph 3 above. e) Treasury regulations under IRC section 6011 require taxpayers to disclose to the IRS their participation in reportable transactions and IRC section 6707A im- poses strict penalties for noncompliance. Client agrees to use its best efforts to promptly inform SMART if Client is required to disclose any transac- tion to the IRS or to any state or other jurisdiction adopting similar or analogous provisions. IRC sec- tion 6111 requires a material advisor with respect to a reportable transaction to disclose information on the transaction to the IRS by a prescribed date, and IRC section 6112 requires the material advisor to maintain, and make available to the IRS upon re- quest, a list of persons and other information with respect to the transaction. SMART will use its best efforts to promptly advise Client if SMART pro- vides Client's information to the IRS under IRS sec- tion 6111 or 6112, or to any state or other jurisdiction adopting similar or analogous provi- sions. The workpapers for this Engagement are the prop- erty of SMART and constitute confidential informa- tion. Information relating to advice SMART provides to Client, including communications be- tween SMART and Client and material SMART creates in the course of providing advice, may be privileged and protected from disclosure to the IRS or other governmental authority. Should such an au- thority seek disclosure from SMART of written or oral communications relating to such advice, SMART will discuss with Client opportunities for asserting the privilege. As SMART is not able to assert the privilege on Client's behalf with respect to any communications for which privilege has been waived, Client agrees to notify SMART of any such waivers, whether resulting from communications with SMART or third parties, ]I. Force Majeure. SMART shall not be liable for any delays resulting from circumstances or causes beyond its reasonable control, including, without limitation, fire or other casualty, act of God, strike or labor dispute, war or other violence, or any law, order or requirement of any governmental agency or authority. 12. Limitation on Actions. No action, regardless of form, arising under or relating to this engagement, may be brought by either party more than twenty-four (24) months after the performance of our services under the Engagement Letter, unless you have previously pro- vided us with written notice specifically calling our at- tention to the defects in our services which form the basis of such claim and except that an action for non- payment may be brought by a party not later than one year following the date of the last payment due to such party hereunder. 13. Independent Contractor. It is understood and agreed that each of the parties hereto is an independent contrac- tor and that neither party is, nor shall be considered to be, an agent, distributor or representative of the other. 09 .06 06 SMART BUSINESS ADVISORY AND CONSULTING, LLC ( "SMART ") STANDARD TERMS AND CONDITIONS COMPENSATION AND BENEFITS SERVICES Neither party shall act or represent itself, directly or by implication, as an agent of the other or in any manner assume or create any obligation on behalf of, or in the name of, the other. ia. Survival. Unless otherwise explicitly stated, all provi- sions of these Standard Terms and Conditions shall sur- vive the expiration or termination of this engagement. 15. Assignment. Except as provided below, neither party may assign, transfer or delegate any of the rights or ob- ligations hereunder without the prior written consent of the other party. SMART may assign or subcontract its rights and obligations hereunder to any affiliate of SMART, without the consent of Client. 16. Governing Law and Severability. These terms, and the proposal, engagement letter or contract to which these terms are appended, including the exhibits, shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania (without giving effect to the choice of law principles thereof). If any provision of these terms is found by a court of com- petent jurisdiction to be unenforceable, such provision shall not affect the other provisions, but such unen- forceable provision shall be deemed modified to the ex- tent necessary to render it enforceable, preserving to the fullest extent permissible the intent of the parties set forth herein. 17. Mediation. The parties hereto agree that any dispute that may arise regarding the meaning, performance, or enforcement of this Engagement will, prior to resorting to litigation, be submitted to mediation upon the written request of any party to this Engagement, The party re- questing mediation shall select the mediation provider from the list of mediation providers approved by the American Arbitration Association. The mediation shall be conducted in accordance with the Commercial Me- diation Rules of the American Arbitration Association or such other rules as may be agreed upon by the par- ties. Both parties shall share costs of any mediation proceedings equally. ia. Alternative Practice Structure Notice. Smart Busi- ness Advisory and Consulting, LLC is not a licensed CPA firm and as such, is not permitted to provide audit, attest, assurance or other services that are required to be conducted only by a licensed CPA firm. .While we do not currently anticipate that these types of services will be undertaken as part of this engagement, to the extent such services are requested or otherwise required, they may be provided by Smart and Associates, LLP, a sepa- rate and independent legal entity which works together with Smart Business Advisory and Consulting, LLC to serve our clients' business needs. Any services to be performed by Smart and Associates,'LLP would be un- dertaken by a separate engagement letter with that firm. 19. Miscellaneous. a) As a result of SMART's prior or future services to Client, SMART may be requested to provide in- formation or documents to Client or a third party in a legal, administrative, arbitration, or similar proceeding in which SMART is not a party. If this occurs, SMART's efforts in complying with such requests will be billable to Client as a separate en- gagement. SMART shall be entitled to compensa- tion for its time and reasonable expense, including legal fees, in complying with the request. For all requests, SMART will observe the confidentiality requirements of the accounting profession and will notify Client of the request. b) Client should consult with legal counsel for the purpose of advising on non -tax legal aspects of matters on which SMART provides tax advice and drafting any legal documents or agreements that may be required in connection therewith. To the extent services of legal counsel or other profes- sional service providers are required, Client is re- sponsible for engaging and paying such service providers. c) SMART may communicate with Client by elec- tronic mail or otherwise transmit documents in electronic form during the course of this Engage- ment. Client accepts the inherent risks of these forms of communication (including security risks of interception of or unauthorized access to such communications and the risks of corruption of such communications and the risks of viruses or other harmful devices) and agrees that it may rely only upon a final hardcopy version of a document or other communication that SMART transmits to Client. d) For engagements where services will be provided by SMART through offices located in California, Client acknowledges that certain of SMART's per- sonnel may be considered "owners" under the California Accountancy Act and implementing regulations (California Business and Professions Code section 5079(a); 16 Cal. Code Regs. section 51 and 51.1) and who may provide services in connection with this engagement, may not be li- censed as certified public accountants under the laws of any of the various states. e) Where SMART is reimbursed for expenses, it is SMART's policy to bill clients the amount in- curred at the time the good or service is purchased. If SMART subsequently receives a volume rebate or other incentive payment from a vendor relating to such expenses, SMART does not credit such payment to the Client. Instead, SMART applies W06.06 SMART BUSINESS ADVISORY AND CONSULTING, LLC ( "SMART ") STANDARD TERMS AND CONDITIONS COMPENSATION AND BENEFITS SERVICES such payments to reduce its overhead costs, which costs are taken into account in determining SMART's standard billing rates and certain trans- action charges that may be charged to clients. 20. Entire Agreement. These terms, and the Proposal or Engagement Letter to which these terms are appended, including the exhibits, constitutes the entire agreement between SMART and Client with respect to the subject matter hereof and supersedes all other oral and written representations, understandings or agreements relating to the subject matter hereof. 09.06.06 EXHIBIT "A" COLORADO PUBLIC EMPLOYEES RETIREMENT ASSOCIATION SUPPLEMENTAL QUESTIONNAIRE TO BE ANSWERED BY ANY BUSINESS PERFORMING SERVICES FOR THE CITY OF PUEBLO Pursuant to section 24 -51- 1101(2), C.R.S., salary or other compensation from the employment, engagement, retention or other use of a person receiving retirement benefits (Retiree) through the Colorado Public Employees Retirement Association (PERA) in an individual capacity or of any entity owned or operated by a PERA Retiree or an affiliated party by the City of Pueblo to perform any service as an employee, contract employee, consultant, independent contractor, or through other arrangements, is subject to employer contributions to PERA by the City of Pueblo. Therefore, as a condition of contracting for services with the City of Pueblo, this document must be completed, signed and returned to the City of Pueblo: (a) Are you, or do you employ or engage in any capacity, including an independent contrac -tor, a PERA Retiree who will perform any services for the City of Pueblo? Yes , No _x_. (b) If you answered yes to (a) above, please answer the following question: Are you an individual, sole proprietor or partnership, or a business or company owned or operated by a PERA Retiree or an affiliated party? Yes , No If you answered Ayes® please state which of the above entities best describes your business: (c) If you answered yes to both (a) and (b), please provide the name, address and social security number of each such PERA Retiree. Name Address Address Social Security Number Social Security Number (If more than two, please attach a supplemental list) Failure to accurately complete, sign and return this document to the City of Pueblo may result in your being denied the privilege or doing business with the City of Pueblo. If you answered yes to both (a) and (b), you agree to reimburse the City of Pueblo for any employer contribution required to be paid by the City of Pueblo to PERA for salary or other compensation paid to you as a PERA Retiree or paid to any employee or independent contractor of yours who is a PERA Retiree performing services for the City of Pueblo. You further authorize the City of Pueblo to deduct and withhold all such contributions from any moneys due or payable to you by the City of Pueblo under any current or future contract or other arrangement for services between you and the City of Pueblo. Signed this 25 day of June, 2008 SMART Business Advisory and Consulting, LLC ;7 �� 2 Carl R. Mowery Managing Director For purposes of responding to question (b) above, an Aaffil fated party® includes (I ) any person who is the named beneficiary or cohenef iciary on the PERA account of the PERA Retiree, (2) any person who is a relative of the PERA Retiree by blood or adoption to and including parents, siblings, half - siblings, children, and grandchildren; (3) any person who is a relative of the PERA Retiree by marriage to and including spouse, spouse =s parents, stepparents, stepchildren, stepsiblings, and spouse =s siblings, and (4) any person or entity with whomthe PERA Retiree has an agreement to share or otherwise profit from the performance ofservices for the City of Pueblo by the PERA Retiree other than the PERA Retiree =s regular salary or compensation.