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
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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
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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.