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HomeMy WebLinkAbout25C - AGMT INDIRECT COST ALLOC PLANREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: AUGUST 20, 2019 CLERK OF COUNCIL USE ONLY: TITLE: APPROVED ❑ As Recommended APPROVE AGREEMENT WITH ❑ As Or Amended ❑ Ordinance on 1s' Reading CLEARSOURCE FINANCIAL CONSULTING ❑ Ordinance on 2nd Reading TO PREPARE AN INDIRECT COST ❑ Implementing Resolution ALLOCATION PLAN AND INTERNAL ❑ Set Public Hearing For SERVIDE FUNDS COST ALLOCATION METHODOLOGY FOR UP TO FIVE YEARS, FOR A TOTAL AGGREGATE AMOUNT NOT TO EXCEED $170,700 (STRATEGIC PLAN NO. 4, 1) CONTINUED TO FILE NUMBER CITY MANAGER RECOMMENDED ACTION Authorize the City Manager and Clerk of the Council to execute an agreement with Clearsource Financial Consulting to prepare an Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology, for a three-year period August 20, 2019 through August 19, 2022, with a provision for two additional one-year terms exercisable (beginning August 2022 through August 2024) by the City Manager and the City Attorney, for a total aggregate amount not to exceed $170,700 for the term of the contract, including the optional renewals, subject to non - substantive changes approved by the City Manager and City Attorney. DISCUSSION On a periodic basis, it is incumbent on local government agencies to review and update their inter -agency charges through a formal study commonly referred to as a Cost Allocation Plan. The primary purpose of conducting such a study is to ensure that the costs of providing certain City services are reasonably recovered through fees and charges. The City currently uses internally developed cost allocation methodologies to recover direct and indirect costs from various City departments and programs (Indirect Costs). However, due to increased complexity of federal, state, and local guidelines for cost principles and audit requirements, the Finance and Management Services Agency (FMSA) has determined that a more comprehensive cost allocation plan is necessary to maintain the City's continued compliance with applicable laws and regulations. The proposed work plan includes two primary components; An Indirect Cost Allocation Plan (Indirect Costs) and Internal Service Funds Cost Allocation Methodology. The Indirect Cost Allocation Plan aims to recover the General Fund's overhead costs of providing indirect support services to operating departments and programs. The Internal Service Funds Cost Allocation 25C-1 Agreement with ClearSource Financial Consulting to Prepare an Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology August 20, 2019 Page 2 Methodology aims to develop a full cost allocation methodology to recover annual operating costs of internal service funds from inter -agency customers. The objective of this project is to ensure that the City's method of identifying and distributing indirect costs and internal service costs is fair, comprehensive, well documented, and defensible. On June 6, 2019, FMSA released a Request for Proposals (RFP) for professional consulting services. A total of seven consulting firms submitted proposals; Clearsource Financial Consuliting, eCivis, Inc., Matrix Consulting Group, Maximus, MGT Consulting Group, NBS Government Finance, and Revenue & Cost Specialists, LLC. The seven proposals were evaluated and ranked by a Review Committee comprised of staff from FMSA and the Risk Management Division of the Human Resources Department. The evaluation was based on several factors: • Overall ability to provide the services based upon the responses to the RFP • Technical qualifications and experience of key members of the engagement team and the firm • Experience with similarly sized governmental agencies in providing the types of services outlined in this RFP • Capability of handling all aspects of the engagement as defined as well as providing support and technical assistance • Fees and charges related to the level of work proposed Based upon the factors noted above, ClearSource Financial Consulting (ClearSource) was selected as the most qualified firm to provide the services. They demonstrated a strong staffing record along with high level of technical knowledge regarding all aspects of the City's engagement, and experience in preparing cost plans for similarly sized governments. Additionally, their highly experienced team will be available to assist with any technical issues or questions. ClearSource will be tasked in developing both a methodology along with a related method of distributing costs including but not limited to the following items: Indirect Costs (General Fund Overhead Support: • City Attorney • Office of the City Manager • Human Resources • City Clerk • Finance (Purchasing, Management & Support, Payroll, Treasury and Purchasing) • Fixed Assets Internal Service Funds: • Information Technology • Workers Compensation 25C-2 Agreement with ClearSource Financial Consulting to Prepare an Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology August 20, 2019 Page 3 • General Liability • Employee Benefits • Fleet • City Yard • Building Maintenance • Central Services In addition, ClearSource will be working with the above -referenced Departments to ensure they optimize their understanding for the respective operations and business process when developing the related methodologies. At the conclusion of their (ClearSource) analysis, an information session will be held to ensure Department stakeholders have an understanding of how the costs are arrived along with the distribution of the said costs to City Departments. As such, staff recommends contracting with ClearSource to provide the City's Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology for a period of three years with the option to renew for two additional one-year terms. STRATEGIC PLAN ALIGNMENT Approval of this item allows the City to meet Goal #7 Team Santa Ana, Objective #5 (Create a culture of innovation and efficiency within the organization), Strategy F (Explore opportunities to engage with outside agencies, both private and public, to share information and increase efficiencies). FISCAL IMPACT Funds in the amount of $170,700 will be budgeted and available for the following fiscal years: Accounting Unit FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 01110110-62300 $22,000 $14,400 $14,400 $14,400 $14,400 01110100-62300 $33,500 $14,400 $14,400 $14,400 $14,400 Total $55,500 $28,800 $28,800 $28,800 $28,800 APPROVED AS TO FUNDS AND ACCOUNTS: Lv ` Kathryn Downs yvw Executive Director Finance and Management Services Agency Exhibit: 1. Professional Services Agreement 25C-3 25C-4 EXHIBIT 7 AGREEMENT WITH CLEARSOURCE FINANCIAL CONSULTING TO DEVELOP AN INDIRECT COST ALLOCATION PLAN AND INTERNAL SERVICE FUNDS COST ALLOCATION METHODOLOGY THIS AGREEMENT is made and entered into on this 201h day of August, 2019 by and between ClearSource Financial Consulting, a California corporation ("Consultant"), and the City of Santa Ana, a charter city and municipal corporation organized and existing under the Constitution and laws of the State of California ("City"). RECITALS A. On June 6, 2019, the City issued Request for Proposal 19-021 seeking qualified consultants to develop an indirect cost allocation plan and internal service funds costs allocation methodology utilized to review and update the City's interagency charges and provide the City a comprehensive cost allocation plan which is necessary to maintain the City's continued compliance with applicable laws and regulations on this matter. B. Consultant submitted a timely proposal, which was selected by the City. Consultant represents that it is able and willing to provide such services to the City. C. In undertaking the performance of this Agreement, Consultant represents that it is knowledgeable in its field and that any services performed by Consultant under this Agreement will be performed in compliance with such standards as may reasonably be expected from a professional consulting firm in the field. NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms and conditions hereinafter set forth, the parties agree as follows: 1. SCOPE OF SERVICES Consultant shall perform during the term of this Agreement, the tasks and obligations including all labor, materials, tools, equipment, and incidental customary work required to fully and adequately complete the services described and set forth in the attached Scope of Services identified as Exhibit A, attached hereto and incorporated by reference. 2. COMPENSATION a. City agrees to pay, and Consultant. agrees to accept as total payment for its services for City, the rates and charges identified in the attached cost proposal identified as Exhibit B. The total amount to be expended during the term of this Agreement shall not exceed $170,700. Per Exhibit B, $113,100 shall be allocated for years 1-3. For any extension periods exercised per Section 3, below, an additional $28,800 per each optional year shall be compensated per Exhibit B. b. Payment by City shall be made within forty-five (45) days following receipt of proper invoice evidencing work performed, subject to City accounting procedures. Payment need not be made for work which fails to meet the standards of performance set forth 45862vl 25C-5 in the Recitals which may reasonably be expected by City. 3. TERM This Agreement shall commence on the date first written above for a three-year term until August 19, 2022, with the option for the City to grant up to two (2) one (I) -year renewals, exercisable by a writing executed by the City Manager and the City Attorney, unless terminated earlier in accordance with Section 15, below. 4. INDEPENDENT CONTRACTOR Consultant shall, during the entire term of this Agreement, be construed to be an independent contractor and not an employee of the City. This Agreement is not intended nor shall it be construed to create an employer -employee relationship, a joint venture relationship, or to allow the City to exercise discretion or control over the professional manner in which Consultant performs the services which are the subject matter of this Agreement; however, the services to be provided by Consultant shall be provided in a manner consistent with all applicable standards and regulations governing such services. Consultant shall pay all salaries and wages, employer's social security taxes, unemployment insurance and similar taxes relating to employees and shall be responsible for all applicable withholding taxes. 5. OWNERSHIP OF MATERIALS This Agreement creates a non-exclusive and perpetual license for City to copy, use, modify, reuse, or sublicense any and all copyrights, designs, and other intellectual property embodied in plans, specifications, studies, drawings, estimates, and other documents or works of authorship fixed in any tangible medium of expression, including but not limited to, physical drawings or data magnetically or otherwise recorded on computer diskettes, which are prepared or caused to be prepared by Consultant under this Agreement ("Documents & Data"). Consultant shall require all subcontractors to agree in writing that City is granted a non-exclusive and perpetual license for any Documents & Data the subcontractor prepares under this Agreement. Consultant represents and warrants that Consultant has the legal right to license any and all Documents & Data. Consultant makes no such representation and warranty in regard to Documents & Data which were provided to Consultant by the City. City shall not be limited in any way in its use of the Documents and Data at any time, provided that any such use not within the purposes intended by this Agreement shall be at City's sole risk. 6. INSURANCE Prior to undertaking performance of work under this Agreement, Consultant shall maintain and shall require its subcontractors, if any, to obtain and maintain insurance as described below: a. Commercial General Liability Insurance. Consultant shall maintain commercial general liability insurance naming the City, its officers, employees, agents, volunteers and representatives as additional insured(s) and shall include, but not be limited to protection against claims arising from bodily and personal injury, including death resulting therefrom and damage to property, resulting from any act #5862vl 25C-6 or occurrence arising out of Consultant's operations in the performance of this Agreement, including, without limitation, acts involving vehicles. The amounts of insurance shall be not less than the following: single limit coverage applying to bodily and personal injury, including death resulting therefrom, and property damage, in the total amount of $1,000,000 per occurrence, with $2,000,000 in the aggregate. Such insurance shall (a) name the City, its officers, employees, agents, and representatives as additional insured(s); (b) be primary and not contributory with respect to insurance or self-insurance programs maintained by the City; and (c) contain standard separation of insureds provisions. b. Business automobile liability insurance, or equivalent form, with a combined single limit of not less than $1,000,000 per occurrence. Such insurance shall include coverage for owned, hired and non -owned automobiles. C. Worker's Compensation Insurance. In accordance with the provisions of Section 3700 of the Labor Code, Consultant, if Consultant has any employees, is required to be insured against liability for worker's compensation or to undertake self- insurance. Prior to commencing the performance of the work under this Agreement, Consultant agrees to obtain and maintain any employer's liability insurance with limits not less than $1,000,000 per accident. d. If Consultant is or employs a licensed professional such as an architect or engineer: Professional liability (errors and omissions) insurance, with a combined single limit of not less than $1,000,000 per claim with $2,000,000 in the aggregate. e. The following requirements apply to the insurance to be provided by Consultant pursuant to this section: i. Consultant shall maintain all insurance required above in full force and effect for the entire period covered by this Agreement. ii. Certificates of insurance shall be furnished to the City upon execution of this Agreement and shall be approved by the City. iii. Certificates and policies shall state that the policies shall not be canceled or reduced in coverage or changed in any other material aspect without thirty (30) days prior written notice to the City. iv. Where the amounts or coverage provided by the certificates of insurance provides coverage greater than those listed by this Agreement, the amounts provided by the certificates of insurance shall be incorporated by reference into the Agreement. V. Consultant shall supply City with a fully executed additional insured endorsement. f. If Consultant fails or refuses to produce or maintain the insurance required by this section or fails or refuses to furnish the City with required proof that insurance has been procured and is in force and paid for, the City shall have the right, at the City's election, to forthwith terminate this Agreement. Such termination shall not affect Consultant's right to be paid for its time and materials expended prior to notification of termination. Consultant waives the right to receive compensation and agrees to indemnify the City for any work performed prior to approval of insurance by the City. #5862vl 25C-7 INDEMNIFICATION Consultant agrees to defend, and shall indemnify and hold harmless the City, its officers, agents, employees, contractors, special counsel, and representatives from liability: (1) for personal injury, damages, just compensation, restitution, judicial or equitable relief arising out of claims for personal injury, including death, and claims for property damage, which may arise from the negligent operations of the Consultant, its subcontractors, agents, employees, or other persons acting on its behalf which relates to the services described in section 1 of this Agreement; and (2) from any claim that personal injury, damages, just compensation, restitution, judicial or equitable relief is due by reason of the terms of or effects arising from this Agreement. This indemnity and hold harmless agreement applies to all claims for damages, just compensation, restitution, judicial or equitable relief suffered, or alleged to have been suffered, by reason of the events referred to in this Section or by reason of the terms of, or effects, arising from this Agreement. The Consultant further agrees to indemnify, hold harmless, and pay all costs for the defense of the City, including fees and costs for special counsel to be selected by the City, regarding any action by a third party challenging the validity of this Agreement, or asserting that personal injury, damages, just compensation, restitution, judicial or equitable relief due to personal or property rights arises by reason of the terms of, or effects arising from this Agreement. City may make all reasonable decisions with respect to its representation in any legal proceeding. Notwithstanding the foregoing, to the extent Consultant's services are subject to Civil Code Section 2782.8, the above indemnity shall be limited, to the extent required by Civil Code Section 2782.8, to claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Consultant. 8. INTELLECTUAL PROPERTY INDEMNIFICATION Consultant shall defend and indemnify the City, its officers, agents, representatives, and employees against any and all liability, including costs, for infringement of any United States' letters patent, trademark, or copyright infringement, including costs, contained in the work product or documents provided by Consultant to the City pursuant to this Agreement. 9. RECORDS Consultant shall keep records and invoices in connection with the work to be performed under this Agreement. Consultant shall maintain complete and accurate records with respect to the costs incurred under this Agreement and any services, expenditures, and disbursements charged to the City for a minimum period of three (3) years, or for any longer period required by law, from the date of final payment to Consultant under this Agreement. All such records and invoices shall be clearly identifiable. Consultant shall allow a representative of the City to examine, audit, and make transcripts or copies of such records and any other documents created pursuant to this Agreement during regular business hours. Consultant shall allow inspection of all work, data, documents, proceedings, and activities related to this Agreement for a period of three (3) years from the date of final payment to Consultant under this Agreement. #5862vl 25C-8 10. CONFIDENTIALITY If Consultant receives from the City information which due to the nature of such information is reasonably understood to be confidential and/or proprietary, Consultant agrees that it shall not use or disclose such information except in the performance of this Agreement, and further agrees to exercise the same degree of care it uses to protect its own information of like importance, but in no event less than reasonable care. "Confidential Information" shall include all nonpublic information. Confidential information includes not only written information, but also information transferred orally, visually, electronically, or by other means. Confidential information disclosed to either party by any subsidiary and/or agent of the other party is covered by this Agreement. The foregoing obligations of non-use and nondisclosure shall not apply to any information that (a) has been disclosed in publicly available sources; (b) is, through no fault of the Consultant disclosed in a publicly available source; (c) is in rightful possession of the Consultant without an obligation of confidentiality; (d) is required to be disclosed by operation of law; or (e) is independently developed by the Consultant without reference to information disclosed by the City. 11. CONFLICT OF INTEREST CLAUSE Consultant covenants that it presently has no interests and shall not have interests, direct or indirect, which would conflict in any manner with performance of services specified under this Agreement. 12. NON-DISCRIMINATION Consultant shall not discriminate because of race, color, creed, religion, sex, marital status, sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited by applicable law, in the recruitment, selection, training, utilization, promotion, termination or other employment related activities. Consultant affirms that it is an equal opportunity employer and shall comply with all applicable federal, state and local laws and regulations. 13. EXCLUSIVITY AND AMENDMENT This Agreement represents the complete and exclusive statement between the City and Consultant, and supersedes any and all other agreements, oral or written, between the parties. In the event of a conflict between the terms of this Agreement and any attachments hereto, the terms of this Agreement shall prevail. This Agreement may not be modified except by written instrument signed by the City and by an authorized representative of Consultant. The parties agree that any terms or conditions of any purchase order or other instrument that are inconsistent with, or in addition to, the terms and conditions hereof, shall not bind or obligate Consultant or the City. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which is not embodied herein. #5862vl 25C-9 14. ASSIGNMENT Inasmuch as this Agreement is intended to secure the specialized services of Consultant, Consultant may not assign, transfer, delegate, or subcontract any interest herein without the prior written consent of the City and any such assignment, transfer, delegation or subcontract without the City's prior written consent shall be considered null and void. Nothing in this Agreement shall be construed to limit the City's ability to have any of the services which are the subject to this Agreement performed by City personnel or by other consultants retained by City. 15. TERMINATION This Agreement may be terminated by the City upon thirty (30) days written notice of termination. In such event, Consultant shall be entitled to receive and the City shall pay Consultant compensation for all services performed by Consultant prior to receipt of such notice of termination, subject to the following conditions: a. As a condition of such payment, the Executive Director may require Consultant to deliver to the City all work product(s) completed as of such date, and in such case such work product shall be the property of the City unless prohibited by law, and Consultant consents to the City's use thereof for such purposes as the City deems appropriate. b. Payment need not be made for work which fails to meet the standard of performance specified in the Recitals of this Agreement. 16. WAIVER No waiver of breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right or remedy. No waiver of any breach, failure or right, or remedy shall be deemed a waiver of any other breach, failure, right or remedy, whether or not similar, nor shall any waiver constitute a continuing waiver unless the writing so specifies. 17. JURISDICTION - VENUE This Agreement has been executed and delivered in the State of California and the validity, interpretation, performance, and enforcement of any of the clauses of this Agreement shall be determined and governed by the laws of the State of California. Both parties further agree that Orange County, California, shall be the venue for any action or proceeding that may be brought or arise out of, in connection with or by reason of this Agreement. 18. PROFESSIONAL LICENSES Consultant shall, throughout the term of this Agreement, maintain all necessary licenses, permits, approvals, waivers, and exemptions necessary for the provision of the services hereunder and required by the laws and regulations of the United States, the State of California, the City of Santa Ana and all other governmental agencies. Consultant shall notify the City immediately and #5862v1 25C-10 in writing of its inability to obtain or maintain such permits, licenses, approvals, waivers, and exemptions. Said inability shall be cause for termination of this Agreement. fV�i; l 1141i Any notice, tender, demand, delivery, or other communication pursuant to this Agreement shall be in writing and shall be deemed to be properly given if delivered in person or mailed by first class or certified mail, postage prepaid, or sent by fax or other telegraphic communication in the manner provided in this Section, to the following persons: To City: Clerk of the City Council City of Santa Ana 20 Civic Center Plaza (M-30) P.O. Box 1988 Santa Ana, CA 92702-1988 Fax: 714- 647-6956 With courtesy copies to: Executive Director, Finance and Management Services Agency City of Santa Ana 20 Civic Center Plaza (M-17) P.O. Box 1988 Santa Ana, California 92702 Fax:714-647-5414 To Consultant: Attn: Terry Madsen, President 7960 B. Soquel Dr., #363 Aptos, CA 95003 A party may change its address by giving notice in writing to the other party. Thereafter, any communication shall be addressed and transmitted to the new address. If sent by mail, communication shall be effective or deemed to have been given three (3) days after it has been deposited in the United States mail, duly registered or certified, with postage prepaid, and addressed as set forth above. If sent by fax, communication shall be effective or deemed to have been given twenty-four (24) hours after the time set forth on the transmission report issued by the transmitting facsimile machine, addressed as set forth above. For purposes of calculating these time frames, weekends, federal, state, County or City holidays shall be excluded. #5862vl 25C-11 20. MISCELLANEOUS PROVISIONS a. Each undersigned represents and warrants that its signature herein below has the power, authority and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify City fully, including reasonable costs and attorney's tees, for any injuries or damages to City in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. b. All Exhibits referenced herein and attached hereto shall be incorporated as if fully set forth in the body of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and year first above written. ATTEST: Daisy Gomez Clerk of the Council APPROVED AS TO FORM: SONIA R. CARVALHO City Attorney By:, Ryan RECOMMENDED FOR APPROVAL: _ dx-tA Kathryn Downs, CPA Executive Director Finance and Management Services Agency #5862v1 CITY OF SANTA ANA Kristine Ridge City Manager CONSULTANT: Terry Mad. en President 25C-12 EXHIBIT A SCOPE OF SERVICES 25C-13 PROJECT UNDERSTANDING Objectives The City of Santa Ana is initiating a Citywide Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology study. Through both elements, this project is intended to fulfill the following: CITYWIDE INDIRECT COST ALLOCATION PLAN Develop a full cost Citywide plan to recover General Fund costs of providing service to city departments and programs. :D Develop a plan that can be updated annually for subsequent fiscal years (e.g., 2020-21 through 2023-24). 0 Provide preliminary reporting to staff and allow for subsequent modification. Z Provide a final plan in electronic format by December 31, 2019, for the City's immediate use. Provide a Cost Allocation Policy and modify according to staff review. Consult with the City in subsequent questions, audits, or challenges. INTERNAL SERVICE FUNDS COST ALLOCATION METHODOLOGY Review the programs and services of each participating internal service fund, and identify the customers of each one. Develop the methodology for allocating the full cost of service for each internal service fund to its customers. Recommend guidelines for annual reconciliation of charges for the actual costs of service incurred. Z Provide the final methodology for each internal service fund in electronic form to allow for subsequent changes to cost and organization. Z Consult with the City in subsequent questions, audits, or challenges. GENERAL PLANNING AND REPORTING Clarify intended goals and purposes and gain understanding of City operations. Discuss perceived issues and notify of any problems. Provide periodic progress reports following a viable work plan. Submit information requests with timetable. (Please note: Rather than submit this element as a separate component, these study orientation and project management tasks are embedded throughout the ClearSource work plan for each component project. However, we wanted to acknowledge here the City's expectations for consultant performance.) Services for Review This type of project is focused on "the costs to serve," from the perspective of internal uses throughout the City's organization: What are the costs of central services within the municipal organization, and how do those costs relate to the array of direct services provided to the community? What are the cost recovery opportunities for these administrative, management, and support services of the agency? These foundational plans provide the justification for eventual full cost recovery from resources tapped outside the agency. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-14 CITYWIDE INDIRECT COST ALLOCATION PLAN A Citywide indirect cost allocation plan provides a method for recovery of central services costs from the direct services of the entity. The results of the plan yield many important outcomes, such as: Indirect rates for use indirectly charging staff time to accounting units (i.e., programs and projects). Indirect rates compliant with 2 CFR Part 200 for federal, state, and local assistance received by those programs and projects. Z Interfund transfers imposed on certain funds to reimburse the General Fund for services provided. Though not necessarily a final or complete listing, the City currently identifies the following central services included for recovery in its indirect rates: Z The Office of the City Manager Human Resources City Clerk Z City Attorney Finance, including Accounting, Management and Support, Payroll, Treasury/Customer Services, and Purchasing 0 Fixed Assets, including equipment, City Hall facilities, and other buildings and improvements INTERNAL SERVICE FUNDS COST ALLOCATION METHODOLOGY A methodology for allocating the costs of internal service funds provides for a reasonable "cost of service" means for apportioning fund costs to the specific users of the fund. The outcome of the methodology prepared for each fund is an array of charges for services that can be budgeted in each accounting unit's expenditure plan, and reconciled to actual costs incurred thereafter. The City currently identifies the following internal service funds participating in this project: Information Technology (Operations, Telecommunications, Copier Usage, Department Applications) Z Worker's Compensation Z General Liability (Insurance) Z Employee Benefits (Operations, Health Insurance) Z Fleet (Equipment and Vehicle Maintenance, Stores) Z City Yard Z Building Maintenance (Preventative Maintenance, Janitorial Services) Z Central Services (Photocopying, Printing) Prevailing Conditions For at least a decade, the City has been maintaining its Citywide indirect cost allocation plan internally, with a formal report documenting the plan for Fiscal Year 2018-19 available. Internal service fund methodologies have been developed more formally by City staff within the past year. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-15 WORK PLAN CITYWIDE INDIRECT COST ALLOCATION PLAN ClearSource presents the following step-by-step work plan to complete the Citywide Indirect Cost Allocation Plan envisioned by the City of Santa Ana. Task 11 Study Orientation The purpose of this task is to generate common understanding of objectives, known issues that must be addressed by study end, participant roles, expected procedural requirements, schedule and pre -established dates, and data collection and development procedures. TASK 1.11 ONSITE PROJECT KICK-OFF Consultants will prepare for, attend, and facilitate one onsite event with City personnel to initiate the project. (This event will be held concurrently with events scheduled for the Internal Service Funds Cost Allocation Methodology Study.) TASK 1.2 1 ASSESS PREVAILING METHODS ClearSource will evaluate prevailing cost allocation models, methods, and applications. Particular attention will be paid to annual procedures, internal opinions and impacts, and balance of workload with the requirements of the City's uses for overhead, including internal transfers/reimbursements and external agency reimbursement. ClearSource will also review readily available budgetary documents to gain a working knowledge of City structure and accounting practices. TASK 1.3 1 PLAN FOR NEW MODEL After project kick-off, ClearSource will determine a plan for generating current indirect cost allocations for the host of uses identified by the City. This will likely include development of a new Excel -based model in alignment with current needs but may include modification of existing tools if City personnel prefer to sustain existing tools. ClearSource will remain flexible. Task 2 1 Critical Inputs The purpose of this task is to develop the necessary foundation for subsequent quantitative analysis. Particular focus will be generating necessary data and documentation of inputs and assumptions as required by the application of plan outcomes. (For example, an OMB 2 CFR Part 225 compliant plan requires a specific inventory of information that may not be as essential if applications are entirely internal to the City. The City has stated that it does receive federal, state, and local assistance, so ClearSource will verify that indirect rates are actively applied to those awards and generate rates accordingly.) TASK 2.11 DEVELOP FINANCIAL INPUTS Consultants will mine the City's financial reporting to access organizational and line - item detail to support costs, allocation factors, workload metrics, and accounting structure in the cost allocation model. TASK 2.2 1 DEVELOP ALLOCATION FACTORS Consultants will pull published statistics that may be useful as bases for distributing costs and where necessary, develop and document alternate data sets to serve as distribution methods. Targeted meetings with representatives from support services departments may be useful to influence CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-16 SECTION 4 data accessibility and relevance in the cost allocation plan, such as work order records, inventories, and other volumetric or organizational tools. Task 3 1 Cost Allocation Model The purpose of this task is to generate the quantitative model to allocate indirect costs Citywide. Structure and detail of the final model will be dependent upon the ultimate application of its results, as a plan submitted for cognizant agency approval in compliance with OMB 2 CFR Part 225 and/or the State Controller's Office for Cost Claiming will require aspects unnecessary in applications where cost recovery is expected to be entirely internal to the agency. TASK 3.11 MODEL DEVELOPMENT ClearSource will develop an Excel -based model to distribute indirect service costs Citywide. The model is expected to identify: Z Citywide fund and accounting structure and fiscal year data for allocation outcomes :> Allocable indirect service centers Allocation bases and related distribution factors for indirect service centers Z Direct service centers Primary and secondary allocations • Resulting annual cost allocations a Resulting indirect service rates Z Resulting interfund transfers The model will establish a specific methodology for deriving overhead costs that will properly reimburse the General Fund. The model will be developed to accommodate iterations, should an internal "full cost" method be desirable in certain applications, while maintaining an iteration with decisions necessary for state/federal compliance in indirect cost reimbursement. The model will be built to accommodate change in the organization: the ability to add or remove direct and indirect costs and to adapt to a range of activities, from simple to complex. Furthermore, the model will be built to enable continuous updates, as the City elects to maintain and update its cost allocation practices in-house in future years. TASK 3.2 1 COMPARISON OF OUTCOMES ClearSource will generate a comparison of outcomes under the updated Cost Allocation Plan to prior year outcomes, including explanation for substantive differences. Task 4 1 Reporting and Tools The purpose of this task is to provide the formal documentation encompassing the work and outcomes of the study, as well as deliver the tools developed throughout the study for the City's ownership and future use. TASK 4.11 DRAFT REPORT ClearSource will prepare a narrative description of the study, describing key data and assumptions, and impacts. The report will include tables and charts to explain findings, and it will include the complete quantitative analysis as the justification for updated indirect cost allocations and associated rates and transfers. Reports will be issued in portable document format (PDF) for digital distribution and any necessary printing by the City. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-17 For a cost allocation plan in compliance with OMB 2 CFR Part 22S, the report/quantitative analysis will include: �D Description of each allocated central service Z Identification of the units rendering services and the units receiving services • Items of expense included in the allocated cost of service • Method used to distribute the cost of service to benefitted units Schedule showing the allocation of each service to the specific benefitted units Z Organizational chart TASK 4.2 1 FINAL REPORT Upon review and feedback from the City staff, consultants will revise the draft report and accompanying outcomes to incorporate direction received. The final report will be issued for the City's implementation. Reports will be issued in PDF for digital distribution and any necessary printing by the City beyond the requested bound and unbound copies delivered by consultants. TASK 4.3 1 MODEL/WORK PAPER DELIVERY Upon issuance of the final report, ClearSource will deliver editable versions of all models, documentation, and associated work papers to the City for future use. Models will be delivered in Microsoft Excel and PDF. Documentation will be delivered in Microsoft Word and PowerPoint and in PDF. Additional work papers developed will be delivered in the format in which they were created and in PDF. TASK4.4 1 STAFF TRAINING At the time of the City's choosing, ClearSource will facilitate an event to train staff in the use and update of the cost allocation model, in an effort to ensure future sustainability of outcomes produced by this study. Task 5 1 Engagement The purpose of this task is to facilitate a meaningful level of interaction between consultants, City personnel, and City Councilmembers. TASK 5.11 CITY STAFF INTERACTION In addition to the project kick-off event described in Task 1, ClearSource anticipates at least two additional site visits to engage with designated City personnel managing cost allocation practices, held in conjunction with events for the Internal Service Funds Cost Allocation Methodology study. TASK 5.2 1 STAKEHOLDER INTERACTION It is expected that the City will want to engage impacted direct service programs in this process. ClearSource anticipates site visits to: Understand current issues with central services cost recovery at the user level. Review interim study outcomes. Present draft proposals and receive feedback prior to final reporting. ClearSource has found that "Q&A" sessions available to departmental stakeholders at scheduled times works well as an open forum for this type of collaboration. Either or both scheduled meetings or open drop -in CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-18 SECTION 4 sessions can be accommodated in this process. TASK 5.3 1 CITY COUNCIL INTERACTION At City management discretion, ClearSource anticipates one event with the City Council to present the draft report and receive WORK PLAN feedback and direction on cost allocation proposals that would impact the City's budgetary and financial practices. Consultants will prepare materials for this session, present the plan (or elements relevant for City Council input), and respond to City Council inquires. INTERNAL SERVICE FUNDS COST ALLOCATION METHODOLOGY ClearSource presents the following step-by-step work plan to complete the Internal Service Funds (ISF) Cost Allocation Methodology study envisioned by the City of Santa Ana. Task 1 I Study Orientation The purpose of this task is to generate common understanding of objectives, known issues that must be addressed by study end, participant roles, expected procedural requirements, schedule and pre -established dates, and data collection and development procedures. This task also includes an upfront effort to examine prevailing rates/allocations, structure, and administration for known issues and to discuss initial and potential modifications to structures and practices. TASK 1.11 ONSITE PROJECT KICK-OFF Consultants will prepare for, attend, and facilitate one onsite event with City personnel to initiate the project. Events may be combined or separated into a series of meetings with involved internal participants/stakeholders. TASK 1.2 1 ASSESSMENT OF PREVAILING RATES Prior to project kick-off, ClearSource will evaluate prevailing rate/charge structures and/or allocations across the participating funds. Assessment will include subjective effectiveness of current structures, in such terms as effective cost recovery, perceived equity among different users, alignment of any differentiation in rate categories with the manner in which work is performed currently, feasibility and accuracy of billing within current technology or practices, and other considerations. TASK 1.3 1 INITIAL RATE STRUCTURE REMODELING After project kick-off, ClearSource will draft an initial or targeted rate/allocation structure for each fund, with categories and proposed charge bases only (not values), stemming from initial conversations, proposed solutions based on industry standards or internal influences, or initial concepts suggested by ClearSource. This initial rate structure will be used as the basis for developing critical data inputs in Task 2; however, it does not have to represent the final structure of rates and charges, as quantitative analysis in Tasks 2 and 3 will also inform recommended cost recovery structures. It is important for us to state that discussion of rate remodeling is intended to indicate our willingness to enact substantive change, CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-19 should the City desire it. Unless our cost of service results indicate an absolute requirement that structures be altered, we are also amenable to continuance of prevailing practices, modified to current costs of service and other influences. In short, we are flexible to conditions on the ground once we arrive. Task 2 1 Data Analysis The purpose of this task is to develop the necessary foundation for subsequent quantitative analysis. We will focus much of our initial work to develop the body of data that will inform every downstream element of the project. TASK 2.11 GATHER, ANALYZE, AND DEVELOP FINANCIAL DATA Consultants will access detailed budget data from City staff and publicly available resources to describe: Z Revenues: This encompasses incoming revenues to each internal service fund by type (ISF charge or other) and source (i.e., other organizational department/fund or external source). A multi -year history of this revenue profile will be preferable if annual revenues vary from year to year. :D Operating Costs: Line -item expenditures will be examined from the currently adopted budget. Additional examination of periodic expenses will be researched. Fee schedules for any contracted personnel/services will be acquired and interpreted. Internal charges or estimation for central services and/or general governmental overhead will be included. Loan repayments and contributions to other activities will be examined. 0 Capital Expenditures: Planned investments, both regularly occurring and specific projects will be acquired. Much of this work focuses on asset management or life -cycle analysis for replacement of existing inventories. :D Fund Performance: Cash balances in each internal service fund will be identified and established fiscal policies on management of those balances will be identified. Reserve Requirements: Any existing policies or practices associated with the planned accumulation and expenditure of dedicated reserves in applicable internal service funds will identified. TASK 2.2 1 ACQUIRE AND ANALYZE VOLUMETRIC STATISTICS FOR SERVICES Consultants will gather from internal service fund personnel any existing data sets that will inform workload/activity/use levels for the functional services under review in each ISF. This includes data such as Inventories of materials and assets maintained, such as different types of equipment, vehicles, hardware, etc. Z Utilization of services and space, such as work orders, hours, tracked usage, billed activity, occupation of facilities, etc. Previously negotiated shares and relevant past practices or behaviors. Z Other direct or indirect metrics that might measure benefit (preferable) or CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-20 SECTION 4 proportionality (acceptable), such as sources outside of the ISF rate structure, personnel counts, budget size, etc. where applicable (e.g., grants, external Acquisition of statistical information from City databases will likely be requested throughout the study as issues for further analysis arise. Task 3 1 Revenue Requirement Forecast The purpose of this task is to develop the financial plan that serves as the foundation for cost of service and cost recovery requirements for each fully self -supported internal service fund. It will produce a multi -year forecast-5 to 10 years — of fund needs and estimated performance. TASK 3.11 OPERATING FORECAST ClearSource will prepare a forecast of operating revenues and expenses in each fund, built from prevailing levels (e.g., adopted budget) and forecasted by applying industry inflation metrics and/or City -specific historical patterns and known schedules. Attention will also be paid to expenses that do not follow a yearly spending pattern. This will yield total annual recurring expenses and corresponding annual revenues in each year of the forecast. TASK 3.2 ( CAPITAL FORECAST ClearSource will prepare a forecast of capital revenues and expenses in each fund, built from established plans of each internal service fund and/or historical activity. Capital investments encompass ongoing, annual levels of rehabilitation and/or replacement of assets, as well as specifically identified projects (e.g., major replacements or widely applied improvements). Revenues encompass cost -sharing, special fees, or negotiations) and capital replacement components embedded in the ISF rate structure itself for long-term asset management. This forecast will yield annual burdens to the fund in each year of the total financial plan. TASK 3.3 j FUND PERFORMANCE FORECAST ClearSource will model yearly cash flow in each internal service fund, identifying 0 Beginning cash balances. :D All inflows and outflows stemming from the forecasts. Ending cash balances. Attainment of established or recommended fiscal policies. Health of dedicated reserves for bother operations and capital requirements. TASK 3.4 1 RESERVE FUNDING ANALYSIS Stemming from the fund performance forecast, ClearSource will develop a reserve funding target to level annual burdens demonstrated. This identifies a component of the overall rate burden intended to accumulate cash balance in the fund in advance of peaks in spending, typically caused by any noteworthy periodic operating expenses or, more often, by specific capital investments anticipated in certain years of the forecast or over longer -term life cycles of major assets, such as facilities or core infrastructure. Reserve components in rates provide an ongoing revenue source for long-term asset management and yield CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-21 SECTION 4 a more stable, predictable charge for TASK 4.11 FUNCTIONAL ALLOCATION OF FUND service from year to year for users of each REQUIREMENTS internal service fund. TASK 3.6 1 REVENUE REQUIREMENT DETERMINATION Accounting for the findings of each previous forecast, ClearSource will identify deficiencies in fund performance when compared to total needs. Consultants will then establish the annual revenue requirement for each internal service fund in each year of the financial plan. Non -rate revenue sources will be deducted, and the final total basis for cost recovery from internal service charges (rates) will be identified for use in Task 4. It is expected this component will be subject to iteration, as in certain funds, the total revenue requirement may produce a result that is immediately infeasible under current City revenue streams. A strategic phase -in to total funding over time may need to be developed; therefore, clear decisions in the underlying financial plan should be made to accommodate lesser funning capacity in a phased approach. Task 4 1 Rate/Charge Development The purpose of this task is to develop the structure and values encompassing a rate or charge structure for each internal service fund, as the means for cost recovery from participating departments/funds. Values determined in this analysis represent the maximum cost recovery amount by user. While the City may make alternate cost recovery decisions oeneath that ceiling if maximum results prove infeasible, the underlying financial plan in Task 3 should be modified so rate outcomes in Task 4 are linked to a reasonable plan that can support self-sufficient ISFs. Stemming from structural decisions made in Task 1.3, as well as the overall composition of fund expenditures developed throughout Task 3, ClearSource will allocate the line -item revenue requirement to core functions of service in each internal service fund. The purpose of this functional allocation is to acknowledge the multi -faceted nature of services provided by each ISF: that users demand or benefit from each sub -function to a different proportion from another sub - function. The result of this task is a breakdown of total annual obligations of the ISF to pools of defined service that may be apportioned to users following different bases. TASK 4.2 1 ALLOCATION OF FUNCTIONAL COSTS In consultation with ISF personnel and engaged internal stakeholders, ClearSource will allocate each function of service within the ISF to department/fund users based on an individually selected metric (or in exceptions, a combination of metrics). This metric will be chosen based on a variety of influences, such as: Relevancy to the underlying service. M Reasonableness in generating a proportional outcome, if not measure of use or benefit. Reasonableness in administration, both in acquiring the data source and updating it in the future. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-22 SECTION 4 Stability in year-to-year impacts, both rate will assume a more rolling, if not to the ISF and to the department/fund users. Avoidance of conflicting behaviors or undesirable incentives within the City organization and its larger goals. TASK 4.3 1 DETERMINATION OF TOTAL CHARGE BY USER Upon completion of Task 4.2, ClearSource will identify the total allocation of internal service fund costs to each participating user of the services. In some cases, it is expected that this annual allocation may be the end result for the ISF, i.e., a total charge for service by user. Fundamentally, this allocation -based result provides a historical "snapshot" approach to cost recovery that sets cost recovery for the fiscal year once. In some aspects of an ISF, it may be the consensus or a necessity that ISF charges be assessed on a more "real- time" basis or be subject to a year-end "true -up" to actual activity, in which case, a rate is required (Task 4.4). TASK 4.4 1 ESTABLISHMENT OF RATE In internal service funds or aspects of the ISF where a total charge by department/fund is insufficient as a cost recovery structure, a rate by function of service will be established. ClearSource will develop a unit cost for the function by expressing the annual amount per unit of service, using a workload, use, beneficiary, or proportional metric selected from the accumulation developed in Task 2.2. Depending on the variable nature of the metric chosen, rates may be based on historical patterns in the underlying data set, rather than a single year snapshot. Or if consensus leans opposite of that, the "real-time" application. Rates will be reconciled to prevailing demographics from each participating user to ensure adequate revenue generation moving forward, absent unforeseen change. TASK 4.5 1 COMPARATIVE RATE/CHARGE IMPACTS ClearSource will compare resulting rates and/or overall charges for service to current cost recovery by each user department/fund. Reasons for any significant changes will be evaluated and explained. This comparison assists in presenting and communicating changes to cost recovery structure and amount. It also enables further testing of the reasonableness and accuracy of substantial changes to approach. TASK 4.6 1 DEVELOPMENT OF PROCESS FOR ACTUAL COST RECONCILIATION ClearSource will establish the methodology for reconciling budgeted charges to end users to charges calculated based on actual costs incurred once auditied expenditures become available. Task 5 1 Reporting and Tools The purpose of this task is to provide the formal documentation encompassing the work and outcomes of the study, as well as deliver the tools developed throughout the study for the City's ownership and future use. TASK 5.11 DRAFT REPORT ClearSource will prepare a narrative description of the study, describing key data and assumptions, financial plan and cost of service outcomes, rate and charge CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-23 proposals, and impacts. The report will include tables and charts to explain findings, and it will include the complete quantitative analysis as the justification for proposed rate/cost recovery methods for eacn internal service fund. Reports will be issued in portable document format (PDF) for digital distribution and any necessary printing by the City. I: is expected that City personnel will review an initial iteration of the draft report, and ClearSource will modify it before it becomes a final delivered document available to the City Council and the puolic. TASK 5.2 1 PRESENTATION/SUMMARY MATERIALS ClearSource will develop a presentation or summary packet for use in communicating proposals to internal stakeholders and, if desired, to the City Council or subcommittee. TASK 5.3 ) STAFF REPORT Should the City choose to discuss ISF rates with the City Council or its subcommittee, ClearSource will assist City staff in the preparation of the staff report delivered as part of the normal agenda process. TASK 5.4 1 FINAL REPORT Upon review and feedback from internal stakeholders and/or the City Council, ClearSource will revise the draft report and accompanying proposals to incorporate direction received. The final report will be issued for the City's implementation of proposals. Reports will be issued in PDF for digital distribution and any necessary printing by the City beyond the requested bound and unbound copies delivered by consultants. TASK 5.5 ) MODEL/WORK PAPER DELIVERY Upon issuance of the final report, ClearSource will deliver editable versions of all models, documentation, and associated work papers to the City for future use. Models will be delivered in Microsoft Excel and PDF. Documentation will be delivered in Microsoft Word and PowerPoint and in PDF. Additional work papers developed will be delivered in the format in which they were created and in PDF. Task 6 1 Engagement The purpose of this task is to facilitate a meaningful level of interaction between consultants, City personnel, and, if desired, City Councilmembers, with the goal of successful approval, implementation, and ongoing maintenance of study proposals. TASK 6.11 INTERNAL SERVICE FUND INTERACTION In addition to the project kick-off event described in Task 1, ClearSource anticipates additional site visits to engage with ISF and Finance personnel, such as eventsto: Z Develop data, such as expenditures, asset life cycles, and workload metrics. Review spending plans and fund performance. Discuss administrative practices and feasibility of cost recovery methods. Review interim study outcomes and final proposals. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-24 SECTION 4 TASK 6.2 1 STAKEHOLDER INTERACTION It is expected that the City will want to engage impacted ISF users in this process. ClearSource anticipates site visits to: Understand current issues with ISF cost recovery at the user level. �Z Review interim study outcomes. Z Present draft proposals and receive feedback prior to final reporting. ClearSource has found that "Q&A" sessions available to departmental stakeholders at scheduled times works well as an open forum for this type of WORK PLAN collaboration. Either or both scheduled meetings or open drop -in sessions can be accommodated in this process. TASK6.3 1 CITY COUNCIL/SUBCOMMITTEE INTERACTION If desired by City leadership, ClearSource will anticipate an event with the City Council or relevant subcommittee to present the draft report and receive feedback on proposals. Consultants will prepare materials for this session, present the study, and respond to City Council inquiries and/or enable Councilmember dialogue with supplemental information. OPTIONAL SUBSEQUENT ANNUAL UPDATES Should the City direct ClearSource to proceed, consultants will perform a truncated version of the previously identified work plans for both the Citywide Indirect Cost Allocation Plan and the Internal Service Funds Cost Allocation Methocology. Though methods and models will be established already, ClearSource would review foundational DATA REQUIREMENTS The fcllowing is an initial list of data which ClearSource will gather from publicly available sources or request from City staff: A chart of accounts, identifying fund numbers, debartments/divisions, and revenue and expense accounts. Z) Actual revenues and expenditures by account for all funds and accounting units decisions in subsequent updates — service profiles and cost structures, for example — as our experience shows us that change is inevitable. Change may stem from organizational or financial reporting modifications, but may also be needed as experience with prior outcomes uncovers issues that must be addressed to optimize these cost recovery practices. within those funds for the most recently finalized and audited fiscal year. Ci Revenues and expenditures by account for all funds and accounting units within those funds for the fiscal year consultants and the City determine to be the basis for both cost allocation study areas. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-25 Most recently completed indirect cost bases for certain cost pools, such as allocation plan and internal service fund workload and work order data, time allocations. tracking, inventories, assigned uses, etc. Adopted budget document(s) for the City for the most current fiscal year and for the year determined to be the basis for each study area. Z Comprehensive Annual Financial Report for the most recently finalized and audited fiscal year. 0 A listing of each staff position for all funds/accounting units showing employee name, title, salary, benefits, and if possible, full-time equivalent allocated to the accounting unit. Z Tc be developed as the studies proceed: volumetric data already tracked by City systems that may be used as allocation Z) Any formal policies of the City that may influence or direct specific actions with respect to cost recovery of indirect and internal service costs. :D Any ongoing agreements stipulating conditions for indirect cost recovery from active federal and state assistance programs. Before undergoing any time-consuming process to create data in response to a ClearSource request, we always encourage additional discussion. For these types of studies — particularly since annual updating is so critical — it is not our intent to create work for staff that is beyond fairly standard data, reporting, and systems capabilities. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 4 25C-26 EXHIBIT B COMPENSATION Fee Proposal including hourly rates if applicable 25C-27 CONSULTING FEE Maximum Not to Exceed Price (Year One) For the complete Citywide Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology, due December 31, 2019 ("Year One'), ClearSource presents the following maximum, not -to -exceed consulting fee: �D Total Project, Year One: $55,500 — Citywide Indirect Cost Allocation Plan: $16,500 — Internal Service Funds Cost Allocation Methodology: $39,000 Figure 3 on the following page illustrates the detail behind our presented maximum price for the project. This includes labor time paired with hourly rates and expenses by task described in the ClearSource work plan. This fee includes all direct and indirect costs. associated with our professional labor, as well as applicable direct expenses for the project. Manner of Payment ClearSource will issue monthly progress reports to the City. Accompanying invoices will be based on hours recorded to the project, with final invoice not submitted until work is completed as scoped in our work plan. Total invoices will not exceed the maximum price presented here. Optional Annual Updates (Subsequent Years, at City Approval to Proceed) The Request for Proposals indicates that the City may enter into a three-year contract, with optional provisions to extend further, which would enable ClearSource to update the Citywide Indirect Cost Allocation Plan and Internal Service Funds Cost Allocation Methodology by December 31 of those subsequent years. At this time, ClearSource estimates the following maximum, not -to -exceed consulting fee for annual updates beyond 2019: Total Project, Annual Update: $28,800 — Citywide Indirect Cost Allocation Plan: $10,800 — Internal Service Funds Cost Allocation Methodology: $18,000 Figure 4 on the following pages illustrates the detail behind our presented maximum price for completing annual updates to the original work product delivered in 2019. CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA SECTION 7 25C-28 FIGURE 3 1 PROJECT FEE DETAIL, YEAR ONE (2019 ONLY) titywide Cost All�ocatwn Plan 1.1...StudyOrienCation Indirect ..............._. ...._._.___......._..._........_.........._......_............_...._.. 8 0 _...__............. ....0._..._......._...._......_..................._8......._........?...._1.200... 2 I Critical Inputs ......................................_.__... ........ _.................. .._4................_._ ..... ...... __. 12 _... _B__ 28 5 4,200 CoM Allocation Model(2 CFR 200 and Full), ........ .................-"--..___... 1................_..-_. 4 (._Reporting and Tools...._ .............._. _.. .......... _._..._..._...._ 6...._................._?..._........__._...._�........_...............,16............._. S._.. 2.... 5 1 ..�...._ Engagement ..........................._._._._..__..._......._..........................,.............._.__._..__....... 12 0 0 0 12......_........5... i 5 16,5W Intemal Sewice Funds Cost Allocation Methodology 0. ......._......_............_...._......._._.._....--_........... 0 0 _.._14............-?•- . 2,100,- 1 1_. Study orientation ......_14........_.__---... . ..................................................... 2 I.DataAnalYsis....._......_�._..._.. _._._.._.........................6....... ---..--_6......................._8........_. __....._6 _. 26 5 3,900 3 1 ._....... Revenue Requirement Forecast(81SFs)_ _20 20 .16_ _ .4 60 ......... ...._ -.. 5_.9;000. 4 1 Rate/Charge Development (81SFs) ........._32 '--_................ ......_....._. ......_18._................. 24._..._....._......_4.._................. 78 ..._......._...._.__..,... 5 11,700 5 1 ......_..... Reporting and Tools ..............._.................._......._............_............__._...._. 12 ...._20 .............._10 ........ .............._. ......_. ......, .....42..._..........._S._...6,300 61_.Engagement .......................32......._..__..........4 4 0 40 5 6,000 Grand Total Not to Exceed Fee for All Elements 158 90 100 22. 370 5 55.5M CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-29 SECTION 7 FIGURE 4 1 PROJECT FEE DETAIL, SUBSEQUENT ANNUAL UPDATE (ESTIMATED FEE PER YEAR AFTER 2019) CirVwide Indirect Cost Allocation Plan -Update 1 I _... Study Orientation —..... ...... ..... _...__._......._.._.............. `!.........._._............ 0....._,..._.._....._�.........._....._._.._4..............._5.......-600 2 1 .._...._..___....._ Criticallnpuss .................._...._........__..---..__......._..._........_........._..._..._....._...._._._......_......................,_...__......................._....................._......:....._._... 2 2 10 4 18 S 2,700 3,1 Cost Allocation. Model (2CFR260ana Full ,6 ............_......_. 10 _._.......... ................. 14 ................ 0 _........ __. 30 ................................ S _.__..___._ 4,500 _4.1.,_Reporting and Tools _....................._.__._._....._............ 6 ........... I ....... 6 .... .._.... -�---' .0 0 .,............_..........._ 12 ..........................................,._ S 1,a00 .5.j....Engagement ,...8...... ... _....... ._................. ......_0........._._...__._0.. 8 S 1,200 86 Internal 11 �...... Service Funds Cost Allocation MetNodology Study Orientation ............................__._..........._.._......................._......................_.._....___........_..........................._.__..._.....---........._........._.......__......--.--._.... - Update 6 0 0 0 6. S 900 2 Data Analysis 2 2 6 6 16 S 2,400 3I __. RevenueRequirementForecastl$ISFs) ....._. �.._....... .,........... 12 .........__..__.. 10 .10 ........ _....--- 0 ' ,32 5._„4,8W- 4 I„..Rate/Charge Development(e1SF,) 12 8 16 ....-Z......._...._........._..............?._._ 5•70. S�... Reporting and Tools..........._..............._. __.._ .................. .._4........... ...,.._....._1... ......._..........._...., ... _............... ..._.........._._...._36...._........ 5.... 2,400 6.1.....Engagement 12 ................._......................_�._....._... 12 S I'm Grand Total. Not to Exceed" Fee for All Elements 74 48 58 12 192 5 28,800 CLEARSOURCE PROPOSAL TO THE CITY OF SANTA ANA 25C-30 SECTION 7