Finance Committee Agenda and Packet 2013 10 15

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Proposed Scope of Work — Electric & Gas Section 2 -- Electric & Gas Overall Tasks 1. Contact City's staff and obtain documentation required to kick -off the project. 2. Review the franchise agreement, applicable federal, state and local regulations to gain a full understanding of the financial obligations to the City and the bases for and determination of franchise fees. 3. Prepare initial data requests to the City and the franchisee requesting information related to the review period, including at least three prior years. During the course of the project, if needed, prepare additional data requests and submit to the franchisee. 4. Correspond with the City and the franchisee, as required via phone and email, to obtain documentation, resolve issues, and obtain any appropriate assistance. S. Identify and formally address any non - disclosure agreement issues that may arise with the franchisee regarding availability and confidentiality of data necessary to effectively complete the review. (Please note that Garth and Dick have been successfully negotiating and executing such agreements for over 15 years). 6. Establish a formal communication mechanism with the City to ensure that the City is notified timely of potential disruptions in the project. Also, inform the City of all progress during the project, noted issues, and proposed solutions. Review Franchisee's Calculation of Taxes and Fees, Verify Compliance with the franchise 7. Verify that the accounting methodologies and procedures used by the franchisee accurately identify sales generated from electric and gas operations within the City during the review period. Investigate any inconsistencies and provide recommendations. Verify whether the franchisee has: a. Identified the appropriate source of revenue on which the City's franchisee fee collections will be based upon; b. Applied the appropriate tax and fee calculation; and, c. Retained supporting documentation such as customer billing and receipt records to substantiate the franchise fee base. 8. Review and analyze payments to the City, including any supporting data, and recalculate the franchise fees for the review period. 9. Utilize proprietary systems and software operated by Azavar Audit Solutions, Inc. to analyze electric and gas usage by service point in the City that are not reported as service addresses by the franchisee. Azavar will identify any address coding discrepancies and will correct miscoded addresses so that the franchisee properly identifies the address property as in the City for future remittances of franchise fees. 10. Perform an analysis confirming that the revenue growth of the franchisee is similar to the growth of the revenues reported to the City in the franchise fee payment. 8 25