HomeMy WebLinkAboutCC AG PKT 2008-09-08 #DAGENDA STAFF REPORT
DATE: September 8, 2008
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Robbeyn Bird, CPA
Director of Administrative Services
SUBJECT: AGREEMENT FOR AUDIT OF CABLE TELEVISION
FRANCHISE AGREEMENT
SUMMARY OF REQUEST:
Staff requests that the City Council approve the agreement for auditing services
of the cable television franchise agreement between Diehl, Evans, and Company
Certified Public Accountants, and the City of Seal and authorize the City
Manager to execute the agreement.
BACKGROUND:
The City has a franchise agreement with Time Warner Cable LLC that authorizes
the construction, operation, and maintenance of a cable television system within
the City of Seal Beach. Section 2.3 of the franchise agreement allows the City to
perform an audit once every three years. It is a prudent business practice to
periodically audit these types of agreements and it has been a number of years
since the last audit.
Diehl, Evans, and Company has extensive experience in performing audits of
cable television franchise agreements and has agreed to perform these services
for a cost not to exceed $13,500.
FINANCIAL IMPACT:
Budget Amendment Number 09-03-01 requests an additional appropriation in the
General Fund in the amount of $13,500.
Agenda Item ~
Page 2
RECOMMENDATION:
Adopt Resolution No. 5780, approving the agreement for auditing services of the
cable television franchise agreement and authorize City Manager to execute said
amendment.
SUBMITTED BY:
Robbey Bird, CPA
Director of Administrative Services
NOTED AND APPROVED:
~-~~~
David Carmany, City Manager
Attachments:
A. Agreement for Auditing Services of Cable Television Franchise Agreement
B. Resolution No. 5780
RESOLUTION NUMBER S7SO
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL
BEACH APPROVING AN AGREEMENT BETWEEN SEAL
BEACH AND DIEHL, EVANS, AND COMPANY FOR AUDIT OF
THE CABLE TELEVISION FRANCHISE AGREEMENT
THE CITY COUNCIL OF THE CITY OF SEAL BEACH HEREBY RESOLVES AS
FOLLOWS:
SECTION 1. The Council hereby approves the agreement between the City of
Seal Beach and Diehl, Evans, and Company for auditing services of the cable
television franchise agreement.
SECTION 2. The Council hereby directs the City Manger to execute the contract
on behalf of the City.
SECTION 3. The City Clerk shall certify to the passage and adoption of this
resolution.
PASSED, APPROVED AND ADOPTED by the City Council of Seal Beach, at a
meeting hereof held on the 8th day of _ September , 2008 by the following vote:
AYES: COUNCILMEMBERS
NOES: COUNCILMEMBERS
ABSENT: COUNCILMEMBERS
ABSTAIN: COUNCILMEMBERS
ATTEST:
Mayor
City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
1, Linda Devine, City Clerk of the City of Seal Beach, California, do hereby certify
that the foregoing resolution is the original copy of Resolution Number 5780 on
file in the office of the City Clerk, passed, approved, and adopted by the City
Council of the City of Seal Beach, at a regular meeting held on the 8th day
of September , 2008.
City Clerk
PROFESSIONAL SERVICES AGREEMENT
between
City of Seal Beach
211 - 8th Street
Seal Beach, California 90740
Diehl, Evans & Company, LLP
5 Corporate Park, Suite 100
Irvine, California 92606-5165
(949) 399-0600
This Professional Service Agreement ("the Agreement") is made as of September 8, 2008 (the
"Effective Date"), by and between Diehl, Evans & Company, LLP ("Consultant"), and the City
of Seal Beach ("City"), a California charter city, (collectively, "the Parties").
RECITALS
WHEREAS, City desires certain professional services; and
WHEREAS, Consultant represents that it is qualified and able to provide City with such
services;
NOW THEREFORE, in consideration of the Parties' performance of the promises,
covenants, and conditions stated herein, the Parties hereto agree as follows.
AGREEMENT
1.0 Scope of Services
1.1. Consultant must provide those professional services set forth in the attached
Exhibit A, which is hereby incorporated by this reference. To the extent that there is any conflict
between Exhibit A and this Agreement, this Agreement must control.
1.2. Consultant must perform all services under this Agreement in accordance with the
standazd of caze generally exercised by like professionals under similaz circumstances and in a
manner reasonably satisfactory to Authority.
1.3. In performing this Agreement, Consultant must comply with all applicable
provisions of federal, state, and local law.
2.0 Consultant's Compensation
Subject to the maximum sums hereafter provided, City must pay Consultant in
accordance with the rate schedule set forth in Exhibit A. The maximum amount of compensation
that Consultant will be entitled to receive pursuant to this Agreement is $13,500 per year. City
will not withhold any applicable federal or state payroll and other required taxes, or other
authorized deductions from payments made to Consultant. No claims for additional services
performed by Consultant will be allowed unless such additional work is authorized by the City in
writing prior to the performance of such services or the incurrence of such expenses.
3.0 Method of Payment
3.1. Consultant must submit to City monthly invoices for all services rendered
pursuant to his Agreement. Such invoices must be submitted within 15 days of the end of the
month during which the services were rendered and must describe in detail the services rendered
during the period, the days worked, number of hours worked, the hourly rates charged, and the
services performed for each day in the period. City must pay Consultant within 30 days of
receiving Consultant's invoice.
3.2. Upon 24 hours notice from City, Consultant must allow City or City's agents or
representatives to inspect at Consultant's offices during reasonable business hours all records,
invoices, time cazds, cost control sheets and other records maintained by Consultant in
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connection with this Agreement. City's rights under this Section shall survive for two yeazs
following the termination of this Agreement.
4.0 Termination
4.1. This Agreement may be terminated by City, without cause, or by Consultant
based on reasonable cause, upon giving the other parry written notice thereof not less than thirty
30 days prior to the date of termination.
4.2. This Agreement may be terminated by City upon 10 days' notice to Consultant if
Consultant fails to provide satisfactory evidence of renewal or replacement of comprehensive
general liability insurance as required by this Agreement at least 20 days before the expiration
date of the previous policy.
5.0 Party Representatives
5.1. The City Manager is the City's representative for purposes of this Agreement.
5.2. William S. Morgan is the Consultant's sole representative for purposes of this
Agreement.
6.0 Notices
6.1. All notices permitted or required under this Agreement shall be deemed made
when personally delivered or when mailed 48 hours after deposit in the U.S. Mail, first class
postage prepaid and addressed to the parry at the following addresses:
To City: City of Seal Beach
211 Eighth Street
Seal Beach, California 90740
Attn: City Manager
To Consultant: Diehl, Evans & Company, LLP
5 Corporate Pazk, Suite 100
Irvine, California 92606-5165
Attn: William S. Morgan
6.2. Actual notice shall be deemed adequate notice on the date actual notice occurred,
regardless of the method of service.
7.0 Independent contractor
Consultant is an independent contractor and not an employee of the City. All services
provided pursuant to this Agreement shall be performed by Consultant or under its supervision.
Consultant will determine the means, methods, and details of performing the services. Any
additional personnel performing services under this Agreement on behalf of Consultant shall also
not be employees of City and shall at all times be under Consultant's exclusive direction and
control. Consultant shall pay all wages, salaries, and other amounts due such personnel in
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connection with their performance of services under this Agreement and as required by law.
Consultant shall be responsible for all reports and obligations respecting such additional
personnel, including, but not limited to: social security taxes, income tax withholding,
unemployment insurance, disability insurance, and workers' compensation insurance.
8.0 Subcontractors
No portion of this Agreement shall be subcontracted without the prior written approval of
the City. Consultant is fully responsible to City for the performance of any and all
subcontractors.
9.0 Assignment
Consultant must not assign or transfer any interest in this Agreement whether by
assignment or novation, without the prior written consent of City. Any purported assignment
without such consent shall be void and without effect.
10.0 Insurance
10.1. Consultant must not commence work under this Agreement until it has provided
evidence satisfactory to the City that Consultant has secured all insurance required under this
Section. Consultant must furnish City with original certificates of insurance and endorsements
effecting coverage required by this Agreement on forms satisfactory to the City. The certificates
and endorsements for each insurance policy must be signed by a person authorized by that
insurer to bind coverage on its behalf, and must be on forms provided by the City if requested.
All certificates and endorsements must be received and approved by the City before work
commences. The City reserves the right to require complete, certified copies of all required
insurance policies, at any time.
10.2. Consultant must, at its expense, procure and maintain for the duration of the
Agreement, insurance against claims for injuries to persons or damages to property that may
arise from or in connection with the performance of this Agreement. Insurance is to be placed
with insurers with a current A.M. Best's rating no less than A:VIII, licensed to do business in
California, and satisfactory to the City. Coverage must be at least as broad as the latest version
of the following: (1) General Liability: Insurance Services Office Commercial General Liability
coverage (occurrence form CG 0001); and (2) Automobile Liability: Insurance Services Office
Business Auto Coverage form number CA 0001, code 1 (any auto). Consultant must maintain
limits no less than: (1) General Liability: $1,000,000 per occurrence for bodily injury, personal
injury and property damage and if Commercial General Liability Insurance or other form with a
general aggregate limit is used, either the general aggregate limit shall apply sepazately to this
Agreementllocation or the general aggregate limit shall be twice the required occurrence limit;
and (2) Automobile Liability: $1,000,000 per accident for bodily injury and property damage.
10.3. The insurance policies must contain the following provisions, or Consultant must
provide endorsements on forms supplied or approved by the City to state: (1) coverage shall not
be suspended, voided, reduced or canceled except after 30 days prior written notice by certified
mail, return receipt requested, has been given to the City; (2) any failure to comply with
reporting or other provisions of the policies, including breaches of warranties, shall not affect
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coverage provided to the City, its directors, officials, officers, (3) coverage must be primary
insurance as respects the City, its directors, officials, officers, employees, agents and volunteers,
or if excess, must stand in an unbroken chain of coverage excess of the Consultant's scheduled
underlying coverage and that any insurance or self-insurance maintained by the City, its
directors, officials, officers, employees, agents and volunteers shall be excess of the Consultant's
insurance and must not be called upon to contribute with it; (4) for general liability insurance,
that the City, its directors, officials, officers, employees, agents and volunteers shall be covered
as additional insureds with respect to the services or operations performed by or on behalf of the
Consultant, including materials, parts or equipment furnished in connection with such work; and
(5) for automobile liability, that the City, its directors, officials, officers, employees, agents and
volunteers shall be covered as additional insureds with respect to the ownership, operation,
maintenance, use, loading or unloading of any auto owned, leased, hired or borrowed by the
Consultant or for which the Consultant is responsible.
10.4. All insurance required by this Section must contain standard separation of
insureds provisions and must not contain any special limitations on the scope of protection
afforded to the City, its directors, officials, officers, employees, agents, and volunteers.
10.5. Any deductibles or self-insured retentions must be declared to and approved by
the City. Consultant guarantees that, at the option of the City, either: (1) the insurer shall reduce
or eliminate such deductibles or self-insured retentions as respects the City, its directors,
officials, officers, employees, agents, and volunteers; or (2) the Consultant shall procure a bond
guaranteeing payment of losses and related investigation costs, claims and administrative and
defense expenses.
11.0 Indemnification and Hold Harmless
Consultant must defend, indemnify, and hold the City, its officials, officers, employees,
volunteers and agents free and harmless from any and all claims, demands, causes of action,
costs, expenses, liability, loss, damage or injury, in law or equity, to property or persons,
including wrongful death, in any manner arising out of or incident to any acts, omissions, or
misconduct ~ of Consultant, its employees, or its agents, arising out of or in connection with the
performance of this Agreement, including without limitation the payment of all consequential
damages and attorneys fees and other related costs and expenses. Consultant must defend, at
Consultant's own cost, expense, and risk, any and all such aforesaid suits, actions, or other legal
proceedings of every kind that may be brought or instituted against City, its directors, officials,
officers, employees, agents or volunteers. Consultant must pay and satisfy any judgment, awazd,
or decree that may be rendered against City or its directors, officials, officers, employees, agents
or volunteers, in any such suit, action or other legal proceeding. Consultant must reimburse City
and its directors, officials, officers, employees, agents and/or volunteers, for any and all legal
expenses and costs incurred by each of them in connection therewith or in enforcing the
indemnity herein provided. Consultant's obligation to indemnify shall not be restricted to
insurance proceeds, if any, received by the City, its directors, officials, officers, employees,
agents or volunteers. All duties of Consultant under this Section shall survive termination of this
Agreement.
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12.0 Equal Opportunity
Consultant affirmatively represents that it is an equal opportunity employer. Consultant
must not discriminate against any subcontractor, employee, or applicant for employment because
of race, religion, color, national origin, handicap, ancestry, sex, sexual orientation, or age. Such
non-discrimination includes, but is not be limited to, all activities related to initial employment,
upgrading, demotion, transfer, recruitment or recruitment advertising, layoff, or termination.
13.0 Labor Certification
By its signature hereunder, Consultant certifies that it is awaze of the provisions of
Section 3700 of the California Labor Code that require every employer to be insured against
liability for Worker's Compensation or to undertake self-insurance in accordance with the
provisions of that Code, and agrees to comply with such provisions before commencing the
performance of the Services.
14.0 Entire Agreement
This Agreement contains the entire Agreement of the parties with respect to the subject
matter hereof, and supersedes all prior negotiations, understandings, or agreements. This
Agreement may only be modified by a writing signed by both parties.
15.0 Severability
The invalidity in whole or in part of any provisions of this Agreement shall not void or
affect the validity of the other provisions of this Agreement.
16.0 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the
State of California.
17.0 No Third Party Rights
No third party shall be deemed to have any rights hereunder against either Party as a
result of this Agreement.
18.0 Waiver
No waiver of any default shall constitute a waiver of any other default or breach, whether
of the same or other covenant or condition. No waiver, benefit, privilege, or service voluntarily
given or performed by a Party shall give the other Party any contractual rights by custom,
estoppel, or otherwise.
19.0 Prohibited Interests
Consultant maintains and warrants that it has not employed nor retained any company or
person, other than a bona fide employee working solely for Consultant, to solicit or secure this
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Agreement. Further, Consultant warrants that it has not paid nor has it agreed to pay any
company or person, other than a bona fide employee working solely for Consultant, any fee,
commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting
from the award or making of this Agreement. For breach or violation of this warranty, City has
the right ~ to rescind this Agreement without liability. For the term of this Agreement, no
member, officer or employee of City, during the term of his or her service with City, shall have
any direct interest in this Agreement, or obtain any present or anticipated material benefit arising
therefrom.
20.0 Attorneys' Fees
If either Party commences an action against the other Party, either legal, administrative or
otherwise, arising out of or in connection with this Agreement, the prevailing Party in such
litigation shall be entitled to have and recover from the losing Party all of its attorney's fees and
other costs incurred in connection with such action.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date and year first above written.
CITY OF SEAL BEACH CONSULTANT
By:
David Carmany, City Manager
Attest:
By:
Linda Devine, City Clerk
Approved as to Form:
By:
Quinn Barrow, City Attorney
By: ,u~ P• PG~-~
Name: ~,AJ ~~.:tt rig ~. P ° (~~~~e. -~
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Ezhibit A to the Professional Services Agreement between
Diehl, Evans & Company, LLP And the City of Seal Beach, dated September 8, 2008
DESCRIPTION OF AGREED-UPON PROCEDURES
CABLE FRANCHISE FEE REVIEW OF TIME WARNER CABLE
AUGUST 1, 2006 -DECEMBER 31, 2007
1. Nature of Engagement:
This will be an agreed-upon procedures engagement. Our basic engagement will be a
review of franchise fees paid by Time Wamer cable to the city for aone-year and five
month period beginning August 1, 2006, through December 31, 2007.
2. Agreed-Upon Procedures Review:
In connection with this engagement, we' will review Time Warner's books and records to
assist the City in determining if the Company has paid the City the appropriate franchise
fees for the review period. Our review will consist of the following procedures:
Phase 1
a. Shortly after we receive a signed engagement letter or contract, we will send a
document request letter requesting the following:
Franchise Fee returns filed with the City by Time Warner for the period from
August 1, 2006, through December 31, 2007
• Rate and Channel Information for 2006-2007
b. We will prepare and forward general questionnaires to Time Wamer with questions
related to franchise fees paid by Time Warner to the City.
Phase 2
We will request that copies of certain books and records of Time Warner be forwarded
to DECO's ofFce in Irvine. In connection with the review of these records:
a. We will review Time Warner's internal controls and systems and procedures for
accounting for gross revenue and franchise fee payments. We will identify the
various types of revenue recorded by Time Warner.
b. We will identify Time Warner's method for the allocation of non-specific revenues
between franchise areas (such as Home Shopping revenues).
c. We will review Time Warner's method for identifying subscribers to the proper
franchise area.
d. We will test subscriber revenue by comparison with amounts recorded on reports
from the Company's outside billing service bureau.
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Ezhibit A to the Professional Services Agreement between
Diehl, Evans & Company, LLP And the City of Seal Beach, dated September 8, 2008
e. We will review the accounting records of Time Warner for any revenue items not
being reported to the City with the periodic remittances.
f. We will review the procedure of Time Warner for recognizing advertising revenues
and cable launch fees in its accounting system, and if appropriate "gross revenues"
are being reported.
g. We will perform an analysis of the practices of Time Warner as to whether it has
been paying franchise fees on franchise fee revenues for the period from August 1,
2006, through December 31, 2007.
h. We will test the mathematical accuracy of selected remittances to the City for the
period August 1, 2006, through December 31, 2007.
Phase 3
We will issue a report on our findings to the City.
Caveat Regarding the Possible Results of this En4actement
The management of the City is advised that, on occasion, these engagements disclose
that the cable operator has overpaid franchise fees. Accordingly, this engagement
could discover refunds owed by the City to Time Warner.
PROJECT SCHEDULE AND TIMING OF WORK
Our "Engagement Beginning Date" will be the date upon which we receive an original
signed engagement letter or contract from the City of Seal Beach retaining our services.
Shortly after the engagement beginning date, we will send a document request letter to
the City.
Within ten (10) business days after we receive a response from the City to our
document request letter, we will draft questionnaires to Time Warner requesting the
documents and information needed for our review.
Within ten (10) business days after receiving a reply from Time Warner to our
questionnaires, we will commence our testing and review work. If Time Warner's
employees supply our firm with all requested information, documents and schedules on
a timely basis, we will complete our review work within ninety (90) business days.
Within ten (10) business days after completing our review work on Time Warner, we will
deliver a "draft" report to the City.
Within ten (10) business days after our "draft" report is approved by the City, we will
deliver final reports to the City.
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Ezhibit A to the Professional Services Agreement between
Diehl, Evans & Company, LLP And the City of Seal Beach, dated September 8, 2008
ESTIMATED FEES
Our not to exceed fee for this engagement will be $13,500.
Provisions for Adjustment in Fee Arrangement
The fee quoted above was estimated based upon the following assumptions:
Time Warner will complete, sign and return our questionnaires, together with all
requested documents and Time Warner -prepared schedules.
Time Warner will have personnel available who are knowledgeable regarding
franchise fee reporting to work with DE&CO personnel.
Should Time Warner not provide the requested questionnaires, information or
documents, we will communicate these circumstances to the City in writing. This may
result in additional hours of work. We may request that the City approve a fee increase
to cover any additional services or expenses that may be involved. Our firm agrees not
to perForm any additional work beyond this initial allocation without expressed written
consent by the City.
BILLING POLICIES
We will invoice the City of Seal Beach monthly for our services based our hours
performed during the month. Invoices are payable on presentation. A finance charge of
1 % per month will be added to fees billed but not received before the end of the month
following the month of our invoice. This corresponds to an Annual Percentage Rate
(APR) of 12%. No interest will be imposed on unpaid finance charges.
RATE SCHEDULE
Partner $195
Principal $195
Manager $125-150
Senior Accountant $75-95
Clerical ~ $50
The rates above do not include any travel or out-of-pocket expenses.
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