HomeMy WebLinkAboutKPMG COST ALLOCATION PLANS
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KPMG llP
Suite 2000
303 Peachtree Street. NE
Atlanta, GA 30308
Telephone 404 222 3000
Fax 404 222 3050
Internet www.u5.kpmg.com
September 14, 2007
Ms. Kathy Williams
Finance Analyst
Augusta-Richmond County
530 Greene Street, Room 207
Augusta, Georgia 30911
Dear Ms. Williams:
KPMG LLP (KPMG) is pleased to submit this engagement letter to Augusta-
Richmond County, Georgia ("County") to provide professional advisory services.
The County is requesting assistance with the development of the Full Cost and
OMB Circular A-87 Cost Allocation Plans based on expenditures for the period
ending December 31, 2006. Our Standard Terms and Conditions are attached
to this letter, and become part of the agreement between KPMG and the County.
The first plan will be a "full-cost" plan for use in allocating indirect costs to
enterprise funds, internal service funds, and certain special revenue funds.
The second plan will be prepared in accordance with the Federal Office of
Management and Budget Circular A-87, Cost Principles for State and Local
Governments and may be used for allocating indirect costs to the County's
federal grant programs. The County is responsible for submitting its cost
allocation plan for negotiation and approval if requested by its federal cognizant
agency. Please note, current OMB Circular A-87 regulations do not require the
County to submit its cost allocation plan for negotiation and appro'{al unless
specifically requested by its federal cognizant agency.
By accepting this engagement letter, County management accepts responsibility
for the substantive outcomes of this engagement and, therefore, has a
responsibility to be in a position in fact and appearance to make an informed
judgment on the results of this engagement and that the County will comply with
the following:
KPMG LLP, a u.s. limited liability partnership, is the U.S.
member firm of KPMG International, a Swiss cooperative.
m9
Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14, 2007
Page 2
· Designate a qualified management-level individual to be responsible and
accountable for overseeing the engagement.
· Establish and monitor the performance of the engagement to ensure that it
meets management's objectives.
· Make any decisions that involve management functions related to the
engagement and accept full responsibility for such decisions.
· Evaluate the adequacy of the services performed and any findings that
result.
KPMG Project Team
Mr. David Dennis, a partner in KPMG's Orlando office, will serve as the
engagement partner. Mr. David Roberts, a manager in KPMG's Atlanta office,
will serve as the engagement manager and will serve as the KPMG primary point
of contact for this engagement. Ms. Sarah Curry and Ms. Heidi Powell, senior
associates with KPMG's Government practice, will serve as the team leads and
will supervise other project staff during the course of the engagement.
David Dennis, a partner based out of our Orlando office, has over 20 years
experience in government services. His public sector experience includes all
levels of governments, including the U.S. House of Representatives, State
governments in Florida, Georgia, and Rhode Island; and local governments in
Georgia and throughout the United States. In addition to his experience as the
engagement partner for state agencies, cities, and counties, he has served as
the engagement partner for over fifty cost allocation and indirect cost rate
proposal studies including Augusta-Richmond County. David is the Engagement
Partner assigned to this project.
David Roberts, a manager based out of our Atlanta office, has over seven years
of professional experience in indirect cost allocation and governmental
accounting. Mr. Roberts focuses on providing governmental costing and
accounting services to state, local and municipal governments. He has worked
on, and managed the preparation and delivery of cost allocation plans for
numerous state department, counties, and cities throughout the Unieted States
and the southeast. David has served as the engagement manager the past three
years providing Augusta-Richmond County with costing services.
m9
Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14. 2007
Page 3
Sarah Curry, a senior associate based out of our Tallahassee office, has over
eight years of experience in providing governmental costing and accounting
services to state, local and municipal governments. She has been involved in
the production of numerous central service cost allocation plans throughout the
southeast United States, and has provided Augusta-Richmond County costing
services in the past.
Heidi Powell, is a Senior Associate and a Certified Public Accountant in
KPMG's Orlando Advisory Services Practice. Her clients are primarily state and
local governments and non-profit organizations. She has been involved in the
production of numerous central service cost allocation plans throughout the
southeast United States, and has provided Augusta-Richmond County costing
services in the past.
Engagement Objective
The objective of this engagement is to assist the County in developing the
indirect cost allocation plans (CAP). To meet this objective, KPMG proposes to
assist the County as follows:
· Deliverable I - Assist with the preparation of the County's Full Cost
Allocation Plan based on County-provided data. The Plan will be prepared
in accordance with the full costing concepts that recognize and incorporate
central service expenditures of County departments and offices, including
"general government" costs. The plan will be prepared based on
expenditures incurred for the fiscal year ended December 31, 2006.
· Deliverable II - Assist with the preparation of the County's OMB Circular
A-8? CAP based on County-provided data. The A-8? plan contains a
determination of allowable costs for providing supporting service. The
CAP will be prepared based on expenditures incurred for the fiscal year
ended December 31,2006.
Work Plan Approach
KPMG is prepared to start the project within three weeks from the receipt of the
signed engagement letter or executed contract. We estimate that an elapsed
calendar time of 90 days from the date of commencement would be required to
assist you in the development of the draft reports. This time frame is dependent
upon the timeliness of requested information furnished by the County. The
County will be responsible for the collection of all statistical information used as
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Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14,2007
Page 4
allocation basis, as well as all decisions regarding allocation statistics, cost
pools, and receiving departments used in the cost allocation plan. KPMG's role
will be to advise the County and compile the indirect cost plans after the County
has made key decisions.
The following chart depicts a view of project timing by phase.
Phase
1. Project Initiation and Fieldwork
2. Data Collection and Analysis
3. Issue Draft Reports (up to 90 days after project start)
4. Issue Final Reports and Project Closeout
As part of our initial planning meeting, we will work with the County's staff to finalize the timeline.
It is anticipated that up to one week of on-site fieldwork at the County's offices
will be required for this project. Interviews conducted with County personnel
during this time are typically 45 to 60 minutes for central service departments
identified for allocation in the plan.
Estimated Project End Date
Ferbruary 2008
...~rbject
Estimated Project Start Date
November 2007
roject Overvi
The KPMG Team will follow a phased approach to meet the engagement objective for the County.
The project schedule estimates a gO-day time span to generate the draft reports. KPMG will
finalize the reports within approximately 30 days of receipt of the County's written comments.
Throughout the engagement, the County will be responsible for all decisions made relative to the
composition of the plan, i.e. cost pools that are allocated, allocation statistics used to allocate
costs etc. KPMG staff will prepare cost reports based on data provided by the County.
1
Organize a project team comprised of KPMG Team personnel
and at least one County staff. Issue the County an information
request letter. We will work with County staff to keep them
informed as our work progresses.
11/05/07
11/09/07
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Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14, 2007
Page 5
Kick-off meeting with the County staff responsible for working
with KPMG in the development of the Cost Allocation Plans
(CAP) to discuss the engagement objectives.
Classify cost centers, services performed, products delivered
etc., and identify allocation bases. Collect financial data to
develop the indirect cost pools.
Meet with County central services to identify departments'
functional activities. KPMG will assist central service department
managers to determine the reasonable basis for allocating each
of their department's functions.
Analyze the County's expenditures to determine the costs for the
2 indirect cost pools for the CAP. 11/05/07 01/28/08
Data collection of departments charging user fees. Conduct
interviews as necessary.
Review the Cost Determination Model (CDM) reconciliation to the
audited financial statements used in the CAPs.
Enter the allocation information into our CDM model. Complete
double step-down analysis using CDM and develop the
associated supporting schedules necessary to prepare the CAPs.
Generate the Cost Allocation Plans, including financial and
statistical schedules.
3 -- 01/14/08 01/28/08
Develop indirect cost pool narratives and explanations.
Issue draft report deliverables.
Follow Up with County. Revise CAPs as necessary and issue
final reports.
4 Final timeline dependent on County's ability to review draft report 02/01/08 02/29/08
and provide feedback timely.
Finalize work papers and submit to KPMG Records Center.
*Phase
1. Project Initiation and Fieldwork
2. Data Collection and Analysis
3. Issue Draft Reports
4. Issue Final Re orts and Pro'ect Closeout
m9
Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14, 2007
Page 6
Project Costs and Assumptions
Our fees for professional services include professional staffing, administrative
support, report production, and travel costs. Total professional fees will not
exceed $25,500. We will invoice the County for 50% of the fee thirty days after
the initial fieldwork date, 25% upon issuance of the draft report, and 25% upon
issuance of the final report. If unforeseen circumstances cause us to believe
that our professional fees will exceed the estimate provided above, we will
discuss this situation with you and agree upon an appropriate course of action.
The County will have the option to renew this contract for an additional two fiscal
years through an addendum to this contract. The table below describes the
pricing for the FY 2006 cost allocation plans and the two potential renewal years.
Fiscal Year End
2006
2007
2008
Professional Fees
$25,500
$26,500
$27,500
Our assumptions for the engagement are as follows:
· The County will provide data for central service departments at division I
department / fund level (or their equivalent) summaries that provide a
reasonable basis for allocating each function's activity to the benefiting
department/division.
· The County is requested to review the draft reports and provide comments
to KPMG within 30 days of receiving the draft report. KPMG will issue the
final reports within 30 days of receiving the County's comments. Should
the County not provide written comments or request an extension for the
review of the draft reports, KPMG will consider the draft reports as
finalized and issue the reports in final form.
· The County will provide relevant operational, technical, and background
information as required by the engagement team.
· The County will provide assistance to help KPMG achieve the successful
completion of the engagement. Such assistance will include:
· Assistance in gaining timely access to documentation, systems, and
key personnel
· Timely feedback at key decision points
· Active participation to facilitate the timely resolution of project-related
issues.
m9
Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14, 2007
Page 7
· The County will provide a common office space adequate for up to 2
KPMG personnel. The office will include access to a telephone,
printer/copier and internet connectivity.
· The County will provide meeting space as needed to conduct interviews
and work sessions throughout the project.
Deliverables and Other Matters
Our analysis will be prepared under the Consulting Standards issued by the
American Institute of Certified Public Accountants (AICPA) and does not
constitute an examination, compilation or agreed upon procedures in accordance
with the standards established by the AICPA. This analysis will be prepared
based on information received from the County. No independent verification of
this information will be made by KPMG and we assume no responsibility for the
accuracy or reliability of the information provided to us. The analysis will be
intended solely for the use of the County and may not be provided to any third
party without the written consent of KPMG and should not be relied upon for any
other purposes.
Additional Considerations
It has been our experience that the County's participation is necessary for this
type of engagement to be successful. It is imperative that we receive timely
cooperation regarding requested data for effective use of KPMG and County
resources, as well as the CDM system. KPMG requests that information
provided by the County to be summarized and subtotaled by
Department/Division (or equivalent) for the General Fund and by Fund for non
General Fund activities. Information requested by KPMG should be provided in
both electronic and hard copy formats. We require temporary office space and
telephone services for local calls while on-site. Additionally, we understand that
it is our responsibility to provide our own computer hardware and software,
supplies, clerical support, and data entry support, and that no County staff or
equipment will be provided for this project except as interviewees.
We look forward to working with you and your staff in the performance of these
services, and would be pleased to discuss this letter with you at any time.
m9
Ms. Kathy Williams
Augusta-Richmond County, Georgia
September 14, 2007
Page 8
For your convenience in confirming these arrangements, we enclosed a copy of
this letter. Please sign it and return it to me.
Very truly yours,
~~
David L. Dennis
Partner
KPMG LLP
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KPMG LLP
Standard Terms and Conditions for Advisory and Tax Services
1. Services; Client Responsibilities.
(a) It is understood and agreed that KPMG's services may include
advice and recommendations; but all decisions in connection with
the implementation of such advice and recommendations shall be
the responsibility of, and made by, Client. KPMG will not
perform management functions or make management decisions
for Client. References herein to Client shall refer to the addressee
of the Proposal or Engagement Letter to which these Standard
Terms and Conditions are attached (the "Engagement Letter").
(b) In connection with KPMG's provision of services under the
Engagement Letter, Client agrees that Client, and not KPMG,
shall perform the following functions: (i) make all management
decisions and perform all management functions; (ii) designate an
individual who possesses suitable skill, knowledge and
experience, preferably within senior management, to oversee such
services, and to evaluate the adequacy and results of such
services; (iii) accept responsibility for the results of such services;
and (iv) establish and maintain internal controls over the processes
with which such services are concerned, including monitoring on-
going activities.
(c) Subsequent to the completion of this engagement, KPMG will not
update its advice, recommendations or work product for changes
or modification to the law and regulations, or to the judicial and
administrative interpretations thereof, or for subsequent events or
transactions, unless Client separately engages KPMG to do so in
writing after such changes or modifications, interpretations, events
or transactions.
2. Tax on Services. All fees, charges and other amounts payable to
KPMG under the Engagement Letter do not include any sales,
use, excise, value added or other applicable taxes, tariffs or duties,
payment of which shall be Client's sole responsibility, excluding
any applicable taxes based on KPMG's net income or taxes
arising from the employment or independent contractor
relationship between KPMG and its personnel.
3. Termination. Either party may terminate the Engagement Letter
at any time by giving written notice to the other party not less than
30 calendar days before the effective date of termination.
4. Ownership and Use of Deliverables.
(a) KPMG has created, acquired, owns or otherwise has rights in, and
may, in connection with the performance of services under the
Engagement Letter, use, provide, modify, create, acquire or
otherwise obtain rights in, concepts, ideas, methods,
methodologies, procedures, processes, know-how, techniques,
models, templates and software (collectively, the "KPMG
Property"). KPMG retains all ownership and use rights in the
KPMG Property. Client shall acquire no rights or interest in the
KPMG Property, except as expressly provided in the next
paragraph. KPMG acknowledges that KPMG Property shall not
include any of Client's confidential information or tangible or
intangible property, and KPMG shall have no ownership rights in
such property.
Page 1
(b) Except for KPMG Property, and upon full and final payment to
KPMG under the Engagement Letter, the tangible items specified
as deliverables or work product in the Engagement Letter
including any intellectual property rights appurtenant thereto (the
"Deliverables") will become the property of Client. If any KPMG
Property is contained in any of the Deliverables, KPMG hereby
grants Client a royalty-free, paid-up, non-exclusive, perpetual
license to use such KPMG Property in connection with Client's
use of the Deliverables.
(c) Client acknowledges and agrees that any advice,
recommendations, information or work product provided to Client
by KPMG in connection with this engagement is for the sole use
of Client and may not be relied upon by any third party. Client
agrees that if it makes such advice, recommendations, information
or work product available to any third party other than as
expressly permitted by the Engagement Letter the provisions of
Paragraph 8(b) shall apply unless Client provides the written
notice to the third party in substantially the form of Appendix A
hereto (the "Notice"), which Notice shall be acknowledged in
writing by such third party and returned to Client. Upon request,
Client shall provide KPMG with a copy of the foregoing Notice
and acknowledgement and any notice and acknowledgement sent
to Client by such third party as contemplated by the Notice.
Notwithstanding the foregoing, (i) in the event of a disclosure
made by Client that is required by law, that is made to a
regulatory authority having jurisdiction over Client or that is made
pursuant to Paragraph 17(a) below, no acknowledgement of the
Notice shall be required and (ii) no Notice or acknowledgement
shall be required with respect to disclosures expressly authorized
by the Engagement Letter.
5. Warranties. KPMG's services under the Engagement Letter are
subject to and will be performed in accordance with American
Institute of Certified Public Accountants ("AI CPA") and other
professional standards applicable to the services provided by
KPMG under the Engagement Letter and in accordance with the
terms thereof. KPMG disclaims all other warranties, either
express or implied.
6. Limitation on Damages. Except for each party's indemnification
obligations herein, neither Client nor KPMG shall be liable to the
other for any actions, damages, claims, liabilities, costs, expenses
or losses in any way arising out of or relating to the services
performed under the Engagement Letter for an aggregate amount
in excess of the fees paid or owing to KPMG under the
Engagement Letter. In no event shall either party be liable for
consequential, special, indirect, incidental, punitive or exemplary
damages, costs, expenses, or losses (including, without limitation,
lost profits and opportunity costs).
7. Infringement.
(a) KPMG hereby agrees to indemnify, hold harmless and defend
Client from and against any and all claims, liabilities, losses,
expenses (including reasonable attorneys' fees), fines, penalties,
taxes or damages (collectively "Liabilities") asserted by a third
party against Client to the extent such Liabilities result from the
infringement by the Deliverables (including any KPMG Property
contained therein) of such third party's patents issued as of the
Revised 9/10/06
KPMG LLP
Standard Terms and Conditions for Advisory and Tax Services
date of the Engagement Letter, trade secrets, trademarks or
copyrights. The preceding indemnification shall not apply to any
infringement arising out of (x) use of the Deliverables other than
in accordance with applicable documentation or instructions
supplied by KPMG or other than in accordance with Paragraph
4(c); (y) any alteration, modification or revision of the
Deliverables not expressly agreed to in writing by KPMG; or (z)
the combination of the Deliverables with materials not supplied or
approved by KPMG.
(b) In case any of the Deliverables (including any KPMG Property
contained therein) or any portion thereof is held, or in KPMG's
reasonable opinion is likely to be held, to constitute infringement,
KPMG may, within a reasonable time, at its option either: (i)
secure for Client the right to continue the use of such infringing
item; or (ii) replace, at KPMG's sole expense, such item with a
substantially equivalent non-infringing item or modify such item
so that it becomes non-infringing. In the event KPMG is, in its
reasonable discretion, unable to perform either of options
described in (i) or (ii) above, Client shall return the Deliverable to
KPMG, and KPMG's sole liability shall be to refund to Client the
amount paid to KPMG for such item; provided that the foregoing
shall not be construed to limit KPMG's indemnification obligation
set forth in Paragraph 7(a) above.
(c) The provisions of this Paragraph 7 state KPMG's entire liability
and Client's sole and exclusive remedy with respect to any
infringement or claim of infringement.
8. Indemnification.
(a) Each party agrees to indemnify, hold harmless and defend the
other from and against any and all Liabilities for physical injury
to, or illness or death of, any person regardless of status, and
damage to or destruction of any tangible property, which the other
party may sustain or incur, to the extent such Liabilities result
from the negligence or willful misconduct of the indemnifying
party.
(b) In accordance with Paragraph 4(c) Client agrees to indemnify,
defend and hold harmless KPMG from and against any and all
Liabilities incurred or suffered by or asserted against KPMG in
connection with a third party claim to the extent resulting from
such party's use or possession of or reliance upon KPMG's
advice, recommendations, information or work product as a result
of Client's disclosure of such advice, recommendations,
information or work product without adhering to the notice
requirements of Paragraph 4(c) above.
(c) The party entitled to indemnification (the "Indemnified Party")
shall promptly notify the party obligated to provide such
indemnification (the "Indemnifying Party") of any claim for
which the Indemnified Party seeks indemnification. The
Indemnifying Party shall have the right to conduct the defense or
settlement of any such claim at the Indemnifying Party's sole
expense, and the Indemnified Party shall cooperate with the
Indemnifying Party. The party not conducting the defense shall
nonetheless have the right to participate in such defense at its own
expense. The Indemnified Party shall have the right to approve
the settlement of any claim that imposes any liability or obligation
other than the payment of money damages.
Page 2
9. Cooperation; Use ofInformation.
(a) Client agrees to cooperate with KPMG in the performance of the
services under the Engagement Letter and shall provide or arrange
to provide KPMG with timely access to and use of the personnel,
facilities, equipment, data and information to the extent necessary
for KPMG to perform the services under the Engagement Letter.
The Engagement Letter may set forth additional obligations of
Client in connection with this engagement. Client acknowledges
that Client's failure to perform these obligations could adversely
affect KPMG's ability to provide the services under the
Engagement Letter.
(b) Client acknowledges and agrees that KPMG will, in performing
the services under the Engagement Letter, base its conclusions on
the facts and assumptions that Client furnishes and that KPMG
may use data, material, and other information furnished by or at
the request or direction of Client without any independent
investigation or verification and that KPMG shall be entitled to
rely upon the accuracy and completeness of such data, material
and other information. Inaccuracy or incompleteness of such data,
material and other information furnished to KPMG could have a
material effect on KPMG's conclusions.
10. Independent Contractor. It is understood and agreed that each
of the parties hereto is an independent contractor and that neither
party is or shall be considered an agent, distributor or
representative of the other. Neither party shall act or represent
itself, directly or by implication, as an agent of the other or in any
manner assume or create any obligation on behalf of, or in the
name of, the other.
I I. Confidentiality.
(a) "Confidential Information" means all documents, software,
reports, data, records, forms and other materials obtained by one
party (the "Receiving Party") from the other party (the
"Disclosing Party") or at the request or direction of the Disclosing
Party in the course of performing the services under the
Engagement Letter: (i) that have been marked as confidential; (ii)
whose confidential nature has been made known by the Disclosing
Party to the Receiving Party; or (iii) that due to their character and
nature, a reasonable person under like circumstances would treat
as confidential. Notwithstanding the foregoing, Confidential
Information does not include information which: (i) is already
known to the Receiving Party at the time of disclosure by the
Disclosing Party; (ii) is or becomes publicly known through no
wrongful act of the Receiving Party; (iii) is independently
developed by the Receiving Party without benefit of the
Disclosing Party's Confidential Information; (iv) relates to the tax
treatment or tax structure of any transaction, (v) the Receiving
Party determines is required to be maintained or disclosed by the
Receiving Party under sections 60 II, 6111 or 6112 of the Internal
Revenue Code ("IRC") or the regulations thereunder or under any
similar or analogous provisions of the laws of a state or other
jurisdiction or (vi) is received by the Receiving Party from a third
party without restriction and without a breach of an obligation of
confidentiality .
Revised 9/10/06
KPMG LLP
Standard Terms and Conditions for Advisory and Tax Services
(b) The Receiving Party will deliver to the Disclosing Party all
Confidential Information of the Disclosing Party and all copies
thereof when the Disclosing Party requests the same, except for
one copy thereof that the Receiving Party may retain for its
records. The Receiving Party shall not use or disclose to any
person, firm or entity any Confidential Information of the
Disclosing Party without the Disclosing Party's express, prior
written permission; provided, however, that notwithstanding the
foregoing, the Receiving Party may disclose Confidential
Information to the extent that it is required to be disclosed
pursuant to a statutory or regulatory provision or court order or to
fulfill professional obligations and standards.
(c) Each party shall be deemed to have met its nondisclosure
ob ligations under this Paragraph 11 as long as it exercises the
same level of care to protect the other's information as it exercises
to protect its own confidential information but in no event less
than reasonable care, except to the extent that applicable law or
professional standards impose a higher requirement.
(d) If the Receiving Party receives a subpoena or other validly issued
administrative or judicial demand requiring it to disclose the
Disclosing Party's Confidential Information, the Receiving Party
shall provide prompt written notice to the Disclosing Party of such
demand in order to permit it to seek a protective order. So long as
the Receiving Party gives notice as provided herein, the Receiving
Party shall be entitled to comply with such demand to the extent
permitted by law, subject to any protective order or the like that
may have been entered in the matter.
12. Assignment; Use of Member Firms. Neither party may assign,
transfer or delegate any of its rights or obligations without the
prior written consent of the other party, such consent not to be
unreasonably withheld. Notwithstanding the foregoing, to the
extent any of the services under the Engagement Letter will be
performed in or relate to a jurisdiction outside of the United
States, Client acknowledges and agrees that such services,
including any applicable tax advice, may be performed by the
member firm of KPMG International practicing in such
jurisdiction. Accordingly, Client consents to KPMG's disclosure
to a member firm and such member firm's use of data and
information, including tax return information, received from or at
the request or direction of Client for the purpose of completing the
services under the Engagement Letter.
13. Governing Law; Severability. The Engagement Letter and these
Standard Terms and Conditions shall be governed by and
construed in accordance with the laws of the State of N ew York,
without regard to its conflict of laws provisions. In the event that
any term or provision of the Engagement Letter or these terms
shall be held to be invalid, void or unenforceable, then the
remainder of the Engagement Letter and these terms shall not be
affected, and each such term and provision shall be valid and
enforceable to the fullest extent permitted by law.
14. Alternative Dispute Resolution.
(a) Any dispute or claim arising out of or relating to the Engagement
Letter between the parties or the services provided thereunder
shall be submitted first to non-binding mediation (unless either
party elects to forego mediation by initiating a written request for
Page 3
arbitration) and if mediation is not successful within 90 days after
the issuance by one of the parties of a request for mediation then
to binding arbitration in accordance with the Rules for Non-
Administered Arbitration of the International Institute for Conflict
Prevention and Resolution ("CPR Arbitration Rules"). By
operation of this provision, the parties agree to forego litigation
over such disputes in any court of competent jurisdiction.
(b) Mediation, if selected, may take place at a location to be
designated by the parties using the Mediation Procedures of the
International Institute for Conflict Prevention and Resolution, with
the exception of paragraph 2 (Selecting the Mediator).
(c) Arbitration shall take place in New York, New York. The
arbitration panel shall have no power to award non-monetary or
equitable relief of any sort except as provided in CPR Rule 13
(Interim Measures of Protection). Damages that are inconsistent
with any applicable agreement between the parties, that are
punitive in nature, or that are not measured by the prevailing
party's actual damages shall be unavailable in arbitration or any
other forum. In no event, even if any other portion of these
provisions is held to be invalid or unenforceable, shall the
arbitration panel have power to make an award or impose a
remedy that could not be made or imposed by a court deciding the
matter in the same jurisdiction.
(d) Either party may seek to enforce any written agreement reached
by the parties during mediation, or to confirm and enforce any
final award entered in arbitration, in any court of competent
jurisdiction.
(e) Notwithstanding the agreement to such procedures, either party
may seek equitable relief to enforce its rights in any court of
competent jurisdiction.
15. Miscellaneous.
(a) Except as otherwise set forth in the Engagement Letter, in
accepting this engagement, Client acknowledges that completion
of this engagement or acceptance of Deliverables resulting from
this engagement will not constitute a basis for Client's assessment
or evaluation of internal control over financial reporting and
disclosure controls and procedures, or its compliance with its
principal officer certification requirements under Section 302 of
the Sarbanes-Oxley Act of 2002 (the "Act"). The services under
the Engagement Letter shall not be construed to support Client's
responsibilities under Section 404 of the Act requiring each
annual report filed under Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 to contain an internal control report from
management.
(b) KPMG may communicate with Client by electronic mail or
otherwise transmit documents in electronic form during the course
of this engagement. Client accepts the inherent risks of these
forms of communication (including the security risks of
interception of or unauthorized access to such communications,
the risks of corruption of such communications and the risks of
viruses or other harmful devices) and agrees that it may rely only
upon a final hardcopy version of a document or other
communication that KPMG transmits to Client unless no such
hard copy is transmitted by KPMG to Client.
Revised 9/10/06
KPMG LLP
Standard Terms and Conditions for Advisory and Tax Services
(c) For engagements where services will be provided by KPMG
through offices located in California, Client acknowledges that
certain of KPMG's personnel who may be considered "owners"
under the California Accountancy Act and implementing
regulations (California Business and Professions Code section
5079(a); 16 Cal. Code Regs. sections 51 and 51.1) and who may
provide services in connection with this engagement, may not be
licensed as certified public accountants under the laws of any of
the various states.
(d) Where KPMG is reimbursed for expenses, it is KPMG's policy to
bill clients the amount incurred at the time the good or service is
purchased. If KPMG subsequently receives a volume rebate or
other incentive payment from a vendor relating to such expenses,
KPMG does not credit such payment to Client. Instead, KPMG
applies such payments to reduce its overhead costs, which costs
are taken into account in determining KPMG's standard billing
rates and certain transaction charges that may be charged to
clients.
(e) Except as permitted by law or the terms of the Engagement Letter,
neither party shall acquire hereunder any right to use the name or
logo of the other party or any part thereof. Any such use shall
require the express written consent of the owner party.
16. Entire Agreement. The Engagement Letter and these Standard
Terms and Conditions, including the Exhibits and Appendices
hereto and thereto, constitute the entire agreement between
KPMG and Client with respect to the services under the
Engagement Letter and supersede all other oral and written
representation, understandings or agreements relating thereto.
17. Additional Terms for Engagements Involving Tax Services.
(a) Notwithstanding anything to the contrary set forth herein, no
provision in the Engagement Letter or these Standard Terms and
Conditions is or is intended to be construed as a condition of
confidentiality within the meaning of IRC sections 60 II, 6111,
6112 or the regulations thereunder, or under any similar or
analogous provisions of the laws of a state or other jurisdiction.
In particular, Client (and each employee, representative, or other
agent of Client) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of any
transaction within the scope of this engagement and all materials
of any kind (including opinions and other tax analyses) that are
provided to Client relating to such tax treatment and tax structure.
Client also agre,es to use commercially reasonable efforts to
inform KPMG of any conditions of confidentiality imposed by
third party advisors with respect to any transaction on which
KPMG advice is requested. Such notification must occur prior to
KPMG providing any advice with respect to the transaction.
(b) Treasury regulations under IRC section 6011 tequire taxpayers to
disclose to the IRS their participation in reportable transactions
and IRC section 6707 A imposes strict penalties for
noncompliance. Client agrees to use commercially reasonable
efforts to inform KPMG if Client is required to disclose any
transaction covered by the Engagement Letter as a reportable
transaction to the IRS or to any state or other jurisdiction adopting
similar or analogous provisions. IRC sectiop 6111 requires a
Page 4
material advisor with respect to a reportable transaction to
disclose information on the transaction to the IRS by a prescribed
date, and IRC section 6112 requires the material advisor to
maintain, and make available to the IRS upon request, a list of
persons and other information with respect to the transaction.
KPMG will use commercially reasonable efforts to inform Client
if KPMG provides Client's identifying information to the IRS
under IRC section 6111 or 6112, or to any state or other
jurisdiction adopting similar or analogous provisions.
(c) Information relating to advice KPMG provides to Client,
including communications between KPMG and Client and
material KPMG creates in the course of providing advice, may be
privileged and protected from disclosure to the IRS or other
governmental authority in certain circumstances. As KPMG is not
able to assert the privilege on Client's behalf with respect to any
communications for which privilege has been waived, Client
agrees to notify KPMG of any such waivers, whether resulting
from communications with KPMG or third parties in the same or a
related matter. Client also understands that privilege may not be
available for communications with an audit client and that KPMG
personnel providing audit and non-audit services will discuss
matters that may affect the audit to the extent required by
applicable professional standards. Client agrees that KPMG will
not assert on Client's behalf any claim of privilege unless Client
specifically instructs KPMG in writing to do so after discussing
the specific request and the grounds on which such privilege claim
would be made. Notwithstanding the foregoing, Client
acknowledges that in no event will KPMG assert any claim of
privilege that KPMG concludes, after exercising reasonable
judgment, is not valid.
(d) Unless expressly provided for, KPMG's services do not include
representing Client in the event of a challenge by the IRS or other
tax or revenue authorities.
(e) Client acknowledges that in connection with any tax compliance
services provided by KPMG under the Engagement Letter, KPMG
may utilize the services of affiliates and third party service
providers within and without the United States to organize and
input data, operate the software used to generate tax returns for
Client or its personnel and perform other related tasks. Client
hereby consents to KPMG's use of such affiliates and third party
service providers and the disclosure to such affiliates and third
party service providers and their use of tax return information,
received from Client or its personnel for the purpose of preparing,
assisting in preparing, or obtaining or providing services in
connection with preparing, any tax return required under the
Engagement Letter.
(f) In rendering tax advice, KPMG may consider, for example, the
applicable provisions of the Internal Revenue Code of 1986, and
the Employee Retirement Income Security Act of 1973, each as
amended, and the relevant state and foreign statutes, the
regulations thereunder, income tax treaties, and judicial and
administrative interpretations, thereof. These authorities are
subject to change, retroactively or prospectively, and any such
changes could affect the validity ofKPMG's advice.
Revised 9/10/06
APPENDIX A
[FORM OF NOTICE AND ACKNOWLEDGEMENT]
[Name of Third Party]
Address
The advice, recommendations and information in the document included with this notice were
prepared for the sole benefit of [Name of Client], based on the specific facts and circumstances
of [Name of Client], and its use is limited to the scope ofKPMG's engagement for [Name of
Client]. It has been provided to you for informational purposes only and may not be relied upon
by you or any other person or organization. You acknowledge and agree that KPMG accepts no
responsibility or liability in respect of the advice, recommendations or other information in such
document to any person or organization other than [Name of Client]. You shall have no right to
disclose the advice, recommendations or other information in such document to anyone else
without including a copy of this notice and obtaining a signed acknowledgement of this notice
from the party to whom disclosure is made and you provide a copy thereof to [Name of Client].
You acknowledge and agree that you will be responsible for any damages suffered by KPMG as
a result of your failure to comply with the terms of this notice.
*Please acknowledge your acceptance of the foregoing by signing and returning to us a copy of
this letter.
Very truly yours,
[Name of Client]
By:
Name:
Title:
* Accepted and Agreed to on this _ day of _, 20_ by:
[Name of Third Party
By:
Name:
Title:
* Remove if a signed acknowledgement is not required by the terms of Paragraph 4( c).
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Revised 9/10/06