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Request for Proposals_Internal Auditing Services
THE CITY OF Dui Masterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Internal Auditing Services Request for Proposal (RFP) DATE: May 29, 2014 Dubuque band AI -America City r 2007 • 2012 • 2013 A Request for Proposal was issued to obtain a firm to provide internal auditing services relative to the City's current cash receipting policies and procedures for all City Departments. Four firms responded to the RFP, and based on the proposal, including fee estimate, staff assigned, and proximity of staff, Finance Director Ken TeKippe recommends City Council approval of the selection of McGladrey LLP for the internal auditing services for the City of Dubuque in the range of costs of $24,900 to $29,800. This is an unbudgeted item and it is recommended the funds come from alcohol fines received over budget in Fiscal Year 2014. I concur with the recommendation and respectfully request Mayor and City Council approval. Ws, Mic ael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Ken TeKippe, Finance Director Masterpiece on the Mississippi TO: Mike Van Milligen, City Manager FROM: Ken TeKippe, Finance Director "°- SUBJECT: Internal Auditing Services Request for Proposal (RFP) DATE: May 29, 2014 Dubuque *****;' All -America City 11111! 2007 • 2012 • 2013 INTRODUCTION The purpose of this memorandum is to request approval of a firm to provide internal auditing services relative to the City's current cash receipting policies and procedures for all City departments. The scope of work includes a thorough review of the cash handling and receipting processes including how monies are being received, entered in the appropriate accounts receivable ledger, receipts posted to the general ledger and deposits reflected in bank statements. The work should identify any flaws in internal control including segregation of duties, security of funds on site, locations of collection sites, billings promptly issued, payments and collections, and the application or reversal of late payment penalties and fees. The firm will assist the City in establishing a need for and if necessary the development of a tip line (fraud hotline) where employees could anonymously report areas of concern. Audit findings/reports will be submitted at least quarterly to the City. BACKGROUND A request for proposal was distributed to a number of firms including the following: • Baker Tilly • Bergan, Paulsen & Company • Deloitte & Touche • Ernst & Young • Honkamp Krueger & Co., P.C. • KPMG • McGladrey LLP • Price Waterhouse Cooper • WPF In addition, the RFP was posted on the city's website. A Dopy of the RFP is attached. Firms were allowed to submit questions relative to the RFP. Four firms submitted a total of 26 questions. The questions and responses provided were posted as an addendum on the city's website. See copy attached. DISCUSSION Four firms submitted timely proposals to the RFP. The firms were: McGladrey LLP, Honkamp Krueger & Co., P.C., KPMG and Compass. The firms provided a wide range of estimated fees for the project. After Jenny Larson, Jean Nachtman and my review of the proposals it is our recommendation that McGladrey LLP be awarded the project. McGladrey LLP's proposal met the criteria set out in the RFP including experience in similar projects, as well as extensive experience with governmental clients. McGladrey LLP is the fifth-largest U.S. provider of assurance, tax and consulting services, with more than 75 offices nationwide including offices in Dubuque and surrounding larger cities. Fee information from the proposals follows: Range • Compass $475,800 - $767,000 • Honkamp Krueger & Co., P.C. 133,250 • KPMG 145,535 334,520 • McGladrey LLP 24,900 - 29,800 Based on proposal including fee estimate, staff assigned, and proximity of staff, it is recommended proceeding with authorizing McGladrey LLP to begin work as soon as possible after July 1st. The firm has expertise and available staff to conduct other phases of the City internal controls review and assist in establishing an internal audit function within the City, if deemed necessary. There will be considerable Finance staff time involved to coordinate and prioritize consultant visits to departments, provide requested reports and/or documentation, and familiarize consultant with the City's current policies and procedures. RECOMMENDATION I respectfully recommend approving McGladrey LLP for the internal auditing services project. KT/em I Enclosures cc: Jenny Larson, Budget Director Jean Nachtman, Assistant Finance Director REQUEST FOR PROPOSAL Internal Auditing Services for City of Dubuque, Iowa Table of Contents 1. Nature of Services to be Provided 2. Description of the Government 3. RFP Procedures 4. Proposal Format and Submittals 5. Proposal Evaluation and Selection Criteria 6. Supplemental Conditions 7. Standard Provisions for Contracts - Professional Service Contract Template Attachments 1. Organizational chart of City Staff and Finance Staff 2. Listing of locations of cash, petty cash, and change funds 3. Listing of departments receiving monies over the counter 4. Schedule C Insurance Requirements 5. Change in Petty Cash Detail 6. Daily Cash Detail 1. NATURE OF SERVICES TO BE PROVIDED A. Introduction The City has many internal controls in place in each department that seek to impact the daily conduct of our business, protect our employees/customers/clients, safeguard our assets, mitigate our risks, and allow for accurate financial reporting (including financial projections) to help ensure a viable, sustainable government that is able to serve its citizens both now and in the future. Over the years, the City Finance Department has performed a limited amount of monitoring of these internal controls. This effort has focused primarily on reviewing the cash receipting process in place in selected City departments that take in monies over the counter to ensure that the monies are properly received, safeguarded, deposited and recorded in a timely way in the City's financial system. The City Manager has requested that the City begin in a greater way to review our internal controls over cash receipting. Given that sufficient staff time and expertise are not available for this work to be done in-house, it was recommended that a request for proposal (RFP) be prepared to solicit bids from qualified firms to perform this work as directed by City management. It is anticipated that this work would begin with a review of the entity -wide controls in place to enable the auditor to better understand our governing and operating structure and also to assess the "tone at the top," since this is often the foundation for all of the other components of internal control. This would most likely be followed by a risk assessment of each department's cash receipting policies, procedures, and practices to identify the areas of highest risk so that these could be reviewed first. The purpose of this RFP is to solicit proposals from qualified firms to provide internal auditing services for City of Dubuque, Iowa for a one year contract to identify and assess the level of risk, and mitigate issues within the City's cash receipting procedures. These services are to be performed in accordance with generally accepted auditing standards issued by the American Institute of Certified Public Accountants (AICPA) and the Standards for The Professional Practice of Internal Auditing issued by the Institute of Internal Auditors (IIA) as well as any guidelines prescribed by the State of Iowa Department of Treasury and any applicable Iowa Public Acts. B. Scope of Work to be Performed 1. Perform a review of the entity -wide internal control environment for the cash receipting policy and procedures in place at the City of Dubuque, Iowa. 2. In conjunction with key City staff, perform a risk assessment of City operations in order to prioritize the departments for internal audit work to be performed. From this prioritization, develop an internal audit schedule encompassing all City departments that routinely receipt cash (see Attachment 1). Review the risk assessment and the internal audit schedule with City management and adjust accordingly to reflect any changes in the internal or external environment that affect the risks the City is facing. 3. Perform internal audits of all departments according to the prioritized schedule developed above. Analyze the data obtained for evidence of deficiencies in controls, fraud or lack of compliance with management policies/procedures. 4. Assist the City in establishing a tip line (fraud hotline) where employees could anonymously report areas of concern to them. 5. Review other areas as deemed necessary or as requested by City. 6. Provide recommendations for strengthening internal controls in order to lower identified risks to the City and improve fraud detection and prevention. 7. Submit audit findings/reports quarterly to the City beginning quarter ending September 30, 2014. Submit final report summarizing audit findings and recommendations by June 30, 2015. Provide recommendation for monitoring compliance where necessary. 8. Assist City in establishing an internal audit program. 2. DESCRIPTION OF THE GOVERNMENT A. Name of Contact Person/ Certain Key Personnel The auditor's principal contact with the City will be Ken Tekippe, Finance Director, or a designated representative, who will coordinate the assistance to be provided by the City. A list of certain key personnel for the audit is included below: City Manager Office Michael Van Milligen, City Manager Finance Department Ken Tekippe, Finance Director Jean Nachtman, Assistant Finance Director Tami Lansing, Accountant Melissa McGinnis, Accountant Budget Department Jenny Larson, Budget Director Mary Brooks, Senior Budget Analyst Information Services Department Chris Kohlmann, Manager Information Services Joe Pregler, Lead Application & Network Analyst City Attorney's Office Barry Lindahl, City Attorney B. Background Information City of Dubuque, Iowa is located on the Mississippi River in northeast Iowa, adjacent to the states of Illinois and Wisconsin. It is the tenth largest City in the State, with a 2010 census population of 57,637. The City has a budgeted annual payroll of approximately $35 million covering approximately 575 full time employees. The City had approximately $78 million in cash, checking and savings accounts, and managed funds as of April 30, 2014 (see Attachments 5 and 6). The cash receipting procedures of the City are decentralized, with much of the accounting activity taking place in the Finance Department. More detailed information on the City and its finances can be found in the Comprehensive Annual Financial Report found on The City of Dubuque, Iowa official Website http://www.cityofdubuque.orq/Archive.aspx?AMID=93 Budget information, official statements and policies and procedures are available on our website for your review http://www.cityofdubuque.orq/index.aspx?NID=1872 The Finance Department is headed by a Finance Director, and consists of 19 employees. The principal functions performed are Financial Reporting, Treasury, Risk Management, Purchasing, Accounts Payable, Accounts Receivable, Payroll, and Utility Billing. The Budgeting Department is separate from Finance and consists of 2 employees, the Budget Director and Senior Budget Analyst. Attached are organizational charts of the City (Attachment 2) and Finance Department structure and personnel (Attachment 3). Computer Hardware Type of Equipment Number Make of Equipment Networked PCs 500+ Various Yes Software Vendor Major Applications FinancePlus SunGard Public Sector. General Ledger, Accounts Payable, Fixed Assets, Purchasing, Payroll & Human Resources Operating Systems CommunityPlus SunGard Public Sector Accounts Receivable for Utility Billing & Miscellaneous billings, (i.e., leases, damage billings, special permits, water testing, parking permits and rentals.) Permits Plus Accela, Inc. Permitting, Licenses Total FBO Hanger Rental FBO Reporting AIMS EDC Parking Tickets Wasteworks Carolina Software, Inc. Landfill Accounts Receivable ActiveNet Leisure Services — Class registration and facility reservations Emphasys Emphasys Computer Solutions, Inc. Housing Section 8 Lender Support Systems Emphasys Computer Solutions, Inc. Housing Rehab Loans Horizon (Plans to switch to EnvisionWare) EnvisionWare, Inc. Library The City of Dubuque, Iowa uses a Windows 2008 server for payroll, general ledger and several sub -ledger systems including utility billing. The parking ticket software runs on a Windows 2003 server, but will be updated to a Windows 2012 server over the next few months. 3. RFP Procedures 3.1 Bid Conditions A. The City reserves the right to accept or reject any or all proposals, to waive irregularities or technicalities in any response and to accept any response which the City deems to be in its best interest. B. The City reserves the right to enter into negotiations with the any firm with the intention of formalizing a mutually agreeable contract document. C. The City reserves the right to accept or reject any exception taken by any firm to the terms and conditions of this request. D. The City reserves the right to qualify, accept or reject any and all firms as deemed in the best interest of the City. E. The City will not pay for any information requested herein, nor will it be liable for any costs incurred in preparing response submittals. F. In the event it becomes necessary to revise any part of this RFP, an addendum will be provided to all firms who received the initial RFP. This includes the City's prerogative to amend the response date. G. Any firm contemplating submitting a proposal that has concerns or questions about any part of the RFP, including comments on any specifications which it believes will limit competition may submit them in writing to the Finance Department at the address listed on the cover of this document. The City will not be responsible for any other explanations or interpretations of the proposed documents. In case of any doubt or difference of opinion as to the true intent of the RFP, and in case of any dispute between the parties under the agreement to be entered there under, the decision of the City shall be final and binding. H. Proposals must include all information required in order to be evaluated and considered for award. Failure to do so may be deemed sufficient cause for disqualification. I. Firms may, at their discretion, submit multiple proposals which provide various alternatives. At least one of the proposals must be complete and comply with all instructions of the RFP, with other proposals to be evaluated as variations of this proposal. The additional proposals may be abbreviated following the same format, providing only that information which differs in any way from the original. J. Modifications or corrections of a previously submitted proposal are to be addressed in the same manner as the original proposal and will be considered if received prior to the scheduled closing time for receipt of proposals. Oral or telephone modifications or corrections will not be accepted. K. Proposals may be withdrawn at any time prior to the scheduled closing time for the receipt of proposals. This can be accomplished by written notification on company letterhead signed by an authorized representative or in person upon presentation of appropriate identification. L Firms submitting a proposal in response to this RFP may be required to give an oral presentation of their proposal to the City. This will provide an opportunity for the firm to clarify or elaborate on the proposal but will in no way change the firm's original proposal. Oral presentations are an option of the evaluating committee, and therefore, may not be requested. Accordingly, proposals should be complete as submitted. 3.2 Best and Final Offers All proposals are to be submitted as best and final offers. Each firm shall include all requirements, terms and conditions they may have, and shall not assume that an opportunity will exist to add such matters after the proposal has been submitted. Unacceptable terms and conditions may cause the City to award to another firm, despite other factors of the evaluation. 3.3 City Contact During review of the RFP and preparation of proposals, firms may discover certain errors, omissions or ambiguities. If so, or if in doubt about the meaning of any part of this RFP, submit written questions via e-mail to Ken TeKippe, Finance Director. Do not rely on verbal instructions or clarifications. Please direct all questions in writing to ktekippe@cityofdubuque.org All questions concerning the RFP must reference the RFP page number, section heading, and paragraph. Questions must be concisely stated and be numbered in sequential order. All questions must be submitted by 3:00 P.M. on Friday, May 16, 2014. Responses to all written questions will be sent to all known and interested firms. Questions submitted after the deadline will not be answered. If assumptions are made about the meaning or accuracy of any part of this RFP firms shall state that in the proposal. If the firm does not ask questions or clarify any assumption, the City will assume the firm agrees with and understands the requirements and that the firm's offering will meet those needs at the prices stated. 3.4 RFP Schedule The planned schedule of RFP events will help the firm prepare its proposal. The key events and deadlines for the proposal process are as follows: RFP available to Firms Friday, May 9, 2014 Questions due from Firms Friday, May 16, 2014 Proposals due from Firms Friday, May 23, 2014 Firm Selection Tuesday, June 17, 2014 3.5 Disqualification of Firms Firms may be disqualified for any of the following reasons: A. Failure to meet minimum qualifications B. Failure to abide by minimum requirements of the RFP as presented herein C. Reason to believe collusion exists among the firms D. Having defaulted on a previous contract, or having performed poorly on a previous contract E. Lack of competency, skill, judgment, financial capability, integrity, reputation, reliability or responsibility to perform the work as revealed by the proposal, questionnaires, financial statement, performance history or other relevant information obtained by the City 3.6 Firm Selection The finalist(s) will be chosen based on the criteria identified in Section 5, Proposal Evaluation and Selection Criteria. The finalist(s) may be required to give an oral presentation of their proposal to representatives of the City. This will provide an opportunity for the firm to clarify or elaborate on the proposal. 3.7 Contract Negotiations Contract negotiations between parties may take place between the firm and the City. The City reserves and in its sole discretion may, but shall not be required to, exercise the following rights and options with respect to the contract negotiation and award process resulting from this RFP: The City reserves the right to enter into post -submission negotiations and discussions with any one or more firms regarding price, scope of service and/or any other term of their proposals, and such other contractual terms as the City may require, at any time prior to execution of a final contract. The City may, at its sole election, enter into simultaneous, competitive negotiations with multiple firms or negotiate with an individual firm. Negotiations with firms may result in the engagement or reduction of the scope of services, or change in other terms that are material to the RFP and the submitted proposals. In such event, the City shall not be obligated to inform other firms of the changes, or to permit them to revise their proposal in light thereof, unless the City, in its sole discretion, determines that doing so is in the City's best interest. In the event negotiations with any f irm(s) are not satisfactory to the City, the City reserves the right to discontinue such negotiations at any time; to enter into or continue negotiations with other firms; to enter negotiations or proposals for components of the Internal Auditor, if any, that are deleted by the City from the successful proposal or the contract resulting from it. The City reserves the right not to enter into any contract with any firm, with or without re -issue of the RFP, if the City determines that such is in the City's best interest. 4. Proposal Format and Submittals 4.1 Proposal Submittal Submit proposal electronically to address below. Proposals must be received no later than Friday, May 23, 2014 at 3:00 P.M., CDT: ktekippe(citvofdubuque.orq It is solely the firm's responsibility to insure timely delivery of its response. All proposals must be received by the closing date and time indicated. Any proposal may be withdrawn prior to the scheduled time for proposal receipt. It is the responsibility of the firm to clearly mark and identify all sections or content of the proposal that, in the firm's opinion, contains trade secrets, confidential information, and other proprietary information. Subject to Iowa law, trade secrets contained in the proposal shall not be open for public inspection. All responses, proposals, and accompanying documentation except proprietary and intellectual property of the firm, shall become the property of the City. If the proposal represents offerings to be made by different firms or organizations, the City will do business only with the firm and will require the firm's organization to assume responsibility as the prime consultant for all services. Power of attorney authorizing agents or others to sign the proposal must be certified and notarized in writing. In addition, the City will not allow assignment of the ensuing contract. 4.2 Electronic Submission All proposals should be submitted as e-mailed or FTP to the address above and the subject line should be clearly state "RFP - Internal Audit Services." Failure to do this may cause the proposal to be misplaced and not considered. All responses, proposals, and accompanying documentation except proprietary and intellectual property of the firm, shall become the property of the City. 4.3 Detailed Proposal Requirements Firms must organize their proposals as defined below to ensure consistency and to facilitate the evaluation of all responses. The required proposal sections are: Transmittal Letter Provide a letter on company letterhead, indicating the following information and signed by an official who is authorized by and binding on the firm's organization. A. The authorized official must certify that the proposal will remain valid for 90 days from the date submitted, and that, upon award of contract; all prices shall be firm and valid for the duration of the contract. B. In addition, the transmittal letter shall indicate that the firm's company agrees to be bound by the proposal included in the original proposal submission without modification. C. The letter should contain a brief statement of the firm's understanding of the services the City is seeking to procure. D. If subcontracting is anticipated, the name of the proposed subcontracting firm must be clearly identified in the proposal. After accepting the proposal, no additional subcontracting will be allowed without the prior written consent of the City. E. Finally, please provide the name, title, address, e-mail address, fax number and telephone number of the firm's primary contact for the project. Table of Contents A table of contents providing a listing for each section of the proposal is required, including the Appendices and any additional material submitted. Executive Summary The executive summary should provide a concise summarization of the services being proposed to meet the City's needs and why it is the solution the City should decide to implement. The firm should also summarize its qualifications and similar experience in similar sized operations and how this experience indicates the firm's solution is suitable for the City. Organization A. A brief history of the firm's organization, full corporate name and affiliate organizations, a review of ownership, current location and territory attended to, number of employees, number of years of experience providing internal audit services and anticipated changes to the existing size and location of your business. B. The services the firm offers which may distinguish it from other firms. C. A profile of the type of accounts and clients for which the firm presently provides internal auditing services. D. Provide the firm's audit and internal controls philosophy, in particular with respect to assets and controls of governmental organizations. Professional Staff A. A biography of the primary staff that will be responsible for the work to be performed. B. A brief biography of principals of firm involved with project. C. An organizational chart for the individuals assigned to the City account. Information A. Describe the firm's experience in providing internal auditing services to local governments as well as other organizations. Describe the unique qualifications of the firm to provide internal auditing services to the City. B. Describe the firm's experience in auditing Electronic Data Processing (EDP) systems, to include, but not limited to, accounting software systems, PC based software applications, local area networks, etc. C. Describe how the firm will ensure that the audit team assigned will have the necessary knowledge and experience in City government internal controls. D. The proposal should include a pricing structure (estimated hours and blended hourly rate) for the entity -wide review of cash receipting internal controls and the risk assessment work to be performed. Describe how the firm would approach risk assessment at the City and how the firm would develop an internal audit schedule for the periodic review of internal controls in City departments based upon the risk assessment. E. Based upon internal audit work performed by the firm for entities similar to the City provide (if possible) an estimate of the hours and yearly cost to review internal controls over cashing handling in City. F. Provide a cost estimate for assisting the City to establish a tip line (fraud hotline) where employees could anonymously report areas of concern to them. G. Describe the firm's professional and technical resources which are available to support the internal audit work. Reporting Provide detail proposed meeting availability for phone calls and face to face meetings. Presence at City Council meetings may be needed. Provide a sample internal audit report and discuss the type(s) of reports and related audit information that is provided to the client. References Please provide the name, contact person, and phone number of three existing internal audit clients, preferably local governments, whom we may contact for references. Indicate the length of time for the engagement. Exceptions to Specifications Although the specifications in the requirements section represent the City's anticipated needs, there may be instances in which it is in the City's best interest to permit exceptions to specifications and accept alternatives. It is extremely important that firms make very clear where an exception is taken to the specifications and how alternatives will be provided. Therefore exceptions, conditions, or qualifications to the provisions of the City's specifications must be clearly identified as such, together with the reasons, and inserted in this section of the proposal. If the firm does not make it clear that an exception is taken, the City will assume the proposal is responding to and will meet the specification as written. Additional Information All additional information the firm deems as pertinent to their proposal must be included in this section. Pricing The firm must provide detailed description of any and all costs for the services to be delivered as part of this proposal. 5. Proposal Evaluation and Selection Criteria 5.1 Evaluation and Selection The City will conduct a comprehensive, fair and impartial evaluation of all proposals received in response to this RFP received by the proposal due date and time specified in this request. The successful firm will be selected on the basis of a comprehensive solution, pricing, and implementation plan as defined in this section. 5.2 Evaluation Process Proposals that meet the minimum requirements listed below will be included in the full evaluation process. If any of the minimum RFP requirements are not met by the firm or not stated in their proposal, the firm's proposal will be rejected and not considered in the evaluation process. 5.3 Evaluation and Selection Committee The Evaluation and Selection Committee will determine the responsiveness and adequacy of each proposal, evaluate each proposal by company organizational structure, professional staffing, internal audit experience, and implementation according to the pre -established criteria described below and develop an overall ranking. 5.4 Evaluation Criteria The criteria upon which evaluation of the proposals will be based include, but are not limited to the following: A. The ability of the firm to provide excellent internal auditing services to the City B. References from persons knowledgeable of the firm's ability to fulfill the terms of the contract C. Economic feasibility and justification of all costs D. General and financial stability of the company and years in business E. Firm willingness and ability to negotiate a contract acceptable to the City F. Quality of the proposal and presentations (if required) G. Ability for the firm to provide quality advice and documentation The evaluation panel reserves the right to reject any or all proposals should they be deemed unsatisfactory or to conclude that there are no satisfactory proposals and discontinue evaluations. The City reserves the right to determine the best proposal submitted in the interest of the City. 5.5 Proposal Evaluation Each proposal will be evaluated in each of the major categories listed above. The City, in its sole discretion, may require a firm to make a presentation of its proposal to the Selection Committee, at no cost to the City, addressing its ability to satisfy the requirements for this RFP. However, the City shall not be required to permit any firm to make such a presentation. The information provided in the presentation will be used in addition to the information provided by the proposal to evaluate the product fit, completeness of the service, and the firm qualifications. Cost to the City is a material factor, but not the sole or necessarily the determining factor in proposal evaluation. The City may, in its sole discretion, award a contract resulting from this RFP to a person or entity other than the responsible and qualified firm submitting the lowest price. The contract will be awarded to the firm whose proposal the City determines, in its sole discretion, is the most advantageous to the City and in the City's best interest. Proposal evaluation will include assessment of the firm's qualifications, technical services, cost proposals, and such other information and investigations as the City deems necessary and appropriate. The City in its sole discretion, may, but shall not be required to, reject without further consideration the proposal of any firm that has not demonstrated, in the City's sole judgment, that it satisfies the qualifications criteria provided in the Proposal Format and Submittals section of this RFP. The City reserves the right, in its sole discretion and without notice to firms, to modify this evaluation procedure as it may deem to be in the City's interest. 5.6 Oral Presentation Selected firms may be invited to make an on-site presentation of their proposal. If so, the oral presentations will be considered part of the firm's offering. Prior to any on- site presentations selected firms will be provided with an agenda. 5.7 Recommendation for Award The Evaluation and Selection Committee will recommend that the award be made to the responsible firm whose best and final offer is determined by the City to be the most advantageous to the City taking into consideration the relative importance of price and other evaluation factors. 6. Supplemental Conditions A. The firm shall comply with the City's policies and procedures and any additional instructions issued from time to time by the City. B. During the period of contract, no change is permitted in any of its conditions and specifications unless the firm receives written approval from the City. C. Should the firm find at any time that existing conditions make modification in contract requirements desirable, it shall promptly report such matter to the City for its consideration and decision. D. The firm shall comply with any and all federal, state or local laws, now in effect or hereafter promulgated which apply to the operation herein specified. E. The firm's performance may be evaluated by the City. It will be the responsibility of the firm to respond, in writing if so requested, to inquiries, requests for change, and recommendations. F. The firm shall advise the Finance Director, or his/her designee, of the firm's telephone numbers and addresses of management personnel and shall arrange for at least one such person to be available during the City's normal working hours by telephone. The firm shall also provide sufficient backup in times of staff shortages due to vacancies, vacations, illnesses, and inclement weather. G. In the event that either party shall fail to maintain or keep in force any of the terms and conditions of the contract, the aggrieved party may notify the other party in writing via Certified Mail of such failure and demand that the agreed upon terms and conditions of the contract be upheld. Failure to abide by the terms and conditions of the contract are grounds for termination. 7. Standard Provisions for Contracts If a contract is awarded, the selected Consultant will be required to adhere to a set of general contract provisions which will become a part of any formal agreement. These provisions are general principles which apply to all Consultants of service to City of Dubuque, Iowa such as the following: PROFESSIONAL SERVICE CONTRACT This AGREEMENT is dated for reference purposes this _ day of 2014, by the CITY OF Dubuque, Iowa, a municipal corporation, with offices at 50 W 13th St, Dubuque, Iowa (City) and the Consultant (Name of Consultant)(Consultant) located at (Address). In consideration of the promises below, the parties mutually agree as follows: SECTION 1. SCOPE OF SERVICES Consultant will (SPELL OUT SCOPE OF SERVICE) SECTION 2. COMPENSATION. Upon completion of the above services and submission of invoices City will pay Consultant as follows; SECTION 3. REPORTING OF CONSULTANT. 3.1. Consultant is to report to (DEPARTMENT HEAD TITLE) and will cooperate and confer with him/her as necessary to insure satisfactory work progress. 3.2 All reports, estimates, memoranda and documents submitted by Consultant must be dated and bear Consultant's name. 3.3 All reports made in connection with these services are subject to review and final approval by the City Manager. 3.4 City may review and inspect Consultant's activities during the term of this Contract. 3.5 When applicable, Consultant will submit a final, written report to the City Manager. 3.6 After reasonable notice to Consultant, City may review any of Consultant's internal records, reports, or insurance policies. SECTION 4. TERM. This contract begins on (MONTH, DAY, YEAR) and ends on (MONTH, DAY, YEAR). SECTION 5. PERSONNEL 5.1 Consultant will provide the required services and will not subcontract or assign the services without City's prior written approval. 5.2 Consultant will not hire any City employee. 5.3 Consultant agrees that it is neither an employee nor an agent of City for any purpose. 5.4 Consultant agrees that all work done under this Contract shall be completed in the United States and that none of the work will be partially or fully completed by either an offshore sub -consultant or an offshore business interest either owned or affiliated with Consultant. For purposes of this contract, the term, "offshore" refers to any area outside the contiguous United States, Alaska or Hawaii. SECTION 6. INDEMNIFICATION AGREEMENT. Consultant will defend, indemnify, and hold harmless the City of Dubuque, Iowa, its officers, agents, servants, volunteers and employees from any and all liabilities, claims, liens, fines, demands and costs, including legal fees, of whatsoever kind and nature which may result in injury or death to any persons, including the Consultant's own employees, and for loss or damage to any property, including property owned or in the care, custody or control of City of Dubuque, Iowa in connection with or in any way incident to or arising out of the occupancy, use, service, operations, performance or non-performance of work in connection with this Contract resulting in whole or in part from negligent acts or omissions of Consultant, any sub -consultant, or any employee, agent or representative of Consultant or any sub - consultant. SECTION 7. INSURANCE REQUIREMENTS. Consultant will procure and maintain at all times while performing services under this Contract insurance as provided in Schedule C attached hereto (Attachment 4). SECTION 8. COMPLIANCE WITH LAWS AND REGULATIONS. Consultant will comply with all federal, state and local regulations, including but not limited to all applicable OSHA requirements and the Americans with Disabilities Act. SECTION 9. INTEREST OF CONSULTANT AND CITY. Consultant represents that it has no interest which would conflict with the performance of services required by this Contract. Consultant also agrees that, in the performance of this Contract, no officer, agent, employee of the City of Dubuque, Iowa, or member of its governing bodies, may participate in any decision relating to this Contract which affects his/her personal interest or the interest of any corporation, partnership or association in which he/she is directly or indirectly interested or has any personal or pecuniary interest. SECTION 10. CONTINGENT FEES. Consultant represents that it has not employed or retained any company or person, other than bona fide employees working solely for Consultant, to solicit or secure this Contract, and that it has not paid or agreed to pay any company or person, other than bona fide employees working solely for Consultant, any fee, commission, percentage, brokerage fee, gifts or any other consideration contingent upon or resulting from the award or making of this Contract. For breach of this representation, City may cancel this Contract without liability or, at its discretion, deduct the full amount of the fee, commission, percentage, brokerage fee, gift or contingent fee from the compensation due Consultant. SECTION 11. DEBARMENT AND SUSPENSION. By signing this Contract, Consultant agrees that it will comply with Federal Regulation 45 CFR Part 76 and certifies that to the best of its knowledge and belief Consultant and any sub -consultants retained by Consultant: (1) Are not presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from covered transactions by any federal department or agency; (2) Have not within a three-year period preceding this Contract been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (federal, state or local) transaction or contract under a public transaction; violation of federal or state antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property; (3) Are not presently indicted or otherwise criminally or civilly charged by a government entity (federal, state or local) with commission of any of the offenses enumerated in section 2, and; (4) Have not within a three-year period preceding this Contract had one or more public transactions (federal, state or local) terminated for cause or default. SECTION 12. OWNERSHIP OF DOCUMENTS AND PUBLICATION. All documents developed as a result of this Contract will be owned by City and freely available to the public. None may be copyrighted by Consultant. During the performance of the services, Consultant will be responsible for any loss of or damage to the documents while they are in its possession and must restore the loss or damage at its own expense. SECTION 13. ASSIGNS AND SUCCESSORS. This Contract is binding on City and Consultant, and their successors and assigns. Neither City nor Consultant will assign or transfer its interest in this Contract without the written consent of the other. SECTION 14. TERMINATION OF CONTRACT. Termination without cause. Either party may terminate the Contract by giving thirty (30) days written notice to the other party. SECTION 15. PRACTICE AND ETHICS. Consultant will conform to the code of ethics of its national professional associations. SECTION 16. CHANGES IN SCOPE OR SCHEDULE OF SERVICES. No changes to this Contract are allowed unless mutually agreed upon by City and Consultant and incorporated into this Contract by written amendment signed by both parties. SECTION 17. CHOICE OF LAW AND FORUM. This Contract is to be interpreted according to the laws of Iowa. The parties agree that the exclusive forum for litigation arising out of this Contract is the Iowa District Court for Dubuque County. SECTION 18. EXTENT OF CONTRACT. This Contract represents the entire agreement between the parties and supersedes all prior representations, negotiations or agreements whether written or oral. CITY OF DUBUQUE, IOWA CONSULTANT Roy D. Buol, Mayor Attest: Kevin S. Firnstahl City Clerk Attachment 1 CITY OF DUBUQUE, IOWA DEPARTMENT CONTACTS Title Location Office Robert Grierson Airport Manager 11000 Airport Road 589-4128 Mary Knopick-Brooks Senior Budget Analyst 50 West 13th 589-4339 Therese Goodmann Assistant City Manager 50 West 13th 589-4110 Cynthia Steinhauser Assistant City Manager 50 West 13th 589-4110 Jenny Larson Budget Director 50 West 13th 589-4322 RichardRussell Building Services Manager 50 West 13th 589-4150 Craig Nowack Cable Franchise Administrator 1300 Main St. 589-4181 Barry Lindahl City Attorney 300 Main, Suite 330 589-4113 Kevin Firnstahl City Clerk 50 West 13th 589-4121 Gus Psihoyos City Engineer 50 West 13th 589-4270 Mike Van Milligen City Manager 50 West 13th 589-4110 Maurice Jones Economic Development Director 50 West 13th 589-4105 Kenneth TeKippe Finance Director 50 West 13th 589-4133 E. Daniel Brown Fire Chief 11 West 9th St. 589-4160 Mary Rose Corrigan Health Services Manager 1300 Main. St. 589-4181 Alvin Nash Housing and Community Development Manager 350 West 6th, Suite 312 589-4239 Kelly Larson Human Rights Director 1300 Main St. 589-4191 Christine Kohlmann Information Services Manager 1300 Main St. 589-4280 Marie Ware Leisure Services Manager 2200 Bunker Hill Rd. 589-4263 Susan Henricks Library Director 360 West 11th St. 589-4225 Tim Horsfield Parking System Supervisor 830 Bluff 589-4266 Randall Peck Personnel Manager 50 West 13th 589-4125 Laura Carstens Planning Services Manager 50 West 13th 589-4210 Mark Dalsing Police Chief 770 Iowa St. 589-4411 Donald Vogt Public Works Director 925 Kerper Blvd. 589-4250 Candace Eudaley Transit Manager 2401 Central Ave 589-4341 Robert Green Water Department Manager 1902 Hawthorne 589-4291 Jonathan Brown Water & Resource Recovery Center Manager 795 Julien Dubuque Dr. 589-4176 CITY OF DUBUQUE ORGANIZATIONAL CHART City Attorney Library Citizens City Council City Clerk Assistant City Manager (2) Personnel Manager Sustainable Community Coordinator Budget Director Senior Budget Analyst City Manager Airport Public Information Officer J Cable TV Geographic Infommatien Systems Neighborhood Development Specialist Arts Coordinator Attachment 2 Building Services Department Economic Development Department J l Parking Division T ransitDivision Emergency Communications Department Finance Department Health Services Departmen l J A Housing & Community Development Human Information Rights Services Department Department J 1 Training & Workforce Development Human Relations Coordinator / \ / \ Leisure Public Works Services Department Department \ J l J M ti ultural Famil Center Planning Services Department J / 1 / Police Engineering Department Department l • Water Water & Department Resource Recovery Center J \ J UTILITY BILLING SUPERVISOR (Rose Hoerner) City of Dubuque FINANCE DEPARTMENT Organizational Chart FINANCE DIRECTOR (Ken TeKippe) SECRETARY (Ella Lahey) PART TIME ASSISTANT FINANCE DIRECTOR (Jean Nachtman) UTILITY ACCOUNT CLERK (Jane Glennon) CASHIERS 4 FULL TIME (Karen Pins) (Vickie Wilwert) (Dawn Carr) (Chris Selchert) 1 PART TIME (Brandi Baumhover) Attachment 3 1 ACCOUNTANTS 2 FULL TIME (Melissa McGinnis) (Tami Lansing) SERVICE WORKERS 1 FULL TIME (Terry Roussel) 1 PART TIME (Jeff Mills) 1 1 1 1 PURCHASING ACCOUNT PAYROLL INTERN COORDINATOR CLERKS SPECIALIST PART TIME (Tony Breitbach) 2 FULL TIME PART TIME (Hung Dao) (Annette Arnold) (Jane) Stoffel) (Cindy Schroeder) Attachment 4 City of Dubuque Insurance Requirements for Professional Services 1. Insurance Schedule C shall furnish a signed Certificate of Insurance to the City of Dubuque, Iowa for the coverage required in Exhibit I prior to commencing work and at the end of the project if the term of work is longer than 60 days. Providers presenting annual certificates shall present a Certificate at the end of each project with the final billing. Each Certificate shall be prepared on the most current ACORD form approved by the Iowa Department of Insurance or an equivalent. Each certificate shall include a statement under Description of Operations as to why issued. Eg: Project # or Lease of premises at or construction of 2. All policies of insurance required hereunder shall be with a carrier authorized to do business in Iowa and all carriers shall have a rating of A or better in the current A.M. Best's Rating Guide. 3. Each Certificate shall be furnished to the contracting department of the City of Dubuque. 4. Failure to provide minimum coverage shall not be deemed a waiver of these requirements by the City of Dubuque. Failure to obtain or maintain the required insurance shall be considered a material breach of this agreement. 5. Subcontractors and sub subcontractor performing work or service shall provide a Certificate of Insurance in accord with Exhibit I. 6. All required endorsements to various policies shall be attached to Certificate of insurance. 7. Whenever a specific ISO form is listed, an equivalent form may be substituted subject to the provider identifying and listing in writing all deviations and exclusions that differ from the ISO form. 8. Provider shall be required to carry the minimum coverage/limits, or greater if required by law or other legal agreement, in Exhibit I. 9. Whenever an ISO form is referenced the current edition of the form must be used. Attachment 4 City of Dubuque Insurance Requirements for Professional Services Insurance Schedule C (continued) Exhibit I A) COMMERCIAL GENERAL LIABILITY General Aggregate Limit $2,000,000 Products -Completed Operations Aggregate Limit $1,000,000 Personal and Advertising Injury Limit $1,000,000 Each Occurrence $1,000,000 Fire Damage Limit (any one occurrence) $ 50,000 Medical Payments $ 5,000 a) Coverage shall be written on an occurrence, not claims made, form. All deviations from the standard ISO commercial general liability form CG 0001, or Business owners form BP 0002, shall be clearly identified. b) Include I50 endorsement form CG 25 04 "Designated Location(s) General Aggregate Limit" or CG 25 03 "Designated Construction Project (s) General Aggregate Limit" as appropriate. c) Include endorsement indicating that coverage is primary and non-contributory. d) Include endorsement to preserve Governmental Immunity. (Sample attached). e) Include an endorsement that deletes any fellow employee exclusion. f) Include additional insured endorsement for: The City of Dubuque, including all its elected and appointed officials, all its employees and volunteers, all its boards, commissions and/or authorities and their board members, employees and volunteers. Use I50 form CG 2026. B) AUTOMOBILE LIABILITY $1,000,000 (Combined Single Limit) C) WORKERS' COMPENSATION & EMPLOYERS LIABILITY Statutory benefits covering all employees injured on the job by accident or disease as prescribed by Iowa Code Chapter 85 as amended. Coverage A Coverage B Statutory—State of Iowa Employers Liability Each Accident $100,000 Each Employee -Disease $100,000 Policy Limit -Disease $500,000 Policy shall include an endorsement providing a waiver of subrogation to the City of Dubuque. Coverage B limits shall be greater if required by Umbrella Carrier. D) UMBRELLA LIABILITY $1,000,000 Umbrella liability coverage must be at least following form with the underlying policies included herein. E) PROFESSIONAL LIABILITY $ Attachment 4 City of Dubuque Insurance Requirements for Professional Services Preservation of Governmental Immunities Endorsement 1. Nonwaiver of Governmental Immunity. The insurance carrier expressly agrees and states that the purchase of this policy and the including of the City of Dubuque, Iowa as an Additional Insured does not waive any of the defenses of governmental immunity available to the City of Dubuque, Iowa under Code of Iowa Section 670.4 as itis now exists and as it may be amended from time to time. 2. Claims Coverage. The insurance carrier further agrees that this policy of insurance shall cover only those claims not subject to the defense of governmental immunity under the Code of Iowa Section 670.4 as it now exists and as it may be amended from time to time. Those claims not subject to Code of Iowa Section 670.4 shall be covered by the terms and conditions of this insurance policy. 3. Assertion of Government Immunity. The City of Dubuque, Iowa shall be responsible for asserting any defense of governmental immunity, and may do so at any time and shall do so upon the timely written request of the insurance carrier. 4. Non -Denial of Coverage. The insurance carrier shall not deny coverage under this policy and the insurance carrier shall not deny any of the rights and benefits accruing to the City of Dubuque, Iowa under this policy for reasons of governmental immunity unless and until a court of competent jurisdiction has ruled in favor of the defense(s) of governmental immunity asserted by the City of Dubuque, Iowa. No Other Change in Policy. The above preservation of governmental immunities shall not otherwise change or alter the coverage available under the policy. SPECIMEN CITY OF DUBUQUE FINANCE DEPARTMENT CHANGE FUNDS / PETTY CASH (1014) As of May 1, 2014 Attachment 5 LOCATION FUND LOCATION AMOUNT DEPT AMOUNT TOTAL FUND GENERAL FUND POLICE: Administration (Contact Jodi Murphy) Evidence and Property_Shipping (Cory Sommer) Staff Bureau (Records) Fire: (Contact Jodi Lukens) PARKS & RECREATION:(Contact-Peggy Kraus/Eileen Trimble) Golf (Pro Shop 450/Snack Bar 300) Recreation Administration (Change Fund) Recreation Administration (Petty Cash) Park Entrance - Eagle Point McAleece Field Concessions Hempstead Flora - Not Yet Open for Season Sutton - Not Yet Open for Season Miller RieenAew Park C -Store Bunker Hill POD Petty Cash Fund LIBRARY: (Contact - Denette Kellogg) Library Administration Office - Petty Cash 50 Circulation Actiuty Cash Register Pod Start -Up 88 Circulation Actiuty Cash Register Pod Start -Up 88 Circulation Actiuty Cash Register Service Desk Start-up 88 Circulation Actiuty Cash Register Service Desk Start-up 88 Circulation Actiuty - Petty Cash 50 Circulation Actiuty - Change Machine 425 Volunteer Fund 700 1,575 AIRPORT: (Contact - Cheryl Sheldon) Operations for Parking 50 Dubuque Jet Center 150 Dubuque Jet Center 175 Dubuque Jet Center 50 Change Machine 500 925 FINANCE/TREASURY: Drawer Change Fund (Annette Arnold) 1,000 Petty Cash (Vickie Wilwert) 1,000 2,000 HOUSING SERVICES (Tami Ernster): 200 TOTAL GENERAL FUND 100 8,850 100 100 50 750 175 225 100 500 0 0 0 100 1500 200 200 250 150 3750 Page 1 of 2 CITY OF DUBUQUE FINANCE DEPARTMENT CHANGE FUNDS / PETTY CASH (1014) As of May 1, 2014 Attachment 5 TRANSIT: (Contact Jodi Johnson) 600 100 WASTE WATER TREATMENT: (Contact Cheryl Pregler) 610 100 PARKING: (Contact Diane Boardman) Locust Street Ramp: Special Events 160 Cash Drawer (Change Fund) 220 Automatic Change Machines (coin hoppers) 642 Extra $1 Coins 100 Petty Cash Provison 100 1,222 Iowa Street Ramp: Cash Drawers (additional set up 10/20/11) 1st Shift 160 Cash Drawers (additional set up 10/20/11) 2nd Shift 185 Automatic Change Machines (coin hoppers) 642 Special Events Prmison 150 1,137 Five Flags Ramp: Automatic Coin Machine 642 Special Events Provision 150 792 5th Street Ramp: (Coin Changer) 100 Port of Dubuque: (Automatic Change Machines) 428 10th & Central Ramp: (Automatic Change Machines) 642 Parking Tickets: (Vicke Wilwert) 100 TOTAL PARKING FUND 630 4,421 WATER: Finance -Utility Billing Change Fund (Contact Rose Hoerner) Drawer 1 200 Drawer 2 200 Drawer 3 100 Drawer 4 100 Sub Total 600 Sub Total 0 TOTAL WATER FUND 640 METRO LANDFILL OP: (Contact Deb Searles) Drawer 1 Drawer 2 600 CITY TOTAL 14,071 400 400 TOTAL DMASWA FUND 940 800 COMBINED TOTAL $ 14,871 2 oft ATTACHMENT #6 CITY OF DUBUQUE - DAILY CASH BALANCING April 30, 2014 Cash In Banks: American Trust & Savings Bank Checking/Savings 104,715.04 American Trust & Savings Bank—Rehab Housing (1011) 85,354.95 American Trust & Savings BankSection 8 111,032.13 Dubuque Bank & Trust Checking/Savings 1,557,546.12 Dubuque Bank & Trust Premium Money Market 18,325,780.68 Dubuque Bank & Trust Checking/Savings—DMASWA 388,101.31 Dubuque Bank & Trust Leisure Services 25,428.71 Dubuque Bank & Trust Cable Franchise Equipment Fund 416,622.98 Dubuque Bank & Trust Police Forfeiture Funds 6,146.62 U S Bank General Checking (Utility) 32,674.08 U S Bank Ambulance 1,686.43 Premier Checking (Utility) 9,807.00 East Dubuque Savings Bank ( Primary Utility) 22,187.57 EDSB Market Advantage Account 1,005,241.43 BBVA Compass Unspent Bond Proceeds: DB&T Series 2009A GO Bond 223,258.08 DB&T Series 2009B GO Bond 455,284.50 AT&S Series 2010A 376,411.78 AT&S Series 2010B 1,389,002.17 AT&S Series 2010C DB&T Series 2010D 18,156.92 US Bank Series 2010FCapital Loan Notes 1,064,642.03 DB&T Series 2011A 824,552.51 DB&T Series 2012A 4,368,363.99 DB&T Series 2012B 3,674,922.30 DB&T Series 2012C 2,492,090.91 DB&T Series 2012D 3,205,467.50 DB&T Series 2012E 1,655,452.09 AT&S Series 2012F 616,130.94 DB&T Series 2012H 2,035,055.81 Total Balance in Banks (1010, 1011 and restricted) Change Funds and Petty Cash Police (100) Fire (100) Parks & Recreation (100) Library (100) Library - Parking for Volunteers Fund Airport (100) Finance -Cash Drawer (100) Finance -Petty Cash (100) Transit Fund (600) Housing Services (100) Utility Billing (640) Waste Water Treatment (610) Parking (630) Parking Tickets in UB (630) DMASWA (940) Total Petty Cash (1014) 250.00 150.00 3,650.00 875.00 700.00 925.00 1,000.00 1,000.00 100.00 200.00 600.00 100.00 4,321.00 100.00 800.00 44,491,116.58 14,771.00 1 of 1 CITY OF DUBUQUE - DAILY CASH BALANCING April 30, 2014 Deposits: American Trust & Savings Bank -Workers' Comp #201-06-01 Express Scripts Prescription Drug (Est 1/01) American Trust & Savings Bank -Health #201-098-1 Total Deposits (1015) Certificate of Deposits (by Bank): American Trust Dubuque Bank & Trust East Dubuque Savings Bank TotalCertificates of Deposits (1051) Treasury Securities (1052) Debt Service Rsv Fund Diamond Jo- DB&T Corporate Stock (1054) ATTACHMENT #6 10,000.00 75,000.00 150,000.00 800,000.00 2,000,000.00 3,600,000.00 Managed Accounts: Dana 6,080,772.96 Dubuque Bank & Trust 7,891,978.43 First Community 5,247,157.88 US Bank & Trust 7,261,022.18 Total Managed Accounts (1057) 235,000.00 6,400,000.00 2,015,125.00 11,513.89 26,480,931.45 TOTAL CASH AND INVESTMENTS 79,648,457.92 2 oft Questions and Responses 1. Will the City require and/or have a preference that each of the service provider team members assigned to this engagement has recognized certifications such as: Certified Internal Auditor, Certified Government Auditing Professional, and/or Certified Fraud Examiner? Preference that team members have recognized certifications, but not a requirement. Team leader should have both appropriate certification(s) and relevant experience in performing this type of audit. 2. Request clarification on #8 within item 1.B. Scope of Work to be Performed — Can you clarify what type of assistance you are looking for in establishing an internal audit program? For example, would selected vendor be working in a co - source/ outsourced capacity as the internal audit function; providing consultation on the methodology for establishing an internal audit function in-house, and/or providing the City with the tools to continue performance of audits of the cash receipting audit developed under item #3 within the Scope of Work? In addition to conducting an internal audit of cash procedures the City would expect consultation on the methodology, and tools, and general advice for the City to establish an internal program. Undetermined at this point whether vendor would continue on in an outsource capacity as an internal auditor or the City would establish an internal program. 3. Is the City's internal control documentation current and when was the last time it was updated? Is this available for review prior to the submission of the proposal? Internal control documentation is not current and accordingly not available to review prior to submission. 4. Does the City follow the Standards for Internal Control in the Federal Government (Green Book) or does it utilize a different control framework (such as the COSO framework)? No 5. Request clarification on #4 within item 1.B. Scope of Work to be Performed— Establishing a tip hotline a. Does the City plan to manage this process in house? b. What is the scope of items the City expects to be reported through the hotline (just fraud or capability to address other issues)? c. If not being managed internally, can you further define the level of assistance the City would be expecting from the selected respondent to this RFP (e.g. assist in identifying a vendor to manage the process, manage the process, perform activities to investigate tips)? The City is exploring the option of creating a tip hotline if results of internal audit warrant or suggest. If a hotline is recommended, we will Questions and Responses explore our options at that time to review vendors or organize internally. 6. Request clarification on #5 within item 1.B. Scope of Work to be Performed — Can the City provide clarification as to what type of activities are being contemplated that may fall in this scope of work? The scope of work would include a thorough review of cash handling and receipting processes including how monies are being received, entry in appropriate AR ledger, receipts postings to general ledger and deposits reflect in bank statements. (City general ledger maintained on "cash basis," may cause complexities.) Identify any flaws in internal control including segregation of duties, security of funds on site, locations of collection sites, billings are promptly issued and collected, and review of application of late payment penalties and fees. 7. Page 3, Section 1.A, 2nd paragraph — the RFP indicates that the City Finance Department has performed a limited amount of monitoring of internal controls. Could you please provide information on the internal control issues identified as part of the previous reviews? Finance has communicated the City's expectations for cash handling in all departments, including prompt receipting and depositing monies. Departments annually report on their cash receipts procedures. City Finance staff have conducted operational review of departments after being invited by the departments. Finance made internal control recommendations as deemed appropriate. Departments visited included: Police, Landfill and Parking. General ledger systems provides for budget to actual comparisons for reasonability. 8. Page 3, Section 1.6.2, 1st paragraph — the RFP indicates that City staff will assist with the risk assessment. Could you please provide details on how many hours will be provided by City staff for the risk assessment? Will City staff assist with any other portions of the in -scope areas? City and specific Finance staff will be available as requested to make the project run smoothly. Estimate that staff would be coordinating schedules with departments, running requested reports, providing supporting documentation as requested, providing instruction on systems, and other support as needed. It would be difficult to estimate number of hours. 9. Page 4, Section 1.6.4, 1st paragraph — is the City planning on establishing an internal tip line or using a third party provided tip line? See Question #5. Questions and Responses 10. Page 5, Section 2.B, 3rd paragraph — the RFP indicates that the cash receipting procedures are decentralized. Are there overall policies and procedures that are to be followed at each City department that receive cash? Are there different systems used across the City departments that receive cash? Yes, overall policy is to receipt cash and deposit daily. Some unique exceptions exists due to hours of operation and/or staffing issues. Monies held overnight are expected to be kept in locked and secure location. Some departments maintain an independent AR software that does not interface with the City's general ledger. All departments are required to turn monies or bank deposit slip into Finance for receipting into the general ledger system. 11. Page 6, Section 2.B, software table and 1st paragraph — is there any knowledge of the quality of data that can be extracted from the systems and if it is available in an electronic format? Each software system has its own reporting capabilities, not aware of extract capabilities. 12. Page 19, Attachment 1, table — is the intent to review every City department or a sample of City departments? Visit all departments; some will require substantially more time than others. 13.On page 3 of the RFP, paragraph 4, when the City states that the work would begin with a review of the entity -wide controls, is the reference to entity -wide controls such as conduct of conduct, whistleblower procedures, oversight committees, etc. or is the City referencing entity -wide controls as it relates to specific oversight and tone at the top for the cash receipting processes? Specific to cash handling, receipting and reporting. Audit should review of the practices and procedures currently in place not just oversight. 14.Are the processes for cash receipting in all 28 departments listed on "Attachment 1" of the RFP (page 18) consistent, following the same policies, procedures, and processes? The purpose of this question is to determine if the vendor selected would need to develop 28 different work programs to perform internal control effectiveness testing because all departments' processes are different or if one work program could be developed and leveraged for all 28 departments (or most departments) because the processes are the same or very similar in nature. See Question #10. 15.On page 4 of the RFP (#4), what does the City mean by "Assist the City in establishing a tip or fraud line?" For example, does this mean provide thought leadership on how an internal tip or fraud line might be set up, provide vendor options to the City? Or does this mean participate in the actual establishment of setting up the line, including working with a vendor or inside department to set up the line, communication with senior leadership, employees, training and awareness, etc.? See Question # 5. Questions and Responses 16.On page 4 of the RFP (#8), what does the City mean by "Assist the City in establishing an internal audit program?" For example, does this mean develop an internal audit charter, perform an entity -wide risk assessment across all departments of the City, and develop an internal audit plan based on the results of the entity -wide risk assessment? Or is the City just looking for thought leadership and guidance on how to establish an internal audit program? Leadership and guidance on how to establish an internal audit program. 17. What types of cash receipts does the City accept? For example, cash, checks, credit cards, ACH, wires. Please provide all types the City accepts. All of above 18. Would the City be okay with taking a risk based approach to scoping the cash receipts and not reviewing/testing internal controls over all types of cash receipts for every department (i.e. vendor selected would not necessarily test internal controls for all types of cash receipts noted in question 5 above for all 28 departments. For one department the vendor might only test cash and wire controls and in another department the vendor might only test credit cards and checks). Cash receipt issues/processes in all departments. 19. Does the City have an estimated fee they are looking to "not exceed" for the Internal Auditing Services as described in this RFP? No budget established at this point. 20. Is the City interested in receiving proposals from vendors that are not local? Yes 21.1s the City willing to provide a 3 business day extension on the due date of the proposals to allow more time to incorporate responses to the vendor questions into the proposal? No 22. Does the RFP only cover the City of Dubuque's cash receipting processes and areas or does number 4, 5, 6, 7, and 8 of the "Scope of Work to be Performed" refer to more comprehensive internal audit program beyond cash receipts receipting? For the purpose of this proposal Scope of Work numbers 4, 5,6,7 and 8 refer to cash handling and receipting only. In the future, evaluation of other facets of internal controls may be requested. 23. Do you really want to accomplish the project over 12 months or would you be open to a shorter timeline — especially for number 1, 2 and 3 of the "Scope of Work to be Performed"? Prefer to have completed in shorter time frame. Questions and Responses 24.Are you expecting a fee range for number 1, 2 and 3 of the "Scope of Work to be Performed"? How are you expecting bidders to proposed fees on number 4, 5, 6, 7 and 8 of the "Scope of Work to be Performed"? Prefer a not to exceed number for entire project. Will accept submitting a fee range, with a not to exceed total. 25. Do you want the firm selected to visit ALL locations that handle cash receipting or the high or medium risk areas? Yes — refer to question 12. 26. Will the City of Dubuque's Indemnification Agreement also apply to the City toward the consultant — and will the total exposure for both sides be capped at a predetermined limit? Yes, mutual indemnification, no predetermined limit. Assurance Tax Consultinc CD -0 Cf.3 4‘,0 f") V May 23, 2014 Mr. Ken Tekippe City of Dubuque 50 West 13th Street Dubuque, IA 52001 Subject: Response to RFP for Internal Audit Services Dear Ken: Mc Clodrey LLP 703 Main Street - Suite B Dubuque, IA 52001 0 563.588.4177 F 563.538.2166 w ww.mcgladrey.com We are very enthusiastic about the prospect of working with you and the City of Dubuque (City). We understand our potential involvement to initially include conducting an internal audit of the City's controls over your cash receipting process and subsequently may include being your internal audit outsourcing partner. This proposal covers the internal audit of the City's controls over your cash receipting process. For over 85 years, we have served the needs of dynamic organizations like the City of Dubuque. Everything about McGladrey—including our culture, values, industry experience and Iowa roots—helps us respond to your needs, earn your trust and contribute to your success. Our commitment to quality and timely service, range of service capabilities, and spirit of innovation and teamwork will'exceed your expectations. We strongly believe McGladrey is the firm best suited to serve the City's needs now and long into the future. We believe you need seasoned advisors that have relevant and deep governmental expertise. Our proposed McGladrey team has been assembled to provide these qualities to the City of Dubuque. You have our personal pledge that we will not simply meet your expectations—we will exceed them. We look forward to further building a long and mutually beneficial relationship. We understand the services the City is seeking to procure and this proposal will meet and exceeds those expectations. We certify that our proposal will remain valid for 90: days and that all prices shall be firm and valid for the duration of our contract. In addition, we agree to be bound by this proposal without modification. Please contact Scott Hauser at 319.360.9123 or by email at scott.hauser@mcgladrey.com with any questions. We appreciate the opportunity to be of service and look forward to working with you on this very important project. Sincerely, McGladrey LLP Scott R. Hauser Director, Management Consulting - Performance Improvement 319.360.9123 ml uF Kenneth W. Furst Partner, Risk Advisory Services 563.588.4691 member of the RSM International netvark of Ind -n xlent accounting tax and consulting firms Executive Summary 1 Organization — McGladrey LLP 2 Why Choose McGladrey? 2 McGladrey's Risk Advisory Services Practice 4 McGladrey's Client Service Philosophy 5 Professional Staff 6 Information 14 Introduction 14 Our Understanding of Your Objectives 14 Overall Approach and Methodology 15 Reporting 17 References - Relevant Past Engagements 22 Exceptions to Specifications 23 Professional Fee Investment 23 Engagement Assumptions and Client Responsibilities 24 Client Acceptance of Work 24 General Business Terms 26 We firmly believe that our involvement will do exactly what you have requested: Perform an internal audit of the City's controls over your cash receipting process, develop recommendations to improve your internal controls and set the stage to advance the City Our professional service team is innovative and focused on bringing a high level of expertise to your internal audit and internal control improvement needs. Our talented professionals, rich with relevant experience, are ready to become your business partners thereby enabling you to better accomplish your specific project objectives. Take advantage of our approach that yields proven results. McGladrey LLP (McGladrey) will bring thought leadership and an overall internal audit process to help you fully analyze your situation, prioritize your opportunities for improvement and then set the stage to further advance your organization. We use a practical roll -up -our -sleeves approach. You will hear "buzzwords" and promises from other professional services firms, but by engaging McGladrey, you can have confidence in a team that has a track record of delivering on its promises. You will benefit from some of our distinct advantages: ® Experience on many similar projects. We have helped many clients with internal auditing, internal control process improvement assistance and sustainable change implementation. Our ultimate goal is to help our clients improve their performance and ultimate organizational success. ® Robust methodology. McGladrey utilizes proven, innovative methods for internal audit and internal control improvement assistance. These methods will help identify and implement solutions that are sustainable for the long term. It is our goal to bring thought leadership to support increases in the effectiveness of the City. McGladrey will customize our involvement to the uniqueness of the City of Dubuque. We will not bring a low expertise, cookie cutter approach. • Extensive experience with your industry. McGladrey has solid experience working with governmental clients. This enables us to add a deep industry perspective to our discussions with you. In addition, the City operates in the same market that your assigned McGladrey professionals work and live in, thereby allowing us to bring additional valuable perspective to your organization. ® Exceptional project management. McGladrey offers a customized, collaborative approach that paves the way for sound project execution and effective adoption. This approach has a strong emphasis on early planning and effective coordination of the project work steps. Our team will work closely with your executives to develop a coordinated approach and then deliver and execute the approach. We will identify and address issues and eliminate risks quickly as they arise. ® You will be a very important client to us. You will receive the priority service you deserve. You will receive dedicated professional assistance with a fresh perspective to accomplish the project objectives and leverage the skills of your existing employees. The City will have a solid ongoing relationship with McGladrey that is designed to be flexible and responsive to any future needs that arise, 1 The Power of Being UnderstoodsM Proprietary and Confidential ll1 c Why Choose v1cUadrey? Clearly you want a professional services provider who is proactive, responsive and knowledgeable. We are excited about the opportunity to demonstrate how our approach and philosophy meets your criteria for selection of a professional services firm. We will challenge your thinking and offer solutions based on over 85 years of solid firm experience. We are ready to start today We understand and appreciate your sense of urgency, and we are prepared to start working with you immediately. We believe we can accomplish the initial scope quickly and start to implement lasting change that will help advance your organization. Local firm and regional resources McGladrey has offices in 75 U.S. cities, including Dubuque, Cedar Rapids, Waterloo, Lacrosse, Madison and may others in the Northern Midwest. We have been serving organizations in the Midwest since our inception. Your immediate service providers will be individuals who have worked in the Midwest for many years and will be available for future advice as you need. National firm with extensive resources While our size affords us the national resources needed to serve many different organizations, industries and clients, size alone is not important. Our growth has been the result of our ability to provide our clients with personal attention, continuity and accessibility to all professional personnel—local, regional and national. National strength—McGladrey LLP is the fifth-largest U.S. provider of assurance, tax and consulting services, with nearly 6,700 professionals in more than 75 offices nationwide. McGladrey is a licensed CPA firm. Service philosophy—We operate under the philosophy of "more than the numbers." We work hard to provide the best possible service at the highest levels of quality in a cost-effective manner and offer substantive advice and counsel to help our clients realize their goals. We join with you to become part of a strong, mutually supportive team that evolves and grows together. We are your advocates, advisors and friends. We are stewards of your success. We are proud of our reputation for hard work. We do whatever is required to get the job done on time and with great accuracy. It is our goal to provide you with solid governmental advice. As a result, we consider ourselves to be a source of valuable counsel for many types of operational and managerial issues. Our people make the difference—We are in the people business. Our ability to attract and retain the best and brightest is what clearly sets us apart from our competition. To protect this valuable asset, we live a people philosophy that guides our activities internally and externally—driving internal initiatives, influencing how we serve clients, and encouraging industry and community involvement. Since instituting our people philosophy, we have experienced a decrease in employee turnover. 2 The Power of Being UnderstoodsM Proprietary and Confidential Collaborative approach—When we work with you, your mission becomes our mission. Although the City is no stranger to us, we will take the time to learn about your specific organization—from the stakeholders you serve to the people behind your success. Using a team approach, we involve the best and brightest professionals to address your needs quickly and offer solutions that fit your organization well. As our client, you will be served by sincere, knowledgeable, approachable people who will give you the attention you deserve. We will collaborate with your team to jointly develop alternatives and help you arrive at the best answers to your organizational needs. Expertise and experience—These alone are not enough to build a successful relationship with a professional services firm. There must be trust and confidence that the firm is working to provide an objective perspective and offer solutions that are based on business fundamentals. You must believe that they adhere to the highest ethical standards. We encourage you to talk to our clients, as we believe their perspective is the most reliable. Consulting rankings—McGladrey provides services that can help you take advantage of the opportunities available to your organization. McGladrey is ranked as the fifth-largest provider of assurance, tax and consulting services in the United States. We have the breadth of experience and depth of knowledge to deliver the proactive services that you deserve. The consulting segment of McGladrey was ranked as the fourth-largest among accounting firms in the United States, according to Accounting Today's top management advisory services revenue rankings. In addition, our organization ranked No. 72 on the CN75 list of the world's top consulting companies. Industry focus—We have industry professionals both locally and nationally whose experience is readily available to members of your service team. Because we are experienced in the governmental sector, we understand how you operate and can anticipate the issues you will face. Functional specialization—We have functional specialties including internal audit, internal control improvement, process improvement, sustainable change implementation, and many other professional services that will help meet your immediate needs. In an effort to meet overall service needs, we typically assign a multidisciplinary team to each client. Quality control—Our quality control system is sound, and you can depend on the quality of our work to help you make sound business decisions. Education and training—All of our personnel receive specialized national and local training. As a result, the team serving you is composed of highly competent individuals who are knowledgeable in providing these services. 3 The Power of Being UnderstoodSM Proprietary and Confidential ,n, M>f a Pra McGladrey's Risk Advisory Services practice includes a dedicated group of CPAs, career internal auditors, technology consultants and management consultants who offer a customized, flexible approach that is based on client needs—combining in-depth industry knowledge and broad experience in internal controls, business risks and corporate governance. Within our consulting practice, McGladrey supports an extensive risk advisory team. Services we provide include: o Internal audit advisory ® Governance, risk and compliance and o Information technology audit enterprise risk management ® IT security and privacy ® Service organization assurance ® Contract compliance ® Regulatory compliance Within this practice, IT security and privacy specialists also perform an array of services relevant to our clients: ® Network and application security reviews ® Security architecture and design ® Disaster recovery and business continuity planning ® Digital forensics ® Penetration testing ® Information system controls e Information security program development e Governance, policies and procedure ® Security information and event management development Many of our professionals hold certifications such as Certified Public Accountant, Certified Information Systems Auditor, Certified Business Continuity Professional, Certified Information Systems Security Professionals and SANS GIAC security certifications. Our staff also has technical certifications, such as Microsoft Certified System Engineer, Cisco Certified Network Associate, Cisco Certified Design Associate and Certified Novell Engineer. Our security consultants subscribe to the ISACA, International Information Systems Security Certification Consortium's (ISC)2 and The SANS Institute's Codes of Ethics. 4 The Power of Being UnderstoodsM Proprietary and Confidential McGladrey has a client service philosophy that follows the below guiding principles, regardless of the deliverable. Discover Ask questions, actively listen—Critical to every business issue or need is scoping, understanding what situation exists, what challenges or opportunities are presented by the situation, and what the implications are to those challenges and opportunities. Collaborate Focus on your agenda, share ideas, co -develop solutions— Based on the implications of the issues presented, we work with you to develop needs -based, right -sized solutions. Advise Provide meaningful insight and actionable recommendations—Using the experience and expertise of the professionals involved, provide the insight to see the solution and how to get there in actionable, manageable steps. Implement We intend to assist in implementing the City advancement initiatives, as necessary. Our feeling is that actionable recommendations are of limited value until implemented. Exceed In areas defining the client service experience: - Expertise – Understanding – Communication – Speed of play – Value 5 The Power of Being UnderstoodsM Proprietary and Confidential Personalized service and senior -level attention We have earned an outstanding reputation for the integrity of our people and the consistently high level of professionalism in which our organization's practices are conducted. McGladrey is a leader in accounting, tax and consulting services. More specifically, we believe we are very well positioned to help you perform your internal audit, internal control improvement, process improvement assistance, and improve your operations in a sustainable way that makes change "stick" for your organization as you move forward. One of the most critical factors of any successful engagement is the working relationship and communication that clients have with their professional services firm. This relationship must be built on trust and confidence. We understand the importance of an effective partnership, which is why the foundation of our services emphasizes personal attention and responsiveness to our clients' needs. s`npai/let experience and expertise in ghat ratters We believe our people are what set us apart from other firms. Our professional service teams bring the necessary experience, technical skills, governmental knowledge, creativity and project management capabilities to serve the City's needs. Our team's full professional biographies are immediately following. Scott Hauser plans to take the lead on the services as outlined in this proposal and Mike Bertling will do much of the internal audit field work. Both Scott and Mike live close to Dubuque which will allow efficient accomplishment of the requested tasks. Going forward, after this initial engagement, exact team members' roles will be determined for each activity to best match your needs with our expertise. In addition to the members of the initial proposed client service team introduced on the following pages, we have the capacity to draw from our 600 Iowa employee base. 6 The Power of Being UnderstoodsM Proprietary and Confidential Scott Hauser Director, Management Consulting—Performance Improvement McGladrey LLP Cedar Rapids, Iowa scott.hauser@mcgladrey.com O 319.298.5299 C 319.360.9123 Consulting areas of emphasis Scott's consulting areas of emphasis include internal audit and controls, loss quantification and litigation support, business process improvements, project management, business planning, organizational advancement and decision analysis. Scott maintains a relationship -based advisory approach that includes obtaining a complete understanding of the client's current situation and assembling the optimal McGladrey team to assist with developing high-value solutions. Scott has held the position of McGladrey's National Financial Management Consulting Practice Champion. Consulting activities Some of Scott's successful engagements have included the following types of high-value professional services: ® Provide various Board governance and Sarbanes-Oxley assistance to both public and not-for-profit entities. • Investigate misallocation of resources and recommend internal accounting control improvements. ® Provide litigation support services related to various legal matters including being an expert witness. ® Improve the effectiveness and efficiency of various accounting and administrative business processes. ® Enhance project and change management efforts to ensure critical and complex initiatives are accomplished timely. ® Investigate lower than desired profitability, and develop specific recommendations to improve organizational financial performance. ® Facilitate planning processes, including annual operational planning and/or strategic long-range planning. ® Assist key executives on organizational structure and top management team development needs. ® Coach numerous business owners on understanding their value drivers and identifying tactics to increase their company's value. ® Provide financial analysis and decision modeling assistance to evaluate and predict the outcomes of large, critical decisions or other significant changes. • Led McGladrey's Financial Executives' Network Groups. 7 The Power of Being UnderstoodsM Proprietary and Confidential Scott Hauser Director, Management Consulting—Performance Improvement Industry focuses • Governmental and progressive not -for -profits ® General contractors, subcontractors and union groups ® Manufacturing ® Consulting and software developers • Miscellaneous other entrepreneurial businesses Education ® Master's degree in business administration • Bachelor of Arts degree in accounting and computer science Employment history Scott has 25 plus years of professional experience in a variety of business settings. Prior to McGladrey, Scott was employed in a variety of capacities, including director of administrative services, finance manager and senior auditor. Some of Scott's responsibilities prior to McGladrey included strategic planning, budgeting, operational measurement system development, management bonus systems, financing, cash management, re-engineering and external auditing. These experiences have resulted in Scott having a practical implementation focused approach to business consulting. Professional credentials ® Certified Public Accountant and Certified Management Accountant Organization involvement ® Adjunct business professor at the University of Iowa ® University of Northern Iowa College of Business Administration Executive Advisory. Committee ® YMCA of the Cedar Rapids Metropolitan Area board member ® Rotary Club International 8 The Power of Being UnderstoodSM Proprietary and Confidential Ken Furst Partner, Risk Advisory Services McGladrey LLP Dubuque, Iowa ken.furst@mcgladrey.com 563.588.4691 Summary of Experience Kenneth Furst's 35 years of experience includes coordinating and providing services in the following areas: • Risk management projects in the area of internal audit, regulatory compliance, trust and loan review for public and private financial institutions a Internal audits of multibank holding companies, community banks and larger credit unions • Tax planning for banks in the areas of S -Corporations, officer compensation plans and succession planning • Mergers, sales and acquisitions ® Serving as a sounding board and unofficial board member for clients in several industries, which exposed Ken to a broad spectrum of tax, accounting, financing, information systems and human resources issues ® Income tax and financial estate planning for affluent individuals Professional Affiliations ® American Institute of Certified Public Accountants member ® Iowa Society of Certified Public Accountants member ® Awarded the 2004 Iowa Public Service Award from the Iowa Society of Certified Public Accountants Community Involvement Ken has served on various community boards and committees, including Junior Achievement (president), Resurrection Parish Council (chairman), Rotary (president) and the Dubuque County Historical Society (treasurer). Education Ken is a graduate of Northwest Missouri State University and has completed a series of graduate -level classes over a multiyear time period on business strategy and management at the University of Chicago and was awarded the "Business Advisor" designation. 9 The Power of Being Understood5M Proprietary and Confidential Brent Olson Director, Risk Advisory Services McGladrey LLP Minneapolis, Minnesota brent.olson@mcgladrey.com 612.376.9801 Summary of Experience Brent Olson specializes in providing internal audit, Sarbanes-Oxley (SOX) and contract compliance services to middle market and Fortune 500 clients from many industries, including governmental, non- profit, manufacturing, industrial products, consumer products, technology, energy, and oil and gas. Brent also specializes in Service Organization Control (SOC) engagements (formerly Statement on Auditing Standards No. 70 [SAS 70] audits). Prior to joining McGladrey LLP, Brent spent several years working with Big Four and national consulting firms, overseeing internal audit, SOX and compliance engagements. Brent also worked for the federal government auditing grant programs and departmental activities. Representative Experience ® Internal audit Brent manages and performs internal audit outsourcing, cosourcing and project engagements focusing on the entire internal audit cycle, including enterprise risk assessment, audit plan development and execution, process improvement recommendations, quality assurance and reporting to senior leadership and audit committees. Brent has also assisted organizations with establishing an internal audit function and in performing quality assessment reviews. ® SOX Brent manages and performs SOX engagements, including initial and ongoing compliance and controls optimization with a focus on planning, documentation and testing assistance. Brent is also able to assist companies with implementing the 2013 Committee of Sponsoring Organizations (COSO) framework. 10 The Power of Being UnderstoodsM Proprietary and Confidential Brent Olson Director, Risk Advisory Services Representative Experience (continued) ® Contract compliance Brent manages and performs contract compliance engagements focusing on procurement, suppliers, third parties and construction projects. Past engagements have resulted in significant cost recoveries and process improvement recommendations. • SOC engagements Brent manages and performs SOC 1 (Type 1 and 2) and SOC 2 engagements involving a variety of hardware, software and operating environments. These engagements include all aspects of computer operations, computer security, and system development and maintenance. Engagements cover operations controls, systems development and documentation controls, hardware and systems controls, access controls, data and procedural controls, physical security, application and processing controls, compliance testing and off-site storage. Professional Affiliations and Certifications ® Certified Public Accountant (CPA) ® Certified Internal Auditor (CIA) ® Certification in Control Self Assessment (CCSA) ® Certified Government Audit Professional (CGAP) ® Institute of Internal Auditors, Twin Cities Chapter ® Association of Certified Fraud Examiners (ACFE) ® American Institute of Certified Public Accountants (AICPA) Education ® Bachelor of Science, business administration and accounting, Northern Michigan University 1.1 The Power of Being UnderstoodSM Proprietary and Confidential Mike Bertling Manager, Management Consulting Services McGladrey LLP mike.bertlinqamcgladrev.com Cell: 319.470.7004 Summary Mike is a Manager in McGladrey's Management Consulting Services group. He focuses on internal audit, financial analysis and operational performance improvement. Prior to coming to McGladrey, Mike's experience included working in a variety of auditing, financial and operational leadership roles and industries as summarized below. Areas of Expertise Mike's areas of expertise include the following service offerings: • Internal control evaluation and improvement • Internal auditing and SOX testing • Professional project management resources • Temporary CFO and controller positions • Accounting and financial management business process improvements • Financial analysis and profit improvement • Projections, modeling and budgeting Litigation support and analysis Summary of Experiences • McGladrey LLP (consulting) — Manager • A&M Industrial Engraving (manufacturing) — Owner • Midamar Corporation (distribution) — Controller • RockwellCollins (public defense contractor) — Internal Audit • Attachment Technologies (manufacturing) — Controller • Honkamp Krueger (public accounting) — Senior Auditor • KPMG (public accounting) — Auditor Professional Credentials • Certified Public Accountant • Certified Managerial Accountant 12 The Power of Being UnderstoodsM Proprietary and Confidential Mike Berilling Manager, Management Consulting Services Education • Bachelor of Arts in Accounting from the University of Northern Iowa • Graduated with High Honors Accounting Software Expertise: ® QuickBooks ® Canopy ® JD Edwards ® MAPICS 13 The Power of Being UnderstoodsM Proprietary and Confidential [rte Ltl ia°!.. €ry introduction Thank you for thinking of McGladrey and sharing information on your current needs. We are enthusiastic about the prospect of serving you and the City of Dubuque. This proposal is to confirm our understanding of the internal audit assistance we propose to provide you and the City. More specifically, this is our proposal to assist you with the internal audit of the City's controls over your cash receipting process, develop recommendations to improve your internal controls and set the stage to advance the City in this area. We understand the following from the RFP process and discussions with you: 1. The City has many internal controls in place in each department that seek to impact the daily conduct of our business, protect our employees/customers/clients, safeguard your assets, mitigate your risks, and allow for accurate financial reporting to help ensure a viable, sustainable government that is able to serve its citizens both now and in the future. 2. Over the years, the City's Finance Department has performed a limited amount of monitoring of these internal controls. This effort has focused primarily on reviewing the cash receipting process in place in selected City departments that take in monies over the counter to ensure that the monies are properly received, safeguarded, deposited and recorded in a timely way in the City's financial system. 3. The City recently had an incident where an employee may have misappropriated City funds for personal gain. 4. The City Manager requested that the City begin in a greater way to review your internal controls over cash receipting. Sufficient City staff time and expertise are not available for this work to be done in- house so you initiated an RFP process to solicit bids from qualified firms to perform this work as directed by City management. This type of activity becomes extremely important as you continue to maintain stakeholder confidence and expand the valuable services the City provides to citizens and visitors. We believe the City needs a service provider who can add value and bring an experienced team to the field in order to perform efficiently and effectively. This includes time and personal dedication from executive -level advisors, timely delivery of professional services, and competitive pricing. This proposal provides you with the information necessary to understand how our capabilities are uniquely positioned to address your needs and provide the greatest value to you now and in the coming years. Our Understanding of Your Objectives Our proposal addresses the following objectives: • Supplement City staff's time and expertise for the activities highlighted in your RFP. • Develop and conduct a "best practice" internal audit program that identifies risks and weaknesses in your cash receipting process and procedures. ® Identify internal control improvements that once implemented will reduce the level of risk and mitigate potential future issues within the City's cash receipting process. ® Provide internal audit and internal control improvement assistance on an as -needed basis for areas where the City does not have the staff time or expertise in the future. ® Become a long-term business partner for the City and provide other assistance as desired. 14 The Power of Being UnderstoodsM Proprietary and Confidential At McGladrey, we don't just see things from a smart financial perspective; we see them from our client's perspective. This approach encourages us to ask the tough questions: Is this the best solution? Does it align with their objectives? Is it innovative and personalized? Will it help them be successful? Specifically, our McGladrey team will approach this project following these work steps related to your cash handling, receipt and reporting processes (to be refined and finalized in the first work step immediately below): 1. Finalize a project charter, collaboratively with the City administration, so all involved parties agree to the optimal project scope, parameters, work steps and deliverables. 2. Review the entity -wide internal control environment in place to better understand the City's governing, operating structure, "tone at the top" and executive level intent. 3. For the 28 locations that receive payments, obtain the magnitude of the payments being collected at each location, the frequency of deposits, current policy and procedure documents, etc. 4. Develop parameters for standardized high and low misappropriation risk payment location categories. Review with City leadership and obtain their approval of the standardized risk categories. 5. In conjunction with City staff, preliminary rate each department's cash receipt policies, procedures, and practices to identify the areas of higher risk so that these can be reviewed first and improved the fastest. From these risk category ratings, develop an internal audit schedule encompassing all City departments that routinely receive cash. Review the risk assessment and the internal audit schedule with City management and adjust accordingly to reflect any changes in the internal or external environment that affect the related risks the City is facing. 6. Develop a customized internal audit program and questionnaire to be used consistently with our site visits. 7. Perform internal audit visits of all 28 departments according to the prioritized schedule developed above. Review departments' cash handling and receipt processes by doing process walk-throughs to observe how relevant activities are conducted. We expect the scope of this work step would include a thorough review of cash handling and receipt processes, including how monies are being received, entry in appropriate AR ledger, receipt postings to general ledger and deposits reflect in bank statements. 8. Analyze the data obtained for evidence of deficiencies in control, fraud or lack of compliance with management policies, procedures or intent. Identify any flaws in internal control including segregation of duties, security of funds on site, location of collection sites, bills are promptly issued and collected, and review application of late payment penalties and fees. 9. Obtain an understanding of the relevant technology, software and banking services used by the City. 15 The Power of Being UnderstoodsM Proprietary and Confidential 10. Understand the financial institutions used by the City and their cash concentration assistance capabilities. 11. Compare your current practices to "best practices" used within other comparable entities with decentralized payment receipt locations. 12. Assist the City to determine the merits of establishing a fraud hotline or comparable method where employees, citizens and others could anonymously report areas of concern. 13. Assist the City with general guidance on how to establish an ongoing cash procedure internal audit and/or oversight program. Provide recommendation for monitoring compliance, if necessary. 14. Develop a draft report that provides our internal audit findings and recommendations for strengthening internal controls in order to lower identified risks to the City and improve fraud detection and prevention. 15. Present and review with City management our draft internal audit findings and recommendations report for review and input. We hope to accomplish this based on the sensitivity of the situation by or before September 30, 2014. 16. Finalize our report and submit to City leadership. Our final report will summarize our final internal audit findings and internal control improvement recommendations. We intend to provide our final report on or before October 31, 2014. After the completion of all tasks requested in the City's RFP, we are prepared to provide additional outsourced internal audit or internal control improvement assistance as requested by the City. This assistance would be provided on an as needed basis and would be after we accomplish all items requested by the current RFP. The fees for this additional assistance would be incremental to the fees estimated below. 16 The Power of Being UnderstoodsM Proprietary and Confidential We intend to develop an executive summary report with the internal audit findings and internal control improvement recommendations designed to be concise and facilitate the prioritized implementation of improvements. We are flexible on the exact report format but have founding something like the example below to be popular with clients and useful for prioritized implementation. 17 The Power of Being UnderstoodsM Proprietary and Confidential L}7e°lI Fir �i7�4 tea rpd.iM, %ra 113 1371 1 New Hire, Payroll Changes, and Moderate Low We recommend that Human Resources review and approve all Payroll Adjustment Forms as evidenced by signature. In addition, a Ceridian Payroll Change Report listing all new hire, termination, and payroll adjustments should be compared to corresponding Payroll Adjustment Forms by the Controller. Evidence of review and approval should be retained on the signed Ceridian Payroll Change Report. Responsible Individual: Target Date: Terminations — Authorization and Review The Payroll Adjustment Form provides the authorization to the Payroll Coordinator to make employee new hire, promotion, and termination updates in Ceridian. The review and approval is not consistently documented on this form by Human Resources. Additionally, there is no independent review process in place to verify that the payroll changes have been accurately entered into the system and are appropriate. This increases the risk that inaccurate and/or unauthorized updates are made to the payroll system. 2 Bid Process — Policies and High Moderate We recommend management develop policies and procedures which formally document and define the criteria to regulate the bid selection process. - Responsible Individual: Target Date: Procedures Policies and procedures for the bid review and approval process do not exist. Currently, employees may bid or elect to work additional open shifts using the Zoll system. Through discussion with the Scheduling Coordinator, it was noted that the selection of the employee and overall bid approval process is not formally documented. The Scheduling Coordinator indicated overtime hours are reviewed as part of the bid selection process; however, a documented, defined criterion does not formally exist. Failure to have formal policies and procedures of the bidding and bid selection process increases the risk that the Company may encounter legal issues surrounding preferential treatment of employees. This also increases the risk that the Company may incur more payroll costs than 17 The Power of Being UnderstoodsM Proprietary and Confidential 18 The Power of Being UnderstoodsM Proprietary and Confidential Ia 13taatjun ? rt IA! la i necessary. Overtime employees may be scheduled instead of employees who would not have earned overtime for that pay period. 3 Bid Process — Approval Review Moderate Low We recommend that a secondary documented review of the bid and bid approval process occur to ensure that bids are appropriately approved or declined. Alternatively, Shift Bid Summary Reports exist in Zoll. If the bidding frequency is so large that it is not cost effective to independently review and approve each bid selection, management should consider performing periodic audits comparing the Shift Bid Summary Reports to the actual individual selected. Responsible Individual Target Date: The Scheduling Coordinator reviews the bids received for each of the open shifts and schedules employees as deemed appropriate. The bids approved and scheduled by the Scheduling Coordinator are not currently reviewed by an independent reviewer. This increases the risk that the Company may encounter legal issues surrounding preferential treatment of employees. This also increases the risk that the Company may incur more payroll costs than necessary. Overtime employees may be scheduled instead of employees who would not have earned overtime for that pay period. 4 Payroll Processing — Review and Low Low We recommend that the Payroll Coordinator and Benefit Coordinator formally document their review and approval of each payroll run. Management should consider additional review and analysis of payroll, including but not limited to a review of the payroll registers, overtime hour reports, and bid approval/denial reports. A payroll trend analysis should be completed as part of the review and monitoring procedures. Responsible Individual: Target Date: Approval The review of the biweekly payroll file prior to submission to Ceridian is performed by the Payroll Coordinator and Benefits Coordinator, who are also both responsible for entering payroll information into the system. Payroll and payroll expenses are not formally monitored or reviewed by an independent party. This increases the risk that payroll is not accurately processed and that errors may not be identified since individuals are reviewing their own work. 5 Payroll Access — Electronic Data High Moderate Management should establish a policy and procedures for the export of Zoll data. Payroll data to be transferred to Ceridian for processing payroll should be transferred in read-only format and Responsible Individual: Target Date: Storage Payroll data stored in electronic format is not properly secured. Through inquiry and observation, it was noted that time keeping (Zoll) export files are not downloaded and transferred into Ceridian read-only 18 The Power of Being UnderstoodsM Proprietary and Confidential 19 The Power of Being UnderstoodsM Proprietary and Confidential }-�k� jfJdS _ — 3 _ 11 iY �i Y �'��rM)� t�9.-i 5{ �i.4� 5-11 Q ) JI iY�Ii Y u7 {i.. ) _ access files. This allows individuals with payroll access to modify approved payroll data, including hours worked prior to the upload in Ceridian. This increases the risk that sensitive employee information or payroll data may be manipulated or misappropriated. access should be restricted within the secured payroll drive. 6 Payroll Access — Physical File Moderate Low Access to hard copy files with sensitive Human Resources and Payroll detail should be stored in secure, restricted areas, accessible only to authorized Human Resources and Payroll personnel. Responsible Individual: Target Date: Storage Physical payroll files are not properly secured. The hard copy files are locked in a room accessible to personnel outside of the Human Resources and Payroll functions. This increases the risk that sensitive employee information or payroll data may be manipulated or misappropriated. 7 Payroll Processing — System Moderate Low . We recommend that reconciliation be performed between the payroll data in Zoll and the data uploaded into Ceridian to ensure completeness and accuracy of the payroll hourly data. Responsible Individual: Target Date: Upload for Hourly Employees Employee hours are recorded, totaled, and approved in the Zoll system. At the end of a payroll period, Zoll data is locked, downloaded to a shared drive, and uploaded into the Ceridian system for payroll processing by the Payroll Coordinator. Through inquiry, it was noted that the file exported and uploaded into the Ceridian system is not independently reviewed or reconciled for completeness. The risk is that modifications could be made to the file uploaded into Ceridian resulting in inaccurate or unauthorized payroll activity. 8 Regulatory Compliance — High Moderate We recommend that management establish policies and procedures for the identification of applicable regulatory changes affecting payroll and payroll processing. The analysis should be completed so that notices are received from all applicable state, local and federal Responsible Individual: Target Date: Notifications The Payroll Coordinator receives regulatory compliance notifications based on the agencies from which the Company has elected to receive updates. These currently include the Internal Revenue Service and Department of Labor. A review has not been performed to determine if the Company is receiving updates from all applicable agencies. This increases the risk that all payroll regulatory updates which impact the 19 The Power of Being UnderstoodsM Proprietary and Confidential 20 The Power of Reing UnderstoodsM Proprietary and Confidential fl - wt a, 71!14_^7L� �$ ui 1 c141 �i1p Company may not be received, agencies. Regulatory updates and changes should be reviewed and interpreted by subject matter experts or legal to verify accuracy and completeness of applicable regulations. 9 Regulatory Compliance — Guidance High Moderate We recommend that management establish a procedure for the identification of applicable regulatory changes affecting payroll and payroll processing. Review of regulatory updates and changes should be reviewed and interpreted by subject matter experts or legal. Responsible Individual: Target Date: and Interpretation Regulatory compliance notifications are received by the Payroll Coordinator. The Payroll Coordinator reviews the change notifications, interprets the changes or new law, and performs updates to the employee files, There is no independent review of the regulatory changes to determine the impact. The risk of not having a review or guidance by an industry or legal expert is that regulatory changes may be misinterpreted resulting in inaccurate payroll processing. 10 ,Requlatory Changes/Adjustments High Low We recommend that management establish a review process in which all regulatory changes or updates made to employee files be reviewed for accuracy and completeness. Changes made due to regulatory changes should be captured on the Payroll Adjustment Form or another document deemed appropriate to support the adjustments made in Ceridian. Responsible Individual: Target Date: The Payroll Coordinator reviews the change notifications, interprets the notification of the changes or new law, and performs updates to the employee files in Ceridian. Changes made as a result of regulatory updates are not subject to an independent review. These changes and adjustments are entered directly into the system, so an audit trail for each employee's update does not exist. This increases the risk that incorrect changes may be made to the payroll master file in Ceridian that may not be detected or easily traceable. 11 Segregation of Duties High Moderate Segregation of duties is a key control critical to the reduction of errors and omissions in financial reporting as well as a preventative control over fraud. Segregation of the custody, recording, and Responsible Individual: Target Date: _ Improper segregation of duties exists related to the roles and responsibilities of the Payroll Coordinator. The Payroll Coordinator has the ability to create new employees, authorize and enter payroll adjustments, create and print 20 The Power of Reing UnderstoodsM Proprietary and Confidential 21 The Power of Being UnderstoodsM Proprietary and Confidential 7ja ti Oji a3' J i a33i�: , 1 `�, 3a 7t J, ii X31 express payroll checks in Ceridian, endorse checks with a check stamp, and receive and distribute payroll checks. There is no independent review performed over these activities. As the Benefits Coordinator is the Payroll Coordinator's back-up, similar segregation of duties issues exists. This increases the risk that improper segregation of these duties may result in financial loss for the Company. authorization for transactions in the payroll process should be achieved wherever staffing levels and business process design allows. Management should examine current roles, responsibilities, and system access levels for the Payroll Coordinator and Benefits Coordinator to maximize segregation of duties with current staffing levels. Where optimal segregation of duties cannot be achieved, a compensating secondary review should be instituted. The development of exception reporting for sensitive transactions should be considered as a compensating secondary review procedure. At a minimum, access to blank check stock and the endorsement stamp should be restricted for Payroll personnel. 12 Check Distribution Moderate Low Management should establish policies and procedures for the storage and distribution of payroll checks and check stubs. Payroll- related information should be handed to the employee by a designated individual or mailed to the registered home address to ensure receipt. Responsible Individual: Target Date: Payroll checks are distributed by either FedEx or Company runners. At the time of distribution, checks are delivered in various repositories without designated oversight by management. At Corporate, checks are distributed by the Payroll Coordinator into employee mailboxes. The lack of oversight and management increases the risk of misappropriation of payroll checks. 21 The Power of Being UnderstoodsM Proprietary and Confidential t� fi s \ice t� t APV n t ')aFP Below you will find information for three organizations, similar to yours, where we provided similar services. University of Iowa Payment receipt internal control improvement assessment for 400 decentralized payment receipt locations Selina Martin Associate Controller, Financial Reporting and Analysis 5 West Jefferson Street Jessup Hall, Office 4M Iowa City, IA 52242 St. Louis Public Library System Business Office services review including the payment receipt activities of seventeen library branch locations Waller McGuire Executive Director 1415 Olive Street — 3`d Floor St. Louis, MO 63103-2389 City of Bettendorf Assist the city competitively select a new financial institution, effectively and efficiently handle decentralized cash receipts and strengthen its cash receipt internal accounting controls Carol Barnes Finance Director 1609 State Street Bettendorf, IA 52722 Others Available Upon Request 22 The Power of Being UnderstoodsM Proprietary and Confidential i1 C lei V 51 We believe this proposal accomplishes and actually exceeds the requested services in the City of Dubuque RFP that was distributed. We have no exceptions to the requested scope of services. ?rof ss on Fee estrnent Our fees for the services described in this proposal will be based on our time actually spent on the assistance at our reduced hourly rates, plus limited out-of-pocket travel expenses. While fees for internal audit type assistance are always difficult to estimate, we estimate our fees to be in the following range: $24,900 to $29,800 Travel time will be billed at 50 percent of our hourly rates and is included in the fee ranges provided above. The top of the fee range will be a "not to exceed" maximum unless both parties agree in advance to additional work and cost. In accordance with our normal billing policy, we will bill you monthly for the services provided. Fees for services of this type are always difficult to estimate. You acknowledge that this is our good faith estimate based upon our understanding of the engagement assumptions and the facts and circumstances we are aware of at this time. If the basis of our estimate is inaccurate, the fees and expenses may be different from those we anticipate. If circumstances are encountered that affect our ability to proceed according to the plan outlined above, such as requested scope changes, loss of key personnel, lack of cooperation and urgency from the project team, or additional information coming to our attention not determined or available during our scoping efforts, we will inform you promptly and seek your approval for any changes in scope, timing, and/or fees that may result from such circumstances. 23 The Power of Being UnderstoodSM Proprietary and Confidential a&Derne n� ���������^�������� ���~en" m� - - --- u- - - - �Q^" -`~--~ --'—'---~ Our services, fees and worschedule arbased upon the foltowing assumptions, representations and information supplied by you. City staff will make this project an important priority and support our performance of our work steps. City will determine the extent of services it wishes McGladrey to provide and ensure our company has access to key people and data. City and Finance staff will be available as requested to make the project run smoothly. We understand that City staff will be coordinating schedules with departments, running requested reports, providing supporting documentation as requested, providing instruction on syotemo, and other miscellaneous support as needed. You agree to furnish personnel, facilities and resorces, and undertake the responsibilities set forth in this proposal. You also agree to cause all levels of your employees to cooperate fully and timely with us. You will designate an employee or employees within your senior management who will make or obtain all management decisions with respect to this engagement on a timely basis. You also agree all assumptions set forth in this engagement letter are accurate and agree to provide us with such further information we may need and which we can rely on to be accurate and complete. We will be entitled to rely onsall of your decisions and approvals made independently, and we will not be obligated to evaluate, confirm or reject such decisions and approvals. You will evaluate the adequacy and results of services and will let us know immediatety of any problems or issues you perceive in our personnel, services or deliverables. We will also let you know where we feet we are not getting the appropriate cooperation or direction and advise you of any other issues related to this engagement. The success of this engagement is dependent upon full openness, communication, cooperation and timely direction. The fulfillment of these responsibilities is critical to the success of this engagement. The successful delivery of our services, and the fees charged, are also dependent on your timely and effective completion of your responsibilities, the accuracy and completeness of the assumptions, and timely decisions and approvals by your management. You will be responsible for any delays, additional costs or other tiabitities caused by or associatedwith with any deficiencies in the assumptions or in carrying out your responsibilities. Client Acceptance of Work At the conclusion of our work, we will review with you the intended scope of work and deliverables set out in this document to confirmwehavemedthedafinedproodexpectabona.|fyouba|ievethode|ivembleo do not conform, you will tell us immediately upon receiving the deliverables that they do not conform. We will then have a reasonable period of time, based upon its severity and complexity, to correct the nonconformity. If you use the deliverables before acceptance, or if you fail to notify us of the nonconformance within a ten (10) -day period, the deliverables will be considered accepted. It is our hope that we will communicate continually during the project and avoid any misunderstands as to deliverables, etc. This iacritical for the successful completion ofthe project. 24 The Power of Being UnderstoodSM Proprietary and Confidentia We are excited about the opportunity to work with you on this very important project. We are confident our assistance will be valuable to your future success. We appreciate the opportunity to be of service to you and look forward to working with you on this project. You will receive our closest attention. The attached General Business Terms apply to this engagement and are an integral part of our agreement. If this proposal defines the arrangements, as you understand them, please sign, date and return a copy of this proposal to scott.hauser@mcgladrey.com. If at any time you have questions, concerns or issues with our scope, services, billings or anything else, please call Scott Hauser at 319.360.9123. Sincerely McGladrey LLP Scott Hauser Director, Management Consulting - Performance Improvement 319.360.9123 Attachment: General Business Terms Acknowledged and accepted: By: Title: Date: FIN: Kenneth W. Furst Partner, Risk Advisory Services 563.588.4691 25 The Power of Being UnderstoodsM Proprietary and Confidential nem ig :ss Terms These General Business Terms (the "Terms") will govern the services provided by McGladrey as described in the Engagement Letter or Proposal (the "Engagement Letter or Proposal") executed by Client and McGladrey in which these Terms are included. These Terms, together with the Engagement Letter or Proposal and any of its attachments, constitute the entire understanding and agreement between Client and McGladrey with respect to the services described in the Engagement Letter or Proposal (collectively, the "Agreement"), supersede all prior oral and written communications, and may be amended, modified or changed (including changes in scope or nature of the services or fees) only in writing when signed by both parties. If there is a conflict between these Terms and the terms of the Engagement Letter or Proposal, these Terms will govern. 1. Confidentiality With respect to any information supplied in connection with this Agreement and designated by either party as confidential, or which the recipient should reasonably believe is confidential based on its subject matter or the circumstances of its disclosure, the recipient agrees to protect the confidential information in a reasonable and appropriate manner, and use and reproduce the confidential information only as necessary to perform its obligations under this Agreement and for no other purpose. The obligations in this section will not apply to information which is: (i) publicly known; (ii) already known to the recipient; (iii) lawfully disclosed by a third party; (iv) independently developed; or (v) disclosed pursuant to legal requirement or order. Subject to the foregoing, the recipient may disclose the confidential information on a need -to -know basis to the recipient's contractors, agents and affiliates who agree to maintain its confidential nature. 2. Deliverables (a) Upon full payment of all amounts due McGladrey in connection with this Agreement, all right, title and interest in the deliverables set out in the Engagement Letter or Proposal will become Client's sole and exclusive property, except as set forth below. McGladrey will retain sole and exclusive ownership of all right, title and interest in its work papers, proprietary information, processes, methodologies, techniques, ideas, concepts, trade secrets, know-how and software, including such information as existed prior to the delivery of the services and, to the extent such information is of general application, anything which McGladrey may discover, create or develop during the provision of services for Client. Except for software owned by and/or proprietary to McGladrey, to the extent the deliverables contain McGladrey's proprietary information, McGladrey grants Client a non- exclusive, non -assignable, royalty -free license to use it in connection with the deliverables and the subject of the Engagement Letter or Proposal and for no other or further use. To the extent the deliverables contain the proprietary information of a third party, Client agrees to comply with such third party's terms of license as the same are communicated to Client. All licenses to software (including any enhancements to software) will be licenses to object -code only. (b) Client acknowledges and agrees that any advice, information or work product provided to Client by McGladrey in connection with this engagement is for the sole benefit and use of Client and may not be relied upon or used by any third party. Client further agrees that if it makes any such advice, information or work product available to any third party other than as expressly permitted by the Engagement Letter or Proposal or Section 1(v) above, the provisions of Section 4(c) below will apply unless: (i) Client provides to the third party an acknowledgement and release letter substantially in the form of Exhibit A attached hereto (the "Letter"); and (ii) the third party signs' and returns the Letter to Client. Upon request, Client will provide McGladrey with a copy of the signed Letter. 26 The Power of Being UnderstoodsM Proprietary and Confidential 3. Warranty McGladrey warrants that the services will be performed with reasonable care in a diligent and competent manner. McGladrey's sole obligation will be to correct any nonconformance with this warranty or, if McGladrey cannot correct the nonconformance, to refund to Client the amount paid to McGladrey for the portion of the services or deliverables that does not conform to this warranty; provided that Client gives McGladrey written notice within thirty (30) days after the services are performed or, if applicable, deliverables are delivered. The notice will specify and detail the nonconformance and McGladrey will have a reasonable amount of time, based on its severity and complexity, to correct the nonconformance. Except for assistance provided by subcontractors or entities affiliated with McGladrey as explicitly identified to Client, McGladrey does not warrant and is not responsible for any third -party services. McGladrey and entities affiliated with McGladrey are not responsible for third -party products and hereby disclaim any and all warranties, express, implied or otherwise, in connection with third - party products, including without limitation the implied warranty of merchantability and the implied warranty of fitness for particular purpose. Client's sole and exclusive rights and remedies with respect to third -party products, and third - party services not provided by McGladrey's subcontractors or entities affiliated with McGladrey, are against the third -party vendor and not against McGladrey or any entities affiliated with McGladrey, including without limitation McGladrey Product Sales LLC. THIS WARRANTY IS MCGLADREY'S ONLY WARRANTY CONCERNING THE SERVICES AND ANY DELIVERABLE, AND IS MADE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND REPRESENTATIONS, EXPRESS, IMPLIED, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY DISCLAIMED. 4. Indemnification (a) Each party agrees to indemnify, hold harmless and defend the other from and against any and all claims, actions, fees, expenses, costs, damages, losses and liabilities (including reasonable attorneys' fees) (collectively, "Liabilities") for bodily injury or death of any person or damage to real or tangible personal 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, its employees, agents or representatives. (b) McGladrey agrees to indemnify, hold harmless and defend Client from and against any and all Liabilities to the extent such Liabilities result from the infringement of any third party's intellectual property by any deliverables provided under this Agreement. The foregoing indemnification will not apply to the extent any infringement results from: (i) the use of the deliverables other than in accordance with the terms of this Agreement and any applicable' documentation or instructions supplied by McGladrey; (ii) any modification to the deliverables not expressly agreed to in writing by McGladrey; or (iii) the combination of the deliverables with any materials not provided or expressly approved by McGladrey. (c) Client agrees to indemnify, defend and hold harmless McGladrey from and against any and all Liabilities incurred or suffered by or asserted against McGladrey to the extent such Liabilities result from a third party's use, possession of or reliance upon McGladrey's advice, information or work product as a result of Client's failure to comply with the Letter requirements of Section 2(b) above. 5. Liability Except for each party's indemnification obligations under this Agreement, the total liability of Client and McGladrey (and their respective affiliates, partners, principals, officers, directors, employees, contractors, agents and representatives) relating to this Agreement will in no event exceed an amount equal to the fees paid (in the case of McGladrey's liability) or owing (in the case of Client's liability) to 27 The Power of Being UnderstoodsM Proprietary and Confidential McGladrey under this Agreement. In no event will Client or McGladrey (or their respective affiliates, partners, principals, officers, directors, employees, contractors, agents or representatives) be liable for any special, consequential, incidental, punitive or exemplary damages or loss (nor any loss of profits, savings, data, use of software or hardware or business opportunity, or interruption of business) even if advised of the possibility of such loss. 6. Termination (a) Either party may terminate this Agreement at any time, with or without cause, upon fifteen (15) days' prior written notice to the other party. (b) Client will pay McGladrey for all services rendered (including deliverables and products delivered), expenses incurred and commitments made by McGladrey through the effective date of termination. 7. General (a) Except for the payment of money, neither party will be liable for any delays or failures in performance due to circumstances beyond its reasonable control. (b) No term of this Agreement will be deemed waived, and no breach of this Agreement excused, unless the waiver or consent is in writing signed by the party granting such waiver or consent. (c) Neither party may assign or transfer this Agreement without the other party's prior written consent, except in connection with (i) the sale of all or substantially all of the party's assets or a line of business sale; (ii) the sale of a majority of the capital stock of the party or (iii) the merger of the party with another entity. In each such instance, the party may transfer the Agreement to the acquirer or surviving company (in the case of a merger). (d) Any notices given pursuant to this Agreement will be in writing, delivered to the addresses set forth in the Engagement Letter or Proposal (unless changed by either party by notice to the other party), and will be effective upon receipt. (e) If any term or provision of this Agreement is determined to be invalid or unenforceable, such term or provision will be deemed stricken, and all other terms and provisions will remain in full force and effect. (f) Each party is an independent contractor and not an employee, agent, joint venturer or partner of the other. (g) McGladrey may from time to time use third - party subcontractors and service providers, or affiliates, including related entities, located within or outside of the United States, to assist it in delivering specific products or services to Client, including without limitation subcontracting the resale of hardware, software and other products through McGladrey Product Sales LLC. In such cases and except as provided herein, McGladrey will continue to be responsible for the obligations set forth in these Terms. The management of and all financial arrangements with subcontractors will be McGladrey's responsibility. (h) The terms of this Agreement which by their nature are to survive this Agreement will survive its expiration or termination. (i) The parties acknowledge that they may correspond or convey documentation via various forms of electronic transmission (including, but not limited to, e-mail, FTP, and cloud -based sharing and hosting applications) and that neither party has control over the performance, reliability, availability or security of these electronic transmission methods. Therefore, neither party will be liable for any loss, damage, expense, harm, disclosure, or inconvenience resulting from the loss, delay, interception, corruption, disclosure, or alteration of any electronic transmission due to any reason beyond its reasonable control. McGladrey also offers its clients the opportunity to use a secure internet portal for the exchange of confidential information using commercially standard encryption protocols. Use of this portal requires the execution of a separate user agreement. (j) Neither party intends that there be any third party beneficiaries to this Agreement. 28 The Power of Being UnderstoodsM Proprietary and Confidential (k) Neither party will use the other party's name, trademarks, service marks, logos, trade names and/or branding without such party's prior written consent. Notwithstanding the foregoing, McGladrey may mention Client's name and provide a general description of the engagement in McGladrey's client lists and marketing materials. (I) The parties agree that this Agreement and any dispute or claim arising out of or relating to this Agreement or the services will be governed by and construed in accordance with the laws of the state in which the McGladrey office providing the services is located without regard to such state's laws of conflicts. The parties agree that all litigation or other legal proceedings under this Agreement will be brought in the state or federal courts located therein. The parties agree to this choice of law, jurisdiction and venue, and waive the defense of an inconvenient forum. Additionally, the parties waive trial by jury and agree that any dispute or claim should be resolved by a judge without a jury. (m) Any action against either party by the other in connection with this Agreement must be brought within eighteen (18) months after the cause of action arises. 29 The Power of Being UnderstoodSM Proprietary and Confidential EXHIBIT A ACKNOWLEDGEMENT AND RELEASE LETTER [to be placed on third -party recipient's letterhead] (SPECIMEN ONLY—DO NOT EXECUTE) [Date] [Client Name and Address] Dear [Client Representative]: [Client] (Organization) has informed [third -party recipient] (Recipient) that McGladrey LLP (McGladrey) has performed certain consulting and professional services for Organization in connection with the engagement letter between Organization and McGladrey dated , 20_ (the Engagement Letter). Recipient understands that any advice, recommendations, information or work product (collectively, the Work) provided to Organization by McGladrey in connection with the Engagement Letter was performed exclusively for Organization's sole benefit and use, and not for the benefit or use of Recipient or any other third party. Recipient acknowledges that the Work was prepared at the direction of Organization and may not include all procedures or information deemed necessary for the purposes of Recipient, and that certain findings and information may have been communicated to Organization that are not reflected in any tangible Work provided to Organization. Recipient further acknowledges that McGladrey makes no representations as to the sufficiency, accuracy, completeness or appropriateness of the Work for Recipient's purposes. In consideration of Organization allowing Recipient access to the Work, Recipient agrees that it does not acquire any rights as a result of such access that it would not otherwise have had and acknowledges that McGladrey does not assume any duties or obligations to Recipient in connection with such access. Recipient further agrees that it will not disclose or make the Work available to any other parties, except to the extent required by law, regulation, subpoena or other legal process. Recipient agrees to indemnify and hold harmless McGladrey and its affiliates and their respective partners, officers, directors, employees, contractors and representatives from and against any and all claims, actions, liabilities, damages, losses, costs or expenses (including reasonable attorneys' fees) incurred or suffered by or asserted against McGladrey as a result of Organization permitting Recipient access to the Work or Recipient's breach of the agreements herein. Further, Recipient agrees that McGladrey is an intended third -party beneficiary to this release letter, and that McGladrey will have a direct right of action to enforce the terms and conditions of this release letter against Recipient. RECIPIENT: By: (SPECIMEN ONLY—DO NOT EXECUTE) [Name/Title] Date: 30 The Power of Being UnderstoodsM Proprietary and Confidential www.mcgladrey.com McGladrey LLP is the leading U.S. provider of assurance, tax and consulting services focused on the middle market, with more than 6,700 people in 75 cities nationwide. McGladrey is a licensed CPA firm and serves clients around the world through RSM International, a global network of independent assurance, tax and consulting firms. McGladrey uses its deep understanding of the needs and aspirations of clients to help them succeed. For more information, visit www.mcgladrey.com, like us on Facebook at McGladrev News, follow us on Twitter (McGladrey and/or connect with us on Linkedln. © 2014 McGladrey LLP. All Rights Reserved,