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HomeMy WebLinkAboutLetter of Engagement with McGladrey, LLPV McGladrey April 23, 2015 Ms. Stacy Kilchenmann Chief Financial Officer City of Meridian 33 B. Broadway Avenue Meridian, Idaho 83642 Dear Ms. Kilchenmann: McGladrey LLP 501 North 44th Street, Suite 300 Phoenix, Arizona 85008-6536 O 602.636.6000 F 602.636.6002 www.nicgladrey.com We are enthusiastic about the prospect of serving you and City of Meridian (Client, you or your). The purpose of this engagement letter is to document your agreement for McGladrey LLP (we, us or our) to provide you with construction audit services. Our organization is highly qualified to provide these services, and we are pleased to present our credentials to you. We have extensive experience and knowledge of your industry, providing construction audit services for over 15 years. Based on our discussions, the City of Meridian is requesting construction risk advisory services to assess project performance and determine if the City of Meridian is adhering to industry standards. This will be accomplished by using experienced personnel who have national exposure to industry practices. Scope of Work It is our understanding that the scope of the audit is for the City of Meridian Department of Public Works, specifically related to the water and sewer utilities program (the Program). The objective of the audit is to determine if there is adequate internal controls and that the Department of Public Works is operating in an efficient and effective manner to meet the goals and objectives of the Program. This includes an assessment to determine if the Program is meeting industry standards and includes best practices. The scope of the work will include a review of processes and the related design of the internal controls. The processes will include, but not be limited to, the following: • Procurement process C Payment applications • Change orders • Allowances • Insurance and bond requirements Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 2 * Schedule * Owner -supplied and stored materials Budget * Accounting for construction in progress * Contract close-out The assessment will include an evaluation of the design of the internal control structure and will identify any gaps in the internal control. Based on the system design, substantive testing will be conducted to determine if the City of Meridian is complying with the design. Approach and Services McGladrey's general approach to performing operational audits is as follows: • Understand client objectives • Understand processes • Understand key compliance issues • Understand performance measures • Draft review procedures • Validate client objectives • Validate key compliance issues • Assess risks and perform gap analysis • Validate review procedures • Obtain client • Execute project plan • Client communication • Status meetings and updates • Internal communication • Work plan monitoring and management • Obtain client feedback • Reporting and discussion of analyses Our approach to this engagement will be conducted in five phases: (1) planning, (11) risk assessment, (111) evaluation of project design, (IV) substantive testing, and (V) reporting, presentations and meetings. The approach will be used for both the close-out audit and the interim audit. =0 McGladrey April 23, 2015 Ms. Stacy Kilchenmann Chief Financial Officer City of Meridian 33 E. Broadway Avenue Meridian, Idaho 83642 Dear Ms. Kilchenmann: McGladrey LLP 509 North 44th Street, Suite 300 Phoenix, Arizona 85408-6536 O 602.636.6000 F 602.636.6002 www. mcgladrey. con) We are enthusiastic about the prospect of serving you and City of Meridian (Client, you or your). The purpose of this engagement letter is to document your agreement for McGladrey LLP (we, us or our) to provide you with construction audit services. Our organization is highly qualified to provide these services, and we are pleased to present our credentials to you. We have extensive experience and knowledge of your industry, providing construction audit services for over 15 years. Based on our discussions, the City of Meridian is requesting construction risk advisory services to assess project performance and determine if the City of Meridian is adhering to industry standards. This will be accomplished by using experienced personnel who have national exposure to industry practices. Scope of Work It is our understanding that the scope of the audit is for the City of Meridian Department of Public Works, specifically related to the water and sewer utilities program (the Program). The objective of the audit is to determine if there is adequate internal controls and that the Department of Public Works is operating in an efficient and effective manner to meet the goals and objectives of the Program. This includes an assessment to determine if the Program is meeting industry standards and includes best practices. The scope of the work will include a review of processes and the related design of the internal controls. The processes will include, but not be limited to, the following: • Procurement process • Payment applications • Change orders * Allowances • Insurance and bond requirements Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 3 Phase I: Promect Planning and Initial Data Gathering Our first task will be to hold a kickoff meeting with members of City of Meridian to determine the expectations for the audit, communication requirements, project timeline and format of status reporting, and to obtain necessary practical information required to execute the project. We will provide a preliminary document request list of client prepared items shortly after this meeting. The purpose of this meeting will also be to discuss and confirm the scope and objectives, identify a point person for data/document requests and establish communication methods between McGladrey and City of Meridian. During the kickoff meeting, we will also discuss our initial document request list and discuss the availability and location of the applicable records and documentation required for the project. Phase 11: Risk Assessment The objective of our risk assessment is to provide City of Meridian with an analysis that identifies areas within the scope that will improve operating efficiency and effectiveness. As part of conducting the risk assessment, we will perform the following steps: • Analyze documentation and conduct interviews with personnel to gain an understanding of the current state of the processes. • Understand the authorization and approval requirements and obtain signature authority documentation. • Understand the selection process for general contractors, architecturallengineering firms and providers of professional services. • Understand the current process for analyzing engineering and construction costs. • Understand project management platform, including the contract approval, budgeting and auditing process. Phase Ill: Assessing the Design After completing our risk assessment, McGladrey will meet with City of Meridian to discuss the results of our risk assessment and our preliminary ranking of risks. We will solicit feedback from City of Meridian during our finalization of the initial work plan. Depending on the results of our fieldwork, we may expand, augment or reduce portions of this work plan. McGladrey will evaluate the design of the systems and determine if there is adequate segregation of duties. McGladrey will also compare the current policies and procedures with the results of the interviews and identify any discrepancies. In addition, McGladrey will compare and evaluate the procedures with industry standards to determine if such procedures meet not only industry standards but also best practices. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 4 McGladrey will document the processes that will include identifying and documenting any gaps in control or areas of process improvements. Phase IV: Substantive Testing As soon as our initial work plan has been approved, we will initiate our substantive testing and evidence gathering phase, and execute our audit plan. Our test work and results, including procedures performed and observations made, will be captured in a memorandum style format containing criteria, condition, cause and effect. Any recommendations will be clearly identified. We plan on periodically reviewing observations with the City of Meridian during our substantive testing and evidence gathering phase as they are developed. The observations will be included in our weekly status report. Certain observations may have already been initiated as a result of our audit risk assessment and the design of the process. We will work with the City of Meridian to augment this plan in order to emphasize certain areas of focus as necessary. Having conducted numerous construction program evaluations for many municipalities, McGladrey is able to compare the City of Meridian with other programs within the industry. This will be included in our evaluation of construction costs. Our audit plan will include testing for each process to determine if the process is operating as intended. The extent of our testing will be determined by our risk assessment; however, every process will include some level of testing. The documents to be tested will be based on judgmental sampling and other sampling techniques. Phase V. Reporting. Presentations and Meetings Throughout our project work, we will utilize documents to accumulate and report our observations. The document will identify criteria, condition, cause and effect and will serve as the basis for our draft report. The tone and format of the report will be discussed with City of Meridian with the objective to appropriately communicate the results of our work. The report will contain a prioritized list of audit observations and recommendations. We will discuss our draft report with City of Meridian and incorporate relevant proposed revisions. After City of Meridian and McGladrey are satisfied with the draft report, an exit meeting will be conducted with the appropriate representatives of City of Meridian. Ms. Stacy Kilchenmann, Chief f=inancial Officer City of Meridian April 23, 2015 Page 5 We have provided a summary of our deliverables below: Deliverables During the course of the engagement, McGladrey will provide several deliverables to City of Meridian. The following is a description of each deliverable and the timing of the deliverable. • Weekly status report McGladrey will provide a weekly status report to City of Meridian and, at City of Meridian's discretion, will arrange a weekly status update conference call. The weekly status report will identify (1) the work completed during the week, (2) any observations and the status of the observations, (3) hours incurred during the week and to date, and (4) work to be completed the subsequent week. Draft and final audit reports McGladrey prepares reports consistent with the reporting guidelines as set forth by the Institute of Internal Auditors. The audit reports include an executive summary and our detailed observations. McGladrey will provide City of Meridian a draft report for review prior to issuing the final audit report. Quality Assurance McGladrey has an extensive quality control program and policy designed to comply with our reporting requirements and client expectations. Our client service approach requires the active involvement of experienced directors and managers in the process to make sure that critical issues are identified and resolved on a timely basis. We find that the quality control review process results in much more effective control of professional services fees and minimizes the need to have back and forth conversations with client staff, which keeps costs low for us and for our clients. Description of Deliverables and Acceptance The deliverables presented as part of this engagement are solely for the use of City of Meridian and may not be used or relied upon for any other purpose, relied upon by any other party, or fled with or disclosed to any third party, including any governmental authority, without our prior written consent. McGladrey shall have no responsibility or liability for losses, damages or costs incurred as a result of the unauthorized use, circulation, publication, reproduction or use of our deliverables contrary to the provisions of this engagement letter. Our deliverables will reflect our observations as of the date we conclude our work. We assume no obligation or responsibility to update or revise the observations whether as a result of new information, future events or otherwise. However, should additional documentation or other information become available that impacts upon the observations described in our deliverables, we reserve the right to amend our documents. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2075 Page 6 Our personnel shall observe your confidentiality, code of conduct or other reasonable policies regarding working conditions and business hours, to the extent our personnel are made aware of such policies. Our responsibility for the refusal of any personnel to observe such policies shall be our attempt to furnish you with replacement personnel. If for any reason any of our personnel are unable to complete the service period or his/her performance does not meet your expectations, we will attempt to provide a suitable replacement. Client Acceptance of Work At the conclusion of each phase of work, we will review with you the intended scope of work and deliverables set out in this document to confirm we have met the defined project expectations. If you believe the deliverables do not conform, you will notify us in writing within 30 business days of 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 the 30 -day period, the deliverables will be considered accepted. Staffing The most critical element in the successful completion of any engagement of this nature is the personnel assigned to carry out the responsibilities. John Croy, national leader, construction risk advisory services, will be responsible for overseeing this engagement. Fred Punsalan will be the engagement manager and Zak Parchment will be the supervisor on the project. Other professionals at the necessary skill and experience level may be called upon to assist in the project as appropriate. While we will attempt to comply with your requests for certain individuals, we retain the right to reassign our personnel, as appropriate, to perform the service. Engagement Assumptions and Client Responsibilities Our services, fees and work schedule are based upon the assumptions, representations and information supplied by you. City of Meridian will determine the extent of services it wishes McGladrey to provide and ensure our firm has access to key people and data. If circumstances arise relating to the availability of sufficient, competent evidence or information which, in our professional judgment, prevents us from completing the engagement, we retain the unilateral right to take any course of action permitted to us, including withdrawal from the engagement. In the event we are requested or authorized by City of Meridian or are required by government regulation, subpoena or other legal process to produce our documents or our personnel as witnesses with respect to our engagements for City of Meridian, City of Meridian will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional time and expenses, including the fees and expenses of our counsel, incurred in responding to such requests. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 7 You agree to furnish personnel, facilities and resources, and undertake the responsibilities set forth in this engagement letter. You also agree to cause all levels of your employees and contractors 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 that 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 on all of your decisions and approvals made independently and we will not be obligated to evaluate, advise on, confirm or reject such decision and approvals. You will evaluate the adequacy and results of services and will let us know immediately of any problems or issues you perceive in our personnel, services or deliverables. We will also let you know where we feel 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, communications, 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 liabilities caused by or associated with any deficiencies in the assumptions or in carrying out your responsibilities. Conflict of Interest In preparing for this engagement letter, an internal conflict of interest check was performed pertaining to this engagement and the parties involved. There was no conflict of interest identified by any McGladrey employees. Fees and Expenses Hourly Rates Our goal is to provide high-quality, reliable service at reasonable fees. Our fees for the services described in this engagement letter will be based upon actual time and materials to develop the project plan and perform the engagement. Our fees reflect a significant discount from our standard hourly rates and will be billed at the following rates by level of staff required: Our proposed rates are applicable for one year after the execution of the agreement. The proposed rates are subject to a three percent increase on an annual basis on the date of the execution of the agreement.. Out-of-pocket costs, including travel and lodging, are billed at actual cost. Billings are prepared monthly and are due upon submission. StandardLevel ... -. Rate Director $425 $275 Manager $275 $195 Supervisor $225 $150 Our proposed rates are applicable for one year after the execution of the agreement. The proposed rates are subject to a three percent increase on an annual basis on the date of the execution of the agreement.. Out-of-pocket costs, including travel and lodging, are billed at actual cost. Billings are prepared monthly and are due upon submission. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 8 Estimated fees The table below provides our estimated fees and our work plan. Estimated Fees Planning . Work DirectorTask • 'r SupervisorHours Total Review policies and procedures 4 - 4 8 Conduct management interviews 12 - 12 24 Obtain organizational chart and assess roles and responsibilities 1 1 2 Conduct analytics based on financial history 1 - 3 4 Contract Award Review process for selecting consultants 1 - 1 2 Review process for reviewing proposals for consultants - - 2 2 Review process for contract awards to consultants 1 - 1 2 Review process for reviewing proposals 1 - 1 2 Review process for contract awards to contractors - - 1 1 Document process - - 2 2 Conduct substantive testing 6 - 16 22 Identify gaps in process 1 - - 1 Application for Payments and Invoices Review pencil draw process for contractors 0.5 - 0.5 1 Review process for payment applications 0.5 - 0.5 1 Assess invoice review and approval process 0.5 - 0.5 1 Document process - - 1 1 Conduct substantive testing 3 - 10 13 Identify gaps in process 0.5 - 0.5 1 Change Orders Review process for change orders and review for compliance and entitlement 1 - 1 2 Determine if board approval required and received 0.5 - 0.5 1 Document process - - 1 1 Conduct substantive testing 3 - 10 13 Identify gaps in process 0.5 - 0.5 1 Allowances Review process for allowances 1 - 1 2 Document process - - 1 1 Conduct substantive testing 2 - 10 12 Identify gaps in process 0.5 - 0.5 1 Insurance Review insurance requirements and compare to industry standards 0.5 3 - 3.5 Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 9 Document process managernours - 1 - 1 Conduct substantive testing 1 - 6 7 Identify gaps in process 0.5 0.5 - 1 Schedule Determine if contract adequately addresses schedule reporting 1 - 1 2 Determine if agreements require regular schedule updates 1 - 1 2 Determine if schedule impacts addressed in change orders 1 - 1 2 Document process - - 0.5 0.5 Conduct substantive testing 2 - 8 10 Identify gaps in process 0.5 - 0.5 1 Owner Supplied and Stored Materials Determine if owner supplied materials addressed in agreements 1 - 1 2 Determine if owner supplied materials addressed in schedule 1 - 1 2 Assess procurement process for owner supplied materials 1 - 1 2 Document process - - 1 1 Conduct substantive testing 2 - 8 10 Identify gaps in process 0.5 - 0.5 1 Budget Obtain and review budget 1 - 1 2 Assess basis for developing budget 2 - 1 3 Review for estimated cost at completion 1 - 1 2 Review and assess contingency 1 - 1 2 Document process - - 1 1 Conduct substantive testing 2 - 8 10 Identify gaps in process 0.5 - 0.5 1 Accounting Review process for posting cost in CIP 2 - 1 3 Review placing asset in service 1 - 1 2 Document process - - 1 1 Conduct substantive testing 1 - 6 7 Identify gaps in process 1 - 1 2 Contract Close -Out Compare Gose -out procedures to McGladrey checklist 2 - 1 3 Conduct substantive testing 1 - 6 7 Document process - - 1 1 Conduct substantive testing 2 - 6 8 Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 10 Task Identify gaps in process DirectorEstimated Fees and Work 0.5 Plan R - Supervisor 0.5 Total Hours 1 Reporting Weekly status reports 6 2 6 14 Exit meeting 2 - 1 3 Report 12 - 3 15 Workpapers review 2 8 2 12 Total Hours 94.5 14.5 163 272 Hourly Rates $275 $195 $150 Estimated Fees $25,988 $2,828 $24,450 $53,265 Estimated Travel 1 $0 $0 $6,000 $6,000 Total Fees 1 $28,188 $1,268 $29,850 $59,265 Therefore, we are proposing a not -to -exceed fee of $59,265, including travel expenses. Fees for services of this type are always difficult to estimate. If circumstances are encountered that affect our ability to proceed according to the plan outlined above, such as major scope changes, loss of key City of Meridian personnel, unavailable information, or undetermined or requested scope changes during our scoping efforts, we will inform you promptly and seek your approval for any changes in scope, timing or fees that may result from such circumstances. The fees quoted in this engagement letter will remain valid for 90 days from the date of issuance. If, during the course of this project, the nature or scope of our work should change, we will discuss such matters with you and any expected effect on our fee 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 estimates is inaccurate, the fees and expenses may be different from those we each anticipate. Fees for services of this type are always difficult to estimate. If circumstances are encountered that affect our ability to proceed according to the plan outlined above, such as major scope changes, loss of key City of Meridian personnel, unavailable information, or undetermined or requested scope changes during our scoping efforts, we will inform you promptly and seek your approval for any changes in scope, timing or fees that may result from such circumstances. We will bill our fees and expenses monthly. Those fees and expenses do not include taxes. You will be responsible for and will pay all applicable sales, use, excise, value-added and other taxes associated with the provision or receipt of the services and deliverables, excluding taxes on our income generally. Our invoices are payable within 45 days of the invoice date. If you object to any portion of an invoice, you will notify us of your objection within 15 business days of the date of the invoice, and the parties will promptly make a good faith effort to settle the disputed portion of the invoice. You will in any event pay the portion of the invoice that is not in dispute within such 45 -day period. We reserve the right to suspend or terminate services if our invoices are not timely paid, in which event we will not be liable for any resulting loss, damage or expense connected with such suspension or termination. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 11 Nonsolicitation During the term of this engagement and for a period of one (1) year following its expiration or termination, neither party will actively solicit, employ or otherwise engage any of the other party's employees (including former employees) who were involved in the engagement. In the event either party breaches this provision, the breaching party agrees to pay to the aggrieved party within thirty (30) days after demand an amount equal to the greater of $50,000 or 100 percent (100%) of the annual base salary of any such employee. For the avoidance of doubt, the foregoing does not prohibit either party from employing individuals who were not involved in the engagement or who apply for positions in response to internal postings, employment advertisements or other general solicitations of employment, whether such applications are during the term of this engagement or thereafter. Agreed and Accepted Please call John Croy at 602.760.2$79 if you have any questions. We look forward to serving City of Meridian on this project. If this engagement letter defines the arrangements as you understand them, please sign, date and return the Business Terms and Project Acceptance section of this engagement letter. Sincerely, McGladrey LLP J hn M. Croy National Director Construction Risk Advisory Services Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 12 Business Terms and Project Acceptance City of Meridian has determined that McGladrey LLP's engagement letter dated April 23, 2015, is acceptable and authorizes McGladrey LLP to perform the construction audit services described in this engagement letter for fees not to exceed $59,265, including travel cost. The Business Terms apply to this engagement and are an integral part of our agreement. This engagement letter and Business Terms correctly set forth our understanding and acceptance of this agreement. Please forward a copy of this signed acceptance to the attention of Mr. ,John Croy via mail or fax to 866.489.1864 or email to contract(g�mcgladrey.com. A fax or scan will be considered the equivalent of an original of this project acceptance. Acknowledged and Accepted: Ms. Tammy de Weerd, Mayor City of Meridian 33 E. Broadway Avenue Meridian, Idaho 83642 By, Title: rd Date: r O 1 c) BusinessfTax ID dumber: Attachment: Business Terms Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 13 Business Terms These Business Terms (the "Terms") will govern the services provided by McGladrey as described in the Engagement Letter or Proposal (the "Engagement Leiter 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 Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 14 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. 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. Client's promise to indemnify, hold harmless, and defend is limited to the extent it is consistent with the Idaho Constitution Article VIII, § 4. (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 Ms. Stacy Kilchenmann, Chief f=inancial Officer City of Meridian April 23, 2015 Page 15 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 Client's promise to indemnify, hold harmless, and defend is limited to the extent it is consistent with the Idaho Constitution Article VIII, § 4. 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 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. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 16 (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 - parry 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. 0) Neither party intends that there be any third party beneficiaries to this Agreement. (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. (1) 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. 8. Equal opAo_ rtunity employer of protected veterans and individuals with disabilities The parties hereto shall abide by the requirements of 41 CFR 6044(a), 60-300.5(a) and 60-741.5(a). These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin. Moreover, these regulations require that covered prime Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 17 contractors and subcontractors take affirmative action to employ and advance in employment qualified individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability. Ms. Stacy Kilchenmann, Chief Financial Officer City of Meridian April 23, 2015 Page 18 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] (Company) has informed [third -party recipient] (Recipient) that McGladrey LLP (McGladrey) has performed certain consulting and professional services for Company in connection with the engagement letter between Company and McGladrey dated , 20_ (the "Engagement Letter"). Recipient understands that any advice, recommendations, information or work product (collectively, the "Work") provided to Company by McGladrey in connection with the Engagement Letter was performed exclusively for Company'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 Company 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 Company that are not reflected in any tangible Work provided to Company. 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 Company 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, principals, 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 Company 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]