230 N. Washington Sq. Suite 300 Lansing, MI (517) Tel. (517) Fx.

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1 230 N. Washington Sq. Suite 300 Lansing, MI (517) Tel. (517) Fx. Dear Michigan Saves Board: Public Sector Consultants (PSC) is pleased to present the attached 2015 management services agreement for your consideration and review. The agreement provides significant detail around services related to staffing the organization, developing and managing programs, and executing the strategic plan. PSC has a successful history with Michigan Saves, and we are honored to have the opportunity to continue to provide resources to serve the needs of the board, the organization, customers, and the market. In 2014, in the spirit of our role of being responsible stewards of Michigan Saves financial commitments, we restructured our previous agreements to support the full-time staffing needs of the organization and also offer the depth and breadth of resources PSC offers. We developed a unique structure for Michigan Saves that reflects the consistent, predictable, and full-time nature of the work for most of the program staff. This predictability and fulltime staff utilization reduces risk and uncertainties for the firm and increases staff productivity and efficiency which, in turn, reduces the cost of providing the service. We are pleased to continue this staffing model in 2015 by providing for four full-time key staff positions, and three part-time positions supported by all the professional services and systems offered by PSC. The four full-time staff positions will be billed at a fixed price that is 50 percent less than PSC s typical fee structure. I would also like to highlight the following changes from last year s contract. We have added a new program, the Michigan Saves Opportunity Loan Program, focused on serving residential applicants that have been denied loans through traditional lenders. We continue to build market awareness in two programs we launched in 2014, the Multifamily Financing Program and the Public Sector Financing Program. We have partnered with several utilities to offer unique interest rate offers in our residential and commercial program. We expect to continue these special offers in 2015 to drive demand for deeper energy efficiency improvements. In these programs, we coordinate marketing activities, drive contractor participation, monitor and alter communication as appropriate and coordinate all aspects of invoicing and payments to lenders. We closed the BetterBuildings for Michigan and the SEP grant in 2014; however, we continue to support reporting and all DOE requirements associated with the grants. We expect to bring our customer service functions in house to increase our communications with end customers, to streamline our operations, and to reduce costs. This shift has allowed us to reduce costs in other outsourced contracts without increasing costs in the PSC/Michigan Saves contract.

2 We will build on the initial contractor outreach program we created in 2014, to ensure contractors are trained on financing programs and its benefits, to increase communications with our primary marketing channel, and to ensure that Michigan Saves is top of mind. The statewide Public Service Announcement campaign will conclude at the end of We will continue to focus on opportunities to build awareness and drive demand for all programs. We expect to develop a Clean Energy Report through a Mott Foundation grant that will guide numerous communities and nonprofit organizations to the best opportunities for program development and clean-energy investments. This report will help guide future activities for Michigan Saves and other organizations, and serve as a stepping stone to a long-term relationship with the Mott Foundation. We continue to look for opportunities to build additional revenue streams from program related activities, grants and other sources. In 2015, we will develop a long-term budget (ten-year) forecast that looks at income and expenses and the impact investments. We will also benchmark other similar programs sustainability plans, analyze program data and history and develop a sustainability strategy and plan for long-term funding of general operations and programs. We will continue to investigate, develop, and deploy viable financing programs that reduce marketplace barriers in line with the strategic plan. Examples include USDA financing for rural electric utilities, on bill financing programs, crowdsourced financing and solar financing. More details are provided in the attached management services agreement. We look forward to continuing to serve such a strong, growing, and worthy organization that supports our passions and inspires pride! Sincerely, Mary Templeton Senior Consultant Public Sector Consultants, Inc.

3 Management Services Agreement: January 1, 2015 December 31, 2015 This Agreement is entered into this day of, 2015, by and between Michigan Saves Inc. (Michigan Saves) and Public Sector Consultants Inc. (PSC). This agreement provides management services for the 2015 calendar year, and expires December 31, Michigan Saves is a 501(c)(3) nonprofit corporation dedicated to making energy improvements easy and affordable. It was established in October 2009 with seed funding from the Michigan Public Service Commission (MPSC). Michigan Saves designs and operates multiple programs, including the Home Energy Loan Program (HELP), Business Energy Financing (BEF) program, Public Sector Financing program, Multifamily Financing program, Michigan Saves Opportunity Loan Program and several pilot initiatives. Michigan Saves attracts loan capital from third parties, typically through the use of a credit enhancement such as a loan loss reserve, and maintains a network of authorized contractors that promote the financing and install energy improvements. Michigan Saves has been funded primarily by grants from the MPSC and U.S. Department of Energy (USDOE). As of the latter part of 2014, and into 2015, Michigan Saves is funded primarily through contractor fees, partner income, and through the change in investment portfolio value. Grants are pursued as available. Michigan Saves seeks to establish a management contract with PSC to provide staff and management services to Michigan Saves. This Agreement outlines management services provided by PSC to maintain the organization, and lists specific activities and deliverables for each Michigan Saves program. APPROACH Michigan Saves Inc. does not employ staff directly. Instead, since the organization s inception, PSC along with its project partner, the Delta Institute, and other subcontractors has provided comprehensive staffing support to Michigan Saves for the design and implementation of programs, fundraising, and administrative functions. As the organization s governance structure and programs evolve over the next several years, PSC will continue to provide full-service staffing support to Michigan Saves in accordance with this Agreement. This provides continuity in the organization s administration, operations, and presence in the market. By contracting for all management, program, and administrative staff, Michigan Saves can operate as a lean organization, purchasing only the staff services it needs from a variety of subcontractors managed by PSC and overseen by the Michigan Saves Board of Directors. This approach allows Michigan Saves to draw on the diverse content and administrative expertise of multiple subcontractors, while minimizing the organization s overhead and personnel expenses. PSC s services outlined in this Agreement include the staff support to the board and committees, general administrative services, hiring and management of subcontractors (e.g., legal, accounting, investment manager, technical assistance, evaluation), project and grant management, program design and implementation, strategic planning, and fundraising. PRIORITIES AND OBJECTIVES FOR 2015 Michigan Saves has several programs in operation and under development. Priorities for 2015 will be centered on the effective administration and reporting of these programs to deliver results in accordance with state and federal post grant requirements and to implement the organization s strategic plan, including fundraising activities. Additional efforts will focus on financial planning and internal processes to sustain operations in a cost-effective manner after 2015 as contemplated in the strategic plan. Michigan Saves Management Services Agreement 1

4 MANAGEMENT SERVICES PSC shall provide the following services for the use and benefit of Michigan Saves. General Organizational Duties Maintain general and contractor telephone lines for the exclusive use of Michigan Saves Maintain a mailing address for Michigan Saves Maintain a secure file transfer system for the receipt and transfer of forms, reports, and other information containing confidential information Answer telephone, , and mail inquiries Provide web/teleconference lines for meetings Maintain distribution lists and related communications with stakeholders Maintain URLs for Michigan Saves and related addresses for staff Provide facsimile, telephone, mail, and copying services Acquire and maintain commercial general liability, commercial liability umbrella, and director s and officers insurance Manage and retain records Coordinate and administer all subcontracts on behalf of Michigan Saves, including, but not limited to, subject matter experts, legal, financial management, accounting, auditing, and quality assurance; competitively bid for new services as applicable Coordinate Michigan Saves activities with local, state, and federal officials, utilities, nonprofit organizations, and other stakeholders Attend meetings and make presentations on Michigan Saves programs, including but not limited to attending the MPSC s Energy Optimization collaborative meetings on topics relevant to Michigan Saves Develop and maintain internal policies and procedures (e.g., internal controls, record retention, procurement, confidential information) Provide any other specific area of administrative expertise requisite to fulfilling the objectives and purposes of Michigan Saves Accounting, Auditing, and Financial Management Services Michigan Saves has subcontracted for accounting, auditing, and financial management services. PSC will provide the following oversight and support services for these contracts. Manage accounting, auditing, and financial management subcontracts Provide invoicing and bill payment services (see also Program Activities and Deliverables section below) Reconcile bank statements and accounts Provide stop-check payments Make deposits Track investments Implement and update, as necessary, investment policy statement Prepare monthly and quarterly financial statements Prepare and file tax returns Michigan Saves Management Services Agreement 2

5 Track grant revenues and expenses Work with the independent auditor to supply records for the financial annual audit or review Address remedial actions identified by independent auditor Develop and track the annual cash flow budget Support for the Board of Directors Plan and secure meeting place; provide web/teleconference service, as applicable Develop agendas and meeting materials Attend meetings (including committee meetings) Take, prepare, and provide minutes Make pertinent materials available Follow through on tasks as assigned during meetings Support board committees Facilitate communication and coordination between the staff and the board Prepare the organization s annual report based on 2014 audited financial statements Report progress toward strategic plan implementation at each board meeting Strategic Planning and Fundraising Implement strategic plan in coordination with the board, including continuous tracking of progress, updating the board on progress at every quarterly meeting, and facilitating a more detailed discussion about progress and plan relevance at the annual board meeting (it is expected that staff will facilitate a formal strategic planning process every five years, but will check annually to see if the document should be updated three years following the previous strategic planning effort) Monitor funding opportunities, including grants and fee-for-service models Pursue and apply for grants that align with Michigan Saves goals and priorities Develop a long-term budget (ten-year) forecast that looks at income and expenses and the impact investments Benchmark other similar programs sustainability plans, analyze program data and history and develop a sustainability strategy and plan for long-term funding of general operations and programs PROGRAM ACTIVITIES AND DELIVERABLES The following activities and deliverables are organized by program. Michigan Saves Home Energy Loan Program General Program Administration Maintain and update, as appropriate, all program forms, guidelines, agreements, and other program information Recruit, screen, train, and monitor network of Michigan Saves authorized contractors with an emphasis on meeting the strategic plan s goals for geographic distribution of contractors and loans Manage quality assurance functions, including, but not limited to, technical file reviews, administration of corrective action process, and management of staff that conduct site inspections Michigan Saves Management Services Agreement 3

6 Maintain and enhance IT and reporting capabilities for contractor and lender information in accordance with the strategic plan Collect and process data on Specification Sheets from contractors; follow up with contractors to address inaccurate or incomplete data; transfer data for additional quality assurance review Collect payment of 1.99% contractor fee from contractors and lenders, as applicable, including collection of delinquent payments Review new technologies to determine eligibility under established criteria and coordinate with MPSC, utilities, and others on the introduction of new eligible measures Lender Relations Manage the loan loss reserve fund and related agreements with participating lenders, including receipt of monthly information from lenders and the loan application center (Lending Solutions Inc.), processing of payments to lenders for loan defaults, and monitoring lender loss reserve allocations Maintain relations and regular communications with participating lenders Engage lenders in evaluating loan denials and related program design options in accordance with the strategic plan Recruit new lenders as appropriate to maintain adequate coverage throughout the state Program Tracking and Evaluation (not including Quality Assurance) Track and assess program performance and related metrics, including average and total loan value, number of loans, approval rate, and energy savings; review geographic distribution of loans issued and denied at least annually Communications and Marketing Implement strategic plan activities related to marketing and outreach, including, but not limited to, the implementation of a strategic marketing plan Update website and marketing collateral, such as ads, brochures, customer testimonials, case studies, etc. Update Michigan Saves brand guidelines Promote the program through partners, including the MPSC, lenders, contractors, nonprofit organizations, and utilities; coordinate with utilities and trade allies to continue to promote the program in conjunction with other available incentives, such as utility energy optimization (EO) programs Respond to inquiries from customers, contractors, and others; provide customer referrals to other programs (Weatherization Assistance Program, U.S. Department of Agriculture, Michigan State Housing Development Authority, etc.) Initiatives for Hard-to-reach Market Segments The Home Energy Loan Program has an approval rate of 61% as of the end of August, 2014 (four years of operation). While the approval rate continues to improve (increased from 51% in 2013) due to program enhancements designed to address denials, it remains important to understand the reasons for denied loans. In accordance with the strategic plan, staff will conduct an assessment of the Michigan Saves Opportunity Loan Program launched in 2014, and will continue to analyze loan denials and explore ways to reach low-to-moderate-income households that are denied loans. Michigan Saves Management Services Agreement 4

7 Michigan Saves Business Energy Financing Program Provide support for ongoing reporting requirements in accordance with grant from USDOE through the Michigan Energy Office (MEO) Continue to recruit, screen, and monitor network of skilled contractors Engage lenders in evaluating lease denials and related program design options in accordance with the strategic plan Recruit new lenders as appropriate to maintain adequate coverage throughout the state, and to address risks and gaps in program design Manage the loan loss reserve fund and related agreements with participating lenders, including receipt of monthly information from lenders, processing of payments to lenders for loan defaults, and monitoring lender loss reserve allocations Provide customer assistance to navigate the contractor selection and financing process Manage marketing and outreach, including partnering organizations assisting with lead generation Manage quality assurance and evaluation Develop program forms and database for tracking and reporting activities and results; monitor program implementation and make adjustments to financing criteria and other program parameters, as needed and where feasible Respond to inquiries from customers, contractors, and others; provide customer referrals to other programs (PACE, Michigan Energy Office Revolving Loan Fund, etc.) Promote the program through program partners, including the MPSC, lenders, contractors, nonprofit organizations, and utilities; coordinate with utilities and trade allies to continue to promote the program in conjunction with other available incentives, such as utility energy optimization (EO) programs Michigan Saves Public Sector Financing Program Administer statewide public sector financing program Engage lenders in evaluating lease denials and related program design options in accordance with the strategic plan Recruit new lenders as appropriate to maintain adequate coverage throughout the state, and to address risks and gaps in program design Manage the loan loss reserve fund and related agreements with participating lenders, including receipt of monthly information from lenders, processing of payments to lenders for loan defaults, and monitoring lender loss reserve allocations, as applicable Provide customer assistance to navigate the contractor selection and financing process Manage marketing and outreach, including partnering organizations assisting with lead generation Develop program forms and database for tracking and reporting activities and results; monitor program implementation and make adjustments to financing criteria and other program parameters, as needed and where feasible Promote the program through program partners, including the MPSC, lenders, contractors, nonprofit organizations, and utilities; coordinate with utilities and trade allies to continue to promote the program in conjunction with other available incentives, such as utility energy optimization (EO) programs Michigan Saves Management Services Agreement 5

8 Michigan Saves Multifamily Financing Program Market Capital Fund Services (CFS) financing for multifamily apartment communities and/or commercial properties through the Michigan Saves network of contractors, nonprofit partners, and trade associations, per the CFS Services Agreement with Michigan Saves Preview each application and work with lender(s) to approve or deny the financing request. If an application is rejected by a Michigan Saves lender, it will be referred to CFS for its consideration as a Direct Loan Provide quarterly reports to CFS regarding: marketing, inquiries, applications processed, applications approved/denied, financing closed, financing pending, projects under construction, projects completed, projected energy savings on projects approved, rebates provided through utility companies or material suppliers, balance remaining on each lease, delinquency/default report (including any dollars tapped by the loan loss reserve) Manage quality assurance Promote the program through program partners, including the MPSC, lenders, contractors, nonprofit organizations, and utilities; coordinate with utilities and trade allies to continue to promote the program in conjunction with other available incentives, such as utility energy optimization (EO) programs Custom/Pilot Programs Explore innovative financing concepts and opportunities for energy efficiency and/or renewable energy to address specific market needs COMPENSATION Management Services Budget For the services above, PSC requests the board authorize an amount not to exceed $716,000. The management services budget includes four full-time resources including an executive director, operations manager, program coordinator/quality assurance manager, and program administrator. Part-time staff includes marketing resources (64 percent), program design and innovation manager (11 percent), and editing services. An additional part-time staff person will be utilized on a project basis to complete research specific to the Mott Foundation grant. Funding for management services will come from contractor fees, partner income, grants and through the change in investment portfolio value (see 2015 budget). In the event that budget modifications are made to support additional grants and/or other funding resulting in an increase in the Michigan Saves contracted staff budget amount, the board authorizes a directly proportional increase in the amount not to exceed $968,000. PSC will notify the finance committee of the board in writing of any change. Exceeding the cap of $968,000 would require board approval. Direct Expenses The aforesaid sums do not include direct expense items and services to be provided to Michigan Saves by PSC, at actual cost. PSC does not charge for acquiring or managing these services, which are determined annually through the Michigan Saves budgeting processes. Additional Contract Services Some large initiatives will require a scope of work for management services that are beyond the terms of those listed under the Management Services Budget section above; these would be subject to board approval and available funding. Specific examples would include a major marketing campaign with Michigan Saves Management Services Agreement 6

9 substantial paid media and a comprehensive, third-party program evaluation. As appropriate and based on direction from the board, PSC will explore funding opportunities for these initiatives. It is expected that the bulk of such work would be performed by third parties under subcontract with Michigan Saves and managed by PSC. It is the responsibility of PSC to bring proposals that address these needs to Michigan Saves for the board s consideration. Upon written approval of Michigan Saves, PSC may be compensated for these additional services not included under the terms of this Agreement under conditions specified by Michigan Saves in its formally adopted policies or through other formal action of its board of directors. BILLING PROCEDURES Within ten days after the end of each month, PSC will deliver to Michigan Saves an invoice for services rendered pursuant to this Agreement including direct expenses, if any. The invoice shall be payable in full within thirty (30) days after receipt by Michigan Saves. ACCOUNTING, RECORDING, AND REPORTING PSC agrees to provide detailed accounting of all direct expenses, and maintain separate accounting of costs related to various accounts and grants. PSC shall maintain such books and records as may be needed in order to allow Michigan Saves to perform its functions as an independent nonprofit organization and as may be required by the accountants and attorneys for Michigan Saves. These records shall be the property of Michigan Saves and shall be delivered to Michigan Saves upon request of Michigan Saves. PSC shall maintain an auditable record of staff hours and costs for management services to Michigan Saves, which shall be available for review by the Michigan Saves Finance Committee upon request. PSC shall provide a quarterly report of cumulative management service cost to the Michigan Saves Finance Committee. TERM The term of this Agreement is from January 1, 2015, through December 31, All notices and other communications given to a party under this Agreement shall be in writing and mailed by first-class mail or delivered by hand to the parties below. Either party shall have the right to terminate the relationship with 90 days advance written notice at any time. INDEPENDENT CONTRACTOR STATUS The parties understand and agree that PSC is an independent contractor engaged in the operation of its own business and that neither party shall be considered the agent, master, or servant of the other party for any purpose and neither has any general authority to enter into any contracts, assume any obligations, or make any warranties or representation on behalf of the other. In performing services under this Agreement, any employees of PSC shall not be deemed employees of Michigan Saves. PSC shall be solely responsible for its employees and agents, compensation, fringe benefits, federal and state tax withholding, workers compensation, and unemployment insurance, as required by law. APPOINTMENT OF REPRESENTATIVES PSC hereby designates Mary Templeton as the primary contact person for Michigan Saves. She will be assisted by other staff of PSC, who will work on the Michigan Saves project under her supervision. PSC agrees that its staff shall be reasonably available to Michigan Saves during regular business hours from 8:00 AM to 5:00 PM, Monday through Friday of each week. The authorized representative of Michigan Michigan Saves Management Services Agreement 7

10 Saves for communications with PSC on a day-to-day basis shall be Conan Smith, or in his absence, Julie Hales-Smith. HOLD HARMLESS PSC agrees to hold harmless Michigan Saves from any and all liability, loss, or damage that may result from claims, costs, judgments, or demands arising out of negligent performance or intentional wrongdoing of PSC or its subcontractors, agents, or employees. INSURANCE PSC shall maintain general liability insurance and other insurances required of employers with regard to all the employees it engages to carry out the terms of this Agreement. ASSIGNMENT This Agreement may not be assigned without the express written consent of both parties. GOVERNING LAW This Agreement shall be governed by the laws of the State of Michigan. SATISFACTION AND TERMINATION OF PREVIOUS CONTRACTS PSC and Michigan Saves agree that this Agreement shall supersede all previous agreements between Michigan Saves and PSC. MISCELLANEOUS This Agreement shall be binding upon the parties and their respective successors and assigns. No modification or renewal, extension, or waiver of this Agreement or any of the provisions contained in this Agreement shall be binding upon either of the parties unless made in writing and signed for each party by a person duly authorized. This Agreement constitutes the full, complete, and entire Agreement between PSC and Michigan Saves. The parties make and execute this Agreement as of the day and year first written above by witnessing this document with their signatures. PUBLIC SECTOR CONSULTANTS INC. SIGNED: MICHIGAN SAVES INC. SIGNED: By: (Signature) By: (Signature) Name: Title: (Typed or Printed) Name: Title: (Typed or Printed) Michigan Saves Management Services Agreement 8