July 15, Mr. Ross VanderHamm Finance Director City of Edmond 7 N Broadway Edmond, OK Cost Allocation Services. Dear Mr.

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1 MGT of America 8200 S Quebec Suite A3 #184 Centennial CO p: (720) July 15, 2015 Mr. Ross VanderHamm Finance Director City of Edmond 7 N Broadway Edmond, OK Subject: Cost Allocation Services Dear Mr. VanderHamm: MGT of America, Inc. (MGT) appreciates this opportunity to present our qualifications to provide Cost Allocation Services for the City of Edmond, Oklahoma (City). For the past several years Mr. Eric Parish and Ms. Michelle Garrett have annually provided the City accurate, on-time, transparent, understandable, and accepted cost allocation plans and associated calculations. The same experienced, helpful and personable project team that has provided services the past several years is proposed to provide services for the next five years. Questions regarding our qualifications may be directed to: Mr. Eric Parish Executive Vice President MGT of America eparish@mgtamer.com Sincerely, Brad Burgess Executive Vice President MGT of America, Inc.

2 Firm Background and Personnel Assigned To Project Firm Background MGT of America, Inc. (MGT) is a national research and management consulting firm specializing in providing management and financial services to government clients. Our staff brings a wealth of knowledge and depth of understanding to all client engagements, delivering the highest quality and timely services to clients. Founded in 1974, over the past 41 years, we have successfully served more than 3,800 clients in all 50 states and several foreign countries. As a financially sound, privately held firm, MGT is not beholden to Wall Street analysts and corporate investors, but rather only to our clients. Since its inception in 1974, MGT has maintained persistent and steady growth. MGT is a financially sound company and is capable of providing the resources required to successfully complete the requested services both now and in the future. The MGT Financial Services subsidiary of MGT provides user fee study, cost allocation plan preparation, and indirect cost rate calculations to government entities in over 30 states including the City of Edmond (City) for the past several years. In the past five years, our consultants have prepared more than 300 hundred cost allocation plans for cities, and counties ranging in population from a few thousand to over three million. Additionally, MGT costing services consultants have successfully completed several thousand user fee studies, cost allocation plans, and related studies for cities and counties in the past 30 years as consultants with MGT or as former consultants with PRM, Matrix Consulting Group (MCG), MAXIMUS, DMG-MAXIMUS, or David M. Griffith & Associates (DMG). Proposed Project Team While the qualifications and experience of a firm are important, perhaps more important are the qualifications and experience of the proposed project team. MGT has successfully implemented the team approach to most cost allocation projects. The two MGT costing services consultants proposed to complete the cost allocation plan for the City have combined to prepare hundreds of cost allocation plan for cities and counties, including the City of Edmond for the past several years. The two consultants included in this proposal are each permanent MGT employees. Our staff stability assures the City that the proposed team will be available to provide services for many years. The City will not be left to wonder who may provide services in a given year, where that person is located, nor will that person be able to perform the proposed services. PAGE 1

3 In the unforeseen event that one of our consultants becomes incapacitated or otherwise unable to provide the proposed services, one of our other 30 consultants may be added to the project. A replacement consultant will have equal or greater cost allocation experience than the consultant being replaced. Team Organization Mr. Eric Parish, CPPM, MA, Project Manager Mr. Parish is an MGT Partner with over 20 years of experience providing public-sector consulting experience including cost allocation services to local governments. Prior to joining MGT, he held positions of responsibility with the national management consulting firms of Public Resource Management Group, LLC, Maximus, Inc., and David M. Griffith & Associates, Ltd. He has prepared and managed hundreds of cost allocation plans including plans for the City of Edmond. As Project Manager, Mr. Parish will have responsibility for the entire project including, managing on-site meetings and interviews, data analysis and review, providing formal status reports to City staff, and ensuring the project stays on schedule. Additionally, Mr. Parish s participation is to ensure the City will be unconditionally satisfied with the services received from MGT. Ms. Michelle Garrett, Project Consultant Ms. Garrett is a Senior Consultant with over eight years of cost allocation consulting experience services to state and local governments in several states. She has prepared dozens of cost allocation plan for cities and counties including plans for the City of Edmond. As MGT s Project Consultant, she will be actively involved in all tasks of our work plan and the development of all deliverables. She will have responsibility for day-to-day activities including: follow up with City personnel; identifying allowable costs; identifying appropriate allocation bases; processing data and reviewing draft calculations with City personnel and processing data into the final cost allocation plans. Ms. Garrett has over eight years of experience providing cost allocation services to local governments including the City of Edmond. She has acquired an extensive knowledge of OMB Circular A-87 and GAAP requirements through her management of and/or participation on CAP and ICRP projects for local and state agencies. She has prepared numerous cost allocation plans and user fee studies for cities and counties across the country. Prior to joining MGT, she held PAGE 2

4 several accounting positions including Auditor with Coopers and Lybrand where she performed numerous governmental entity audits. Engagement Strategy Strategies to Meet Objectives of Scope of Work Local governments often contract with a consulting firm to receive cost allocation and related services. The reasons for contracting vary but most often include: Local and national expertise Project understanding Ability to integrate knowledge from similar engagements Ability to maximize indirect cost recovery Ability to interface with internal departments and external approval entities Experience educating key stakeholders Independence (City with state and federal agencies, and General Fund with non- General Funds) Each of these common reasons is included in our approach and work plan for this engagement. General Methodology The cost allocation plans will be prepared not only in a transparent, collaborative manner, but will also be compliant and defensible with all applicable principles and guidelines. The calculations that flow out of the cost allocation plans will be understandable to all project stakeholders, not just cost accounting experts. Cost allocation plans and indirect cost rates are more than simply updating expenditure and statistical data from the prior year which was simply an update from the year before that. Rather, MGT cost allocation plans are a series of complex calculations that require an understanding of each jurisdiction s financial reports, administrative structure, and operational services and programs. Technical Methodology MGT consultants utilize a cost allocation plan methodology which has been reviewed and accepted by state agencies and federal cognizant agencies in multiple states. Our methodology incorporates years of experience applying OMB Circular A-87 and GAAP principles into a PAGE 3

5 systematic, yet flexible, multi-step approach to raise the accuracy and acceptance of cost allocation plan results. This methodology utilizes the MGT proprietary software and incorporates a double step down format for preparing a cost allocation plan. Specific Phases The following four-phase work plan has been refined over many years to provide a methodology that produces compliant cost allocation plans with minimal disruption to our client s workload. These phases are applicable to all four requested cost allocation plans (Full Cost, Insurance, Debt Service and Field Services). For each year of provided services, the prepared cost allocation plans will be based on the upcoming year budgeted expenditures and four subsequent years budgeted expenditures. Phase 1 Meetings with City Personnel and Data Collection Meet with key City personnel. This meeting will refine project objectives, establish the final project schedule, and identify potential pitfalls. We will review our project approach with meeting participants and make sure that all involved personnel fully understand how the cost allocation plans will be developed and adopted, as well as confirm the City s desired outcomes. We will also request from the City source financial and operational data at this time. Instruct City personnel in the concepts and applications of cost allocation plans as necesary. We will review with staff optimum data requisition options with a view for operational simplicity for future City plans. Meet with each central service department or division to identify the primary services (or functions) provided and the recipients of those services. We will then determine appropriate net costs including labor for each identified service. We will also determine jointly with department personnel optimal allocation drivers or metrics to distribute the identified service costs. Phase 2 Process Draft Cost Allocation Plans Based on each central service department s identified services, corresponding net costs, service recipients, and allocation driver or metric, we will process draft cost allocation plans. These draft plans will be reviewed and refined based on several quality assurance activities. Our proprietary cost allocation software will be used to process the cost allocation plans. PAGE 4

6 Proprietary Software. Our cost allocation software was designed by our top cost allocation experts, and it produces more than the traditional cost allocation data. With two years of data, allocation information is automatically produced and includes comparisons of data, variance analysis and statistical information that our clients find understandable and helpful. Our cost allocation software is technically accurate, robust and detailed, has a selfauditing feature, incorporates a double iteration process, and has been used for over 200 cost allocation plans in the past five years many submitted for federal and state approval. The Microsoft Windows-based MGT proprietary software is written in a relational database, uses Microsoft Excel as a report writer, and complies fully with OMB Circular A-87 and GAAP principles and guidelines. Phase 3 Review Draft Results with City Personnel Review Meeting(s) After draft cost allocation plans are prepared and reviewed internally, our consultants will review the results with City personnel from Finance and key central service and receiving departments. Inconsistencies will be reconciled, new data obtained as required, and the draft cost allocation plans will be revised as necessary. Phase 4 Finalize Results and Provide On-going Assistance After Finance and other key department personnel have approved the final cost allocation plans we will finalize the plans and reconcile the results to Budget documents. Deliver the agreed-to number of printed and electronic cost allocation plans to the City, as well as electronic copies of all supporting documentation as requested. We will also assist City staff integrate the cost allocation plans into the City's financial and operational systems. Provide audit defense and technical assistance on an on-going basis to City personnel. We will be available and responsive to City personnel throughout the year to answer questions or provide information. PAGE 5

7 Timeline As has happened each year with MGT, the final cost allocation plans will be submitted to the City on or before the City s deadline each year even if this means our team works evenings and weekends. The following table illustrates the project timetable by major task. CITY OF EDMOND - FULL COST, INSURANCE, DEBT SERVICE AND FIELD SERVICES WEEKS 1-2 WEEKS 3-4 WEEKS 5-6 ON-GOING AS REQUESTED 1 Initial assessment, meetings and interviews 2 Collect data 3 Divide departments into functions 4 Distribute costs to functions 5 Develop allocation drivers 6 Process draft plans 7 Conduct internal review of plans 8 Reconcile draft plans to Budget 9 Provide draft plans 10 Process final plans 11 Reconcile final plans to Budget 12 Provide final plans 13 Respond to audit inquiries 14 Provide training, guidance, assistance 15 Identify additional uses for plans 16 Prepare project recap report The task and deliverable timing can be adjusted based on the City s needs. PAGE 6

8 Pricing All-inclusive Price We will provide the project deliverables for the following fixed, all-inclusive fee. This fee contains all direct and indirect costs including meetings, presentations, document production, etc $16,290 $16,920 $16,920 $17,480 $17,480 Progressive payments are requested based on achieving project milestones. The MGT contract approval process is guaranteed to be hassle free. Virtually all contracts are approved in 10 business days or less. Project Deliverables The City will annually receive the following project deliverables. Initial project assessment, meetings, workshops, interviews, and presentations in Edmond related to the cost allocation plans. Review of the City s current data collection work papers, allocation drivers, indirect cost pools and methods of distributing costs for appropriateness and to identify alternative methodologies which may be more appropriate. Draft Full Cost, Insurance, Debt Service and Field Services allocation plans using a double step-down allocation methodology. Each set of draft cost allocation plans will be based on the upcoming year budgeted expenditures and four subsequent years budgeted expenditures. Final Full Cost, Insurance, Debt Service and Field Service allocation plans using a double step-down allocation methodology. Each set of final cost allocation plans will be based on the upcoming year budgeted expenditures and four subsequent years budgeted expenditures. PAGE 7

9 Reconcile the cost allocation plans output to the City s budget documents to ensure balancing and all costs are accounted for. Customized management reports based on the final cost allocation plans. These management reports will include the following information: A comparison to the prior year s cost allocation plans, or similar analysis, to identify major variances of allocated costs to key receiving departments. The per-unit costs of specific administrative and support activities. Variance analysis of costs or allocations. Three printed and bound copies, and one electronic copy (PDF and or Excel) of the final cost allocation plans. A comprehensive review and training session of the draft cost allocation plans. This session in Edmond with all project stakeholders will include specific data and examples drawn from the current year draft cost allocation plans. Development of strategies and procedures to be used by City personnel that will optimize potential indirect cost recovery. Assistance to City personnel to integrate the cost allocation plan data into ongoing City operations. Defense of the cost allocation plans with the appropriate auditors if such defense is requested. Ongoing training, guidance, and assistance to City personnel to ensure full understanding of the methodologies employed in the development of the cost allocation plans. Assistance to identify additional uses of the cost allocation plans. Formal project status reports at intervals requested by City personnel. PAGE 8