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2006-045 ORDINANCE NO. 2006- !JL/s AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH R. J. COVINGTON CONSULTING, LLC FOR CONSULTING SERVICES RELATING TO TASK ORDER NO. 06-C; PROVIDING FOR THE REVIEW OF CITY ACCOUNTING SYSTEMS USED TO SUPPORT UTILITY AND SOLID WASTE FUNCTIONS; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Council deems it in the public interest to continue to engage the firm of R. J. Covington Consulting, LLC of Austin, Texas ("Covington"), to provide further professional consulting services to the City relating to Task Order No. 06-C; which includes, without limitation, review of the City accounting systems used to support utility and solid waste functions; and WHEREAS, the City staff has reported to the City Council that there is a substantial need for the above-described specialized professional services, and that limited City staff cannot adequately perform the services and tasks with its own personnel; and WHEREAS, Chapter 2254 of the Texas Government Code, known as the "Professional Services Procurement Act", generally provides that a City may not select a provider of professional services on the basis of competitive bids, but must select the provider on the basis of demonstrated competence, knowledge, and qualifications, and for a fair and reasonable price; and WHEREAS, Covington has represented DME continuously and ably over the last nine (9) years, and has proven to be a valuable, reliable, affordable, and competent professional resource that has expertise in, and is well-acquainted with the electric operations as well as the financial and regulatory framework of Denton Municipal Electric ("DME). Covington and his staff are particularly familiar with the characteristics, operations, and accounting systems of DME: and WHEREAS, the City Council has provided in the City Budget for the appropriation of funds to be used for the purchase of the professional services, as set forth in the Professional Services Agreement; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I: That the City Manager is hereby authorized to execute a Professional Services Agreement with R. J. Covington Consulting, LLC of Austin, Texas, for professional consulting services, relating to Task Order No. 06-C, to the City and to Denton Municipal Electric, in an amount of not to exceed $55,000; in substantially the form of the Professional Services Agreement that is attached hereto and incorporated herewith by reference as Exhibit "A." 1 SECTION 2: That the award of this Agreement by the City is on the basis of the demonstrated competence, knowledge, and qualifications of Covington and the ability of Covington to perform the professional services needed by the City for a fair and reasonable pnce. SECTION 3: That the expenditure of funds as provided in the attached Professional Services Agreement is hereby authorized. SECTION 4: That this ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the 1flt. day of \ l.M1d1J/i r-- ' 2006. c~/k~ EULINE BROCK, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY By: APPROVED AS TO LEGAL FORM: EDWIN M. SNYDER, CITY ATTORNEY B'~~ S:\Qur Documents\Ordinances\06\R J Covington Consulting LLC-DME+Ord Aprv TO 06-C 2006.doc 2 STATE OF TEXAS ~ ~ ~ COUNTY OF DENTON PROFESSIONAL SERVICES AGREEMENT FOR CONSULTING SERVICES PERTAINING TO DENTON MUNICIPAL ELECTRIC THIS AGREEMENT is made and entered into on the 7th day of ~~2006, by and between the City of Denton, Texas, a Municipal Corporation, with its princIpal offi e at 215 East McKinney Street, Denton, Texas 76201 ("CITY"); and R. J. COVINGTON CONSULTING, LLC, a Texas Limited Liability Corporation, with its principal office at 11044 Research Boulevard, Suite A-325, Austin, Texas 78759, hereafter "COVINGTON"; acting herein by and through their duly authorized representatives. WITNESSETH, that in consideration of the covenants, promises and agreements herein contained, the CITY and COVINGTON do hereby AGREE as follows: ARTrrr F r EMPLOYMENT OF CONSULTANT The CrTY hereby contracts with COVINGTON, as an independent contractor, and COVINGTON hereby agrees to perform the services herein in connection with the Scopc of Services as stated in the Articles to follow, with diligence and in accordance with the professional standards customarily obtained for such services in the State of Texas. ARTwr F II SCOPE OF SERVICES A. COVINGTON shall provide to the CITY professional consulting services pertaining to the review of accounting systems used by the City, including data necessary for various regulatory proceedings, meeting intemal conflicts and reporting needs, meeting utility and City-widc financial and accounting reporting requirements, coordination between utility record keeping and City accounting systems, and maintaining recognition of govemmental accounting standards. COVINGTON agrees to perform those services and tasks more particularly and specifically described in Task Order No. 06-C attached hereto and incorporated herewith by reference. B. To consult with the City Manager, Assistant City Manager/Utilities, the Director of Electric Utilities, the Utility Attomey, and any other designated administrative personnel regarding any and all aspects of the services to be performed pursuant to this Agreement. A RTTC;r F III PERIOD OF SERVICE This Agreement shall become effective on the date this Agreement is approved and upon the issuance of a notice to proceed by Denton Municipal Electric ("DME"). The termination date of this Agreement shall be upon the earliest to occur of the following events: completion of the work 1 described herein and in the attached Task Order No. 06-C; or upon the depletion and exhaustion of the $55,000 not-to-exceed amount provided for hereinl or upon fifteen (15) day's written notice to terminate, issued by the Director of Electric Utilities, DME. This Agreement may be sooner terminated in accordance with the provisions hereof. I Time is of the essence in this Agreement. COVINGTON shall make all reasonable efforts to complete the services set forth herein as expeditiously as possible and to meet the schedule established by the CITY, acting through its Director of Electric Utilities. I I I A RT((;/'F IV , COMPENSA HON I I I , COMPENSATION TERMS: A. "Direct Non-Labor Expense" is defined as that exbense for any assignment incurred hereunder by COVINGTON for supplies, long-distance t~lephone, telecopier, reproduction expense, , overnight courier, photocopy expense, transportation, travel, communications, subsistence and , lodging away from home and similar incidental expenses reasonably incurred in connection with that assignment.. I I B. BILLING AND PAYMENT: I , l. For and in consideration of the professional services to be performed by COVINGTON herein, the CITY agrees to pay COVINGTON, a total fee, including reimbursement for direct non-labor expense, not to exceed $55,000 for thoke services described in Task Order No. 06- C. I 2. The fee for the services described in this A~reement to be perfornled by COVINGTON are to be billed the rates as set forth in Exhibit "lV' attached hereto and incorporated herewith by reference. Billing shall be reported in minimu~ one-quarter (1/4) hour increments. 3. Payments to COVINGTON will be made bt the CITY on the basis of detailed monthly statements rendered to the CITY through its Dir~ctor of Electric Utilities. The fee bills as submitted, shall be allowed and approved by th~ Director of Electric Utilities. However, under no circumstances shall any monthly statement for services exceed the value of the work performed at the time astatement is rendered. I I . 4. Nothing contained in this Article shall reql!ire the CITY to pay for any work which is unsatisfactory as reasonably determined by the ICity Manager or the Director of Electric Utilities, or which is not submitted in compliance with the terms of this Agreement. The City shall not be required to make any payments to COVINGTON when COVINGTON is In default under this Agreement. 5. It is specifically understood and agreed that I COVINGTON shall not be authorized to undertake any work pursuant to this Agreement which would require additional payments by the CITY for any charge, expense or reimbJrsement above the maximum not-to-exceed fee as stated, without first having obtained writlen authorization from the CITY. I 2 c. PAYMENT If the CITY fails to make payments due COVINGTON for services and expenses within forty (40) days after receipt of COVINGTON'S undisputed statement thereof; the amounts due COVINGTON will be increased by the rate of one percent (I %) per month from the said forty (40th) day, and in addition, COVINGTON may, after giving ten (10) days' written notice to the CITY, suspend services under this Agreement until COVINGTON has been paid in full all amounts due for services, expenses and charges provided. However, nothing herein shall require the CITY to pay the late charge of one percent (1 %) set forth herein if the CITY reasonably determines that the work of COVINGTON is unsatisfactory, in accordance with this Article IV, Compensation, and the CITY notifies COVINGTON in writing of any such defect. ARTTrT F V OBSERVATION AND REVIEW OF THE WORK COVINGTON will exercise rcasonable care and due diligence in discovering and promptly reporting to the CITY any defects or deficiencies in his work or the work of any subconsultants performed hereunder. ARTlr:r F VI OWNERSHIP OF DOCUMENTS All documents, analyses and other data prepared by COVINGTON under this Agreement ("Work Products") are instruments of service and are and shall remain the property of CITY. COVINGTON shall have the right to make and retain copies and use all Work Products; provided, however, the use shall be limited to the intended use for which the services and Work Products are provided under this Agreement. COVINGTON may use and may copyright certain non-sensitive Work Products as property of COVINGTON; provided that prior written approval is obtained from CITY, whose approval shall not be unreasonably withheld, and providing that copywriting will not restrict CITY'S right to retain or make copies of the Work Products for its information, reference and use on the Project or services under the Agreement. The Work Products shall not be changed or used for purposes other than those set forth in this Agreement without the prior written approval of COVINGTON. If CITY releases the Work Products to a third party without COVINGTON'S prior written consent, or changes or uses the Work Products other than as intended hereunder, CITY does so at its sole risk and discretion and COVINGTON shall not be liable for any claims or damages resulting from or connected with the release or any third party's use of the Work Products. . ARTTrT F VII INDEPENDENT CONTRACTOR COVINGTON shall provide services to the CITY as an independent contractor, not as an employee of the CITY. COVINGTON shall not have or claim any right arising from employee status. 3 ARTWI F VTTT INDEMNITY AGREEMENT COVINGTON shall indemnifY and save and hold harmless the CITY and its officers, agents, and employees from and against any and all liability, claims, demands, damages, losses and expenses, including but not limited to court costs and reasonable attomey's fees incurred by the CITY, and including without limitation, damages for bodily and personal injury, death and property damage, and damage for professional malpractice resulting from the negligent acts or omissions of COVINGTON or any subconsultants, in performance of this Agreement. COVINGTON'S liability under this Article VIII is expressly limited to the amount of COVINGTON'S insurance coverage as set forth in Article IX. Nothing in this Agreement shall be construed to create a liability to any person who is not a party to this Agreement and nothing herein shall waive any of the party's defenses, both at law or equity, to any claim, cause of action or litigation filed by anyone not a party to this Agreement, including the defense of govemmental immunity, which defenses are hereby expressly reserved. ARTTrf F rx INSURANCE During the performance of the Services under this Agreement, COVINGTON shall maintain the following insurance with an insurance company licensed to do business in the State of Texas by the State Insurance Commission or any successor agency that has a rating with Best Rate Carriers of at least an "A-" or above: A. Comprehensive General Liability Insurance with bodily injury limits of not less than $500,000 for each occurrence and not less than $500,000 in the aggregate, and with property damage limits of not less than $100,000 for each occurrence, and not less than $100,000 in the ag/:,'Tegate. B. Automobile Liability Insurance with bodily injury limits of not less than $500,000 for each person and not less than $500,000 for each accident; and with property damage limits of not less than $ I 00,000 for each accident. C. Professional Liability Insurance with policy limits of not less than $1,000,000 annual aggregate. D. COVINGTON shall fumish insurance certificates or insurance policies at the CITY's request to evidence such coverages. The insurance policies shall name the CITY as an additional insured on all such policies to the extent legally possible, and shall contain a provision that such insurance shall not be canceled or modified without thirty (30) days prior written notice to CITY and COVINGTON. In such event, COVINGTON shall, prior to the effective date of the change or cancellation, deliver substitute policies furnishing the same coverage to the CITY. . 4 ARTlc:r F X ARBITRA TION AND AL TERNA TE DISPUTE RESOLUTION The parties agree to settle any disputes under this Agreement by submitting the dispute to arbitration or other means of alternate dispute resolution such as mediation. No arbitration or alternate dispute resolution arising out of or relating to, this Agreement involving one party's disagreement may include the other party to the disagreement without the other's approval. ARTTc:r F Xl LIMITA TlON OF LIABILITY To the extent permitted by law, the total liability of COVINGTON to CITY for any and all claims arising out of this Agreement, whether caused by negligence, errors, omissions, strict liability, breach of contract or contribution, or indemnity claims based on third-party claims, shall not exceed one million dollars ($1,000,000). ARTTc:r F XII CONSEQUENTIAL DAMAGES In no event and under no circumstances shall COVINGTON be liable to CITY for any interest, loss of anticipated revenues, earnings, profits, or increased expense of operations, or for any consequential, indirect or special damages. ARTT~T F XTTT PROFESSIONAL STANDARDS COVINGTON will perfornl services under this Agreement with the degree of skill and diligence normally practiced by professional engineers or consultants performing the same degree of similar services. No other warranty or guarantee, expressed or implied, is made with respect to thc services furnished under this Agreement and all implied wan.anties are disclaimed. ARTTc:r F XTV TERMINATION OF AGREEMENT A. Notwithstanding any other provision of this Agreement, either party may terminate this Agreement by giving thirty (30) days advance written notice of termination to the other party. B. This Agreement may be terminated in whole or in part in the event of either party substantially failing to fulfill its obligations under this Agreement. No such termination will be effected unless the other party is given: (1) written notice (delivered by certified mail, return receipt requested) of intent to terminate and setting forth the reasons specifYing the nonperformance, and not less than ten (10) business days in which to cure the failure; and (2) an opportunity for consultation with the terminating party prior to termination. C. If this Agreement is terminated prior to completion of the services to be provided hereunder, COVINGTON shall immediately cease all services and shall render a final bill for services to 5 the CITY within thirty (30) days after the date of tetmination. The CITY shall pay COVINGTON for all services properly rendered and satisfactorily performed and for reimbursable expenses to termination incurred prior to the date of termination in accordance with Article IV, Compensation. Should the CITY subsequently contract with a new consultant for the continuation of services on the Project, COVINGTON shall cooperate in providing information. COVINGTON shall turn over all documents prepared or furnished by COVINGTON pursuant to this Agreement to the CITY on or before the date of tennination, but may maintain copies of such documents for its use. ARTIO F XV RESPONSIBILITY FOR CLAIMS AND LIABILITIES Approval by the CITY shall not constitute nor be deemed a release of the responsibility and liability of COVINGTON, or any subconsultants of COVINGTON, for the accuracy and competency of their designs or other work product. ARTTO F XVI NOTICES All notices, communications, and reports required or pernlitted under this Agreement shall be personally delivered or mailed to the respcctive parties by depositing same in the United Statcs mail at the address shown below, certified mail, return receipt requested unless otherwise specified herein. Mailed notices shall be sent to the parties at the following addresses: To COVINGTON: To CITY: RJ. Covington Consulting, LLC Attn: Richard J. Covington, President 11044 Research Blvd., Suite A-325 Austin, Texas 78759 City of Denton, Texas Attn: City Manager 215 East McKinney Street Denton, Texas 76201 and to City of Denton, Texas Attn: Director of Electric Utilities 901-A Texas Street Denton, Texas 76205 All notices shall be deemed effective upon receipt by the party to whom such notice is given or within three days after the date of mailing. ARTIer F XVlI ENTIRE AGREEMENT This Agreement consisting of nine (9) pages, and four (4) additional pages consisting of Task Order No. 06-C, constitutes the complete and final expression of the agreement of the parties and is intended as a complete and exclusive statement of the terms of their agreements and supersedes all 6 prior contemporaneous offers, promises, representations, negotiations, discussions, communications and agreements which may have been made in connection with the subject matter hereof. A RTlc:T F XVTTI SEVERABILITY If any provision of this Agreement is found or deemed by a court of competent jurisdiction to be invalid or unenforceable, it shall be considered severable from the remainder of this Agreement and shall not cause the remainder to be invalid or unenforceable. In such event, the party shall reform this Agreement to replace such stricken provision with a valid and enforceable provision which comes as close as possible to expressing the intention of the stricken provision. ARTwr F XIX COMPLIANCE WITH LAWS COVINGTON shall comply with all federal, state, local laws, rules, regulations, and ordinances applicable to the work covered hereunder as they may now read or hereinafter be amended. ARTfc:T F XX DISCRIMINA nON PROHIBITED Tn performing the services required hereunder, COVINGTON shall not discriminate against any person on the basis of race, color, religion, sex, national origin or ancestry, age, or physical handicap. ARTIl:I F XXI PERSONNEL A. COVINGTON represents that he has secured, or will sccure at his own expense any additional personnel required to perform all the services required under this Agreement. Such personnel shall be subconsultants of COVINGTON, and shall not be employees or officers of, nor have any contractual relations with the CITY. COVINGTON shall inform the CITY of any conflict of interest or potential conflict of interest that may arise during the term of this Agreement. B. All services required hereunder will be performed by COVINGTON or under his supervision. All personnel engaged in work shall be qualified and shall be authorized and permitted under state and local laws to perform such services. ARTIl:I F XXTI ASSIGNABILITY COVINGTON shall not assign any interest in this Agreement and shall not transfer any interest in this Agreement (whether by assignment, novation or otherwise) without the prior written consent of the CITY. 7 ARTfc:T E xxrrr MODIFICATION No waiver or modification of this Agreement or of any covenant, condition, limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith and no evidence of any waiver or modification shall be offered or received in evidence in any proceeding arising between the parties hereto out of or affecting this Agreement, or the rights or obligations of the parties hereunder, and unless such waiver or modification is in writing, duly executed; and, the parties further agree that the provisions of this section will not be waived unless as herein set forth. A RTfl:1 F XXIV MISCELLANEOUS A. COVINGTON agrees that CITY shall, until the expiration of three (3) years after the final payment under this Agreement, have access to and the right to examine any directly pertinent books, documents, papers and records of COVINGTON involving transactions relating to this Agreement. COVINGTON agrees that the CITY shall have access during normal working hours to all necessary COVINGTON facilities and shall be provided adequate and appropriate working space in order to conduct audits in compliance with this section. The CITY shall give COVINGTON reasonable advance noticc of any intended audits. B. Venue of any suit or cause of action under this Agreement shall lie exclusively in Denton County, Texas. This Agreement shall be govemed by, and constnled in accordance with the laws of the State of Texas. C. COVINGTON shall commence, carry on, and complete the work required by this engagement with all applicable dispatch, in a sound, economical, efficient manner and in accordance with the provisions hereof. In accomplishing the work, COVINGTON shall take such steps as are appropriate to ensure that the work involved is properly coordinated with related work being carried on by the CITY. D. The CITY shall assist COVINGTON by placing at COVINGTON's disposal all available information pertinent to the work required by this engagement, including previous reports, any other data relative to the project and arranging for the access to, and make all provisions for COVINGTON to enter in or upon, public and private property as required for COVINGTON to perform services under this Agreement. E. The captions of this Agreement are for informational purposes only and shall not in any way affect the substantive terms or conditions of this Agreement. IN WITNESS WHEREOF, the City of Denton, Texas has caused this Agreement to be executed in four (4) original counterparts, by its duly authorized City Manager; and RJ. Covington Consulting, LLC has executed this Agreement by its duly authorized officer on this the 7ilt day of J~r2006. - "CITY" 8 CITY OF DENTON, TEXAS A Municipal Corporation By: ATTEST: JENNIFER WALTERS, CITY SECRETARY "y~~1 \),~ APPRO "D AS L;GAL FORM: EDWIN M. SNYDER, CITY ATTORNEY RY~~ "COVINGTON" R. 1. COVINGTON CONSULTING, LLC A Texas Limited Liability Corporation BY:~~ Richard 1. Covi on, Pre' t S:\Our Documents\Conrracts\06\RJ Covington Consulting LLC.PSA-Rvw Acctg Systems-TO 06-C DME.doc 9 Task Order No. 06--C Review Accounting Systems ATTACHMENT PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND R.J. COVINGTON CONSULTING, LLC TASK ORDER NO. 06-C Review Accounting Systems This Attachment is a Task Order contemplated by and appended to the Professional Services Agreement entered into by and between the City of Denton, Texas ("City") and R.J. Covington Consulting, LLC, CRJC") as approved by the Denton City Council. The work provided for in this Task Order is for RJC to provide a review of the utility accounting systems used by the City to determine the appropriateness of those systems m: . Providing data necessary for various regulatory proceedings . Meeting internal controls and reporting needs . Meeting utility and City-wide financial and accounting reporting requirements . Coordination between utility record keeping and City accounting systems . Maintaining recognition of governmental accounting standards The accounting systems to be reviewed are those systems (chart of accounts, accounting entry systems, books and reporting) used to provide accounting data for the electric, water, wastewater, solid waste and drainage utility functions of the City. The focus of this review will be on Denton Municipal Electric (DME), however the review will include a high level survey of how identified issues may also affect the City's other utility systems. The services under this Task Order will bc to evaluate the current accounting systems and related policies and procedures in order to identify the range of issues that will need to be addressed in order to insure that the systems are providing the appropriate level of information needed for operation of the utilities and for the City's financial and accounting reporting purposes. Future services under this Task Order will be identified following this review of the accounting systems and specific recommendations will be made to resolve the. identified issues at a future time. The review will be conducted through interviews of DME staff, staff of the other City utility systems, and City accounting staff, in order to gain an understanding of the systems currently in use. These systems include the present work order recording systems, continuing property records (CPR), entry of utility expenses and revenues to the general ledger (GL), capitalization and depreciation procedures, and other systems as identified. RJC will also review several years of accounting entries for DME in order to assist in the identification of specific items that should be included in follow-up reviews. Task Order No. 06--C Review Accounting Systems Upon completion of the review, RJC will provide a briefing to DME staff and the appropriate City personnel describing the findings of the review. At that time, RJC will provide a new Task Order describing the follow-up tasks to be performed to address the identified deficiencies. As part of the follow-up task order, RJC will assist DME and City staff with the development of policies and procedures to implement the utility accounting system changes identified. These policies and procedures will act as a guide for City accountants with respect to the appropriate treatment of utility accounting issues in order to establish a resource for consistent appl ication of utility accounting standards for the City. The majority of the work on this Task Order will be performed by Richard Covington and Gerald Tucker with assistance from other members of the RJC firm as required. Gerald Tucker will be the project manager. RJC also understands that the City will provide personnel, as time permits, to prepare accounting analysis as required. The estimated cost provided below assumes that a substantial portion of the detailed work of compiling accounting entries will be performed by City personnel. If City personnel are not available for this effort, the cost of the services will require adjustment. Mr. Covington and Mr. Tucker are both certified public accountants (CPA's) who are highly experienced utility consultants. RJC is not a public accounting firm, and the opinions expressed by RJC do not represent certified opinions of a public accounting firm for financial reporting purposes. The following scope of work is based on RJC's current understanding of the issues to be addressed. As the review progresses, this scope may be modified as directed by the Director of Electric Utilities. To the extent modifications are required, a revised budget will be provided. The list of work activities below are not necessarily sequential, and work may progress on several tasks at the same time, as appropriate. Scope of Services Task A -- Interviews 1. RJC will conduct interviews of DME staff to identify problems and concerns they are currently aware of with present accounting processes. 2. Interviews with other utility department heads and appropriate staff members will be held to determine the status of their systems. 3. RJC will meet with the Assistant City Manager for utilities and staff of the City to discuss overall utility accounting issues. 4. RJC will conduct interviews of city accounting staff to discuss issues identified by utility staff and other accounting system issues as identified by city accounting staff Task B -- Review Accounting Systems 1. To gain a better understanding of the City's accounting systems and their use in developing utility books and records, RJC will review each accounting system (both accounting programs and spreadsheets), their purpose, and coordination of each to the overall City accounting systems. This will include a review of the Harris billing 2 Task Order No. 06--C Review Accounting Systems system and the J.D. Edwards financial reporting system as they relate to utility accounting issues identified as problem areas. 2. RJC will review the reports produced by each of the accounting systems, identify gaps if any in reporting needs, and evaluate the processes used for internal control to insure proper transfer of data between the programs and spreadsheets. 3. Particular emphasis will be on processes currently being used to produce utility accounting data used in regulatory proceedings and rate design. Task C -- Review Accounting Policies and Procedures I. RJC will review the current policies and procedures used for keeping the utility books, to include depreciation policies, fixed asset booking and maintenance of CPR, procedures for booking utility and non-utility revenues to utility systems, and other policies and procedures as identified. 2. RJC will conduct a complete review of the City's utility chart of accounts and thcir appropriateness for utility accounting (for example: the cross-over of costs between the City's natural accounts to utility FERC accounts). 3. RJC will assemble and review DME accounting transactions for several years of operations to assist in identifying potential problems. Task D -- Develop Recommendations I. RJC will meet with City personnel to discuss the preliminary findings, to correct errors in understanding, clarify concerns, and discuss a range of potential solutions. 2. Based on the review, RJC will develop a report addressing the findings, and making recommendations on ways to address deficiencies in the utility accounting process. 3. As part of this report, RJC will present a new draft Task Order with a list of additional tasks that can be completed to insure that the accounting systems provide adequate information to allow the utility systems to operate properly. This draft Task Order will be for discussion purposes and will not indicate acceptance by the City of RJC to continue work beyond the scope of services provided for in this Task Order No. 06-C. Budget The estimated budget for this Task Order is an amount not to exceed $55,000. This budget is based on hourly rates for labor and expenses necessary to complete the task. This budget will not be exceeded without prior approval of the City of Denton. RJC will bill monthly with supporting documentation of activities performed and expenses made. The termination date of this Task Order shall be on the earliest to occur of the following events: the data of completion of the work described herein; or the exhaustion of the $55,000 amount; or upon fifteen (15) days written notice to terminate, issued by the Director of Electric Utilities, DME. The work being performed will be under the supervision of the Director of Electric Utilities and the city's Chief Finance Officer and may be modified at any time upon appropriate notice to RJC. 3 , Task Order No. 06--C Review Accounting Systems EXECUTED in four (4) original counterparts by a duly authorized officer of RJC and by a duly authorized officer of the City of Denton, Texas on this the 1fh day of J~ ,2006. AUTHORIZED BY: ACCEPTED BY: "CITY" "RJC" CITY OF DENTON, TEXAS A Texas Municipal Corporation By: fb<< XUA 'JYIaA*~ Howard Martin \ City Manager R.J. COVINGTON CONSULTING, LLC By: If(}~ R. J. <t6vington, esident Dated: ,;2, /'1 lOb I I Dated: ~//1ft~ ATTEST: APPROVED AS TO LEGAL FORM: JENNIFER WALTERS, CITY SECRETARY EDWINM. SNYDER, CITY ATTORNEY By: 1tDDA ~j) Ik/~ / I Dated: S:\Our Documents\Contracts\06\R J Covington Consulting - Task Order 06.C - Accounting,doc 4