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HomeMy WebLinkAboutHOWARD SCHULTZ & ASSOCIATES - Professional Services Contract for accounts payable auditing services 4/21/97 - 1997-04-215�1 Council/Agency Meeting Held: Deferred/Continued to: ❑ Approved Xconditionally Approved ❑ Denied City Clerk's Si ture Cow ,e ting Date: April 21, 1997 Department ID Number: 97-007 wl�_h A bac k -6 L4�jm..T 3 „„,QC' . CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBE SUBMITTED BY: MICHAEL T. UBERUAGA, City Administrator PREPARED BY: Robert J. Franz, Deputy City Administra SUBJECT: Agreement with Howard Schultz and Associates for Accounts t'ya Auditing Services Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: In an effort to ensure that the City is not paying too much for goods or services, staff is recommending the assistance of an accounts payable auditing firm to review the City's disbursement history. Funding Source: N/A. The fee for this contract is contingent on recovery of costs and will be paid from any cash recoveries made by Howard Schultz and Associates. Recommended Action: 1. Approve the attached agreement with Howard Schultz and Associates to provide accounts payable auditing services with waiver of 30 day notice of cancellation in event of non-payment of premiums. 2. The Settlement Committee is also recommending that the Council waive professional liability insurance due to the nature of the work performed. The Committee is further recommending that the City waive workers compensation insurance since Howard Schultz and Associates has no. employees and utilizes independent contractors for the services. Alternative Action(s): 1. Select a different firm to perform the audit. 2. Do not approve the agreement REQUEST FOR COUNCIL ACTi%jN MEETING DATE: April 21, 1997 DEPARTMENT ID NUMBER: 97-007 Analysis: The City processes approximately 35,000 non -payroll checks annually for a total volume of approximately $85,000,000 in payments. City staff reviewed proposals from 3 firms concerning accounts payable auditing services.. Staff feels all three are qualified to perform the audit, but is recommending Howard Schultz and Associates. Howard Schultz and Associates has a program that reviews all of the disbursements of the City for a period of time and checks for errors concerning freight, sales tax, use tax, invoice extensions, and duplicate payments. If errors are discovered and cash or credit recovery is made, the attached agreement provides for payment to Howard Schultz and Associates 39% of these amounts. This recovery percentage will apply only to actual recoveries. If no recoveries are made, no payment is due to Howard Schultz and Associates. Howard Schultz and Associates has many years of experience in this type of work. Current staff does not have the time, nor the expertise in this type of review of a a large volume of transactions for errors. The consultant utilizes a computer program to analyze the City's vendor files. In order for current staff to perform this procedure, it would take not only accounting time, but considerable time from Information Systems to develop specialized computer programs for such auditing. The Settlement Committee is recommending that the Council waive professional liability insurance due to the nature of the work performed. The Committee is also recommending that the City waive workers compensation insurance since Howard Schultz and Associates has no employees and utilizes independent contractors for the services. Environmental Status: NIA Attachment(s): Contract with Howard Schultz and Associates Page City Clerk's - APAUDIT.DOC -2- 04/14/97 4:53 PM V-4A CI` OY .OF UNTING`�ON BEACH 2000 MAIN STREET CALIFORNIA 92648 OFFICE OF THE CITY CLERK . CONNIE BROCKWAY CITY CLERK CITY CLERK LETTER OF TRANSMITTAL REGARDING ITEM APPROVED BY THE CITY COUNCIUREDEVELOPMENT AGENCY APPROVED ITEM DATE. - TO: D ATTENTION: Z�& Name Y do'? boo DEPARTMENT: Str et �3D REGARDING: GAD City, State, Zip See Attached Action Agenda Item Date of Approval Enclosed For Your Records Is An Executed Copy Of The Above Referenced Item For Your Records. Connie Brockway City Clerk Attachments: Action Agenda Page RCA Remarks: Agreement ✓ Bonds Insurance Deed Other CC: ✓ Name Department RCA RCA Name Department RCA Nance Department Risk ]Management Department Insurance Copy Agreement Insurance Othcr Agreement Insurance Othcr Agreement Insurance Other G:l-ollot+up'agrnttsrtransltr ( Telephone: 714-536-5227 ) PROFESSIONAL SERVICES CONTRACT BETWEEN THE CITY OF HUNTINGTON BEACH AND HOWARD SCHULTZ & ASSOCIATES FOR ACCOUNTS PAYABLE AUDITING SERVICES THIS AGREEMENT is made and entered into this �21 5 day of 1997 by and between the CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California, hereinafter referred to as "CITY," and HOWARD SCHULTZ & ASSOCIATES, a Texas corporation, hereinafter referred to as "CONTRACTOR." WHEREAS, CITY desires to engage the services of a contractor to provide accounts payable auditing services for payment recovery in the City of Huntington Beach; and Pursuant to documentation on file in the office of the City Clerk, the provisions of HBMC Chapter 3.03 relating to procurement of professional service contracts has been complied with; and CONTRACTOR has been selected to perform said services, NOW, THEREFORE, it is agreed by CITY and CONTRACTOR as follows: 1. WORK STATEMENT CONTRACTOR shall provide all services as CONTRACTOR'S Accounts Payable Audit Agreement dated January 28, 1997 (hereinafter collectively referred to as Exhibit "A"), which is attached hereto and incorporated into this Agreement by this reference. Said services shall sometimes hereinafter be referred to as "PROJECT." 1 CONTRACTOR hereby designates Charles Schembri, Regional Vice President, who shall represent it and be its sole contact and agent in all consultations with CITY during the performance of this Agreement. 2. CITY STAFF ASSISTANCE CITY shall assign a staff coordinator to work directly with CONTRACTOR in the performance of this Agreement. 3. TIME OF PERFORMANCE Time is of the essence of this Agreement. The services of the CONTRACTOR are to commence as soon as practicable after the execution of this Agreement and all tasks specified in Exhibit "A" shall be completed no later than one year from the date of this Agreement. These times may be extended with the written permission of the CITY. The time for performance of the tasks identified in Exhibit "A" are generally to be as shown in the Scope of Services on the Work Program/Project Schedule. This schedule may be amended to benefit the PROJECT if mutually agreed by the CITY and CONTRACTOR. 4. COMPENSATION In consideration of the performance of the services described herein, CITY agrees to pay CONTRACTOR a fee not to exceed thirty-nine percent (39%) of cash recovery. 5. EXTRA WORK In the event CITY requires additional services not included in Exhibit "A", or changes in the scope of services described in Exhibit "A", CONTRACTOR will 4 undertake such work after receiving written authorization from CITY. Additional compensation for such extra work shall be allowed only if the prior written approval of CITY is obtained. 6. METHOD OF PAYMENT A. Delivery of work project: A copy of every technical memo and report prepared by CONTRACTOR shall be submitted to the CITY to demonstrate progress toward completion of tasks. In the event CITY rejects or has comments on any such product, CITY shall identify specific requirements for satisfactory completion. Any such project which has not been formally accepted or rejected by CITY shall be deemed accepted. B. The CONTRACTOR shall submit to the CITY an invoice for each progress payment due. Such invoice shall: 1) Reference this Agreement; 2) Describe the services performed; 3) Show the total amount of the payment due; 4) Include a certification by a principal member of the CONTRACTOR'S firm that the work has been performed in accordance with the provisions of this Agreement; and work completed. 5) For all payments include an estimate of the percentage of Upon submission of any such invoice, if CITY is satisfied that CONTRACTOR is making satisfactory progress toward completion of tasks in 3 accordance with this Agreement, CITY shall promptly approve the invoice, in which event payment shall be made within thirty (30) days of receipt of the invoice by CITY. SUCH approval shall not be unreasonably withheld. If the CITY does not approve an invoice, CITY shall notify CONTRACTOR in writing of the reasons for non -approval, within seven (7) calendar days of receipt of the invoice, and the schedule of performance set forth in Exhibit "A" shall be suspended until the parties agree that past performance by CONTRACTOR is in, or has been brought into compliance, or until this Agreement is terminated as provided herein. C. Any billings for extra work or additional services authorized by the CITY shall be invoiced separately to the CITY. Such invoice shall contain all of the information required above, and in addition shall list the hours expended and hourly rate charged for such time. Such invoices shall be approved by CITY if the work performed is in accordance with the extra work or additional services requested, and if CITY is satisfied that the statement of hours worked and costs incurred is accurate. Such approval shall not be unreasonably withheld. Any dispute between the parties concerning payment of such an invoice shall be treated as separate and apart from the ongoing performance of the remainder of this Agreement. 7. DISPOSITION OF PLANS, ESTIMATES AND OTHER DOCUMENTS. CONTRACTOR agrees that all materials prepared hereunder, including all original drawings, designs, reports, both field and office notes, calculations, maps and other documents, shall be turned over to CITY upon termination of this Agreement or upon PROJECT completion, whichever shall occur first. In the event this Agreement is ld is terminated, said materials may be used by CITY in the completion of PROJECT or as it otherwise sees fit. Title to said materials shall pass to the CITY upon payment of fees determined to be earned by CONTRACTOR to the point of termination or completion of the PROJECT, whichever is applicable. CONTRACTOR shall be entitled to retain copies of all data prepared hereunder. 8. INDEMNIFICATION, DEFENSE, HOLD HARMLESS CONTRACTOR shall indemnify and save and hold harmless CITY, its officers and employees, from any and all liability, including any claim of liability and any and all losses or costs arising out of the negligent performance of this Agreement by CONTRACTOR, its officers or employees. 9. WORKERS' COMPENSATION Requirement waived by City Council 4/21 /97. 10. INSURANCE In addition to the workers' compensation insurance and CONTRACTOR'S covenant to indemnify CITY, CONTRACTOR shall obtain and furnish to CITY the following insurance policies covering the PROJECT. - A. General Liability Insurance. A policy of general public liability insurance, including motor vehicle coverage. Said policy shall indemnify CITY, its officers, agents and employees, while acting within the scope of their duties, against any and all claims arising out of or in connection with the PROJECT, and shall provide coverage in not less than the following amount: combined single limit bodily injury and property damage, including products, completed operations liability and blanket 5 contractual liability, of $1,000,000 per occurrence. If coverage is provided under a form which includes a designated general aggregate limit, the aggregate limit must be no less than $1,000,000. Said policy shall name CITY, its officers and employees as Additional Insureds, and shall specifically provide that any other insurance coverage which may be applicable to the PROJECT shall be deemed excess coverage and that CONTRACTOR'S insurance shall be primary. B. Professional Liability Insurance. Requirement waived by City Council 4/21/97 11. CERTIFICATES OF INSURANCE Prior to commencing performance of the work hereunder, CONTRACTOR shall furnish to CITY certificates of insurance subject to approval of the City Attorney evidencing the foregoing insurance coverages as required by this Agreement; said certificates shall provide the name and policy number of each carrier and policy, and shall state that the policy is currently in force and shall promise to provide that such policies will not be canceled or modified without thirty (30) days prior written notice to CITY. CONTRACTOR shall maintain the foregoing insurance coverages in force until the work under this Agreement is fully completed and accepted by CITY. The requirement for carrying the foregoing insurance coverages shall not derogate from the provisions for indemnification of CITY by CONTRACTOR under this Agreement. CITY or its representative shall at all times have the right to demand the original or a copy of all said policies of insurance. CONTRACTOR shall r pay, in a prompt and timely manner, the premiums on all insurance hereinabove required. 12. INDEPENDENT CONTRACTOR CONTRACTOR is, and shall be, acting at all times in the performance of this Agreement as an independent contractor. CONTRACTOR shall secure at its expense, and be responsible for any and all payments of all taxes, social security, state disability insurance compensation, unemployment compensation and other payroll deductions for CONTRACTOR and its officers, agents and employees and all business licenses, if any, in connection with the services to be performed hereunder. 13. TERMINATION OF AGREEMENT All work required hereunder shall be performed in a good and workmanlike manner. CITY may terminate CONTRACTOR'S services hereunder at any time with or without cause, and whether or not PROJECT is fully complete. Any termination of this Agreement by CITY shall be made in writing through the Director of Administrative Services, notice of which shall be delivered to CONTRACTOR as provided herein. 14. ASSIGNMENT AND SUBCONTRACTING This Agreement is a personal service contract and the supervisory work hereunder shall not be delegated by CONTRACTOR to any other person or entity without the consent of CITY. 7 15. COPYRIGHTS/PATENTS CITY shall own all rights to any patent or copyright on any work, item or material produced as a result of this Agreement. 16. CITY EMPLOYEES AND OFFICIALS CONTRACTOR shall employ no CITY official nor any regular CITY employee in the work performed pursuant to this Agreement. No officer or employee of CITY shall have any financial interest in this Agreement in violation of the applicable provisions of the California Government Code. 17. NOTICES Any notices or special instructions required to be given in writing under this Agreement shall be given either by personal delivery to CONTRACTOR'S agent (as designated in Section I herein above) or to CITY'S Director of Administrative Services as the situation shall warrant, or by enclosing the same in a sealed envelope, postage prepaid, and depositing the same in the United States Postal Services, addressed as follows: TO CITY: Mr. Robert Franz Director of Administrative Services City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 E:3 TO CONTRACTOR: Mr. Charles Schembri Regional Vice President Howard Schultz & Associates 23861 El Toro Road #600 Lake Forest, CA 92630 18. IMMIGRATION CONTRACTOR shall be responsible for full compliance with the immigration and naturalization laws of the United States and shall, in particular, comply with the provisions of the United States Code regarding employment verification. 19. LEGAL SERVICES SUBCONTRACTING PROHIBITED CONTRACTOR and CITY agree that CITY is not liable for payment of any subcontractor work involving legal services, and that such legal services are expressly outside the scope of services contemplated hereunder. CONTRACTOR understands that pursuant to Huntington Beach City Charter § 309, the City Attorney is the exclusive legal counsel for CITY; and CITY shall not be liable for payment of any legal services expenses incurred by CONTRACTOR. Rest of page intentionally left blank W 20. ENTIRETY The foregoing, and Exhibit "A" attached hereto, set forth the entire Agreement between the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by and through their authorized officers the day, month and year first above written. CONTRACTOR rl e-S C5C'k .ntibV-i (print name) Its: (circle one) Chairman/Pres (den:tJV!ice resident By: (print name) hief F Its: (circle one) SecretaryFinancial Asst. Secretary -Treasurer REVIEWED AND APPROVED: c_"� Citdmin!§sjta,tor G�-- 10 CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California xt*4 ,1l.�0 Mayor ATTEST: City Clerk y�ay�97 APPROVED AS TO FORM: S��' City Attomey IN-l-TA"ItD A ID ROVED: hector of Ad 'nistrative Se ices howard schultz & associates 23861 el toro road • suite 600 • lake forest, California 92630 - (714) 588-2371 fax (714) 588-2372 pacific southwest region charles schembri, regional vice president January 9, 1997 Robert Sedlak, Principal Accountant City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Dear Mr. Sedlak: Thank you for the interest you recently expressed in our cost recovery accounts payable audit services. For your reference I have enclosed some information about our company and services that includes the following: • A general company brochure, which describes our mainline accounts payable audit program , • A smaller green brochure that describes our vendor statement audit specialty area, • A white brochure that describes our real property lease expense audit specialty area, and • An article reprinted from the Wall Street Journal that was authored by our founder and CEO, Howard Schultz, about our business, as well as • An abbreviated client listing. Howard Schultz & Associates, is the leading provider of cost recovery accounts payable auditing services in the World today. in our audits we scour all of your paper records and electronic media for evidences of overcharges, incorrect pricing, hidden credits, duplicate payments, additional discount opportunities, rebates, freight overcharges and more. We currently serve over 1500 clients in 15 countries. We provide our cost recovery audit services exclusively on a contingency fee basis. That is, we only get paid if we are successful in recovering overpayments for our clients; and then it is a competitive percentage of the amounts recovered. Even when we do not make significant recoveries for our clients, they still benefit by receiving a professional third party review and evaluation of their systems and payment procedures in a formal report to management presented at the conclusion of each audit. We look forward to meeting you on Tuesday, January 28th, for our presentation at your office. Sincerely, C" Sc"* Charles Schembri Enclosures accounts payable audit specialists executive offices: 9241 LBJ freeway • dallas, texas 75243 Abbreviated Client Listing Howard Schultz & Associates Stanislaus County, CA Sam's Club Loyola University Target Stores Mt. Sinai Hospital J.C. Penny Aerojet General Home Depot Phillips Petroleum Nordstroms Exxon Circuit City Levi Strauss & Company Neiman Marcus Merisel Company K-Mart .Tandy Corporation Foleys PETsMART The Kroger Company McKesson Drugs Lucky's Supermarkets Foxmeyer Drug Food 4 Less Skaggs Companies Albertsons Hilton Hotels, UK Ralphs Grocery Marriott Corporation John Deere International Game Technology Zellerbach Corporation ACCOUNTS PAYABLE AUDIT AGREEMENT This Audit Agreement (Agreement) dated the_2f A day of , 1997, entered into in Phoenix, Arizona, by and between the City of Huntin n Beac City) and Howard Schultz & Associates (HS&A) is as follows: 1. Scope: Howard Schultz & Associates (HS&A) will have the exclusive first outside audit review of the Accounts Payable records of City for the audit years 1995 and 1996. The audit shall include a Vendor Statement Review, and a Duplicate Payment and Mispay Review from an electronic data download to be made available by City. It also may include a review of all other paper records and files related to purchasing and payments that City may make available for HS&A's inspection and analysis. 2. Recovery Claims: Where HS&A auditors find overpayments, they will prepare chargebacks (recovery claims) on City forms, attach supporting documentation, and submit the charge - backs to City for approval, mailing and deduction from vendor remittances. City will have the full right to reject or cancel any chargeback written at any time. 3. Confidential Information: All information, including vendor terms and agreements, of City will be treated and protected by HS&A as confidential and privileged information. 4. Costs and Fees: There shall be no costs, expenses or other liabilities to City other than a percentage of the overpayments that are recovered as a result of HS&A's efforts, either through deduction form vendor payments, or by payment received by City directly from the vendor. The fee payable to HS&A for each audit year will be 39% of total net recoveries received by City. Net recoveries are defined as gross recovery claim totals, less any cancellations by either HS&A or City, and any uncollectable claims. 5. Payment: HS&A's audit fees shall be billed and paid as follows: HS&A will present City with a request for payment of fees due on a monthly basis beginning not earlier than 120 days after the commencement of the audit. Each monthly payment request will include all chargeback / recovery claims submitted to City for processing 90 days or more prior to the date of the request, net of any claims canceled by either HS&A or City, since the date of the last payment request. Payment shall be due within 15 days of receipt of the request by City. 6. Guaranty: HS&A will complete each annual audit as stipulated above to City's satisfaction. City shall notify HS&A's Regional Vice President should any problem develop. HS&A's Regional Vice President shall immediately take the appropriate action to remedy the problem to City's complete satisfaction. This Agreement will remain in effect as long as HS&A meets this requirement. Accounts Payable Audit Agreement (continued) 7. Management Report: HS&A will provide a detailed Management Report at the conclusion of each annual audit, which will include a breakdown of all claims by vendor and type of claim, and recommendations for any improvements needed in City's payment and control systems and procedures, to correct any significant problems or deficiencies its auditors identify in the course of conducting the audit. 8. Post Audit Assistance: HS&A will provide post audit assistance on vendor inquiries and other matters resulting from the audits, to the extent needed or desired by City. 9. Termination: Not withstanding the provisions of paragraph 6 above, the parties agree that this Agreement may be terminated by either party at any time with at least thirty days advance notice given by the terminating party. By: 1341411, /Zt Charles Schembri Title: Regional Vice President For: Howard Schultz & Associates Pacific Southwest Re-gion Date: �y howard schultz & associates slip 7402 w. detroit street, suite 180 • chandler, az. 86226 • (602) 940-7279 fax (602) 940-4166 pacific southwest region January 29, 1997 ,.i Robert Sedlak, Principal Accountant City of Huntington Beach ;? 2000 Main Street Huntington Beach, CA 92648 Dear Mr. Sedlak: Thank you very much for meeting with us yesterday to discuss Howard Schultz & Associates' cost recovery accounts payable audit services. We are extremely pleased to have the opportunity to present the City of Huntington Beach with our proposal to conduct an audit of its payments for the years 1995 and 1996. We understand that the fee for these services will be a very important factor in your selection process. We are confident that our bid of 39% of the actual net cash recoveries that we affect for the City is very competitive. However, whether or not our fee proves to be the lowest of the three bidders from which you are accepting proposals, we hope that you will keep in mind these other important factors regarding our proposal: • Howard Schultz & Associates serves more clients with this service, by a great margin, than any other company in the World. We feel that our extensive experience in this field will help us net greater recoveries for the City of Huntington Beach than any other firm in our field. • Our experience also better equips us to offer you and your staff constructive recommendations regarding your payment procedures and control systems, which we include in our Management Report at the end of the audit, than any of our competitors. This will help you correct any problem areas that we detect, and could save the City significant dollars in future years. • Our proposed lead Audit Associate for your audit, Jim Callos, is a long time resident of Huntington Beach, who has raised his family in the City and has been very active in civic and community affairs there for many years. Because I believe you indicated that we needed to submit three copies of our proposal, I have enclosed two additional copies to add to the one that we left with you at our meeting. I have also enclosed an additional company brochure to supplement the two that we left with you yesterday. Please let me know if we need to complete any additional paperwork or forms, in order to officially conclude the submission of our proposal. I look forward to following up with you in a few weeks to check on the status of our proposal. Sincerel ZIM James M. Garth Vice President Marketing Enclosures accounts payable audit specialists executive offices: 9241 LBJ freeway • dallas, texas 75243 MAR-26-1997 16:22 TRI COU',!__':�+�C_'���r/ �� 818 223 8181 P. n ylerc n n y .rn7 ! If` r "r k a -I r�i�rt Bpi ��DI 1"'!� >' 00, # ® ❑ c y , b�' �4 r11 Ni I Ilr }' _,rLLta:�l�.''.�� i0iiceR I7. 4 SUED AS A MATTr~�i ., INFORMATION ONLY VID UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE N, a-:`C`reND OR ALTER THE COVERAGE AFFORDED BY THE Td Cowq Immance CaWabasas M6i Craftsman Road #1 a' PANIES AFFORDING COVERAGE Ca(abaaa~a CA 91302 JJJ� _relli a "rs Elm Ins. Co. LIM';Y norl! Union Ins. Ca. Howard jScfiuftz & Assodos Of me PSw 2=1 El Tom Road Su10® 600 __......--- •.--- _ Lake crest CA 9M fHAsI {b BEL INDICATF;p, NOTNTHSTANOING ANY REQUIREMENT, TERM OR WNGr' CERTIFICATE MAY BE 155UEDi OR MAY PERTAIN, THE INSURANCE AFC^' EXCLUSIONS AND CONDITIONS OF SUCH POUCIES. UMITS SHOWN TYPE OF IN5URANCE POUCY INUMUR .R' GENUM LMILIiy FALQ03211 A — j(—��; COMMERCIAI GENERAL UA ury CLANS MADE x OCCUR, &NER'S & CONTRACTOR'S PROT. �AYfOY091LJE LJABILTTY ANY AUTO A110WNED AUTOS -, S�HEOULED AUTOS HIRED AUTOS NON -GINNED AUTOS -. a RAGE UABIUTY I U(CEss UABILT[ r ` _. ... CADZ54576 X UMBRELLA FORM OTHER THAN UMBRELLA FORM WORKERS OOYPENSAT*N AND EAWLDYEA9 UABIIifY OTMER I THE PSW 5159 EDISON AVENUE, SUITE 8, CHINO, CA 9171a 41I���W;Y;°�jTiM da�4\.cli•i7{W'L ��wl f' il�{ Ada .1a�Uct NAMED ABOVE FO�i E F �1 J�TfKV- H R DOCUMENT WITH RESPECT TO WHICH THIS u K:' i I;DED HEREIN IS SUBJECT TO ALL THE TERMS, r�7Ll;_ In C�IMS. Gt : u'LlGY EXPIRATION um" DATE iMIdIODlM fJ5l'. 05)06J97 GENERAL AGGREGATE ,S 2 000 q00 PRODUCTS•COMPlOP p(}p. $ 2, 00q, 000 PERSONA✓i JUpY —.. L aDV. xJ .--.—N___...... SACK oCCuaRENCE-- diAe D6MAGE lAmi one fire) --- s - ti 00 , 000 MEP. EXPENSE Any a{e psrsarrj i8 ---- 5 , 000 COMNINED SINGLE $ LIMIT 8001L`f INJURY (Per person) S ' eODll`.' INJURY __--------_- _.--------_ $ (Per nwang PROPEATY DAMAGE S 0`s L 05?06(97 EACH 000uRRENCE�— is _ _5.000,90q WG,;JGLlS'L�wX STATUTORY UMITS EACH ACCIDENT $ DISEASE _ WLkC U" -. Mrr I-$ ----- DISEASE - EACN EMPLOIEE - iS--- SPECT TO: HCJ,NAW SCHULTZ & ASSOCIATES OF '-' mt��`•�%p;�rf:� f�i�°TM'L;y,, '3 )LO ,� ^+50 E�OES�FIB a�IL�I C FOR �J �AT10 1 Q`EOF, THE ISSUING COMPANY WILL EN XX)(XXXXX NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE CITY OF HUNTINGTON BEACH ITS 4hdFIS & EMPLOYEES M MAIN STREET sLJ..: VmXXXXXXXXXXX HUNTINGTON BEACH CA 9m ' En 'a " t;N PAYMENT OF PREMIUM ;s .,.. Don Lw6s ��'n^��ni R'- to r r , a � � :.-• -r_ - et r �'n � { I ►7 MAR-26-1997 10:28 TRI CCU�I NCE 818 223 8181 P.03 POL�CYNUMSER: :ALQ03Z11 7 (/,7,,kU.MMERC1A1-G- ERALLIABILITY HOW,FDI SCHULTZ & ASSCCIATFS OF THE FS: E� THIS EN®ORSEMENT CHANT" A Qj,` " " J i _EASE D IT CAREFULLY. . ADDITIONAL INS"` t � RSr LESSEES or CONTI' A) Thisiendorsement modifies insurance provic ii,e fu" COMMERCIAL GENERAL LIABILITY ' „ PAR _ Name of Person or Organization (Addition: Location of CITY of HUNTINGTON BEACH Covered Operations 1TS I OFFICERS & EMFLOY 'dS 200( mAiN STREET HWtIrCTON BEACH CA 92648 Premium 13- Advance Premium Bod�ly Injury and Property Damage liability Cost S1(: u, 1 (If no entry appears above, information requ as applicable to this endorsement.) 1, 1�11­10 IS AN INSURED (Section 11) is 2m,- include as an insured the person or org (called "additional insured") shown in th Ole but only with respect to liability arisir,. b. "Your work" for the additional inSi the location designated above, or 8. Acts or omissions of the additional i in connection with their general su of "your work" at the location sh Schedule. 2. With respect to the insurance afforded tl`,,_ tionai insureds; the following additional p, apply. 14. None of the exclusions under Ccv except exclusions (a), (d), (e), (f), and (m), apply to this insurance_ �. AdditionalExclusions. This insur not apply to: (1) "Bodily injury" or "property for which the additional insuro obligated to pay damages by the assumption of liability in a c: I agreement. This exclusion does i to liability for damagesthat the insured(s) would have in the a` the contract or agreement. (2) "Bodily injury" or "property occurring after: i i CG 20 09 11 85 Copyright, i A6 "p-Mium $ Jplet ;dorsement will be shown in the Declarations (a) All work on the project (other than service, maintenance, or repairs) to be performed by or on behalf of the additional insured(s) at the site of the covered operations has been com- pleted; or (b) That portion of "your work" out of which the injury or damage arises has been put to its intended use by any person or organization other than an- other contractor or subcontractor engaged in performing operations for a principal as a part of the same project. "Bodily injury" or "property damage" arising out of any act or omission of the additional insuted(s) or any of their em- ployees, other.than the general supervi- sion of work performed for the additional insureds) by you. "Property damage" to: (a) Property owned, used or occupied by or rented to the additional insured(s); (b) Property in the care, custody, or con- trol of the; additional insured(s) or over which the additional insured(s) are for any:, purpose exercising phys- ical controll; or (c) "Your work" for the additional in- sured(s). 3rvic_ inc_, 1984 0 TOTAL P.03 MAR-26-1997 I6:23 TR I CCU -: - 1 JRANCE Gle 223 elel P.03 � -- I- POLICY NUMBER; FALW3211 MERCIAL GENERAL LIABILI HOWARD §CHULTZ & A$-010CIATES OF THE FSI�� 44 (IUW04��� C' --,'.-.EASE READ IT CARF-14LY.AB; 1117 THIS ENDORSEMENT CHANGt-..­ '17RS LESSEES or ADD ITI 0 N AL I N S L C0NTR,-A)­:_' I This endorsement modifies insurance provide,,., �'h� f o i COMMERCIAL GENERAL LIABILITY CARZ. Nam6of Person or Organization (Additionall Location of Covered Operations CITY OF HUNTINGTON BEACH TTS OFFICERS & "IPLOYEES 2000MAIN STRES7 HUNTING -MN BEACH CA 92648 Premium Ba_ Advance Premium Elodll� Injury and Propdrty Damage Liability Cost 10"', -,)5Z) $ $ (if noentry appears above, information requi;li. 1.r3dorsernent will be shown in the Declarations as applicable to this endorsement.) 1. WHO IS AN INSURED (Section 11) is aMp,.­ (a) All work on the project (other than include as an insured the person or orga.- service, maintenance, or repairs) to Galled "additional insured") shown in the be performed by or on behalf of the ufe but only with respect W liability arisim� , additional insured(s) at the site of the A! "Your work!' for the additional jnsur covered operations has been com- pleted, or the location designated above, or B Acts or omissions of the additional in: (b) That portion of "your work" out of in connection with their general sur,�. which the injury or damage arises has of "your work" at the location showc been put to its intended use by any person or organization other than an - Schedule, 2. V'th respect to the insurance afforded th(!.. other contractor or subcontractor engaged in performing operations for titonal insureds, the following additional prr: `.- a principal as a part of the same apply: project. W. None of the exclusions under Coin Bodily injury" or "property damage" i except exclusions (a), (6), (e), (f), arising out of any act or omission of the and (m). apply to this insurance. additional insured(s) or any of their ern- B. Additional Exclusions. This insurw,­.. Rloyees. other than the general- supervi- not apply to, slon of work performed for the additional (1) "Bodily injury" or "property insured(s) by you - for which the additional insure ;. 1"property damage" to: obligated to pay damages by n�- (a) Property owned, used or occupied by the assumption of liability in a con, or rented to the additional insured(5): agreement. This exclusion does to liability for damages that the aci (b) Property in the care, custody, or con- insured(s) would have in the ab-. trot of the'additional insureds) or over which' the additional insured(s) the contract or agreement. are for any: purpose exercising phys- (2) "Bodily injury" or "property cv� Ical control; or occurring after: (c) "Your work" for the additional in- sured(s). CC 2o 09 1185 Copyright, i Inc., 1984 9 TOTAL P.03 To: Joe Barron, City Attorney's Office From: Robert Sedlak, Principal Accountant Subject: Howard Schultz and Associates Contract Date: 3/25197 Attached is a fax from Howard Schultz and Associates regarding the liability and workers compensation insurance. If you concur that liability insurance is not applicable, please get the appropriate waivers. Call me at X5907 if you have questions. J,r �� a(, (/:T� 6-1 A I ✓ dc'77 4 4� -7:;> , --, - 3-2S-1997 3:15PM FROM HSA—PS',i-� 66 P. 3 howard sohul#z AAOFM & ass, 7402 w. detroit s- �t ,its; 18C ., c'—Ia Idler, az. 86226 + (602) 940-7279 fax (602) 940-4166 pacific southwest region March 25, 1997 Robert J. Sedlak, Jr., Principal AccowitT City of Huntington Beach P.O, Box 190 Huntington Beach, CA 92648 Re: Insurance Requirements .for Ar( - ,y*le A zc I (Professional Services Contract) Dear Mr. Sedlak: As you suggested, I spoke to Christi M -,. : your a? si,: Management office about the standard insurance requirements contained in the A ofessior a? Services Contract form that you sent us for signing; as they relate to the nature xsitress .; rr, es and the legal form of our company organization. For your information, Howard Schultz ` ;iat�,s is an u5sociation of independent contractors. All of our professional auditors are cor he cor - x airy itself has no employees, however in many cases our audit centers have cler ' )yees tl are fired by, and are the responsibility of, the contractors themselves. Our Regional Vice President, Charles' < who is .�sponsible for the assignment and execution of our anticipated audit enga, _ vity1 the City of Huntington Beach, has assigned the audit to our Chino Audit Center, under �;lion of o,,Yr Lead Audit Associate, Jim Callos, whom we previously indicated is a long time of lluntington Beach. Mr. Callos and the Chino Audit Center employ several clerical er which are all supplied by a temporary employemt agency. We have requested that a Cer� fa.sur%ncc-. naming the City of Huntington Beach as an "also insured party" for Workers CoJon cov G PTO, lie seat to your attention as soon as possible by this employment agency. The insurance information form that yo form indicates that the city has a Declav •. certify the fact that we have no employ,: Compensation coverage. I spoke to Mi - she referred nie to Jennifer McGraf to `.a matter- tits. McCraf is apparently out this matter in her stead. Mr. Barron is.,( Declaration of Non -employee Status f( yIlrith tl-, ;,reposed Professional Services Contract TonT� 1i�'oyee Status form that we can sign to e there. t e not required to carry Workers -YZa abo, -s--nding us one of these forms to sign, but dLomty'S office for further discussion on, the of a' e:'iocl, so Joseph Barron talked to me about '-I)at he s :°.s no problem with our signing the ;u of pf;,„"icing the requested Workers Compensation accour Rio a°t ;!';: t I tests executive otfics- . - Ir �,� �� =, ullaS, texas 75243 3-25-1997 3 : 14PM FROM HSA—PS"N _�i7,,; `,_. = ^ 1 66 P. 2 Certificate. He told me in our converszr¢ :: ,f ti u; ,,,sterday, that he would send us the form to sign. I also discussed the requirement for Liability' Coverage with Mr. Barron. This insurance is commonly known as Error- t::i " taussions ;overage. We do not carry this coverage, because we do not provide advice or se :> > < ;; can Jj - meartirrgful degree of professional liability with them as other professionai:: do, suoAl : s accounting firms, attorneys, architects and engineers. When we identify error_; .. ;rs. ;ices tl-iaaOi.r'- clients have paid, we simply assist in the processing of a chargeback, or in scF, 3c c;:, -S a r; qLl �St xor repayment, from our clients' vendors. Our clients maintain full discretionary <;r::# o of the ch-kg-,-.back at all times, so that they can cancel any chargeback (recovery claim) that p'r4 t= Esc to tht r , ,at any time. If we make an error in our proposed chargeback, either we or our <'.'ts t pan simthe chargeback. Our clients do not incur any potential liability from follovi; %i a chargeback that we file is, valid, it is processed and deducted by our client r.. t' act loo .Vledged by our client's vendor through its acceptance of the deduction from curre _ , mitt,::, :s clue. If it is invalid or erroneous, the vendor will challenge the chargeback, ;: ' . � we or o fir client will cancel the claim and reverse the chargeback. We do not provide lei:! to our clients as attorneys do; we do not produce audited financial statements for our 'IYU relied i pon by third parties as public accounting firms do; we do not design or supervise of wilding projects as architects and engineers do; and therefore we should .:kr ulred to provide insurance coverage for a risk that does not exist in the performance and s�- 7r,- tar servi.;;as as a cost recovery accounts payable auditing company. By copy of this Iett lac 3:. ve mould Ke to request a waiver of this particular- requirement for our- a i? �;;n� ee. .pith the City of Huntington Beach. I discussed this waiver with Mr. Barron agrees the coverage is not needed in this case, and that he will assist in the processiziu . -%fe. , if izaitiate the request. He suggested that he will have more freedom to process the lboui additional levels of approval and review, if he receives the request by tomorrow, due tc i ;!i',o Lie Implemented I believe on Thursday of this week. He told me that you would aii hint to .iitiate the request. I told him that I would fax this letter to you with a cope ?+ orde r � > cxpedite the haridling of this particular issue. I will send the hard copy by 1~eo - ,-css for ;)-w records, along with the signature page of the Contract. We are confident that these administrat --,is can 1 resolved to satisfy both the City of Huntington Beach and Howard Schultz ,iztes. ; 'R look forward to serving you with a productive and illuminating cost recov. F1cas� v R ine if you would like to discuss any of these insurance issues further. Sincerely. James M. Garth Vice president Marketing cc: Joseph Barron, City Attorney's O%_ howard schultz o & associates 7402 w. detroit street, suite 180 • chandler, az. 85226 • (602) 940-7279 fax (602) 940-4166 pacific southwest region March 25, 1997 Robert J. Sedlak, Jr., Principal Accountant City of Huntington Beach P.O. Box 190 Huntington Beach, CA 92648 Re: Insurance Requirements for Accounts Payable Audit (Professional Services Contract) Dear Mr. Sedlak: As you suggested, I spoke to Christi Mendoza in your Risk Management office about the standard insurance requirements contained in the city's Professional Services Contract form that you sent us for signing, as they relate to the nature of our business services and the legal form of our company organization. For your information, Howard Schultz & Associates is an association of independent contractors. All of our professional auditors are contractors. The company itself has no employees, however in many cases our audit centers have clerical employees that are hired by, and are the responsibility of, the contractors themselves. Our Regional Vice President, Charles Schembri, who is responsible for the assignment and execution of our anticipated audit engagement with the City of Huntington Beach, has assigned the audit to our Chino Audit Center, :.,rider the direction of our Lead Audit Associate, Jim Callos, whom we previously indicated is a 1„ ux time resident of Huntington Beach. Mr. Callos and the Chino Audit Center employ several clerical employees, which are all supplied by a temporary employemt agency. We have requested that a Certificate of Insurance naming the City of Huntington Beach as an "also insured party" for Workers Compensation coverage, be sent to your attention as soon as possible by this employment agency. The insurance information form that you sent us with the proposed Professional Services Contract form indicates that the city has a Declaration of Non -employee Status form that we can sign to certify the fact that we have no employees, and are therefore not required to carry Workers Compensation coverage. I spoke to Ms. Mendoza about sending us one of these forms to sign, but she referred me to Jennifer McGraf in the City Attorney's office for further discussion on the matter. Ms. McGraf is apparently out for an indefinite period, so Joseph Barron talked to me about this matter in her stead. Mr. Barron indicated that he sees no problem with our signing the Declaration of Non -employee Status form in lieu of providing the requested Workers Compensation accounts payable audit specialists executive offices; 9241 LBJ freeway • dallas, texas 75243 Certificate. He told me in our conversation on this matter yesterday, that he would send us the form to sign. I also discussed the requirement for Professional Liability Coverage with Mr. Barron. This insurance is commonly known as Errors and Omissions coverage. We do not carry this coverage, because we do not provide advice or services that carry any meaningful degree of professional liability with them as other professional services do, such as accounting firms, attorneys, architects and engineers. When we identify errors in invoices that our clients have paid, we simply assist in the processing of a chargeback, or in some cases a request for repayment, from our clients' vendors. Our clients maintain full discretionary control of the chargeback at all times, so that they can cancel any chargeback (recovery claim) that we propose to them at any time. If we make an error in our proposed chargeback, either %ve or our clients can simply cancel the chargeback. Our clients do not incur any potential liability from following our advice. If a chargeback that we file is valid, it is processed and deducted by our client, and is tacitly acknowledged by our client's vendor through its acceptance of the deduction from current period remittances due. If it is invalid or erroneous, the vendor will challenge the chargeback, and either we or our client will cancel the claim and reverse the chargeback. We do not provide legal advice to our clients as attorneys do; we do not produce audited financial statements for our clients that are relied upon by third parties as public accounting firms do; we do not design or supervise the construction of building projects as architects and engineers do; and therefore we should not be required to provide insurance coverage for a risk that does not exist in the performance and scope of our services as a cost recovery accounts payable auditing company. By copy of this letter to Mr. Barron, we would like to request a waiver of this particular requirement for our audit engagement with the City of Huntington Beach. I discussed this waiver with Mr. Barron and he agrees that the coverage is not needed in this case, and that he will assist in the processing of a waiver, if you initiate the request. He suggested that he will have more freedom to process the waiver without additional levels of approval and review, if he receives the request by tomorrow, due to new policies to be implemented I believe on Thursday of this week. He told me that you would need to call him to initiate the request. I told him that I would fax this letter to you with a copy to him in order to expedite the handling of this particular issue. I will send the hard copy by Federal Express for your records, along with the signature page of the Contract. We are confident that these administrative matters can be resolved to satisfy both the City of Huntington Beach and Howard Schultz & Associates. We look forward to serving you with a productive and illuminating cost recovery audit. Please call me if you would like to discuss any of these insurance issues further. Sincerely, James M. Garth Vice President Marketing cc: Joseph Barron, City Attorney's Office