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Mr. Steven Bocian, Assistant City Manager Page 4 August 7, 2014 We will verify that the financial data, and required forms, are complete and consistent with the Application format and content requirements of the City. We will verify that sufficient documentation, and schedules, are included to support the information provided in the Application. If the City requests us to do so, we will notify PGS whether the Application is "complete" within 30 days of our receipt of the Application using a letter of completeness. We will then conduct a detailed review of the Application. Our review will consist of performing the following steps: Reconcile the Application to audited financial statements (if they are furnished with this Application) Review actual and projected revenue requirements Review actual and projected revenues to determine why they are increasing/decreasing Assess how line items costs compare with prior years Compare year-to-year changes in revenues and costs with the change in the Consumer Price Index (CPI) For allocated costs, review allocation basis for reasonableness • Assess transactions with affiliates Determine if wage rates are consistent with norms Cross-check disposal fees using tonnages and tipping fees Review lease schedules Review depreciation schedules Evaluate planned new equipment purchases Assess the extent of new regulatory requirements (mandatory commercial recycling per AB 341) • Review and verify current and projected profit results Assess the prior year (deficit)/credit carry forward • Review costs to ensure PGS followed cost caps Review operating and performance data for consistency with financial results Develop rate setting adjustments, as necessary. We will follow up with PGS by requesting additional documents, data, or clarification, if necessary. We also will conduct an on-site review of PGS operations to validate that the financial information contained in the Application matches actual PGS operations. We will develop workpaper documentation of our Application review. 2. Provide Assistance Regarding Potential Rate Structures and Adjustment Amounts In this task, we will provide the City with assistance regarding potential rate structures, and adjustment amounts identified in Task 1, to assure consistency with the Franchise Agreement and PGS financial information. We will assist the City with