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accurate. (Task 2.2) <br />Step 2: Test to verify that service subscribers are billed the correct rate for the level of <br />service provided. (Task 2.3) <br />Step 3: Test to verify that the billed amounts to City residents and businesses, and the <br />corresponding payments received, are properly recorded in the ACI billing and <br />accounting systems. (Task 2.4) <br />Step 4: Test to verify that the franchise fees are calculated correctly, and based on the <br />correct level of recorded revenues. (Task 2.5) <br />In developing the Project Approach for this Task, R3 has anticipated that the City and the ACI <br />will provide access to all required financial and operational records. In the event that access to <br />the records is not granted or the records are unavailable, the testing protocol will be modified to <br />include those records that are available, and the Final Report will indicate the extent to which the <br />scope of testing was limited. In the event that a conclusion regarding the accuracy of the <br />revenues received by the City, or regarding any of the other items tested cannot be reached due <br />to a lack of records, R3 will document this limitation in the Final Report (Task 3). <br />Task 2.1 Sampling Plan <br />After the initial examination of the information and records provided by ACI and the City, R3 <br />will prepare the billing and financial transaction sampling plans ("plans"). In preparing the <br />plans, R3 will perform preliminary "reasonableness" testing to determine a statistically <br />significant sample-size for the billing audits (e.g. number of subscribers or transactions, as <br />appropriate). <br />Task 2.2 Test of Rates and Rate Model <br />The purpose of this test is to verify that annual adjustments to the service rates have been <br />calculated correctly. Due to the fact that rate adjustments are cumulative from year to year, it is <br />important that all rate adjustments since the execution of the franchise agreement be tested for <br />accuracy. <br />R3 will obtain the Consumer Price Index figures from the Bureau of Labor Statistics web-site <br />and recalculate the annual index changes. R3 will also obtain annual tip-fee information and <br />recalculate the annual percentage changes. Using this information, R3 will prepare a fmancial <br />model to recalculate the annual rate adjustments since the execution of the franchise agreement <br />to verify the accuracy of the rates. <br />At the conclusion of these tests, R3 will make a determination of the accuracy of the rates and <br />provide suggestions, as appropriate, to improve the accuracy of the system. <br />Task 2.3 Test of Subscribers <br />The purpose of this test is to allow R3 to determine the extent to which residential and <br />commercial subscribers are billed correctly for the level of service provided, and if billings are <br />consistent with the appropriate rate schedule. The test of subscribers will include the following <br />items: <br />^ A statistically significant sample of residential and commercial subscribers will be <br />selected for the test period. The billing file for each subscriber will be reviewed to verify <br />that the rate charged by ACI corresponds to the level of services provided, and that the <br />billed rate is consistent with the appropriate rate schedule; and <br />Consulting Services Agreement between 3/] 4/2005 <br />City of San Leandro and R3 Consulting Group, Inc. Page 25 of 25 <br />