HomeMy WebLinkAboutDoc 039 - Amend Humane Soc Redmond Loan AgrmtDeschutes County Board of Commissioners
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AGENDA REQUEST & STAFF REPORT
For Board Business Meeting of March 12, 2014
DATE: March 11, 2014
FROM: Mark Pilliod, Legal Counsel
TITLE OF AGENDA ITEM:
FIRST AMENDMENT TO REHABILITATION LOAN AGREEMENT, Document No. 2014-039; and
SALE AGREEMENT between Deschutes County and Central Oregon Community College, Document
No. 2014-152
PUBLIC HEARING ON THIS DATE? No
BACKGROUND AND POLICY IMPLICATIONS:
Deschutes County and the Humane Society of Redmond (now known as BrightSide) entered into a
Rehabilitation Loan Agreement in 2008 under which the County helped BrightSide reorganize by
negotiating and paying off certain outstanding financial obligations. This included the County lending
Brightside approximately $1 million, extending a line of credit, and, in order to secure the same,
accepting a deed to the real property and shelter facilities.
Recently, BrightSide negotiated the sale of the "Event Center" to COCC-Cascades to enable the college
to establish a veterinary tech program. This transaction requires the County's cooperation, as owner of
the property. This transaction will also require a partition of the parcel, to legally separate the portion of
the lot on which the Event Center is located.
The Rehabilitation Loan Agreement anticipates the possible sale of the Event Center but requires the
County to apply the proceeds (after deducting the costs and expenses involved in the transaction) to
BrightSide's outstanding loan balance, now estimated at $650,000. However, BrightSide has asked that
the County not apply all of the proceeds to its outstanding loan, but rather donate to BrightSide a
portion of the net proceeds for its current operational needs.
The County is willing to accommodate BrightSide's request, provided that it agrees to implement
certain changes in operating procedures, which would be recommended by a management consultant
hired by the County.
FISCAL IMPLICATIONS:
Staff estimates that the $300,000 purchase price will be reduced by approximately $40,000 for the costs
involved in the partition and closing the purchase transaction. From the $260,000 net proceeds, the
County would apply $141,000 to outstanding loans. From the balance of $119,000, the County would
apply not more than $7,000 for the cost of a management consultant. After deducting its costs and
expenses, the County would issue a check for the remaining funds to the humane society.
RECOMMENDATION & ACTION REQUESTED:
Approve and sign FIRST AMENDMENT TO REHABILITATION LOAN AGREEMENT, Document
No. 2014-039.
Authorize County Administrator to execute the SALE AGREEMENT, Document No. 2014-152 and to
execute any other documents necessary to close the property transaction with COCC
ATTENDANCE:
Mark Pilliod, Legal Counsel
DISTRIBUTION OF DOCUMENTS:
Property and Facilities
Finance
Humane Society of Redmond, Mark Crose, President
REVIEW 1D
-9(
LEGAL COUNSEL
For Recording Stamp Only
DOCUMENT NO. 2014-039
FIRST AMENDMENT TO REHABILITATION LOAN AGREEMENT -
Document No. 2008-619
PARTIES:
DESCHUTES COUNTY (County), a Political Subdivision of the State of Oregon, and
HUMAN SOCIETY OF REDMOND (HSR), a Nonprofit Oregon Corporation.
RECITALS:
WHEREAS, the Parties entered into a Rehabilitation Loan Agreement dated December
10, 2008 ("Agreement"); and
WHEREAS, in order to secure loans made by the County pursuant to the Agreement,
HSR transferred title to its capital assets to the County, which so long as HSR has outstanding
obligations for those loans, or unless any are sold in accordance with the Agreement, County
continues to hold title thereto; and
WHEREAS, the Agreement identifies several sources of funds which may be available to
repay loans made by the County to HSR, including the sale the Event Center, described below;
and
WHEREAS, the Agreement requires that the County apply the net proceeds of the sale of
HSR assets (owned by the County) first and foremost to pay off the principal and accrued
interest on the several outstanding loans made by the County to HSR; and
WHEREAS, while the Rehabilitation Loan Agreement requires HSR to prepare and
deliver to the County monthly financial statements, these reports have not provided the level of
regularity, detail or accuracy that the County reasonably expected; and
WHEREAS, based upon County concerns over the financial condition of HSR, the
parties have agreed that the County be authorized to select and contract with a professional
management consultant or CPA who would examine the bookkeeping practices of HSR
management, including but not limited to operating revenues and expenses, and prepare a report
and recommendation to County and HSR concerning how HSR might establish better business
practices, maintain more complete and accurate records of HSR's financial condition, more
accurately report its financial condition to the County, all of which would enable HSR to avoid
seeking additional operating capital from the County; and
Page 1 — DOC. NO. 2014 -039 -FIRST AMENDMENT TO REHABILITION LOAN AGREEMENT
WHEREAS, the parties have obtained an appraisal of the market value of the Event
Center, which is Three Hundred Thousand Dollars ($300,000), subject to the costs of partition,
separate utility service and separate metering, and
WHEREAS, HSR has negotiated with Central Oregon Community College (COCC) for
the partition and sale of the Event Center, at the appraised value, which COCC would use to
establish and operate a learning center for its Veterinary Tech Program; and
WHEREAS, currently HSR has outstanding loans to the County that were made pursuant
to the Agreement of approximately Six Hundred Fifty Thousand Dollars ($650,000), which loans
are due and payable in full no later than December 31, 2015; and
WHEREAS, at HSR's request the County is willing to distribute the net proceeds of the
sale of the Event Center in part to reduce the outstanding principal on HSR's loans, but also to
reimburse the County for the cost of the partition and sale, the cost of retaining a management
consultant, and to distribute the remaining funds to HSR to cover current and anticipated
operational needs; and
WHEREAS, the purpose of this First Amendment to Rehabilitation Loan Agreement
Document No. 2008-619 (Amendment) is to modify the Agreement and to set forth the Parties'
agreement with respect to the distribution of proceeds of the sale of the Event Center;
AGREEMENT
NOW, THEREFORE, the Agreement is hereby amended as follows:
Section 1. The County will enter into a Sale Agreement with COCC concerning the
Event Center property, generally described as: a metal clad light industrial type building of
approximately Five Thousand Five Hundred Fifty Six Square Feet (5556), located on the mostly
unimproved portion of the HSR premises north of the animal shelter, on Jackpine Avenue in
Redmond, Oregon. The terms of said Sale Agreement are as follows:
a. COCC will cause to be prepared certain necessary surveys, plans and
applications and present and process the same with the City of Redmond
with the objective of partitioning the HSR facilities into two parcels,
consisting of the Animal Shelter Parcel on one and the Event Center
Parcel on the other. COCC will observe and satisfy any required
conditions imposed by the City of Redmond on the partition approval. As
fee title holder, the County would cooperate with COCC to allow the
submittal of the aforesaid application. The final partition plat shall be
properly recorded.
b. COCC will contract for, secure and install any utility lines or feeds
required for use of the Event Center Parcel outside the boundaries of the
remaining portion of the HSR premises containing the animal shelter,
including without limitation the installation of a waterline and necessary
metering from the City of Redmond water main, and to pay any required
fees in connection therewith.
Page 2 — DOC. NO. 2014 -039 -FIRST AMENDMENT TO REHABILITION LOAN AGREEMENT
c. The County will obtain a title report demonstrating the condition of title to
the Event Center Parcel acceptable to COCC. The County will take
appropriate steps to remove from the title any conditions or encumbrances
identified by COCC as unacceptable.
d. After completion of the above-described partition, satisfaction of any
conditions imposed by the City of Redmond and recording of the partition
plat the County will prepare, submit for COCC's review and acceptance
and tender a fully executed Bargain and Sale Deed over the Event Center
Parcel.
e. COCC will pay the County Three Hundred Thousand Dollars ($300,000)
less the actual costs of the tasks described in paragraphs a and b of this
Section 1.
f. The transaction described in this Section 1 will close in escrow.
g.
The Sale Agreement, Document No. 2014-152 is marked Exhibit A,
attached hereto and incorporated.
Section 2. The County will enter into a Personal Services Contract with a
management consultant, either a CPA or other qualified financial advisor. The scope of work for
such consultant will be as generally described on Exhibit B, attached hereto and incorporated by
reference. The results of the scope of work will be contained in the consultant's report to the
County concerning the financial management and condition of HSR, together with
recommendations on how through the implementation of certain business practices, the same
may be improved. The County shall furnish a copy of the completed report to HSR. The cost of
the consultant services shall not exceed Seven Thousand Dollars ($7,000).
Section 3. Promptly after receiving notice from the County that the consultant,
described in Section 2 immediately above has been retained, HSR management and staff shall
permit said consultant full access to HSR's books and records and otherwise assist and cooperate
with the consultant in promptly and diligently fulfilling its tasks as described in Exhibit A.
Section 4. Upon completion and receipt of the report described in Section 2 above,
HSR shall meet with County representatives and the consultant for the purpose of implementing
recommendations to HSR contained in the consultant's report.
Section 5. Upon completion of tasks described in Sections 1 and 2 of this
Amendment, the County shall distribute the proceeds of the Event Center Parcel sale as follows
and in the following sequence:
a. From the proceeds of the sale of the Event Center Parcel to COCC as
described in Section 1, paragraph e above, the County would retain the
costs of preparing the real property appraisal referred to in the recitals, the
cost of the title report on the Event Center Parcel, any costs associated
with clearing title to the Event Center Parcel, document recording costs
Page 3 — DOC. NO. 2014 -039 -FIRST AMENDMENT TO REHABILITION LOAN AGREEMENT
and any other closing expenses.
b. After deducting the costs and expenses described in this Section 5,
paragraph a immediately above, the County would apply One Hundred
Forty One Thousand Dollars ($141,000) toward the outstanding principal
and accrued interest on HSR's outstanding loans, pursuant to the terms of
the Agreement.
c. After distribution of funds as described in the this Section 5, paragraphs a
and b, County will distribute the balance by check payable to HSR.
Section 6. Section 5.3b of the Agreement is amended to read:
"(b) No later than January 15, 2009, and the 15th day of each consecutive
calendar month thereafter, HSR will deliver to County a written statement
of its financial operations (i.e. a profit and loss statement), prepared on the
accrual basis, for the calendar month next preceding the calendar month
that such statement is to be delivered along with a description, and the
results of, any fundraising activities that took place during that month.
Such statements shall reflect the receipt of any advances made under the
above-mentioned Optional Advance Note during the month subject of
such statement and may be included in the total amount of revenues
reported for that month for purposes of disclosure of the financial results
of operations during that period. The report shall be prepared in
accordance with programs and procedures recommended to HSR in
the consultant report concerning HSR's financial operations, dated
2014 and prepared on behalf of Deschutes County. The contents of
each of these reports will be maintained in strictest confidence by County
to the fullest extent authorized by law and to be used solely for the
purpose of undertaking the actions described in subsection 7.4 below."
Section 7. The distribution by the County to HSR of the proceeds of the sale of the
Event Center Parcel as described in Section 5c may be characterized as a grant and should be
prudently used by HSR to meet its immediate financial obligations. The transactions described
in this Amendment shall be construed as in full compliance with the requirements of the
Agreement with respect to the partition and sale of the Event Center Parcel and the distribution
of proceeds therefrom. Notwithstanding the immediately preceding sentence, under no
circumstances shall this Amendment or the distribution of proceeds from the partition and sale of
the Event Center Parcel be construed as a waiver or release of HSR's liability for the full
payment and satisfaction of the principal and interest owing on loans made by the County
pursuant to the Agreement. Furthermore, the deadline for HSR to fully satisfy its obligations
under the Agreement remains December 31, 2015.
/1/
///
///
Page 4 — DOC. NO. 2014 -039 -FIRST AMENDMENT TO REHABILITION LOAN AGREEMENT
/1/
Section 8. Except as otherwise provided in this Amendment, the terms and
conditions of the Agreement remain in effect.
Dated this
ATTEST:
of , 2014 BOARD OF COUNTY COMMISSIONERS
OF DESCHUTES COUNTY, OREGON
Recording Secretary
TAMMY BANEY, Chair
ANTHONY DEBONE, Vice Chair
ALAN UNGER, Commissioner
HUMANE SOCIETY OF REDMOND
Mark Crose, President
Page 5 — DOC. NO. 2014 -039 -FIRST AMENDMENT TO REHABILITION LOAN AGREEMENT
EXHIBIT A
SALE AGREEMENT
DATE: March 12, 2014
SELLER: DESCHUTES COUNTY, a political subdivision of the STATE OF OREGON
BUYER: CENTRAL OREGON COMMUNITY COLLEGE
RECITAL:
Seller desires to sell to Buyer and Buyer desires to purchase from Seller a portion of that
certain real property with all improvements located on it commonly known as 1355 NE
Hemlock, Redmond, Deschutes, Oregon, referred to as the Brightside Event Center, having the
following legal description (the "Property"):
Partition Plat 2001-29, PT Parcel 2 and PT Parcel 3
(See Exhibit 1 and 2 attached hereto and incorporated by reference herein)
Together with an access easement 50 feet in width as generally described on Exhibit 2
AGREEMENT:
Now, therefore, for valuable consideration, the parties agree as follows:
1. Sale and Purchase. Buyer agrees to purchase the Property from Seller and Seller agrees
to sell the Property to Buyer for the sum of $300,000 less the costs of partition incurred by Buyer
(the "Purchase Price").
2. Payment of Purchase Price. At closing, Buyer shall pay the net purchase price in cash.
3. Closing. Closing shall take place within 30 days of the completion of the property
partition (the "Closing Date"). Each party shall may one-half of the escrow fee.
4. Preliminary Title Report. Within 15 days after full execution of this Agreement, Seller
shall furnish to Buyer a preliminary title report showing the condition of title to the Property,
together with copies of all exceptions listed therein (the "Title Report"). Buyer will have 10 days
from receipt of the Title Report to review the Title Report and to notify Seller, in writing, of
Buyer's disapproval of any exceptions shown in the Title Report. Those exceptions that are not
objected to by Buyer are referred to below as the "Permitted Exceptions." Zoning ordinances,
building restrictions, taxes due and payable for the current tax year, and reservations in federal
patents and state deeds shall be deemed Permitted Exceptions. If Buyer notifies Seller of
Page 1 — SALE AGREEMENT DC #2014-152
FITCH LAW GROUP, PC
210 SW 5TH STREET, SUITE 2
REDMOND, OR 97756
541-316-1588 PHONE
541-316-1943 FAX
disapproval of any exceptions, Seller shall have 15 days after receiving the disapproval notice to
either remove the exceptions or provide Buyer with reasonable assurances of the manner in
which the exceptions will be removed before the transaction closes. If Seller does not remove
the exceptions or provide Buyer with such assurances, Buyer may terminate this Agreement by
written notice to Seller given within 15 days after expiration of such 15 -day period, in which
event the earnest money shall be refunded to Buyer and this Agreement shall be null and void.
5. Conditions. Buyer's obligation to purchase the Property is contingent upon City of
Redmond approval of a partition of the subject property.
6. Deed. On the Closing Date, Seller shall execute and deliver to Buyer a bargain and sale
deed, conveying the Property to Buyer, free and clear of all liens and encumbrances except the
Permitted Exceptions.
7. Prorates. Insurance premiums (if Buyer assumes the existing policy) and other usual
items shall be prorated as of the Closing Date.
8. Possession. Buyer shall be entitled to possession immediately upon closing.
9. Property Included. All built-in appliances, floor coverings, window and door screens,
storm doors and windows, irrigation, plumbing, ventilation, cooling and heating fixtures and
equipment, water heaters, attached electric light fixtures, window coverings, awnings, planted
shrubs, plants and trees, and all fixtures are part of the Property and shall be left on the Property
by Seller.
10. Representations. Buyer represents that it has accepted and executed this Agreement on
the basis of its own examination and personal knowledge of the Property; that Seller and Seller's
agents have made no representations, warranties, or other agreements concerning matters relating
to the Property; that Seller and Seller's agents have made no agreement or promise to alter,
repair, or improve the Property; and that Buyer takes the Property in the condition, known or
unknown, existing at the time of this Agreement, "AS IS."
11. Binding Effect/Assignment Restricted. This Agreement is binding on and will inure to
the benefit of Seller, Buyer, and their respective heirs, legal representatives, successors, and
assigns. Nevertheless, Buyer will not assign its rights under this Agreement without Seller's
prior written consent which consent shall not be unreasonably withheld.
12. Remedies. TIME IS OF THE ESSENCE REGARDING THIS AGREEMENT. If the
conditions described in Section 5 above are satisfied, either party reserves all legal and equitable
remedies if the other party fails to close this transaction.
Page 2 — SALE AGREEMENT DC #2014-152
FITCH LAW GROUP, PC
210 SW 5TH STREET, SUITE 2
REDMOND, OR 97756
541-316-1588 PHONE
541-316-1943 FAX
13. Attorney Fees. In the event action is instituted to enforce any tern of this Agreement,
the prevailing party shall recover from the losing party reasonable attorney fees incurred in such
action as set by the trial court and, in the event of appeal, as set by the appellate courts.
14. Notices. All notices and communications in connection with this Agreement shall be
given in writing and shall be transmitted by certified or registered mail, return receipt requested,
to the appropriate party at the address first set forth below. Any notice so transmitted shall be
deemed effective on the date it is placed in the United States mail, postage prepaid. Either party
may, by written notice, designate a different address for purposes of this Agreement.
Buyer: Central Oregon Community College
c/o Matt McCoy, Vice President of Administration
Boyle Education Center
2600 NW College Way
Bend, OR 97701
Seller: Deschutes County
c/o Susan Ross, Property & Facilities Director
PO Box 6005
Bend, Oregon 97708
15. Entire Agreement. This Agreement sets forth the entire understanding of the parties
with respect to the purchase and sale of the Property. This Agreement supersedes any and all
prior negotiations, discussions, agreements, and understandings between the parties. This
Agreement may not be modified or amended except by a written agreement executed by both
parties.
16. Applicable Law. This Agreement shall be construed, applied, and enforced in
accordance with the laws of the state of Oregon.
17. Acceptance. This Agreement shall be null and void unless accepted by Seller, by Seller's
execution of it, on or before April 15, 2014.
THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A
FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS
SUBJECT TO LAND USE LAWS AND REGULATIONS THAT, IN FARM OR FOREST
ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE
AND THAT LIMIT LAWSUITS AGAINST FARMING OR FOREST PRACTICES, AS
DEFINED IN ORS 30.930, IN ALL ZONES. BEFORE SIGNING OR ACCEPTING THIS
INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE
Page 3 — SALE AGREEMENT DC #2014-152
FITCH LAW GROUP, PC
210 SW 5TH STREET, SUITE 2
REDMOND, OR 97756
541-316-1588 PHONE
541-316-1943 FAX
ABOUT THE PERSON'S RIGHTS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305
TO 195.336 AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007, AND
SECTIONS 2 TO 9 AND 17, CHAPTER 855, OREGON LAWS 2009. BEFORE SIGNING
OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO
THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY
PLANNING DEPARTMENT TO VERIFY THAT THE UNIT OF LAND BEING
TRANSFERRED IS A LAWFULLY ESTABLISHED LOT OR PARCEL, AS DEFINED
IN ORS 92.010 OR 215.010, TO VERIFY THE APPROVED USES OF THE LOT OR
PARCEL, TO VERIFY THE EXISTENCE OF FIRE PROTECTION FOR
STRUCTURES AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING
PROPERTY OWNERS, IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336
AND SECTIONS 5 TO 11, CHAPTER 424, OREGON LAWS 2007, AND SECTIONS 2
TO 9 AND 17 CHAPTER 855, OREGON LAWS 2009.
THE PROPERTY DESCRIBED IN THIS INSTRUMENT IS SUBJECT TO SPECIAL
ASSESSMENT UNDER ORS 358.505.
SELLER: BUYER:
Deschutes County Central Oregon Community College
By: Tom Anderson, County Administrator By: James Middleton
Its: President
Page 4 — SALE AGREEMENT DC #2014-152
FITCH LAW GROUP, PC
210 SW 51H STREET, SUITE 2
REDMOND, OR 97756
541-316-1588 PI-IONE
541-316-1943 FAX
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PAGE F
Exhibit B
Deschutes County - Accounting Procedures
On behalf of BrightSide Animal Center (Humane Society of Redmond)
Purpose: The following procedures have been identified by Deschutes County to support
the ongoing evaluation of financial position of the BrightSide Animal Center (HSR) and
to aid HSR in being thorough and accurate in its financial accounting.
Scope: The most current accounting information for the most recent month and fiscal
year where the accounting has been closed (anticipated being January 31, 2014 and June
30, 2013). It is understood the accounting is on an accrual basis of accounting prepared
through QuickBooks.
Deschutes County will select an independent CPA for applying the procedures, described
below. The CPA will have experience with accounting procedures by a non-profit
organization and their application in a QuickBooks accounting environment.
Compensation to the CPA for services will be fixed in advance (not to exceed) based
upon the scope of work described below. Each element of the stated procedures will be
performed, unless based upon the professional opinion of the CPA that the procedure is
not applicable in the given period. Any significant adjustments to the anticipated
procedures will be approved in advance with Deschutes County. The CPA is to be
selected and paid by Deschutes County. The results will be shared with HSR.
The CPA selection and these procedures will be confirmed by HSR management with the
understanding that HSR Board and management will be responsible for implementation
of any corrective actions and management recommendations coming from the CPA. HSR
management and staff will cooperate with and provide access to its personnel, facilities
and records to complete the requested analysis.
The CPA will not issue an audit, review or compilation opinion on any of the financial
statements. The report will be limited to addressing the procedures below.
Source: The financial statements utilized will be from HSR's QuickBooks accounting
system as prepared for County and HSR management. The statements do not generally
include notes.
Performance of Agreed Upon Procedures: The current Agreed Upon Procedures
engagement shall be performed in accordance with professional standards identified by
the CPA. The sufficiency of the procedures is solely the responsibility of Deschutes
County.
Page 1 - Exhibit B — Deschutes County Accounting Procedures
Agreed Upon Procedures:
1. Gaining an understanding of processes for internal control over revenue from cash
handling at the HSR thrift store and shelter. Develop appropriate recommendations
based upon observations and anticipated/expected controls.
2. Gaining an understanding of monthly and fiscal period closing procedures to assure
accrual accounting is properly developed. Inquiry and review should include (but is
not limited to):
a. Bank reconciliations.
b. Payroll liabilities and payroll taxes (reconcile and determine that they are
current).
c. Assess cutoff procedures for the accrual accounting.
d. Review established chart of accounts and segment reporting setup.
e. CPA's report should include recommended journal entries to correct any
identified accounting issues. Any accounting procedures and practices found
to be deficient should be addressed.
3. Identify any issues with the current accounting presentation that should be addressed.
a. For example, non-recurring non-cash revenues may have been improperly
included in the operational income statements.
4. Analyze and present common financial ratios and analyses for the statements (based
on the CPA's judgment) that would compare them to their peers. Identify any
potential issues.
5. Assist HSR in developing the standard reporting process through QuickBooks for
financial information to be provided to Deschutes County as well as the HSR Board,
including:
a. Comparative balance sheets.
b. Comparative income statements with budget information (YTD and Monthly).
i. With sufficient detail for major programs and expense categories.
c. Cash flow statements.
d. Identifying and providing explanatory comments with statements to point out
important topics.
6. CPA will develop an appropriate agreed upon procedures report summarizing results
of procedures, findings and recommendations.
Page 2 - Exhibit B — Deschutes County Accounting Procedures