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<br />E. Notify Contractor <br />If the Application is incomplete, the consultant will request, in writing from the Contractor <br />the necessary additional information. <br />DETAILED REVIEW OF COMPENSATION ADJUSTMENT APPLICATION <br />The Contractor is allowed to recover actual, reasonable and necessary expenses that are <br />incurred in the normal course of its business and earn a profit in accordance with the <br />Agreement. The compensation review process is intended to allow the SBWMA to <br />determine whether the Contractor's Application meets this "actual, reasonable and <br />necessary" standard. <br />Application Review Process <br />The SBWMA Consultant will take the following steps during its review of the Contractor's <br />Application. <br />A. Rate Application Reconciliation <br />The SBWMA Consultant will test the Contractor's reconciliation of the Application to the <br />Contractor's audited financial statements. <br />B. Review of Revenues <br />The SBWMA Consultant will review the jurisdiction, historical, actual and forecasted <br />revenues and calculate current revenues based on then current customer counts and rates. <br />Any unusual trend will be identified and reasonable explanations obtained from the <br />Contractor's management. Any adjustments will be identified and documented. <br />C. Review of Expenses <br />Based on the financial audit performed in accordance with Section 8.02 of the Agreement <br />of Solid Waste, Recyclable Materials and Plant Materials Collection Services, the SBWMA <br />Consultant will review historical expenses to determine that they have actually been <br />incurred, are necessary, and reasonable. The SBWMA Consultant shall select a judgmental <br />sample of transactions related to expense items for testing each year. The selected items <br />should be tested to ensure that they are properly supported by invoices, time cards, dump <br />tickets, recyclable processing invoices, or other appropriate source documents. The <br />Contractor will assemble the source documents of the selected items for the SBWMA <br />Consultant's review. <br />SBWMA Compensation Adjustment Guidelines June 6, 2000 <br />PAGE 20 <br />