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also review the allocation statistics to identify any unusual trends and ensure that they are being accumulated and calculated correctly and to identify unusual trends. The SBWMA Consultant should review and test the underlying reports and management systems used to generate these allocation statistics to ensure that the data is consistently recorded and reported. G. Calculation of Operating Ratio Following adjustment of allowed expenses resulting from the SBWMA's Consultant's review, the operating ratio will be calculated in accordance with the Agreement. The consultant should calculate liquidated damages, if any, according to the service thresholds contained in the Agreement and deduct the total from the calculated profit. H. Review of Performance Data The SBWMA Consultant should review operating statistics to gain an understanding of past historical trends as they relate to future expense projections. The SBWMA Consultant should investigate unusual trends to determine their cause and effect on future cost performance. This step is critical to ascertaining the reasonableness of projected costs, because it places these costs in the context of the actual services being provided. I. Determine Surplus/Shortfall-Balancing Account The SBWMA Consultant should identify the surplus due to SBWMA by jurisdiction or the shortfall resulting from the actual expenses for the Prior Year against the actual revenues for the Prior Year (Prior Year surplus/shortfall). The SBWMA Consultant will then project the Current Year surplus or shortfall resulting from the projected current year expenses, against the projected revenues based on the then-current rates (Current Year surplus/ shortfall). The SBWMA Consultant will then determine the Rate Year surplus or shortfall resulting from the forecasted future year expenses, against the projected revenues based on the then-current rates (Future Year surplus/ shortfall). The SBWMA Consultant should then sum the total for the three rate years. Effective for Rate Year 2000, the SBWMA Consultant will calculate interest on the revenue shortfall or surplus and add the amount to the balancing account. Interest will be calculated using the One-Year Treasury Bill Rate from the Federal Reserve Bank as of the last week in October of each year. SBWMA Compensation Adjustment Guidelines June 6, 2000 PAGE 22