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									                     NEW JERSEY DEPARTMENT OF TRANSPORTATION
                                TRENTON, NEW JERSEY

                                                                                               Page 1 of 4

                  CONSULTANT AGREEMENT MODIFICATION
          REVISION OF STANDARD ARTICLES FOR AUDIT REGULATIONS


CONSULTANT                                                 CONSULTANT I.D. NO:

     IN ACCORDANCE WITH STANDARD DEPARTMENT POLICY AND PROCEDURE, THE
CONSULTANT AND THE STATE AGREE TO CHANGES TO THE AGREEMENT(S) AS FOLLOWS:


The Consultant and the State agree that the below-listed agreements shall be modified as follows:

1. Upon execution of this Consultant Agreement Modification, the Consultant will adhere to the
   requirements as outlined in Standard Terms and Conditions, Article 58 attached hereto, and also
   effective for all future agreements.

The following regulations apply:

    a. Consultants registered as an NJDOT Emerging Small Business Enterprise (ESBE - less
       than $6.5 Million in annual Gross Revenues), or State of New Jersey Small Business
       Enterprise Categories 1 & 2 (SBE - less than $5 Million in annual Gross Revenues), will
       be classified as “Exempt” and not be required to engage a qualified independent CPA
       firm to conduct the necessary Overhead and Direct Cost audits for those prior years’
       unaudited costs. Exempted firms will be required to prepare and submit annual overhead
       schedules adjusted in accordance with the regulations noted herein, along with a signed
       Compliance Certification Form. Consultants and Sub-consultants not classified as
       “Exempt” are required to engage a qualified independent CPA firm to conduct the
       Overhead and Direct Cost audits for those prior years’ unaudited contract costs if there is
       $50,000.00 or more of NJDOT related Direct Labor in any one fiscal year on cost plus
       fixed fee contracts. A qualified auditor is defined as an independent CPA, an agency of
       the Federal government, and / or State Transportation Agency. These requirements are
       applicable to both Prime and Subconsultants. The Consultants and their auditors should
       have knowledge of the following regulations applicable to the audit of a consulting
       engineer’s indirect cost rates:

    b. The audits must be performed in accordance with Generally Accepted Government
       Auditing Standards, Code of Federal Regulations, Title 48, Federal Acquisition
       Regulations (FAR) Part 31.0, 31.1 and 31.2., contract payment provisions and
       applicable State of NJ Circular Letters. Audits must be submitted within 9 months of the
       firm’s completed fiscal year for current audits and within the due date schedule for prior
       periods as follows:

                Unaudited Costs                         Due Date______________
                 1 to 4 years           12 months from effective date (of 06/01/08)
                 5 to 8 years           18 months from effective date (of 06/01/08)
                 9 and over             24 months from effective date (of 06/01/08)

    c. Failure by the consultant or subconsultant to provide an audited FAR indirect cost rate to
        the Department within 9 months of the close of the firm’s fiscal year (or within the above
        timeframe for prior period costs) will result in no new contracts or Consultant Agreement
        Modifications (CAM’s) being awarded to the firm.

    d. The cost of the overhead audits will be considered an allowable component of the
        consultant’s overhead rate calculation and therefore billable through increased charges
        across all contracts. The cost of direct cost audits is eligible for reimbursement against
        the individual contracts being audited. In those instances where a direct cost audit
        engagement includes the audit of more than one consultant agreement, the CPA audit
        costs will be distributed amongst the audited agreements proportional to the total
        agreement expenditures to date. The Department will agree to modify consultant
        agreements to reflect the actual auditing cost allocable to each project.

    e. The Overhead Audit Reports shall be submitted to the Bureau of Auditing within 9
        months of the completed fiscal year for utilization on interim billing, and funding on
        future NJDOT Contracts/CAM’s. Failure to provide the required overhead audits within
        this timeframe will result in no new contracts or CAM’s being awarded to the firm.
                        NEW JERSEY DEPARTMENT OF TRANSPORTATION
                                   TRENTON, NEW JERSEY

                                                                                                    Page 2 of 4

                     CONSULTANT AGREEMENT MODIFICATION
             REVISION OF STANDARD ARTICLES FOR AUDIT REGULATIONS


   CONSULTANT                                                  CONSULTANT I.D. NO:


   2. All other terms and conditions of the below listed agreement(s) shall remain in full force and effect.

   3. The agreement(s) to which this Contract Agreement Modification apply are:


                                                                            DEPARTMENT              DEPARTMENT
AGREEMENT      AGREEMENT
                                            DESCRIPTION                       PROJECT                ASSISTANT
   NO.            DATE
                                                                             MANAGER               COMMISSIONER




   ACCEPTED
                             Consultant                                                  Date



   RECOMMENDED
                             Judith Sigle                                                Date
                             Acting Director
                             Division of Accounting & Auditing


   APPROVED
                             Steven Hanson                                               Date
                             Chief Financial Officer
                             New Jersey Department of Transportation
                   NEW JERSEY DEPARTMENT OF TRANSPORTATION
                              TRENTON, NEW JERSEY

                                                                                                    Page 3 of 4

                                          ARTICLE 58
                               REVISIONS TO AUDIT REQUIREMENTS

All Consultants and Sub-consultants not classified as “Exempt”: Consultants registered as an NJDOT
Emerging Small Business Enterprise (less than $6.5 Million in annual Gross Revenues), or State of New Jersey
Small Business Enterprise Categories 1 & 2 (less than $5 Million in annual Gross Revenues), shall engage a
qualified auditor to conduct Overhead and Direct Cost Audits (O/D) for those prior years unaudited contract
costs, if there is $50,000.00 or more of NJDOT related Direct Labor in any one fiscal year on Cost Plus Fixed
Fee contracts. A qualified auditor is defined as an independent CPA, an agency of the Federal government,
and/or State Transportation Agency. The Consultant’s auditors should have knowledge of the following
regulations applicable to the audit of a consulting engineer’s indirect cost rates:

            Generally Accepted Government Auditing Standards (GAGAS referred to as ”Yellow Book”
             revised 2007) for financial and compliance audits.

            Code of Federal Regulations, Title 48, Federal Acquisition Regulations (FAR) Part 31.0, 31.1,
             31.2.

            State of New Jersey Current Circular Letters regarding Travel Regulations and Automobile
             Mileage Reimbursement.

            Department Policy 336 for Travel Regulations.

All Consultants and Sub-Consultants classified as “Exempt”: Consultants registered as an NJDOT Emerging
Small Business Enterprise (less than $6.5 Million in annual Gross Revenues), or State of New Jersey Small
Business Enterprise Categories 1 & 2 (less than $5 Million in annual Gross Revenues), will not be required to
engage a qualified independent CPA firm to conduct the necessary Overhead and Direct Cost audits for those
prior years’ unaudited costs. Exempted firms will be required to prepare and submit annual overhead schedules
adjusted in accordance with the regulations noted herein, along with a signed Compliance Certification Form.
NJDOT-hired CPA firms may continue to audit companies that are classified as “Exempt”, or those Non-
Exempt firms that have incurred less than $50,000.00 in Direct Labor for any one fiscal year on a Cost Plus
Fixed Fee contract, based on a review of the submitted firm adjusted Overhead Rate, unless these firms
voluntarily choose to hire a CPA firm themselves. NJDOT-hired CPA firms may also continue to audit any
contracted Utility and Rail firms.

The Department will accept an independent CPA firm’s combined package of the submitted Overhead, Direct
Cost Audit and “Settle-Up Schedule” at one time, subject to a subsequent Quality Assurance Review.

Those “Exempt” Consultants, and those non-exempt Consultants with less than $50,000.00 of Direct Labor in
any one fiscal year, that do not hire an independent CPA firm to prepare their Overhead Rate, must
submit their firm adjusted and prepared Overhead Rate for Bureau of Auditing review and acceptance prior to
submission of the Direct Cost audit and “Settle-Up Schedule”. In addition, a Compliance Certification Form
must accompany the overhead statement certifying that all required audit criteria were met.

The Consultant is responsible for the final calculation of the amount due the Consultant and/or any payment due
the Department from the Consultant as a result of any audit findings. The Consultant shall submit a completed
“Settle-Up Schedule” (Exhibit A) detailing the basis for its final payment determinations and adjustments. A
payment must be enclosed with the “Settle-Up Schedule” for amounts due to the Department, and a payment
voucher submitted for amounts due to the Consultant.

The Department requires submission of an O/D Audit within 9 months following the close of the
Consultant’s fiscal year. The Overhead rate will be effective the months following receipt by the Department.

The Department reserves the right to perform or engage independent CPA firms to conduct Quality Assurance
reviews of all consultant-hired CPA firms to ensure compliance with the Department’s requirements.

Oversight of Quality Assurance reviews conducted by the Department and hired CPA firms shall include
evaluating the completed work program and corresponding supporting documentation. The Department’s
Bureau of Auditing (BOA) will retain final authority to approve or disapprove all Overhead Audit reports.
BOA staff will then authorize its concurrence with the CPA firm’s final determination as to the overall
acceptability of the audit. Audits will not be accepted when standards involving independence and external
quality control as mandated by GAGAS are not met. Oversight of audits performed by NJDOT-hired CPA
firms of companies which fall under the thresholds noted herein will continue to include the detailed review and
approval of all working papers and reports to assure compliance with the applicable regulations.

In lieu of consultant hired CPA audits, the Department will accept overhead audits which have been approved
by the cognizant home State agency in accordance with Federal regulations. The cognizant home State agency
refers to a Federal or State government agency located in the State where the company’s headquarters and
corporate accounting records reside. For consultant firms with headquarters and corporate accounting records
located in New Jersey, but operations in other States, the Department can act as the cognizant agency in
approving Overhead rate audits. FHWA guidance defines a cognizant audit for the indirect cost rates as follows:

        A. A Cognizant Agency performs or directs the work of a CPA who performs the indirect cost audit.

        B. A Non-Home State auditor, or CPA working under the Non-Home State’s direction, issues an
           audit report and the Home State issues a letter of concurrence.
                   NEW JERSEY DEPARTMENT OF TRANSPORTATION
                              TRENTON, NEW JERSEY

                                                                                                      Page 4 of 4

         C. An indirect cost audit performed by a CPA hired by the firm will become a cognizant, if one of the
            following conditions is met:

                    1.   The Home State reviews the CPA’s working papers and the Home State issues a letter
                         of concurrence with the audit report.


                    2.   A Non-Home State reviews the CPA’s audit work papers and issues a letter of
                         concurrence with the CPA’s report, which is then accepted by the Home State. If the
                         Home State does not accept the Non-Home State review, the Home State has 180 days
                         from the receipt to complete a review of the CPA audit report and either concur with it,
                         modify it, or reject it due to a material error requiring resubmittal: otherwise, the CPA
                         audit report with which the Non-Home State has concurred will be cognizant for the
                         one year applicable accounting period.

The cost of Overhead Audits is an eligible overhead cost and therefore billable through increased overhead
billing across all contracts. The cost of Direct Cost Audits is eligible for reimbursement against the individual
contracts being audited. In those instances where a direct cost audit engagement includes the audit of more than
one consultant agreement, the CPA audit costs will be distributed amongst the audited agreements proportional
to the total agreement expenditures to date. The Department will agree to modify consultant agreements to
reflect the actual auditing cost allocable to each project.

								
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