Page i
Proposal
Exhibit B
CITY OF SALINAS
In Response to:
Revised Scope – Commercial Cannabis Tax
Assessments
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
Scope of Work
SCI Team will conduct a project kick-off meeting with City staff to establish project priorities and goals, communication protocols, and timelines. Further, we will gather and review all applicable information needed to perform the required tasks. SCI will be available to meet via teleconference call on a regular basis when work is in progress and will be available to attend regularly scheduled coordination meetings as necessary when work is in progress.
1. Commercial Cannabis Tax Assessments
The SCI Team, led by the David Siris of The Pun Group for this task, will provide comprehensive annual auditing of cannabis businesses in order to ensure that the City receives full payment of all Measure L taxes, and ensuring compliance with applicable laws.
We will perform the following steps to deliver the services requested by the City:
Cannabis
Business Gross
Receipts and
Square Footage
Taxes
• Evaluate consistency between gross receipts and other information reported on financial statements to what was reported to the C DTFA for sales and use tax, cannabis excise tax, and/or cultivation tax.
• Evaluate consistency between gross receipts reported on financial statements to gross receipts reported to the City.
• Verify cultivation canopy as compared to maximum canopy reported on the business license application.
Collection and
Audit
of any Cannabis
Tax
• Ensure each cannabis facility is complying with applicable portions of the City’s Code and is submitting the true amount of gross receipts and tax. • Review business license tax returns submitted by the business and collected by the City and compare to each business’s records for the time period identified by the City to determine accuracy and timeliness of gross receipts returns filed with the City.
• Trace and verify the gross receipts reported on the quarterly gross receipts returns prepared by the business to gross receipts recorded in the business’s accounting records to verify that these were in accordance with the City’s regulations. • Verify reasonableness of reported revenues
• We will issue all reports to the City in accordance with applicable standards from generally accepted auditing standards (GAAS).
• The report for each cannabis business license tax audit will include the following information:
• The overall conclusion of whether or not the cannabis business paid all required business license taxes and fees for the time period specified. • Any exceptions, errors, or areas of noncompliance were identified as a result of the procedures performed. This i ncludes any significant deficiency in the design or operation of the internal control structure, including but not limited to the following areas: cash handling, inventory control, point of sale systems, and any other areas City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
that the auditor deems necessary for purposes of accurately reporting business license taxes due to the City.
• Express an opinion regarding the taxes remitted to the City by the cannabis business, or state that an opinion cannot be expressed in the auditor’s report. If the Firm concludes, it cannot express an overall opinion. The engagement team will state the reasons, therefore, in the auditor’s report.
• Examine records and documentation that demonstrates that all cannabis goods have been obtained from, and are provided to, other licensed cannabis businesses and that details all the revenues and expenses, and assets and liabilities of the business.
• Examine books of account, invoices, copies of orders and sales, shipping instructions, bills of lading, weigh bills, bank statements including canceled checks and deposit slips, and all other records necessary to show all transactions of the cannabis business.
State Rule
Making
Interpretation
and
Implementation
• Check for compliance with the latest officially approved state regulations for cannabis businesses across the supply chain. Licensees are required to comply with all rules and regulations pertaining to their license type, as well as follow all other applicable state laws.
Deliverables:
• Prepare and send notification letters to each cannabis business • Annual Financial Audit and Audit Report for each cannabis business
2. Compliance Inspections and Reporting
For this task, Kyle Tankard of SCI will provide onsite facility inspections for each commercial cannabis business and report to the City the results of inspections relative to the City’s local regulations and ordinances, conditions of approval, and State law. SCI will prepare an inspection checklist for each cannabis activity. Prior t o conducting each inspection, SCI will prepare notification to the businesses to schedule inspections. Following the inspection, SCI will provide the City with a written report detailing the results of the compliance inspection including photo documentation of any violations. SCI will provide follow -up support to the City and cannabis businesses to provide recommendations to address and correct any deficiencies.
Among the elements and activities SCI will inspect and monitor are as follows:
• Product: Inventory management, seed-to-sale tracking, packaging and labeling verification, product testing protocols, etc.
• Record Retention: Review and confirm employee records, business records, tax information records, transportation manifests, video surveillance retention, equipment certifications, training programs and safety programs.
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
• Security and Surveillance: Verify video surveillance equipment, camera placement, alarm systems, locks, facility access control, security guards, occupational badges, and other security and safety processes.
• Facility Compliance: Verify facility’s operational compliance including waste management, odor control, pesticide and solvent storage, signage, cash handling procedures, product shipment and receival procedures, etc.
Deliverables:
• Conduct onsite facility inspections
• Provide written report detailing the findings of inspections • Provide follow-up support and recommendations
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
Budget Estimate
In consideration for the Tasks as detailed in the Scope of Work, the estimated compensation is detailed below by task:
Work Plan Fee
1. Commercial Cannabis Tax Assessments $ *6,500 (per audit per permit)
2. Compliance Inspections & Reporting $ 1,700 (per inspection per facility)
*If the initial audit period for a cannabis permit is less than 1 year (12 months) the fee will be prorated by each quarter (3 months) at $1,625 for each quarter audited. If the permit holder’s audit period is equal to or less than 1 month the City has the option to defer the audit and add that audit period the next audit period (for example: if the initial audit period is 1 month, the City can defer that 1 month to the following 12 month audit period for a total of 13 months). If a permit holder has multiple permits for different cannabis business types, the fee for the audit of each additional permit will be $6,500 if the business type’s gross revenue is greater than $100,000 and $3,250 if the gross revenue is equal to or less than $100,000.
SCI Staff Hourly Rate
John Bliss, President $ 290
Kyle Tankard, Cannabis Services Leader $ 300
Arcelia Herrera, Senior Cannabis Consultant $ 250
The Pun Group Staff Hourly Rate
Ken Pun, Engagement Partner $ 200
Venessa Burke, Partner $ 200
David Siris, Manager $ 175
Masood K. Yousufzai, Assistant Manager $ 150
Incidental costs incurred for the purchase of additional travel and other out -of-pocket expenses will be reimbursed at actual cost, with the total not to exceed $ 750 per year without prior authorization from the City. The scope of services includes one face-to-face staff planning meeting. Any additional face-to-face meetings, if required, shall be billed at the rate of $1,500 per person, per meeting. SCI is available to meet via teleconference call on a regular basis at no additional charge.
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
Project Schedule
Timeline
Project start date January 1, 2023
Financial Audits 2021 May 2023 – August 2023
Compliance Inspections June 2023
Financial Audits 2022 August 2023 – December 2023
Financial Audits 2023 – Kick Off March 2024 – June 2024 Compliance Inspection June 2024
Commercial Cannabis Tax Assessments
The Pun Group is available to begin the Commercial Cannabis Tax Assessments upon execution of the contract. An initial meeting with the City’s dedicated team will be coordinated to determine the competition schedule of the audits of business licenses and finalize the report template. On average, a typical financial audit takes 4-6 weeks.
Compliance Inspections & Reporting
SCI is available to begin onsite compliance inspections for operational cannabis businesses upon execution of the contract. If conducting annual inspections, the inspections will take place mid- year for each cannabis facility. If additional inspections are requested, they will be scheduled proportionately throughout the year.
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
General Contract Requirements
Proof of Insurability
City of Salinas
Proposal for Commercial Cannabis Tax Assessments
By SCIConsultingGroup, May 2023
Concurrence with C ontract Provisions
The SCI Team acc epts the provisions of the City’s standard contract as attached to the RFP .
Furthermore, The SCI Team understands that under certain circumstances, and subject to the discretion of the City, some provisions of the contract may be modified upon final contract negotiations with the selected consultant.