Scope of Services

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Bond Document Review Process

Initially, the Tax Agreements, Official Statements and other relevant documents are reviewed. The Tax Agreement prepared by bond counsel provides information about the bond proceeds and other funds that could be subject to rebate and elections relating to rebate exceptions. These documents provide the information which enables us to complete an independent verification of the bond yield. Since the bond yield is the basis for arbitrage liability, ensuring that all amounts are accounted for in accordance with the Code is extremely important. Amounts used to pay the original issue discount, premiums and qualified guarantee payments are needed to complete this process.

Verification that each issue is subject to the rebate requirements.
Through the document review process, outlined above, and the pattern of bond issuance, we are able to identify which issues are subject to rebate. If the client qualifies for a rebate exception, this information is included in our reports and documented for the clients' records.

The recalculation of the yield on each bond issue.
Yield calculations performed prior to closing often do not contain all requisite figures, resulting in inaccurate calculations for rebate purposes. Since the bond yield is the basis for rebate computations, it is essential that it is computed accurately. The bond yield may be adjusted for qualified guarantee payments, original issue discount and premiums. This effort certifies we are presenting accurate information and enables us to issue our unqualified opinion.

The reconciliation of all sources and uses of funds.
The professional opinion of the firm can only be issued after we have reconciled the source and application of all proceeds and replacement proceeds through the various bond accounts. Once deposited, our rebate computation process provides a concise accounting of each use of the proceeds. Our report format provides for an effortless reconciliation of all project disbursement and investment income which can be reconciled back to the General Ledger. This important control ensures that no proceeds have been overlooked and allows for the elimination or segregation of non proceeds that may otherwise effect the correct computation of the arbitrage liability.

Processing of Investment and Disbursement Data

Amtec computes rebate from listings of bond proceeds disbursements from each bond and capital account.
These listings can be in the form of written or typed reports or bank statements. These listings can also be processed from spreadsheets saved to diskette or e-mail.

The calculation of the yield on all investments, subject to rebate, for the five year period.
Each annual computation includes the allowable bond yield, the actual yield on investments and the rebate liability which is expressed as a positive or negative dollar amount. Positive amounts denote the actual rebate liability and negative amounts provide the amount of additional income that may be earned before a rebate liability is incurred. Each report is cumulative and commences with the date of closing through each annual calculation date and finally to the fifth anniversary date of the bonds, when at least 90% of the rebate liability must be paid to the IRS. Amtec applies rebate computation credits as they are earned and each annual report is future valued to the rebate payment date. The future valuation of the rebate amount provides the most accurate picture of the rebate liability on a prospective basis. Failure to report the future value amount may grossly underestimate the final rebate amount that would be paid several years hence.

Investment Portfolio Evaluation

Along with the disbursement listings, we gather information on the unspent bond proceeds and investments. We value each investment for every calculation.
We follow the regulatory valuation requirements and select the most advantageous valuation method for our clients. The most advantageous valuation is the one which produces the smallest amount of rebate. We use care in these determinations to ensure market value fluctuations do not give rise to erroneous rebate returns.

Solving for Rebate - Future Value Computation Methodology

Once we have completed these steps, we solve for the rebate amount by account, if more than one account has been established for an issue.
Amtec utilizes the future value methodology, as required by the Regulations, to determine the rebate amount. Each rebate amount, either positive or negative, is determined along with the rate of return of the investment portfolio for each fund. The portfolio returns should be consistent with the computed yield.

Rebate Consolidation

We solve for the rebate for each account within a specific issue. Once each piece has been solved and reconciled, the entire report is consolidated and the rebate amount is identified.
The consolidation produces a blended rate of return and rebate amount for all accounts within an issue. We also provide the individual computations for each fund so our clients can easily determine which funds are generating arbitrage profits and which are generating losses.

Rebate Exception Testing

Once we have determined the rebate amount, we continue to test for exceptions from rebate.
Often, there are projects within a multipurpose issue which may qualify for a spending exception. We identify the projects which have qualified for an exception from rebate and adjust the rebate consolidation to reflect these changes.

Other Compliance Benchmarks

For most new money transactions, issuers must certify that they intend to spend 85% of the proceeds within three years of the date of the issue. Occasionally, this time frame is not achieved and the proceeds become subject to yield restrictions or reduction payments at the onset of the fourth bond year. Unspent proceeds beyond the three-year temporary period are subject to yield restriction or yield reduction payments. We provide the required regulatory computation methodology adjustment, which ensures that proceeds unspent at the end of the temporary period receive yield reduction computations.

Amtec's Professional Opinion

The annual rebate report is a formal document issued together with the professional opinion of Amtec. Our opinion cites the various computation methodologies used to arrive at the rebate amount. If the issue qualifies for a rebate exception or we were required to treat proceeds differently, each process is identified. Proceeds subject to rebate exception, yield reduction and yield restriction are clearly defined in our final documentation and are reflected on each annual rebate report.

IRS Reporting

Should a rebate liability exist on the computation date, which is generally five years after the closing, Amtec prepares the required transmittal documents for IRS reporting. The completed documentation and letter of instructions would be provided in advance of the payment due date.

Each of the steps, outlined above, provides an important computational control. The reconciliation of the disbursements and investment income to the General Ledger, the blended investment yield on the bond portfolio investments and the final results of our computations are reviewed by Amtec's senior staff before each rebate report is delivered. These steps ensure that the results of our computations are consistent with the issuer's accounting records, investment experience and the Regulations.

Scope of Service Summary

Each Amtec Rebate Report Includes:
• A computation of the bond yield (arbitrage or restricted yield);
• The expiration date for temporary periods or spend down periods;
• The next rebate or spend down computation date;
• The rebate liability, expressed as a positive or negative number;
• The yield on all investments which generated the rebate amount for the five year period;
• The production of rebate reports, indicating the above stated information, and issuance of the Amtec Opinion which is delivered to the client;
• The preparation of an executive summary identifying the methodology employed, conclusions and appropriate instructions about when to rebate required amounts.
• The preparation of IRS Form 8038-T and accompanying documentation, should a rebate payment be required;
• Consultation as necessary regarding arbitrage related matters;
• We will discuss the results of our Report with you, your auditors, and the IRS, if requested;
• The certification that all computations performed are in accordance with Section 148 of the Internal Revenue Code; and
• The guarantee of complete and accurate computations by Amtec.