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Calvin, Giordano & Associates, Inc. Notes to the Statement of Direct Labor, Fringe Benefits and General Overhead December 31, 2017 5 Note D – Overhead Rate Structure (continued) Overhead Rate Structure The Company has three divisions that are not part of its core engineering business. They operated (1) Parks, (2) Operations and Management for one City, and (3a) Public works, (3b) Parks Operations, and (3c) Right of Way Maintenance staff for another City. All actual costs and direct labor for these three divisions have been removed from the expenses used to calculate these rates. Also, a portion of the corporate expenses were allocated to these divisions using the methodology described in the previous paragraph. Those cost were removed from the rates calculated. Note E – Field Office In calculating the field office pool, the allocation to indirect labor and fringe benefits is based upon the ratio of field office direct labor to total direct labor. The remaining field office pool allocation is based upon the ratio of field indirect labor allocation to total home office labor. The direct labor dollars for the field office represent the wages of the individuals specifically identified by the Company as physically working at the field office site. Note F – Labor Related Costs Project Labor The Company charges labor to all projects using actual pay rates times actual hours reported on weekly time sheets. Paid Time Off The Company allows regular full-time employees up to a maximum of six (6) sick days per payroll year. Regular full-time employees are eligible for PTO leave benefits after three (3) months of continuous employment and subsequently at the beginning of each calendar year. Any unused PTO leave may not be accumulated and carried over from one year to the next. The Company offers a conversion from sick to vacation days as follows: Sick days per year Sick days converted to Vacation Days 0 3 1 2 2 1 72