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To the Honorable City Council of the City of Santa Ana Santa Ana, California EXHIBIT 3 We have audited the financial statements of the governmental activities, business -type activities, each major fund, and aggregate remaining fund information of the City of Santa Ana, California (the City) for the year ended June 30, 2018. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our planning letter to you dated July 23, 2018. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. As discussed in Note IE to the financial statements, in fiscal year 2017-2018, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The adoption of this standard required retrospective application resulting in a reduction of previously reported net position. No other accounting policies were adopted and the application of other existing policies was not changed during the year ended June 30, 2018. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were as follows: a. Management's estimate of the fair market value of investments is based on quoted prices in an active market. When quoted prices in active markets are not available, fair values are based on evaluated prices received by the City's broker or custodian. -1- 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tet• 714.978.1300 • Fax: 714.978.7893 Offtres located nirDS peadf&I Diego Counties