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Actuarial Valuation of Other Post - Employment Benefit Programs as of <br />April 1, 2012 for the City of Sample City <br />The Governmental Accounting Standards Board (GASB) issued GASB Statement No. 45, <br />Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than <br />Pensions. This Statement establishes standards for the measurement, recognition, and <br />display of OPEB expense /expenditures and related liabilities (assets), note disclosures, <br />and, if applicable, required supplementary information (RSI) in the financial reports of state <br />and local governmental employers. We understand that the City implemented GASB 45 for <br />the fiscal year ended June 30, 2009. <br />GASB 45 disclosures include the determination of an annual OPEB cost. For the first year, <br />the annual OPEB cost is equal to the annual required contribution (ARC) as determined by <br />the actuary. <br />• If the City's OPEB contributions equal the ARC each year, the net OPEB obligation <br />will equal $0. 4 <br />• If the City's actual contribution is less than (greater than) the ARC, then a net OPEB <br />obligation (asset) amount is established. In subsequent years, the annual OPEB <br />expense will reflect adjustments made to the net OPEB obligation, in addition to the <br />ARC (see Table 1 C). <br />The decision whether or not to prefund, and at what level, is at the discretion of the City, as <br />are the manner and term for paying down the unfunded actuarial accrued liability. Once a <br />funding policy has been established, however, the City's auditor may have an opinion as to <br />the timing and manner of any change to such policy in future years. The level of prefunding <br />also affects the selection of the discount rate used for valuing the liabilities. <br />We note that various issues in this report may involve legal analysis of applicable law or <br />regulations. The City should consult counsel on these matters; Bickmore does not practice <br />law and does not intend anything in this report to constitute legal advice, In addition, we <br />recommend the City consult with their internal accounting staff or external auditor or <br />accounting firm about the accounting treatment of OPEB liabilities. <br />B ckmore 3 <br />