25A - AGMT - FINANCIAL AUDIT SRVS

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Amend Agreement with Macias Gini & O'Connell LLP March 17, 2015 Page 2 auditing issues facing governmental employers that participate in Agent Multiple - Employer Defined Benefit Pension Plan as well as best practice solutions to address these items. MGO actively participated in the SLGEP and was selected by CalPERS to assist in the implementation of their GASB No. 68 audit services. GASB Statement No. 67 and 68 Requirements In June 2012, the Governmental Accounting Standards Board (GASB) issued two new standards that substantially changed the accounting and financial reporting of public employee pension plans and the state and local governments that participate in such plans. GASB Statement No. 67, Financial Reporting for Pension Plans revises existing guidance for the financial reports for most governmental pension plans. GASB Statement No. 68, Accounting and Financial Reporting for Pensions revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits. GASB Statement No. 67 is applicable to CalPERS and effective for financial statements for fiscal years beginning after June 15, 2013. GASB Statement No. 68 is applicable to employers and effective for financial statements for fiscal years beginning after June 15, 2014. The City of Santa Ana contributes to the California Public Employees Retirement System (CalPERS), an agent multiple - employer public employee defined benefit pension plan. GASB Statement No. 68 requires employers to recognize a liability as employees earn their pension benefits (that is, as they provide services to the government). To the extent that a long- term obligation to provide pension benefits (that is, total pension liability) is larger than the value of the assets available in the plan (that is, fiduciary net position) to pay pension benefits, employers must report a net pension liability on the employer's accrual -based financial statements for the first time. Challenges of Employers in Agent Multiple - Employer Plans and the Auditors An agent multiple - employer plan (agent plan) is one in which the assets of the employers are pooled for investment purposes but separate accounts are maintained for each individual employer. To comply with GASB Statement No. 68, agent plan employers will also need information beyond what is provided in the plan's financial statements. GASB Statement No. 67 does not require the plan administrator (CaIPERS) to report specific pension amounts, actuarial information, and fiduciary net position for each individual employer. The City (employer) does not have direct access to the underlying plan's records and data supporting such amounts. Similarly, the City auditors face challenges in obtaining sufficient and appropriate audit evidence regarding the specific pension amounts included in City's financial statements. 25A -2