WHITE NELSON DIEHL EVANS LLP (3) -2016

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B. Budgetary Basis of Accounting The City's budget is adopted annually by the City Council and is prepared for each fund in accordance with its basis of accounting (generally modified accrual). The City Manager is responsible for preparation and implementation of the annual budget. While all unencumbered appropriations are lapsed at year-end, valid outstanding encumbrances (those for which performance under executory contract is expected in the next year) are re -appropriated and become part of the subsequent year's budget. The City Council and the City Manager have the authority to amend the budget during the year. The City's FY2015-16 total budget is approximately $476 million with the General Fund budget totaling approximately $226 million. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the appropriated budget approved by the City Council. The level of budgetary control is established by function and activity within each fund. C. Component Units The City identified the Successor Agency to the Community Redevelopment Agency as a Fiduciary Component Unit and Housing Authority of the City of Santa Ana and the Santa Ana Financing Authority as Blended Component Units. D. Federal, State and Local Assistance The City receives financial assistance in the form of state and federal programs which vary from year to year. Accordingly, compliance with the Single Audit Act of 1996 and implementing regulations issued by the United States Office of Management and Budget (OMB) Circular A- 133, and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200) will be required. E. The City's Comprehensive Annual Financial Reports (CAFR) for the last ten years are available on the City's website at: http://www.ci.santa-ana.ca.us/finance/cafr/ The audits of the City for the past eight (8) fiscal years were performed by Macias Gini & O'Connell LLP. It is anticipated that their work papers will be available for review. 3) SCOPE OF SERVICES A. Terms The City is selecting auditors to perform an examination and issue an opinion on the financial statements of all fund types and account groups of the City for the two consecutive years beginning with the fiscal year ending June 30, 2016 with the option for one additional two-year period.