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kelly associates <br />Management Group <br />June 1, 2017 <br />Ms. Cynthia J. Kurtz, Interim City Manager <br />Mr. Francisco Gutierrez, Executive Director of Finance <br />City of Santa Ana <br />20 Civic Center Plaza <br />Santa Ana, CA 92701 <br />SUBJECT ANALYSIS OF CITY OF SANTA ANA RESERVE FUNDS <br />Dear Ms. Kurtz and Mr. Gutierrez: <br />The City of Santa Ana retained Kelly Associates Management Group LLC ("KAMG") to perform a review <br />of the City's financial operating reserve balances. The Scope of Work for this engagement included the <br />following tasks: <br />• A review of the last three years audited financial statements to ascertain the level and prior <br />historical use and classification of fund reserves. This would include not only the General Fund <br />but all funds to ensure that fund reserves are being used and accounted for accurately. <br />• A review of the last three years adopted budgets to identify any City Council directives regarding <br />use of fund balance reserves or one-time budget savings. <br />• Identify the financial events that led to the budget savings in fiscal years 2014-15 and 2015-16. <br />Confirm that the remaining savings are accounted for properly in the 2015-16 financial <br />statements <br />• Review and reconfirm that any identified one-time budget savings are indeed one-time savings <br />and not ongoing structural budget surpluses. Review methodologies of budgeting for full-time <br />positions, as well costing allocations. <br />• Review potential 2016-17 and 2017-18 budget shortfalls, including budgeting practices that are <br />followed to ensure that best practices are being followed to produce fiscally sound citywide <br />budgets. This would include a detail review of the budget practices and philosophies <br />implemented in each budget cycle that led to, one, balanced budgets, and two, any potential <br />structural budget surpluses and/or budget savings. <br />• Prepare a Status Memorandum to the City summarizing its findings and recommendations. <br />• Prepare and submit a final report and will assist in the preparation of any required follow-up <br />reports to the City Council as directed. <br />KAMG has now completed its data collection and analysis and offers this report with ourfindings and <br />recommendations. <br />1,1=10 north harbor botilevard w suite 900 m hillerlon m ca m 92835 <br />7g.gBA <br />