Honorable Mayor and
Members of the City Council
City of Santa Ana
Santa Ana, California
CliftonlarsonAllen LLP
CLAconnect.com
We have audited the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the City of Santa Ana (the City) as of and for the year ended June 30, 2024, and have issued our report thereon dated December 12, 2024. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit in our engagement agreement dated May 29, 2024. Professional standards also require that we communicate to you the following information related to our audit.
Significant audit findings
Qualitative aspects of accounting practices
Accounting policies
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 described in Note 1 E, the City changed accounting policies by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 100, Accounting Changes and Error Corrections, effective July 1, 2023. The implementation of this standard resulted in the City showing a restatement for a change to or within the financial reporting entity due to the change in presentation of the Capital Projects Capital Grants Capital Projects Fund from nonmajor to major.
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
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 financial statements were:
• The annual required contributions, pension expense, net pension liability, and corresponding deferred outflows of resources and deferred inflows of resources for the City's agent multiple employer defined benefit pension plans are based on actuarial valuations provided by California Public Employee Retirement System actuaries and for the City's single employer defined benefit pension plan are based on an actuarial valuation provided by a third-party actuary.
CLA (CliftonlarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer.
EXHIBIT 3
Honorable Mayor and
Members of the City Council
City of Santa Ana
• The other postemployment benefits (OPEB) expense and total OPEB liability, and corresponding deferred outflows of resources and deferred inflows of resources for the City's OPEB plan are based on an actuarial valuation provided by a third-party actuary. • The claims liability for workers' compensation and general liabilities are based on certain actuarial assumptions and methods prepared by an outside consultant. • The allowance for uncollectible accounts are based on management's analysis of collectability of receivables based on terms and conditions of agreements, as well as current economic conditions and considerations of creditors ability to pay. We evaluated the key factors and assumptions used to develop the above estimates in determining that they are reasonable in relation to the financial statements taken as a whole.
Financial statement disclosures
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties encountered in performing the audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Uncorrected misstatements
Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole.
Corrected misstatements
None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole.
Disagreements with management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors' report. No such disagreements arose during our audit.
Circumstances that affect the form and content of the auditors' report As previously communicated to you, the report was modified to include an emphasis of a matter to direct readers to Note IE to the financial statements regarding adoption of new account guidance, Statement of Governmental Accounting Standards Board (GASB Statement) No. 100, Accounting Changes and Error Corrections.
Honorable Mayor and
Members of the City Council
City of Santa Ana
Management representations
We have requested certain representations from management that are included in the management representation letter dated December 12, 2024.
Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the entity's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Required Supplementary Information
With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management's responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI.
Supplementary information in relation to the financial statements as a whole With respect to the combining and individual non-major fund financial statements and schedules (collectively, the supplementary information) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated December 12, 2024.
Honorable Mayor and
Members of the City Council
City of Santa Ana
Page4
Other information included in annual reports
Other information (financial or nonfinancial information other than the financial statements and our auditors' report thereon) is being included in your annual report and is comprised of introductory and statistical sections. Our responsibility for other information included in your annual report does not extend beyond the financial information identified in our opinion on the financial statements. We have no responsibility for determining whether such other information is properly stated and do not have an obligation to perform any procedures to corroborate other information contained in your annual report.
We are required by professional standards to read the other information included in your annual report and consider whether a material inconsistency exists between the other information and the financial statements because the credibility of the financial statements and our auditors' report thereon may be undermined by material inconsistencies between the audited financial statements and other information. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Our auditors' report on the financial statements includes a separate section, "Other Information," which states we do not express an opinion or any form of assurance on the other information included in the annual report. We did not identify any material inconsistencies between the other information and the audited financial statements.
* * *
This communication is intended solely for the information and use of the City Council and management of the City of Santa Ana and is not intended to be, and should not be, used by anyone other than these specified parties.
CliftonlarsonAllen LLP
Irvine, California
December 12, 2024
Honorable Mayor and
Members of the City Council
City of Santa Ana
Description
Expenses that should have been accrued in FY 23-24
Expenses that should have been accrued in FY 23-24
Net current year misstatements (Iron Curtain l\/lethod) Effect of prior year uncorrected misstatements on the
current year net income
Combined current and prior year misstatements
(Rollover l\/lethod) $
SUMMARY OF UNCORRECTED MISSTATEMENTS -AUDIT
Santa Ana, City of
Assets
Sewer Enterprise Fund
Year Ended June 30, 2024
Deferred
Outflows of
Resources Liabilities
$ (60,000)
(66,199)
Deferred
Inflows of
Resources
$ $ (126,199) _$~----
Fund Balance /
Net Position
$
Net
Expense/Revenue
and Change in
Net Position /
Fund Balance
$
$
60,000
66,199
126,199
126,199