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<br /> December 10, 2018, Meeting – Item 2D <br /> <br /> The auditors conduct the audit of the City's basic financial statements in accordance with generally accepted auditing standards and the Minimum Standards for Audits of Oregon Municipal Corporations. In addition, as a recipient of federal grants, the City is subject to the Federal Single Audit Act of 1984, which requires that the audit be conducted in accordance with Government Auditing Standards, issued by the Comptroller General of the United States and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). These standards and the Uniform Guidance require that the auditors plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement and whether the City complied with the laws and regulations pertaining to federally-funded programs. In addition to state and federal requirements, the City has a contractual obligation in connection with its debt issuances which requires that the City issue annual audited financial statements. Two additional reports, beginning on page 171, specifically address compliance with Federal laws, regulations, contracts and grants, and indicate that the auditors found no material instances of the City's noncompliance with these requirements, nor were there any findings or questioned costs noted in relation to Federal awards made to the City. This year, the City implemented Governmental Accounting Standards Board Statement No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The statement requires that the value of the City’s liability related to Other Post-Employment Benefits be recorded in the financial statements. OPEB are benefits that an employee earns while working, but does not receive until after they retire. The City’s primary OPEB obligation is driven by an ORS mandate that requires all local governments provide healthcare coverage to retirees, spouses, and domestic partners until they are Medicare eligible. Retiree health care costs are higher than the health care premiums they pay, so as required by statute, the City covers the difference between retiree healthcare costs and retiree health care premiums, which is known as the implicit subsidy. The City reduced its beginning net position by $15.0 million to recognize the implicit subsidy. This accounting change does not have any impact on the City’s budget or funding for OPEB. In past years the OPEB unfunded liability was simply reported as Required Supplementary Information. Management is responsible for the information contained in, and the preparation of, the City's financial statements. To effectively fulfill this responsibility and to contain the cost of auditor services, City staff devotes significant effort to the closing of accounting records, the preparation of schedules and audit workpapers, and the production of the CAFR. This also results in staff expertise being developed on specific financial and service issues that can then be used to assist departments and other pertinent parties. Professional requirements mandate auditors provide a report to the governing body that addresses any concerns or findings they encountered in such audit-related issues as significant audit findings, accounting estimates, and disagreements with management. Isler CPA’s memo addressing these issues for fiscal year 2018 is included as Attachment B and it states that there were no concerns that required communication to City Council.