Accreditation: GASB 43/45 Best Practices

1. Accreditation: GASB 43/45 Best Practices Vice President Mazie L. Brewington and Diana Keelen Board of Trustees Meeting April 8, 2013

2. Accreditation Recommendation • To comply with the standards it is recommended that the college, when making its short-range financial plan, e.g. the annual budget of the college, consider its long-range financial obligation to pay the cost of the GASB 45 – Other Post-Employment Benefits (OPEB) as the costs are incurred instead of delaying payment to some future date. Specifically, the college is encouraged to prepare a comprehensive plan to prevent disruption of services offered to students by paying the Annual Required Contribution (ARC) determined using generally accepted accounting principles into an irrevocable trust fund at the amount equal to the actuarially determined Annual required Contribution (III.D.1.c).

3. Best Practices • Phase I – Actuarial Study (Required every two years or three years per GASB 43/45) • Phase II – Managing the Liability • Phase III – Establishing the OPEB Trust • Phase IV – Post Installation: Administration the OPEB Process • Phase V – Conclusions: Major Compliance Benefits & Results

4. Phase I –Actuarial Study • Determines the size of the liability • Identifies the difference between the pay as you go method versus funding the Annual Required Contribution • Amortization Period & Discount Assumptions (Time Value of Money) • Identify changes in assumptions, i.e., collective bargaining, GASB rules, carrier changes, employee/retiree contributions and funding

5. Phase II – Managing the Liability • Follow prudent investor rules as per California Constitution Article 16: Public Finance Section 17 • Develop Long-term and Short-term goals & objectives • Develop District’s Retirement Board of Authority-Currently part of the California Community College League’s Joint Powers Association (JPA) • JPA Meetings follow the Brown Act

6. Phase III – Establishing the OPEB Trust • Development & Installation of a Comprehensive Compliance Plan, which includes the “Substantive Plan” • Develop a funding plan for the Trust

7. Phase IV – Post Installation: Administration the OPEB Process • Maintain the Comprehensive Plan • Implement Long-term and Short-term cost containment strategies • Verify District Liability includes Indemnification & Defense coverage • Set Goals for First Year and & Annual Accounting/Audit Process • Installation of Conflict of Interest and Fiduciary Liability Policies, Procedures & Training

8. Phase V – Conclusions: Major Compliance Benefits & Results • Meeting accreditation standards • Positive audit reports • Positive impact to credit rating • Lower expense through a long term investment strategy • Funding established for promised retiree benefits • Increased public confidence • Mitigation of Conflict of Interest and Fiduciary Liability

9. Where are we as of February 2013? • Phase I – Antelope Valley College chooses to have the evaluation done every two years. Actuarial study conducted as of March 2011. Currently an actuarial study is being performed as of March 2013. • Determines the size of the liability - unfunded liability $7,600,837 as of March 2011 • Identifies the difference between the pay as you go method versus funding the ARC. • Pay as you go as of March 2011- $557,401 • Annual Required Contribution as of March 2011 - $2,150,886. • Amortization Period – 30 Years, Discount Rate 5% • Identify changes in assumptions, i.e., collective bargaining, GASB rules, carrier changes, employee/retiree contributions and funding

10. Where are we as of February 2013? Continued… • Phase II – Managing the Liability • Currently part of the California Community College League’s Joint Powers Association (JPA), but need to develop District-level Retirement Board of Authority (RBA) • RBA develops long and short range plans for managing the liability (Also part of the comprehensive plan) • Meetings follow the Brown Act

11. Where are we as of February 2013? Continued… • Phase III – Establishing the OPEB Trust • Establishing a District level Retirement Board Authority (RBA) • Development & Installation of a Comprehensive Compliance Plan, which includes the “Substantive Plan” • Develop a funding plan for the Trust – $325K set aside in the 2013-2014 Budget to fund the trust

12. Questions?