2015 Annual Report

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Public Agency Risk Sharing Authority of California1525 Response Road, Suite 1Sacramento, California 95815

(800) 400-2642 • www.parsac.org

Accredited with ExcellenceSince 1996 Public Agency Risk Sharing Authority of California

2015 Annual Report

Public Agency Risk Sharing Authority of California

Board of Directors2014-2015

ALTURAS Heather MacDonnellModoc Kenneth Barnes

AMADOR CITY Tim KnoxAmador Janet Spencer

AVALON Ben HarveyLos Angeles

BLUE LAKE John Berchtold *Humboldt April Sousa

CALIFORNIA CITY William “Tom” WeilKern

CALIMESA Darlene GerdesRiverside Randy Anstine

CALISTOGA Richard SpitlerNapa Gloria Leon

CITRUS HEIGHTS Ronda Rivera †*Sacramento Amy Van

CLEARLAKE Melissa SwansonLake Joan Phillipe

COALINGA Rene RamirezFresno Mercedes Garcia

FERNDALE Jay ParrishHumboldt

GRASS VALLEY Mette RichardsonNevada Tim Kiser

HIGHLAND Chuck Dantuono †*San Bernardino Joe Hughes

MENIFEE Bruce FoltzRiverside Robert Johnson

NEVADA CITY Catrina Olson †*Nevada Corey Shaver

PACIFIC GROVE Thomas Frutchey *Monterey Cathy Krysyna

PLACENTIA Troy ButzlaffOrange Eddie De La Torre

PLACERVILLE Cleve Morris †*El Dorado Dave Warren *

PLYMOUTH Jeff Gardner *Amador Gloria Stoddard

POINT ARENA Doug BurkeyMendocino Phillip Vince

RANCHO CUCAMONGA John Gillison †*San Bernardino Robert Neiuber

RANCHO SANTA MARGARITA Mark Taylor †*Orange Jennifer Cervantez

RIALTO George Harris*San Bernardino Paula Mohan

SAN JUAN BAUTISTA Trish PaetzSan Benito Roger Grimsley

SOUTH LAKE TAHOE Mark Carlson*El Dorado Janet Emmett*

TEHAMA Carolyn Steffan †*Tehama Betty Celano

TRINIDAD Gabriel AdamsHumboldt Dan Berman

TRUCKEE Kim Szczurek*Nevada Chrissy Earnhardt

TWENTYNINE PALMS Ron Peck *San Bernardino Larry Bowden

WATSONVILLE Nathalie Manning †

Santa Cruz Tamara Vides

WEST HOLLYWOOD John HeilmanLos Angeles David Wilson

WHEATLAND Stephen Wright †*Yuba Rex Miller

WILDOMAR Marsha SwansonRiverside Debbie Lee

YOUNTVILLE Steve Rogers †*Napa Kathleen Bradbury

YUCAIPA Greg Franklin †*San Bernardino Raymond Casey

YUCCA VALLEY Debra Breidenbach-SterlingSan Bernardino Curtis Yakimow

† Executive Committee * Subcommittee Volunteer

2

When I learned of the theme for this year’s Annual Report, I remember thinking that it is a great topic, untilI attempted to articulate those thoughts for the benefi t of others. What do I do to empower those around me to succeed? Benjamin Franklin once said, “Tell me and I forget. Teach me and I remember. Involve meand I learn.” What have you and I done in the past 12 months to help people get involved and learn? Isn’tthat the beginning of empowering others, so that they learn and have ownership?

What do I do to enhance the livelihood and wellbeing of those with whom I’m entrusted or of those towhom I report? The defi nition of enhance is to raise to a higher degree; intensify; magnify. I do know that’s what we’ve done here in PARSAC, where the risk management bar has been raised again this pastyear and the expectations intensifi ed so that we have become intentional about the safety of our collective employees and the protection of our many residents.

Do I invest in others and inspire them to act? It certainly is a challenge at times. But, truly investing inothers is the best way to ensure an unmatched return. I urge each of you to take this as a challenge andevaluate these attributes in regards to your own service and choose to invest wisely. Have you ever giventhought as to who has invested in you? I believe it was someone pretty special.

I once wrote a note and placed it in a card in honor of my nephew’s high school graduation. My intent wasto inspire him for greatness, as he prepared for college, and encourage him that life is so big out there thathe could do whatever he wants. Since then, I’ve given this piece of literature to many other high schoolgraduates. The framed version is much longer and certainly far more profound; but, the abbreviatedversion goes something like this:

To the Board of Directors:

Public Agency Risk Sharing Authority of California 3

You’re 18! You already know all that you know, and what you don’t know, you won’t know,Until you know. Then, you’ll know. Ya’ know?

You see, you’re 18.We don’t know what you know. But, we know what you don’t know.

And what you don’t know, you will know. Then, we’ll all know.

I am confi dent that I get the same blank response each time; “Really? I hope you didn’t spend too much time on that.” Well, that’s alright. The point is we all need inspiration, encouragement. The sameBenjamin Franklin was once quoted to say, “Either write something worth reading or do something worthwriting.” I don’t know if I will ever fi nd success in either category. But, I refuse to give up trying and as one calendar closes and another opens, I will continue to run the race set before me with diligence to fi nish that race well. There’s that approach, or there’s always this one: I don’t know how many calendars I haveleft to turn, but I do know, I have one less. I’ll choose the former.

In closing, I consider it an absolute privilege to serve as the President of PARSAC. This is a tremendousorganization and I am grateful for each of you who work tirelessly to ensure it stays that way. Choose howyou will invest in someone this next year and make the next one, the best one. Thank you and may 2016be the year that exceeds your expectations and imagination!

Greg Franklin, PresidentCity of Yucaipa

4

Empower, Enhance, Inspire; three simple words guide PARSAC and its Memberagencies in service to their communities. As a group we empower each otherwith support for our common vision. As a group we enhance the servicecapacity of each member by sharing resources. As a group we spark the spirit ofcreativity and innovation, invigorate the public process, and lend our insight andexperience to encourage the next generation of public leaders. Let’s celebrateour accomplishments for 2014/15:

• PARSAC was entrusted with two new members: the beautiful little city ofBelvedere in the middle of San Francisco Bay and the high performing RanchoCucamonga Fire District, our fi rst non-municipal agency.

• Ever the fi scal stewards, the Board returned $2 million in dividends to the membership while setting funds aside to cover its pension and OPEB obligations.The Workers’ Compensation program improved its outcomes while the Liabilityprogram proved the wisdom of funding conservatively for the quixotic natureof liability claims. Both the Workers’ Compensation Excess Pool (LAWCX) andthe Liability Excess Pool (CSAC) adapted to increasing costs, the EmploymentPractices Pool (ERMA) had another banner year, returning dividends andreducing rates.

• PARSAC’s focus has been and continues to be on cultivating an educated andengaged membership. This year the Board reallocated administrative costs tomore equitably distribute expenses by program; expanded coverage for defenseand indemnity related to the Americans with Disabilities Act (ADA) claims from$250,000 to $1million. The coverage limit was also increased from $250,000 to$500,000 for claims alleging inverse condemnation. The enhancement refl ects concern about an uptick in litigation for the failure of public systems, includingstrict liability arising from trees that de-limb.

• The PARSAC Academy presented public employees with tools to addressconfl ict via an introduction to Verbal Judo and the best practices introduced members to the increasing risk of Workplace Violence by developing a newpolicy template and providing access to City of Houston’s award winning video,“Run, Hide, Fight.” Additionally, the Board continued the grant program, addeda $10,000 EPL grant and Liebert Cassidy Consortium membership, funded byERMA dividends.

PARSAC remains the JPA of choice due to the Board of Directors’ investment,innovation and commitment to be of service to each other. Through yourtough decisions and sacrifi ces we have a fi nancially strong, collegial and stable organization today, tomorrow and many years in to the future. On behalf of staff,we are grateful for your trust and confi dence and look forward to many years of service to PARSAC and its Member agencies.

Joanne Rennie, ARM SPHRGeneral Manager

General Manager’s Message


6

Self-Insured Liability Program

PARSAC provides members with a fiscally stableLiability Program, prospectively funded at the 80%confi dence level. The Program is self-funded for the fi rst $1 million and an additional $34 million of excess coverage is provided through a combination of pooling,excess insurance, and reinsurance through CSAC ExcessInsurance Authority (CSAC-EIA). Employment PracticesLiability (EPL) coverage limit is $35 million through theliability program’s excess coverage with the fi rst $1 million provided by the Employment Risk ManagementAssociation (ERMA).

The pool funding rate for 2014-15 decreased slightly from$1.16 to $1.14 due to favorable loss development. TheProgram remained well funded above the 90% confi dence level; surplus was $8.9 million at expected.

PARSAC believes in proactive claims management.Members are encouraged to contact PARSAC forassistance with incidents before they become claims,which can reduce the cost of the claim. Cases areassigned to defense panel counsel according to specialtyto produce the best outcome while ensuring cost control.

Self-Insured Workers’ Compensation Program

PARSAC’s Workers’ Compensation Program beganin 1990. The Program delivers timely medical careand benefi ts to employees while providing members with affordable, fi nancially stable coverage. PARSAC provides quality care through a dedicated claims unit,nurse advocate, expedited specialist referral, andaccess to selected Centers of Excellence facilities. Ourproactive approach helps members to preserve positiverelationships with their employees.

PARSAC self-funds the fi rst $500,000 with statutory limits provided through a combination of pooling,reinsurance, and excess insurance through the LocalAgency Workers Compensation Excess (LAWCX). Thephilosophy of fi scal stability continues in this Program, which is funded prospectively at the 75% confi dence level.

The pool loss funding rate for 2014-15 increased slightlyfrom $4.26 to $4.28 due to increasing claims costs. TheProgram remained well funded above the 90% confi dence level; surplus of $9.9 million at expected.

Programs and ServicesEX

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Added Value Services

Consultation:

v Litigation Managementv Proactive Incident and Claim Resolutionv Representation at Mediation and Settlement Conferencesv Preserving Governmental Immunitiesv Specialist and Resource Referralsv Legislative and Regulatory Compliancev Contractual Risk Transfer

Risk Management:

v Safety & Loss Control Grant Programv On-Site Risk Assessmentsv Post-incident Assistance and Mitigationv Operational Best Practices Policy Templatesv Lexipol Policies and Daily Training for

Law Enforcement & Fire

Training:

v Video and Print Resource Librariesv Regional and On-Site Training Programsv Personalized Risk Management Trainingv Web-based OSHA compliant Safety Coursesv Web-based Employment Practices Coursesv Liebert Cassidy Whitmore (LCW) Consortium

Group Purchased Programs

PEPIP Property Coverage: All-risk, replacement cost coverage with limits up to $1 billion for all insurableproperty and autos. Additional benefi ts include boiler and machinery up to $100 million; new property acquisitions up to $25 million; and new autos up to $10 million. Optional coverages include course ofconstruction, earthquake, and fl ood damage.

Special Events: Protects the member from liability by providing facility users with cost-effective insuranceup to a $5 million limit per occurrence. Participating members receive up to a $1,000 credit toward theirLiability premium.

Bond Program: Up to $1 million per occurrence with a $2,500 deductible for Public Employee Dishonesty;Forgery or Alteration; Theft, Disappearance and Destruction; and Computer Fraud.

Ancillary Benefi ts: Optional employee health benefi ts such as dental, vision, life, accidental death & dismemberment, and disability coverage at competitive prices.

We exist to serve ourMembers and strive

to do so by enhancingprograms to meet their

changing needs.

8

The U.S. economy grew steadily over the past year, fueled by strength in the labor andhousing markets and consumer spending, the largest contributor to Gross DomesticProduct (GDP). As a result, intermediate-term interest rates trended higher; the yield onthe two-year U.S. Treasury Note rose 0.10% to end Fiscal Year 2013/14 at 0.46%, and the3-year yield rose 0.22% to 0.87%. Yields on short-term investments remained anchored bythe Federal Funds Rate, which has been between 0 – 0.25% since December 2008.

PARSAC’s investment portfolio has been actively managed by PFM Asset Management LLC,in compliance with PARSAC’s investment policy objectives. PARSAC’s investment programcontinues to perform well in the wake of the slow economic recovery and the increasing

global turmoil, as shown in the chart ofhistoric growth. This is primarily due tomaintaining a conservative investmentstrategy that focuses on safety fi rst, liquidity and then yield.

PFM seeks to add value in a variety ofways: duration management; adjustingmaturities along the yield curve;emphasizing sectors that offer the bestvalue; and careful issue-level analysisand security selection. The portfolioof almost $35 million recorded atotal return of 1.26% during the year,compared with 0.15% for the prior year.

Short-term funds are held by the California State Treasurer’s Offi ce in the Local Agency Investment Fund (LAIF) and earned an average of 0.24% during the year. PARSAC earned$410,000 in investment income during Fiscal Year 2013/14, before factoring gains on salesand unrealized market value losses.

With the expected continued decline in the supplyof Federal Agency bonds and notes over the nextseveral years, PARSAC recently added two new assetclasses to the investment policy: high quality municipalsecurities and medium-term corporate notes, whichnow represent 4% and 14% of the portfolio, as shownat right.

While the next year will present many new challengesfor PARSAC -- higher interest rates triggered by widelyanticipated Fed action -- we can be confi dent that our strong fi nancial base will allow us to continue turning challenges into opportunities. PARSAC’s investments will continue to provide quality riskprotection at a reasonable cost.

John Gillison, TreasurerCity of Rancho Cucamonga

Treasurer’s Report

June 2015

LAIF1%

USTN42%

FNMA16%

FHLMC17%

FHLB5%

CorpNotes14%

MuniObligation

5%

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000


Our conservativeapproach ensures longterm stability, competitiverates, and continuedprotection of members’interests.

10


Financial Statementswith Supplementary Information

for the years ended

JUNE 30, 2015 AND 2014

including Independent Auditor’s Report

12

Board of DirectorsPublic Agency Risk Sharing Authority of CaliforniaSacramento, California

We have audited the accompanying fi nancial statements of the Public Agency Risk Sharing Authority of California (PARSAC) as of and for the year ended June 30, 2015, and the related notes to the fi nancial statements, which collectively comprise PARSAC’s basic fi nancial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with accounting principles generally accepted in the United States ofAmerica; this includes the design, implementation, andmaintenance of internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable tofi nancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the State Controller’s Minimum Audit Requirements for California Special Districts. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk ofmaterial misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to PARSAC’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of PARSAC’s internal control. Accordingly, we express no such opinion.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of signifi cant accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements referred to above present fairly, in all material respects, the fi nancial position of PARSAC as of June 30, 2015, and the changes in fi nancial position and cash fl ows for the year then ended in accordance with accounting principles generally accepted in the United States of America, as well as accountingsystems prescribed by the State Controller’s offi ce and state regulations governing special districts.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussionand analysis and claims development information on pages 3 through 10 and 37 through 39 be presented tosupplement the basic fi nancial statements. Such information, although not a part of the basic fi nancial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of fi nancial reporting for placing the basic fi nancial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing

INDEPENDENT AUDITOR’S REPORT


standards generally accepted in the United States of America, which consisted of inquiries of management about themethods of preparing the information and comparing the information for consistency with management’s responseto our inquiries, the basic fi nancial statements, and other knowledge we obtained during our audit of the basic fi nancial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with suffi cient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the fi nancial statements that collectively comprise PARSAC’s basic fi nancial statements. The combining statements are presented for purposes of additional analysis and are not a required part of the basic fi nancial statements.

The combining statements are the responsibility of management and were derived from and relate directly to theunderlying accounting and other records used to prepare the basic fi nancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic fi nancial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and otherrecords used to prepare the basic fi nancial statements or to the basic fi nancial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America.In our opinion, the combining statements are fairly stated in all material respects in relation to the basic fi nancial statements as a whole.

Implementation of New Accounting Standards

As disclosed in Note 1 to the fi nancial statements, PARSAC implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, and GASB Statement No. 71, PensionTransaction for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No.68, during the fi scal year.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 16, 2015 on ourconsideration of PARSAC’s internal control over fi nancial reporting and on our tests of its compliance with certain provisions of laws, regulations and contracts and other matters. The purpose of that report is to describe the scopeof our testing of internal control over fi nancial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over fi nancial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering PARSAC’s internal control overfi nancial reporting and compliance.

14

MANAGEMENT’S DISCUSSION AND ANALYSIS

The management of the Public Agency Risk Sharing Authority of California (PARSAC) is pleased topresent the following discussion and analysis of the fi nancial performance for the fi scal year ended June 30, 2015 to enhance the information included in the following fi nancial report.

Formed in May 1986, the Public Agency Risk Sharing Authority of California, formerly the CaliforniaMunicipal Insurance Authority (CMIA), is a state-wide joint powers authority. It provides both self-insuredand group purchase coverage to 36 municipalities throughout California. PARSAC operates self-insuredprograms for liability and workers’ compensation, and offers insured programs for property, boiler andmachinery, fi delity bonds, special events and employee benefi ts. Additionally, PARSAC provides claims administration, loss control and training for members. PARSAC has invested in a building in Sacramentothat houses its administrative offi ce and a conference center that is available for meetings and training.

The Authority is governed by a Board of Directors comprised of representatives from each memberagency. The Board of Directors elects its offi cers: President, Vice President, Treasurer, and Auditor/Controller. Daily operations are administered by the General Manager who serves as the chief executiveoffi cer. The General Manager is responsible for the administration of the policies as set forth by the Authority’s organizational documents and the Board of Directors.

FINANCIAL HIGHLIGHTS

• Retrospective Premium Adjustments (RPA) were declared in both programs; $895,584for Liability Program members participating in the 2004/05 to 2009/10 program years and$1,399,460 for Workers’ Compensation Program members participating in the 1990/91 to2006/07 program years.

• The Grant Program concluded its third year, reimbursing members for loss control services,equipment and training. The Board approved continuing the program for another threeyears, increasing the reimbursement to up to $10,000.

• The Board reduced the Liability Program funding from 85% to 80% due to its continuedhealthy fi nancial position, and continued the Workers’ Compensation Program funding at the 75% confi dence level. The discount factors used in the premium calculation remained at 1.5% and 2.5% for the Liability and Workers’ Compensation Programs, respectively.

• Dividends were received from excess providers, CARMA and ERMA; $482,000 fromCARMA for 2001/02 to 2007/08 program years; $381,000 from ERMA for 2006/07 to2009/10 years.

OVERVIEW OF THE FINANCIAL STATEMENTS

The Authority operates as an enterprise fund applying the accrual basis of accounting. Individualprogram accounting is maintained in-house and is provided as supplemental information to the fi nancial statements. The Statement of Net Position provides information about the combined fi nancial position of PARSAC as of the fi scal years noted. The Statement of Revenues, Expenses, and Changes in Net Position reports the results of operations. The Statement of Cash Flows is presented to refl ect the operations of PARSAC based strictly on the infl ow and outfl ow of cash. The Notes to the Financial Statements provide information on accounting policies of the Authority, such as development of claimliabilities, and retrospective premium adjustment.


June 30, 2015 % June 30, 2014 % June 30, 2013 %

Current Assets $ 3,694,919 10% $ 3,219,416 8% $ 7,161,607 19%

Non-Current Assets 34,096,858 88% 34,799,571 90% 29,665,931 79%

Capital Assets 771,421 2% 796,811 2% 854,704 2%

Deferred Outflow ofResources

125,427 0%

Total Assets andDeferred Outflow ofResources

$ 38,688,625 100% $ 38,815,798 100% $ 37,682,242 100%

Current Liabilities $ 7,221,629 38% $ 6,946,443 40% $ 6,058,818 39%

Non-Current Liabilities 10,533,015 61% 10,533,015 60% 9,613,780 61%

Deferred Inflow ofResources

183,592 1%

Total Liabilities andDeferred Inflow ofResources

18,892,601 100% 17,479,458 100% 15,672,598 100%

Invested in Capital Assets 771,421 4% 796,811 4% 854,704 4%

Net Position 19,024,603 96% 20,539,529 96% 21,154,940 96%

Total Net Position 19,796,024 100% 21,336,340 100% 22,009,644 100%

Total Liabilities, DeferredInflow of Resources andNet Position $ 38,688,625 100% $ 38,815,798 100% $ 37,682,242 100%

CONDENSED FINANCIAL INFORMATION

Statement ofNet Position

Statement ofRevenues,

Expenses, andChanges in Net

Position

Year EndedJune 30, 2015



Operating Revenues:

Member Contributions $11,082,653 $11,400,010 10,974,682

Retro Premium Adjust. (RPA) (2,295,044) (2,000,000) (1,596,727)

Other Revenue 875,089 2,231,991 617,193

9,662,698 11,632,001 9,995,148

Operating Expenses:

Claims Expense 4,134,409 6,286,816 2,747,997

Excess Insurance Expense 4,200,666 3,780,577 3,792,563

Program Services Expense 942,053 976,571 752,420

Excess Insurance Refund 392,052 382,087 0

General Administrative Expense 1,348,485 1,300,834 1,242,911

Total Operating Expenses 11,017,665 12,726,885 8,535,891

Operating Income (Loss) (1,354,967) (1,094,884) 1,459,257

Non-Operating Income and (Expense):

Investment Income 464,094 451,404 47,272

Rental Expense (29,832) (29,824) (49,848)

Total Non-Operating Income (Expense) 434,262 421,580 (2,576)

Income (Loss) Before Equity Distribution (920,705) (673,304) 1,456,681

Equity Distribution 0 0 (177,342)

Change in Net Position (920,705) (673,304) 1,279,339

Net Position, Beginning of Year 21,336,340 22,009,644 20,730,305

Retroactive Restatement- Accounting Change (619,611) 0 0

Net Position, End of Year $19,796,024 $21,336,340 $22,009,644

16

ANALYSIS OF OVERALL FINANCIAL POSITION

PARSAC continues to be fi nancially stable, meeting Board approved equity targets and exceeding the actuary’s 90% confi dence level for funding overall. Total assets remained level with the prior year whilenet position decreased by 7%. The Liability Program net positiondecreased by $1.5 million due to increasing claim costs and return ofexcess dividends. The net position of the Workers’ CompensationProgram increased by $700,000 due to reduction in claim liabilities.

The Authority’s investment portfolio increased from $34.7 to $35.1million during the year, and continues to be managed by investmentadvisor, PFM Asset Management, LLC with securities held in acustodial account at Union Bank. The actively managed portfolioconsists of fi xed income, municipal and medium term corporate securities in accordance with the Authority’s investment policy andthe California Government Code. Short term funds not immediatelyneeded for the payment of claims and administrative expenses aremaintained in the State of California Local Agency Investment Fund(LAIF), which is administered by the State Treasurer’s Offi ce. At June 30, 2015, the LAIF balance was approximately $489,000.

Figure 2 above, illustrates the portfolio’s change in maturity distribution from the prior year. The portfolioduration has been expanded into the fi fth year to maximize duration and yield. Future investment earnings directly impact program rates, as this projected income is a part of the funding and future liability calculation.When investments fall short of projections, additional funding may be required to meet actuarial revenueestimates. The Authority takes interest rate conditions into consideration when developing annual premiums.


Figure 1 – Total Assets by Program

LiabilityProgram

41%

Workers'Compensation

Program56%

Property/BondProgram

0%

Building Fund3%

Figure 2 – Portfolio Maturity Distribution

0%

5%

10%

15%

20%

25%

30%

35%

40%

%o

fTo

tal

Po

rtfo

lio

June 30,2014 June 30, 2015


ANALYSIS OF OVERALL RESULTS OF OPERATIONS

All members participate in the Liability Program, which generatedthe largest portion of revenue at $4.5 million or 44%. Thatpercentage drops to 39% when excess provider dividends of$863,000 are excluded from program revenue. The Workers’Compensation Program follows at $3.4 million, representing 34% ofrevenue. Investment income, including coupon earnings of $428,800and gains on the sale of investments of $41,400, were reduced bymarket value losses for total investment income of $464,100.

Overall, operating expenses decreased by $1.6 million. This wasmainly due to a decrease in the Workers’ Compensation Programexpenses for claims paid and change in claim liabilities. Additionally,expenses included $392,000 of excess dividends returned tomembers. Claims expense and excess insurance make up 75% oftotal expense as shown in the Figure 4 above. Claims administrationand loss control programs represent 7% of expenses and generaladministration is 12% of expenses.

Retrospective Premium Adjustments and Rate Stabilization Fund

Retrospective Premium Adjustment (RPA) is the reconciliation of equity, that is typically returned to membersthrough dividends, and on occasion assessments. The calculation is based on policies requiring a minimumoverall funding level as well as a Target Equity goal equal to fi ve times the pool self-insured retention before funds can be released. Both programs met the respective equity goals.

The Board approved an RPA dividend in each self-insured program that included a portion to fund the pensionand Other Post Employment Benefi ts (OPEB) for staff. The Liability Program dividend of $895,584 includes $166,916 for pension and OEPB liabilities and the balance to members participating in program years 2004/05to 2009/10. The Workers’ Compensation Program dividend of $1,399,460 includes $400,166 for pension andOPEB liabilities and just under $1 million to members participating in program years 1990/91 to 2006/07.

Rate Stabilization Funds were established in both the Liability and Workers’ Compensation programs to helpcushion the impact of pool or excess rate increases. Funds were not used this year. The Board approvedincreasing the Liability Program Rate Stabilization Fund to $700,000 by allocating a portion of CARMAdividends received. The Workers’ Compensation Program balance remained at $322,658.

Pension and Other Post-Employment Benefi ts (OPEB) Liability

The accounting standard, GASB 68, was effective this year requiring reporting of unfunded pension liabilities.Additionally, a similar standard (GASB 75) will require reporting of OPEB liabilities beginning with the 2017/18year.

The Board recognized the value of early funding of these liabilities to reduce the agency’s total cost, and approvedpayment of $710,912 for the pension liability and $335,121 for the OPEB liability. The unfunded liabilities werefrom the latest actuarial valuations provided by CalPERS and Bickmore Risk Services. These funds will come fromequity, a portion from the equity paid through the RPA process and the balance from a CARMA dividend.

Figure 3 – Revenue by Program

LiabilityProgram

44%

Work CompProgram

34%

Prop/BondProgram

17%

InvestmentIncome

4%

BuildingIncome

1%

Figure 4 –Total Expense by Category

Claims Exp37%

Excess Ins38%

ClaimsAdmin

4%

LossControl

3%

Consultants1%

Excess Refund4%

Gen.Admin

12%

18

Claims Expense

The Authority contracts with Bickmore RiskServices for annual funding and year-endactuarial valuations of the self-insured Liabilityand Workers’ Compensation Programs.

Figure 5 illustrates the Liability ProgramUltimate Loss by Program Year as determinedby the actuary. The ultimate loss represents thetotal cost of claims expected in a given programyear. Components of ultimate loss are paid andreserved claims, incurred but not reported(IBNR) and unallocated loss adjustment expense(ULAE) reserves. The Liability Program claimhistory has been unpredictable, with claim costsranging from a high of $5.4 million to a low of$50,000. The actuary’s ultimate cost of claimsaverages $2.4 million over the past fi ve years, an increase from $1.7 million reported last year.

Figure 6 illustrates the Workers’Compensation Program Ultimate Loss byProgram Year as determined by the actuary.The Program’s history indicates moreconsistent claim patterns than the LiabilityProgram with costs in the early years averaging$1 million. Claims costs began increasing sevenyears ago, nearly doubling the prior annual costexpectations. In the past four years, claimshave trended down and the actuary’s averageultimate cost of claims is $2 million per year.

CAPITAL ASSETS

The majority of the Authority’s capital assets are invested in a building located in Sacramento. The buildinghouses PARSAC’s administrative offi ce and the remaining 3,600 square feet, formerly tenant space, has been converted into a conference facility for meetings and training. The Authority will endeavor to lease the spacewhen economic circumstances in the market improve.


Paid (less recovery)

Reserves for Reported Claims

Discounted IBNR & Reserve

Figure 6 – Workers’ Compensation Program Ultimate Loss by Program Year

-$500,000

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

Figure 5 – Liability Program Ultimate Loss by Program Year

-$1,000,000

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

86

/87

87

/88

88

/89

89

/90

90

/91

91

/92

92

/93

93

/94

94

/95

95

/96

96

/97

97

/98

98

/99

99

/00

00

/01

01

/02

02

/03

03

/04

04

/05

05

/06

06

/07

07

/08

08

/09

09

/10

10

/11

11

/12

12

/13

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/14

14

/15


ASSETS

Current Assets:

Cash and Cash Equivalents (Note 2) $ 1,318,256

Investments (Note 3) 1,052,678

Receivables: 1,052,678

Interest 112,640

Member 574,810

Excess Insurance 210,577

ERMA Dividend 380,991

Prepaid Expenses 44,967

Total Current Assets 3,694,919

Non-Current Assets:

Investments (Note 3) 34,096,858

Capital Assets (Note 4) 1,722,597

Accumulated Depreciation (Note 4) (951,176)

Total Non-Current Assets 34,868,279

Total Assets 38,563,198

Deferred Outfl ow of Resources:

Deferred Pensions (Note 9) 125,427

Total Deferred Outfl ow of Resources 125,427

Total Assets and Deferred Outfl ow of Resources 38,688,625

LIABILITIES & NET POSITION

Current Liabilities:

Accounts Payable 54,964

Accrued Expenses 148,870

Committee Training Stipend Payable 17,260

Excess Premium Assessments 24,469

Retrospective Premium Adjustment Payable (Note 6) 2,624,629

Unpaid Claims and Adjustment Expenses (Note 7) 4,351,437

Total Current Liabilities 7,221,629

Non-Current Liabilities:

Unpaid Claims and Claims Adjustment Expenses 10,928,715

Net Pension Liability (Note 9) 558,665

Total Non-Current Liabilities 11,487,380

Total Liabilities 18,709,009

Deferred Infl ow of Resources:

Deferred Pensions (Note 9) 183,592

Total Deferred Infl ow of Resources 183,592

Total Deferred Infl ow of Resources and Liabilities 18,892,601

Net Position (Note 8):

Invested In Capital Assets 771,421

Unrestricted 19,024,603

Total Net Position $ 19,796,024

STATEMENT OFNET POSITION

June 30, 2015

20

Operating Revenues:

Premium Contributions $11,082,653

Retrospective Adjustment (2,295,044)

CARMA Dividend 482,191


Other 11,907

Total Operating Revenues 9,662,698

Operating Expenses:

Claims Paid 3,535,952

Change In Claims Liabilities 598,457

Excess Insurance 4,200,666

Program Administration 592,182

Risk Management 349,871

Professional Fees 153,192

Salaries 956,979

Travel and Meetings 86,914

CARMA/ERMA Dividend Refunds 392,052

Facility Expense 59,425

Other General and Administrative Expenses 91,975

Total Operating Expenses 11,017,665

Operating Loss (1,354,967)

Non-Operating Revenues (Expenses):

Investment Income 464,094

Facility Expense, Net (29,832)

Total Non-Operating Revenues (Expenses) 434,262

Change in Net Position (920,705)

Net Position, Beginning of Year, as Previously Reported 21,336,340

Restatement for Accounting Change (619,611)

Net Position, Beginning of Year, as Restated 20,716,729

Net Position, End of Year $19,796,024

STATEMENTOF REVENUES,EXPENSES AND

CHANGES IN NETPOSITION

For the Year EndedJune 30, 2015



Cash Flows from Operating Activities:

Contributions Received $8,881,490


CARMA Dividend 482,191

Other Revenues 11,907

Salaries and Benefi ts Paid (949,591)

Claims Expense Paid (3,140,080)

Premiums Paid (4,235,242)

General and Administrative Expenses Paid (1,323,957)

CARMA/ERMA Dividend Refunds (392,052)

Net Cash Provided By (Used) Operating Activities 266,856

Cash Flows from Investing Activities:

Investment Income 530,591

Investments Purchased (19,932,647)

Proceeds from Sales and Maturities of Investments 19,428,942

Facilities Expenses Paid (8,274)

Net Cash Provided By Investing Activities 18,612

Cash Flows from Capital and Related Financing Activities:

Purchase of Capital Assets (32,595)

Net Cash Used In Capital and Related Financing Activities (32,595)

Net Increase in Cash and Cash Equivalents 252,873

Cash and Cash Equivalents, Beginning of Year 1,065,383

Cash and Cash Equivalents, End of Year $1,318,256

Reconciliation of Net Operating Income (Loss) To Net CashProvided By Operating Activities:

Operating Loss $(1,354,967)

Adjustments To Reconcile Operating Income (Loss) To NetCash Provided By Operating Activities:

Depreciation Expense 36,426

(Increase) Decrease In:

Member Receivable (19,673)

Excess Receivable 395,872

ERMA Dividend Receivable 551,199

Prepaid Expenses (10,107)

Increase (Decrease) In:

Accounts Payable (26,824)

Accrued Expenses 10,168

Committee Training Stipend Payable 2,000

Unearned Contributions 0

Excess Premium Assessments (24,469)

Retrospective Premium Adjustment Payable 111,554

Claims Liabilities 598,457

Net Pension Liability (2,780)

Net Cash Provided (Used) By Operating Activities $266,856

Supplementary Non-Cash Flow Information

Investing Activities

Increase in Fair Value of Investments $6,158

STATEMENT OFCASH FLOWS

For the Year EndedJune 30, 2015

22

1. ORGANIZATION

General. The Public Agency Risk Sharing Authority of California (PARSAC) is a governmental joint powersauthority pursuant to the Government Code of the State of California, commencing with Section6500. PARSAC is a statewide agency providing California municipalities with risk managementservices including loss control, risk sharing and joint purchase coverage programs.

PARSAC offers self-funded Liability and Workers’ Compensation programs. In addition, PARSACoffers members access to group purchase insurance programs covering Property, Fidelity Bonds,Special Events and Employee Benefi ts.

Liability Program – The Liability Program, implemented in 1986, provides comprehensive general andautomobile liability coverage. PARSAC is self-insured to $1 million and purchases excess coveragethrough the California State Association of Counties Excess Insurance Authority (CSAC-EIA).PARSAC also offers members Employment Practices Liability coverage through the Employment RiskManagement Authority (ERMA).

Workers’ Compensation Program – The Workers’ Compensation Program, implemented in 1990,provides coverage for employee injuries arising out of and in the course of employment. From1990 to 2007, PARSAC was self-insured to $250,000. In 2008, PARSAC increased the self-insuredretention from $250,000 to $500,000. Losses in excess of PARSAC’s limit are covered through theLocal Agency Workers’ Compensation Excess Pool (LAWCX) up to statutory limits.

PARSAC is a California public entity as provided in Internal Revenue Section 115; thus, it is tax-exempt. The California Offi ce of the Controller, Division of Local Governmental Fiscal Affairs, for the purpose of fi ling an Annual Report of Financial Transactions of Special Districts considers PARSAC to be a “Special District.”

Reporting Entity. The reporting entity includes all activities considered to be part of PARSAC. This includesfi nancial activity relating to all of the membership years of PARSAC. In determining its reporting entity, PARSAC considered all governmental units that were members of PARSAC since inception.The criteria did not require the inclusion of these entities in their fi nancial statements principally because PARSAC does not exercise oversight responsibility over any members.

Basis of Accounting. The accompanying fi nancial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Underthe accrual basis, revenues and the related assets are recognized when earned, and expenses arerecognized when the obligation is incurred. PARSAC applies all applicable FASB pronouncementsin accounting and reporting for its proprietary operations, except where superseded by GASBpronouncements. Liabilities for reserves for open claims and claims incurred but not reported havebeen recorded in PARSAC’s fi nancial statements.

PARSAC maintains separate program accounting for each program’s revenues, expenses and relatedreserves. The program funds are considered a Proprietary/Enterprise Fund type.

Fund Accounting. The accounts of PARSAC are organized on the basis of funds, each of which is consideredto be a separate accounting entity. PARSAC’s funds have been combined for the presentation of thebasic fi nancial statements. The operations of each fund are accounted for by providing a separate set of self- balancing accounts which comprise its assets, liabilities, net position, revenues and expenses.The general and administrative expenses of PARSAC are allocated 55% to the Liability Program, 40%to the Workers’ Compensation Program and 5% to the Property Program.

NOTES TO FINANCIAL STATEMENTSYEAR ENDED JUNE 30, 2015


Cash and Cash Equivalents. For purposes of the statement of cash fl ows, PARSAC considers all highly liquid assets with a maturity of three months or less, when purchased, to be cash and cash equivalents.

Receivables. All receivables are reported at their gross value, and where appropriate, are reduced by theestimated portion that is expected to be uncollectible. As of June 30, 2015, the total accountsreceivable portfolio was considered collectible. Interest on investments is recorded in the year theinterest is earned.

Investments and Investment Pools. PARSAC records its investment in Local Agency Investment Fund (LAIF)and its other investments at fair value. Changes in fair value are reported as non-operating revenue inthe statement of revenues, expenses and changes in net position.

Fair value of investments and LAIF has been determined by the sponsoring government based onquoted market prices. PARSAC’s investment in LAIF has been valued based on the relative fair valueof the entire external pool to the external pool’s respective amortized cost.

Capital Assets. Capital assets are carried at cost. Assets with an original purchase price over $10,000 arecapitalized at cost. Depreciation and amortization is computed on the straight-line method. Theestimated useful lives used for buildings and improvements is thirty years. The estimated useful lifefor furniture and equipment range from three to fi ve years. Software is depreciated over fi ve years.

Accrued Vacation. In accordance with PARSAC’s employee policies, compensated absences for vacation areaccrued at various numbers of hours per month depending on each employee’s years of service. Theliability for compensated absences at June 30, 2015 was $110,843 and is included in accrued expenseson the statement of net position.

Provision for Unpaid Claims and Claims Adjustment Expenses. PARSAC’s policy is to establish claims liabilitiesbased on estimates of the ultimate cost of claims that have been reported but not settled, and ofclaims that have been incurred but not reported. The length of time for which such costs must beestimated varies depending on the coverage involved. Estimated amounts of salvage, subrogation andinsurance recoverable on unpaid claims are deducted from the liability for unpaid claims. PARSACincreases the liability for allocated and unallocated claims adjustment expenses. Because actual claimscosts depend on such complex factors as infl ation, changes in doctrine of legal liability and damage awards, the process used in computing claims liabilities does not necessarily result in an exact amount.Claims liabilities are recomputed periodically using a variety of actuarial and statistical techniques toproduce current estimates that refl ect recent settlements, claim frequency and other economic and social factors. A provision for infl ation in the calculation of estimated future claims costs is implicit in the calculation because reliance is placed both on actual historical data that refl ect past infl ation and on other factors that are considered to be appropriate modifi ers of past experience. Adjustments to claims liabilities are charged or credited to expense in the period in which they are made. Theportion of claims considered currently payable has been actuarially determined.

Pension Plan. PARSAC recognizes a net pension liability, which represents its proportionate share of theexcess of the total pension liability over the fi duciary net position of the pension refl ected in the actuarial report provided by the CalPERS Actuarial Offi ce. The net pension liability is measured as of PARSAC’s prior fi scal year-end. Changes in the net pension liability are recorded, in the period incurred, as pension expense or as deferred infl ows of resources or deferred outfl ows of resources depending on the nature of the change. The changes in net pension liability that are recorded asdeferred infl ows of resources or deferred outfl ows of resources (that arise from changes in actuarial assumptions or other inputs and differences between expected or actual experience) are amortized

24

over the weighted average remaining service life of all participants in the respective pension planand are recorded as a component of pension expense beginning with the period in which they areincurred. The average remaining service lifetime for the 2013-2014 measurement period is 3.8 years.

For purposes of measuring the net pension liability, deferred outfl ows and infl ows of resources related to pensions, and pension expense, information about the fi duciary net position and additions to/deductions from the fi duciary net position have been determined on the same basis as they are reported by CalPERS Financial Offi ce. For this purpose, benefi t payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with thebenefi t terms. Investments are reported at fair value. CalPERS audited fi nancial statements are publicly available reports that can be obtained at CalPERS’ website under Forms and Publications.

GASB 68 requires that the reported results must pertain to liability and asset information withincertain defi ned timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2013

Measurement Date June 30, 2014

Measurement Period July 1, 2013 to June 30, 2014

Projected earnings on pension investments are recognized as a component of pension expense.Differences between projected and actual investment earnings are reported as deferred infl ows of resources or deferred outfl ows of resources and amortized as a component of pension expense on a closed basis over a fi ve-year period beginning with the period in which the difference occurred. Each subsequent year will incorporate an additional closed basis fi ve-year period of recognition.

Net Position. PARSAC adopted a Target Equity policy to ensure adequate overall funding of the pooledprograms. The policy designates that equity may be returned to members when (1) the overallconfi dence level exceeds 90%, (2) an additional amount equal to fi ve times the self-insured retention has been set aside and (3) equity is available to return in eligible years.

The three methods approved for returning equity to members are, (1) the Retrospective PremiumAdjustment (RPA) process; (2) the Liability and Workers’ Compensation Program Rate StabilizationFund, and (3) an alternate use of equity approach.

• The RPA process reconciles program year revenue and expenses. Claims in the LiabilityProgram become eligible for an RPA in the fi fth year; thus, allowing the claims suffi cient time for development. Workers’ Compensation Program claims fi rst become eligible for an RPA in the eighth year.

• The Liability Program Rate Stabilization Fund was established in 2009/10 from savings realizedwhen PARSAC changed excess programs. The policy limit for the fund was increased to $750,000and allows funds to be used to offset pool or excess premium rate increases.

• The Workers’ Compensation Program established a Rate Stabilization Fund. The policy limitsthe fund balance to $500,000 and allows funds to be used to offset pool or excess premium rateincreases.

• The Employment Practices Liability (EPL) Rate Stabilization Fund was established from an ERMAdividend. The policy limits the fund balance to $300,000 to offset rate increases and pay ERMAassessments.



Excess Insurance. PARSAC enters into agreements whereby it obtains excess coverage from other jointpowers authorities or insurance companies. PARSAC does not report excess insured risk as a liabilityunless it is probable that a risk will not be covered by excess insurers. Settlements have not exceededinsurance coverage in each of the past three years.

Revenue Recognition. Premium contributions are recognized as revenue when earned based upon thecoverage period of the related insurance. To the extent that allocated losses exceed premiumcontributions previously paid, interest and other income, PARSAC can assess its member’s additionalcontributions. Supplemental assessments are recognized as income in the period assessed. Operatingrevenues and expenses include all activities necessary to achieve the objectives of PARSAC. Non-operating revenues and expenses include investment activities, rental income and other non-essentialactivity.

Use of Estimates. The preparation of fi nancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions.These estimates and assumptions affect the reported amounts of assets and liabilities at the date ofthe fi nancial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Income Taxes. As a governmental agency PARSAC is exempt from both federal income and California statefranchise taxes.

New Accounting Pronouncements. The provisions of the following Governmental Accounting Standards Board(GASB) Statements have are effective for fi nancial statements for fi scal years beginning after June 15, 2014 and have been implemented in the current fi nancial statements.

Statement No. 68 “Accounting and Financial Reporting for Pensions – an amendment of GASBStatement No. 27”

Statement No. 71 “Pension Transition for Contributions Made Subsequent to the MeasurementDate – an amendment of GASB Statement No. 68”

2. CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of June 30, 2015 consisted of the following:

Cash and Cash Equivalents:

Cash on Hand $ 88

Cash in Bank 694,640

LAIF 489,301

Money Market Accounts 134,227

Total Cash and Cash Equivalents $1,318,256

Custodial Credit Risk. Custodial credit risk for deposits is the risk that, in the event of the failure of adepository fi nancial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodialcredit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment orcollateral securities that are in the possession of another party. None of PARSAC’s investments were

26

subject to custodial credit risk. Custodial credit risk does not apply to a local government’s indirectinvestment in securities through the use of mutual funds or government investment pools (such asLAIF). The California Government Code and PARSAC’s investment policy do not contain legal orpolicy requirements that would limit the exposure to custodial credit risk for deposits or investments,other than the following provision of deposits: The California Government Code requires that afi nancial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived bythe governmental unit). The market value of the pledged securities in the collateral pool must equalat least 110% of the total amount deposited by the public agencies. California law also allows fi nancial institutions to secure public entity deposits by pledging fi rst trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2015, none of PARSAC’s deposits with fi nancial institutions in excess of federal depository insurance limits were held in uncollateralized accounts.

Local Agency Investment Fund. PARSAC places certain funds with the State of California’s Local AgencyInvestment Fund (LAIF). PARSAC is a voluntary participant in LAIF, which is regulated by CaliforniaGovernment Code Section 16429 under the oversight of the Treasurer of the State of California andthe Pooled Money Investment Board. The State Treasurer’s Offi ce pools these funds with those of other governmental agencies in the State and invests the cash. The fair value of PARSAC’s investmentin this pool is reported in the accompanying fi nancial statements based upon PARSAC’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized costs ofthat portfolio). The monies held in the pooled investment funds are not subject to categorization byrisk category. The balance available for withdrawal is based on the accounting records maintained byLAIF, which are recorded on an amortized cost basis.

3. INVESTMENTS

At June 30, 2015, investments are reported at fair value and consisted of the following:

Federal Agency Bonds and Notes $13,396,423

U.S. Treasury Notes 14,979,992

Municipal Obligations 1,706,401

Corporate Notes 5,066,720

Total Investments 35,149,536

Investments maturing within one year (1,052,678)

Long-term investments $34,096,858

Disclosures Relating to Interest Risk Rate. Interest rate risk is the risk that changes in market interestrates will adversely affect the fair value of an investment. Generally, the longer the maturity of aninvestment, the greater the sensitivity of its fair value to changes in market interest rates. One ofthe ways that PARSAC manages its exposure to interest rate risk is by purchasing a combination ofshorter term and longer term investments and by timing cash fl ows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide thecash fl ow and liquidity needed for operations.



Information about the sensitivity of the fair values of PARSAC’s investments to market interest ratefl uctuations is provided by the following table that shows the distribution of PARSAC’s investments by maturity at June 30, 2015:

Remaining Maturity (in Months)

Investment Type Amount12 MonthsOr Less

13 to 24Months

25 to 60Months

Federal Agency Bonds and Notes:

FHLMC $ 6,019,173 $ 611,640 $ 2,036,987 $ 3,370,546

FNMA 5,795,818 2,271,638 3,524,180

FHLB 1,581,432 1,581,432

U.S.Treasury Notes 14,979,992 3,120,956 11,859,036

Municipal Obligations 1,706,401 441,038 602,808 662,555

Corporate Notes 5,066,720 2,071,182 2,995,538

Total $ 35,149,536 $ 1,052,678 $ 11,685,003 $ 22,411,855

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations. PARSAC’s portfolio includes thefollowing investments that are highly sensitive to interest rate fl uctuations (to a greater degree than already indicated in the information provided above).

Highly Sensitive Investments Fair Value at Year End

Federal Agency Securities $651,210

These securities are subject to early payment in a period of declining interest rates. The resultantreduction in expected total cash fl ows affects the fair value of these securities and makes the fair value of these securities highly sensitive to changes in interest rates.

Disclosures Relating to Credit Risk. Generally, credit risk is the risk that an issuer of an investment will notfulfi ll its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual Standard andPoor’s rating as of June 30, 2015 for each investment type:

Rating as ofYear-End

Investment Type Amount A AA AAA

Federal Agency Bonds and Notes:

FHLMC $ 6,019,173 $ $ 6,019,173 $

FNMA 5,795,818 5,795,818

FHLB 1,581,432 1,581,432

U.S.Treasury Notes 14,979,992 14,979,992

Municipal Obligations 1,706,401 441,039 1,265,362

Corporate Notes 5,066,720 1,219,444 3,147,843 699,433

Total $ 35,149,536 $ 1,219,444 $ 31,965,297 $ 1,964,795

28

Concentration of Credit Risk. At June 30, 2015, PARSAC had the following investments that represent morethan fi ve percent of PARSAC’s net investments:

U.S.Treasury Notes 43%

FHLMC 17%

FNMA 16%

Corporate Notes 14%

4. CAPITAL ASSETS

PARSAC’s capital asset activity for the year ended June 30, 2015 is as follows:

BeginningBalance Additions

Retirements/Adjustments

EndingBalance

Capital Assets Not Being Depreciated

Land $ 515,861 $ $ $ 515,861

Total Capital Assets Not Being Depreciated 515,861 515,861

Capital Assets Being Depreciated

Building 807,042 11,454 818,496

Building Improvements 203,585 21,141 224,726

Equipment 124,744 (1,730) 123,014

Vehicles 40,500 40,500

Total Capital Assets Being Depreciated 1,175,871 32,595 (1,730) 1,206,736

Less Accumulated Depreciation For

Building 560,398 39,791 600,189

Building Improvements 190,147 3,326 193,473

Equipment 114,002 6,768 (1,730) 119,040

Vehicles 30,374 8,100 38,474

Total Accumulated Depreciation 894,921 57,985 (1,730) 951,176

Total Capital Assets Being Depreciated Net 280,950 (25,390) 255,560

Total Capital Assets, Net $ 796,811 $ (25,390) $ 0 $ 771,421

Depreciation expense was charged to the various programs as follows:

Liability $ $ 20,034

Workers’ Compensation 14,571

Building 21,559

Property 1,821

$ $ 57,985



5. FACILITY EXPENSES

PARSAC purchased an 8,700 square foot building in Sacramento in 1995. Of the 7,200 useable square feet,PARSAC occupies approximately 3,576 square feet and historically leased out the balance. Due to thecontinued downward trend in the Sacramento commercial leasing market, approximately 3,639 square feetof unoccupied tenant space was converted to a conference facility. The space is available for training andcommittee meetings. PARSAC will endeavor to lease the space when economic circumstances improve. Thetenant space was vacant during the 2015 fi scal year. For the period ended June 30, 2015, the facility expenses were $59,425. For the 2014/2015 year, 50% of budgeted facility expenses were allocated to the programs inthe same proportion as general and administrative expenses.

6. RETROSPECTIVE PREMIUM ADJUSTMENTS

PARSAC’s Joint Powers Agreement requires periodic evaluation of each programs’ equity. The process isreferred to as a Retrospective Premium Adjustment (RPA).

For the year ended June 30, 2015, the Board approved RPA’s in the Liability and Workers’ Compensationprograms of $895,584 and $1,399,460, respectively.

7. UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES

As discussed in Note 1, PARSAC establishes a liability for both reported and unreported insured events,which includes estimates of both future payments of losses and related claim adjustment expenses, bothallocated and unallocated. The following represents changes in those aggregate liabilities during the yearsended June 30, 2015 and 2014.

2015 2014

Unpaid claims and claims adjustment expenses,beginning of fi scal year $ 14,681,695 $ 13,691,441

Incurred claims and claims adjustment expenses:

Provision for covered events of the current fi scal year 3,931,104 3,882,102

Change in provision for covered events of prior fi scal years 203,305 2,404,714

Total incurred claims and claims adjustment expense 4,134,409 6,286,816

Payments:

Claims and claims adjustment expenses attributableto covered events of the current fi scal year 65,797 512,691

Claims and claims adjustment expenses attributableto covered events of prior fi scal years 3,470,155 4,783,871

Total Payments 3,535,952 5,296,562

Total unpaid claims and claims adjustment expenses,end of fi scal year $ 15,280,152 $ 14,681,695

30

The components of the unpaid claims and claim adjustment expenses as of June 30, 2015 and 2014 were asfollows:

2015 2014

Claims Reserves $ 7,688,475 $ 7,935,598

Claims incurred but not reported (IBNR) 6,320,364 5,590,835

Unallocated loss adjustment expenses (ULAE) 1,271,313 1,155,262

$ 15,280,152 $ 14,681,695

The current and long-term portions of claims liabilities were $4,351,437 and $10,928,715, respectively, as ofJune 30, 2015 and $4,173,149 and $10,508,546, as of June 30, 2014. At June 30, 2015 and 2014, the liabilitywas reported at the present value using an expected future investment yield assumption of 2.5% for bothyears presented for the Workers’ Compensation Program and 1.5% for both years presented for the LiabilityProgram. The total undiscounted liability as of June 30, 2015 and 2014 was $16,895,894 and $16,305,147,respectively.

8. NET POSITION

Net Position is the excess of all the Authority’s assets and deferred outfl ows over all its liabilities, and deferred infl ows. Net Position is divided into three categories as follows:

Investment in Capital Assets describes the portion of net position which is represented by the currentnet book value of the Authority’s capital assets, less the outstanding balance of any debt issue tofi nance these assets, if any.

Restricted describes the portion of net position which is restricted as to use by the terms andconditions of agreements with outside parties, governmental regulations, laws, or other restrictionswhich the Authority cannot unilaterally alter. These principally include facility capacity fees receivedfor use on capital projects, fees charged for the provision of future water resources and debt servicereserve funds.

Unrestricted describes the portion of net position which is not restricted as to use.



PARSAC’s net position as of June 30, 2015 consists of the following:

Invested in Capital Assets $ 771,421

Unrestricted, Designated for:

Errors and Omission 100,000

Capital Replacement 188,739

Grant Program 369,293

Rate Stabilization 1,322,658

Target Equity 7,500,000

Contingency Fund 100,000

Pension/OPEB Liability 482,189

Liability Coverage Expansion 400,000

Liability Retention Increase 200,000

Distributions to Withdrawn Members 264,583

EPL Coverage Expansion 360,184

Liebert Cassidy Consortium 396,500

Undesignated Equity 7,340,457

Unrestricted Total 19,024,603

Net Position $ 19,796,024

9. EMPLOYEE RETIREMENT SYSTEM

Plan Description. Qualifi ed employees are eligible to participate in the Authority’s cost-sharing multiple employer defi ned benefi ts pension plan administered by the California Public Employees’ Retirement system (CalPERS). Benefi t provisions under the Plan are established by State statute and Authority resolution. CalPERS issues publicly available reports that include a full description of the pensionplans regarding benefi t provisions, assumption and membership information that can be found on the CalPERS website.

The Authority’s plan had less than 100 active members as of June 30, 2014 actuarial valuation. As aresult, PARSAC’s members are required to participate in a larger Miscellaneous Employee Risk Pool.

Benefi ts Provided. CalPERS provides service retirement and disability benefi ts, annual cost of living adjustments and death benefi ts to plan members, who must be public employees or their benefi ciaries. Benefi ts are based on years of credited service, equal to one year of full time employment. Members with fi ve years of total service are eligible to retire at age 50 with statutorily reduced benefi ts. The Basic Death benefi t is provided. The cost of living adjustment has a maximum increase of 5%.

Effective January 1, 2013, CalPERS instituted a new pension plan as a result of the Public EmployeePension Reform Act (PEPRA). Employees hired from that date on are subject to the new 2% at 62benefi t formula. The 2.5% at 55 benefi t formula has been closed to new hires from January 1, 2013 on, unless they meet the rules for a CalPERS Classic employee. A Classic employee is already CalPERSmember through prior employment and was employed by a CalPERS member within the last 6months. See the CalPERS website for more information.

32

The Plan provisions and benefi ts in effect at June 30, 2015 are summarized as follows:

Miscellaneous

Hire Date Prior toJanuary 1, 2013

On or afterJanuary 1, 2013

Benefi t Formula 2.5% @ 55 2% @ 62

Benefi t Vesting Schedule 5 years service 5 years service

Benefi t Payments Monthly for life Monthly for life

Retirement Age 50 – 55 52 – 67

Monthly Benefi ts, as a % of Eligible Compensation

2.0% - 2.5% 1.0% - 2.5%

Final Compensation Period 1 year 3 years

Required Employee Contribution Rates 8.0% 6.5%

Required Employer Contribution Rates 16.541% 6.7%

Contributions. Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires thatthe employer contribution rates for all public employers be determined on an annual basis by theactuary effective on the July 1 following notice of a change in the rate. The total plan contributionsare determined through the CalPERS’ annual actuarial valuation process. For public agency cost-sharing plans covered by the Miscellaneous risk pool, the Plan’s actuarially determined rate is based onthe estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefi ts earned by employees during the year, and any unfunded accrued liability. The employer is requiredto contribute the difference between the actuarially determined rate and the contribution rate ofemployees. For the measurement period ended June 30, 2014 (the measurement date), the activeemployee contribution rate is 7.942 percent of annual pay, and the average employers’ contributionrate is 16.541 percent of annual payroll. During the periods ended June 30, 2014 and 2015, PARSACcontributed 6% and 4%, respectively, of the employee portion of the active plan members’ annualsalaries. For the year ended June 30, 2015, the contributions recognized as part of pension expensewere as follows:

Contributions - Employer $91,048Contributions - Employee (paid by Employer) 33,150

Pension Liabilities, Pension Expense, and Deferred Outfl ows of Resources and Deferred Infl ows of Resources Related to Pensions. At June 30, 2015, PARSAC reported a liability of $558,665 for its proportionateshare of the net pension liability. The net pension liability was measured as of June 30, 2014 andthe total pension liability used to calculate the net pension liability was determined by an actuarialvaluation as of that date. PARSAC’s proportion of the net pension liability was based on a projectionof PARSAC’s long-term share of contributions to the pension plan relative to the projectedcontributions of all participating employers in the Miscellaneous Risk Pool, actuarially determined.



PARSAC’s proportionate share of the net pension liability as of the June 30, 2013 and June 30, 2014measurement dates was as follows:

Measurement Date

June 30, 2013 June 30, 2014

Net Pension Liability – PARSAC $ 743,809 $ 558,665

Total Miscellaneous Risk Pool Pension Liability $ 3,276,668,431 $ 2,471,487,278

PARSAC’s Proportion of the Total Liability .0227% .0226%

For the year ended June 30, 2015, PARSAC recognized pension expense of $122,646. Thepension expense for the risk pool for the measurement period is $239,824,465. Pension expenserepresents the change in the net pension liability during the measurement period, adjusted for actualcontributions and the deferred recognition of changes in investment gain/loss, actuarial gain/loss,actuarial assumptions or method, and plan benefi ts. At June 30, 2015, PARSAC reported deferred outfl ows of resources and deferred infl ows of resources related to pensions from the following sources:

DeferredOutfl ows

of Resources

DeferredInfl ows

of Resources

Pension contributions subsequent to themeasurement date

$ 125,427 $

Net difference between projected and actualearnings on retirement plan investments

172,206

Adjustments due to differences in proportions 11,386

$ 125,427 $ 183,592

Deferred outfl ows of resources and deferred infl ows of resources above represent the unamortized portion of changes to net pension liability to be recognized in future periods in a systematic andrational manner.

Deferred outfl ows of resources of $125,427 relate to contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ended June 30, 2016.Other amounts reported as deferred outfl ows of resources and deferred infl ows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30, Amount

2016 $ (47,117)

2017 (47,117)

2018 (46,305)

2019 (43,053)

2020

Thereafter

$ (183,592)

34

Actuarial Assumptions

For the measurement period ending June 30, 2014 (the measurement date), the total pension liabilitywas determined by rolling forward the June 30, 2013 total pension liability. Both the June 30, 2013total pension liability and the June 30, 2014 pension liability were based on the following actuarialmethods and assumptions:

Actuarial Cost Method Entry Age Normal in accordance with the requirements ofGASB Statement No. 68

Actuarial Assumptions

Discount Rate 7.50%

Infl ation 2.75%

Salary Increases Varies by Entry Age and Service

Investment Rate of Return 7.50% Net of Pension Plan Investment and AdministrativeExpenses; includes Infl ation

Mortality Rate Table1 Derived using CalPERS’ Membership Data for all Funds

Post Retirement Benefi t Contract COLA up to 2.75% until Purchasing Power

Increase Protection Allowance Floor on Purchasing Power Applies,2.75% thereafter

All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of anactuarial experience study for the fi scal years 1997 to 2011, including updates to salary increase, mortality and retirement rates.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns,net of pension plan investment expense and infl ation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-termand long-term market return expectations as well as the expected pension fund cash fl ows. Such cash fl ows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’asset classes, expected compound (geometric) returns were calculated over the short-term (fi rst 10 years) and long-term (11-60 years) using a building-block approach. Using the expected normalreturns for both short-term and long-term, the present value of benefi ts was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrivedat the same present value of benefi ts for cash fl ows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent tothe single equivalent rate calculated above and rounded down to the nearest one quarter of onepercent.

The table on the following page refl ects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discountrate and asset allocation. These geometric rates of return are net of administrative expenses.



Asset Class

NewStrategic

AllocationReal ReturnYears 1-10l

Real ReturnYears 11+2

Global Equity 47.0% 5.25% 5.71%

Global Fixed Income 19.0 0.99 2.43

Infl ation Sensitive 6.0 0.45 3.36

Private Equity 12.0 6.83 6.95

Real Estate 11.0 4.50 5.13

Infrastructure andForestland 3.0 4.50 5.09

Liquidity 2.0 (0.55) (1.05)

Total 100.0%

1An expected infl ation of 2.5% used for this period2An expected infl ation of 3.0% used for this period

Discount Rate. The discount rate used to measure the total pension liability was 7.50 percent. To determinewhether the municipal bond rate should be used in the calculation of a discount rate for each plan,CalPERS stress tested plans that would most likely result in a discount rate that would be differentfrom the actuarially assumed discount rate. Based on the testing, none of the tested plans run outof assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipalbond rate calculation is not necessary. The long-term expected discount rate of 7.50 percent isapplied to all plans in the Public Employees Retirement Fund.

The 7.50 percent investment return assumption used in this accounting valuation is net ofadministrative expenses. Administrative expenses are assumed to be 15 basis points. An investmentreturn excluding administrative expenses would have been 7.65 percent. Using this lower discountrate has resulted in a slightly higher total pension liability and net pension liability. This difference wasdeemed immaterial to the Public Agency Cost-Sharing Multiple-Employer Defi ned Benefi t Pension Plan.

Sensitivity of PARSAC’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents PARSAC’s proportionate share of the net pension liability as of themeasurement date calculated using the discount rate of 7.5 percent, as well as what the proportionateshare of the net pension liability would be if it were calculated using a discount rate that is1-percentage point lower (6.5 percent) or 1-percentage point higher (8.5 percent) than the currentrate:

1% Decrease DiscountRate

1% Increase

6.50% 7.50% 8.50%

PARSAC’s proportionate share ofthe net pension plan liability

$965,371 $558,665 $221,138

Pension fund fi duciary net position. Detailed information about the pension fund’s fi duciary net position is

available in the separately issued CalPERS CAFR.

36

10. OTHER POSTEMPLOYMENT BENEFITS

PARSAC provides post-retirement health care benefi ts for employees who satisfy the requirements for retirement under CalPERS (attained age 50 with 5 years of service). PARSAC currently pays 100% of themedical premium and 80% of the dependent’s premium for active and retired employees.

PARSAC’s annual other post-employment benefi t (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with theparameters of GASB Cod. Sec. P50.108.109. The ARC represents a level of funding that, if paid on an ongoingbasis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or fundingexcess) over a period not to exceed thirty years. PARSAC reduced the remaining period for amortizing theunfunded actuarial accrued liability from thirty years to ten years effective July 1, 2014.

The following table shows the components of PARSAC’s annual OPEB cost for the year, the amount actuallycontributed to the plan, and changes in PARSAC’s net OPEB obligation:

Annual Required Contribution $ 81,885

Adjustment to Annual Required Contribution 0

Annual OPEB Cost 0

Contributions Made 81,885

Change in Net OPEB Obligation 0

Net OPEB Obligation – Beginning of Year 0

Net OPEB Obligation – End of Year $ 0

PARSAC’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEBobligation for the three years ended June 30, 2015 was as follows:

Fiscal YearEnded

AnnualOPEB Cost

Percentage ofAnnual OPEB Cost

ContributedNet OPEB

Asset

June 30, 2012 $57,469 100% $ -

June 30, 2013 $59,716 100% $ -

June 30, 2014 $60,492 100% $ -

June 30, 2015 $81,885 100% $ -

As of July 1, 2013, the most recent actuarial valuation date, the actuarial accrued liability for benefi ts was $676,511, and the actuarial value of assets was $412,615, resulting in an unfunded actuarial accrued liability(UAAL) of $263,896. The covered payroll (annual payroll of active employees covered by the Plan) was$570,673, and the ratio of the UAAL to the covered payroll was 46.2%.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptionsabout the probability of occurrence of events far into the future. Examples include assumptions about futureemployment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status ofthe plan and the annual required contributions of the employer are subject to continual revision as actualresults are compared with past expectations and new estimates are made about the future. The schedule offunding progress, shown above, presents multiyear trend information about whether the actuarial value ofplan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefi ts.Projections of benefi ts for fi nancial reporting purposes are based on the substantive plan (the plan as



understood by the employer and the plan members) and include the types of benefi ts provided at the time of each valuation and the historical pattern of sharing the benefi t costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reducethe effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistentwith the long-term perspective of the calculations.

In the July 1, 2013 actuarial valuation, the entry age normal cost method was used. The actuarial assumptionsinclude a 7.25% investment rate (net of administrative expenses), which is a blended rate of the expectedlong-term investment returns on plan assets and on the employer’s own investments calculated basedon the funded level of the plan on the valuation date, and an annual healthcare cost trend rate of 8.5%initially, reduced by decrements to an ultimate rate of 4.5% after 10 years. Both rates include a 3% infl ation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a fi ve-year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2015,was 9 years.

11. JOINT POWERS AGREEMENT

PARSAC participates in joint ventures under several Joint Powers Agreements (JPA) with Local AgencyWorkers’ Compensation Excess JPA (LAWCX), Employment Risk Management Authority (ERMA) andCalifornia State Association of Counties Excess Insurance Authority (CSAC-EIA). The relationship is such thatLAWCX, ERMA and CSAC-EIA are not component units of PARSAC for fi nancial reporting purposes.

ERMA arranges for and provides up to $975,000 employment practices liability coverage in excess ofthe self-insured retention while CSAC-EIA provides $34 million excess liability insurance coverage(including employment practices) above PARSAC’s $1 million retention. LAWCX provides excess workers’compensation insurance coverage for losses in excess of $500,000 up to statutory limits.

ERMA, CSAC-EIA and LAWCX are governed by Boards with member agency representation. Theirrespective Boards control the operations, including selection of management and approval of operatingbudgets, independent of any infl uence by the member agencies beyond their representation on the board. Each member agency pays a premium commensurate with the level of coverage requested and sharessurpluses and defi cits proportionate to their participation. Complete fi nancial statements of ERMA, CSAC-EIA and LAWCX may be obtained from each agency, respectively.

LAWCX CSAC-EIA ERMA

Purpose To self-insure andpool excess workers’compensation losses

To provide coverage relating to Worker’sCompensation, General Liability Medical

Malpractice, Property and EmployeeMedical Plans

To provide employmentliability coverage to

California Public Entities

Participants 23 municipalities, 10 jointpowers authorities, and one

special district

55 counties and 255 public entitiesincluding cities, school districts, special

districts and other joint powers authorities

10 joint powers authorities

GoverningBoard

Consisting of one memberfrom each participating

agency

Consisting of one member from eachparticipating member county and sevenmembers elected by the public entity

membership

Consisting of one memberfrom each participating

agency

Payments forthe CurrentYear

$749,950 $949,166 $870,601

38


Condensed Financial Information

LAWCXJune 30, 2014*

CSAC-EIAJune 30, 2014*

ERMAJune 30, 2014*

Total Assets $ 75,575,526 $ 592,584,275 $ 27,136,775

Total Liabilities $ 56,692,721 $ 479,255,274 $ 8,631,638

Net Position 18,882,805 113,329,001 18,505,137

Total Liabilities and Net Position $ 75,575,526 $ 592,584,275 $ 27,136,775

Revenues $ 10,580,567 $ 580,207,501 $ 5,984,260

Expenses 18,390,529 585,493,896 7,225,148

Change in Net Assets $ (7,809,962) $ (5,286,395) $ (1,240,888)

* Most recent information available.

12. CONTINGENCIES

PARSAC is subject to legal proceedings and claims which arise in the ordinary course of business. In theopinion of management, the amount of ultimate liability with respect to these actions will not materially affectthe fi nancial position or results of operations of PARSAC.

13. RESTATEMENT FOR ACCOUNTING CHANGE

As more fully discussed in Notes 1 and 9, PARSAC implemented two new GASB pronouncements during theyear related to the net pension liability adjustment.

The effect on the fi nancial statements of applying these pronouncements resulted in a reduction to the beginning net position of $619,611.


REQUIRED SUPPLEMENTARY INFORMATION

40

California Public Employees Retirement System (CalPERS)Schedule of PARSAC’s Proportionate Share of the Net Pension Liability

Last 10 Fiscal Years* June 30, 2014

Plans proportion of the net pension liability (asset)** .000898%

Plans proportionate share of the net pension liability (asset) $558,665

Plans covered-employee payroll $537,006

Plans proportionate share of the net pension liability (asset) as apercentage of its covered-employee payroll

104.03%

Plan fi duciary net position as a percentage of the total pension liability 81.78%

*Amounts presented above were determined as of 6/30/14.Additional years will be presented as they become available.

**Includes both miscellaneous and Safety Risk Pools

California Public Employees Retirement System (CalPERS)Schedule of PARSAC’s Contributions

Last 10 Fiscal Years* June 30, 2014

Actuarially Determined Contribution $91,048

Contributions in Relation to the Actuarially Determined Contribution (91,048)

Contribution Defi ciency (Excess) 0

PARSAC’s covered-employee payroll $537,006

Contributions as a percentage of covered-employee payroll 16.95%

*Amounts presented above were determined as of 6/30/14.Additional years will be presented as they become available.

Other Postemployment Benefi ts (OPEB)Schedule of Funding Progress

FiscalYear

Ended

ActuarialValuation

Date

ActuarialValue ofAssets

ActuarialAccruedLiability(AAL)

UnfundedActuarialAccruedLiability(UAAL)

FundedRatio

CoveredPayroll

UAAL as aPercentageof Covered

Payroll

6/30/2012 1/1/2011 $112,739 $524,411 $411,672 21.5% $489,274 84.1%

6/30/2013 1/1/2011 $231,974 $576,828 $344,854 40.2% $505,175 68.3%

6/30/2014 1/1/2011 $328,764 $631,136 $302,372 52.1% $546,384 55.3%

6/30/2015 7/1/2013 $412,615 $676,511 $263,896 61.0% $564,143 46.8%



CLAIMSDEVELOPMENTINFORMATION

June 30, 2015

The following tables illustrate how PARSAC’s earned revenue (net of reinsurance)and investment income compare to related costs of loss (net of loss assumed byreinsurers) and other expenses assumed by the Program for its most current tenyear period. The claims development information is presented on an undiscountedbasis; however, all claims liabilities reported in the basic fi nancial statements are on a discounted basis.

The rows of the tables are defi ned as follows:

(1) This line shows the total of each fi scal year’s earned deposit premiums and cumulative investment income less ceded (excess insurance cost) to arriveat net earned contribution.

(2) This line shows each fi scal year’s other operating costs of the Program including overhead and loss adjustment expenses not allocable to individualclaims.

(3) This line shows the cumulative Retrospective Premium Adjustmentattributed to the program year.

(4) This line shows the Program’s gross incurred losses and allocated lossadjustment expense, losses assumed by reinsurers, and net incurred lossesand loss adjustment expense (both paid and accrued) as originally reportedat the end of the year in which the event that triggered coverage occurred(called program year).

(5) This section of rows shows the cumulative net amounts paid as of the endof successive years for each program year.

(6) This line shows the latest reestimated amount of losses assumed byreinsurers for each program year.

(7) This section of rows shows how each program year’s net amount of lossesincreased or decreased as of the end of successive years. (This annualreestimation results from new information received on known losses,reevaluation of existing information on known losses, and emergence ofnew losses not previously known.)

(8) This line compares the latest reestimated net incurred losses amount tothe amount originally established (line 3) and shows whether this latestestimate of losses is greater or less than originally thought. As datafor individual program years mature, the correlation between originalestimates and reestimated amounts is commonly used to evaluate theaccuracy of net incurred losses currently recognized in less matureprogram years. The columns of the table show data for successiveprogram years.

42

200

5/200

6200

6/200

7200

7/200

8200

8/200

9200

9/201

0201

0/201

1201

1/201

2201

2/201

3201

3/201

4201

4/201

5

1R

equir

ed

Co

ntr

ibuti

on

and

Inve

stm

ent

Rev

enue:

Ear

ned

Co

ntr

ibuti

on

$5,0

45,6

46

$5,6

26,6

51

$6,8

57,8

56

$6,7

65,0

98

$6,1

51,2

09

$5,6

11,3

97

$5,1

70,9

65

$5,0

18,8

35

$4,9

55,8

30

$4,7

90,9

31

Inve

stm

ent

Inco

me

599,9

03

742,5

32

521,0

73

330,7

00

231,1

69

47,2

37

91,0

66

32,1

08

58,1

75

20,4

00

Ceded

2,1

78,7

87

2,2

88,2

78

2,6

39,1

07

2,2

52,2

36

2,1

50,7

01

2,0

76,8

35

1,8

26,0

29

1,7

63,6

53

1,6

93,0

21

1,8

19,7

67

Net

Ear

ned

$3,4

66,7

62

$4,0

80,9

05

$4,7

39,8

22

$4,8

43,5

62

$4,2

31,6

77

$3,5

81,7

99

$3,4

36,0

02

$3,2

87,2

90

$3,3

20,9

84

$2,9

91,5

64

2U

nal

loca

ted

Expense

s$

714,8

35

$689,3

04

$663,1

85

$829,6

63

$823,8

72

$951,4

12

$912,8

30

$1,0

32,1

29

$1,1

93,5

77

$1,2

22,4

22

3C

um

ula

tive

Retr

osp

ecti

vePre

miu

mA

dju

stm

ent

1,1

40,6

54

1,5

00,8

42

40,7

25

4Est

imat

ed

Incu

rred

Cla

ims

and

Expense

End

ofY

ear

$3,2

68,7

87

$3,5

61,2

78

$4,4

96,1

07

$4,0

11,9

27

$3,8

19,7

01

$4,2

06,9

04

$3,3

22,6

91

$3,0

55,5

57

$2,9

95,7

50

$3,3

03,9

75

Ceded

2,1

78,7

87

2,2

88,2

78

2,6

39,1

07

2,2

52,2

36

2,1

50,7

01

2,0

76,8

35

1,8

26,0

29

1,7

63,6

53

1,6

93,0

21

1,8

19,7

67

Net

Incu

rred

$1,0

90,0

00

$1,2

73,0

00

$1,8

57,0

00

$1,7

59,6

91

$1,6

69,0

00

$2,1

30,0

69

$1,4

96,6

62

$1,2

91,9

04

$1,3

02,7

29

$1,4

84,2

08

5C

um

ula

tive

Pai

dEnd

of

Pro

gram

Year

$38,8

06

$15,0

00

$75,1

61

$(3

,466)

$10,1

88

$376,1

00

$76,2

44

$58,3

31

$6,2

39

$428

One

Yea

rLat

er

$255,5

62

$187,3

94

$195,3

44

$70,0

55

$107,2

03

$1,7

42,1

07

$113,2

02

$968,3

93

$68,7

72

Two

Year

sLat

er

$669,3

43

$363,1

05

$1,5

32,2

85

$381,9

48

$243,2

28

$2,5

53,6

01

$331,5

65

$2,7

83,1

80

Thre

eYe

ars

Lat

er

$1,2

10,4

27

$390,5

66

$3,3

19,4

28

$747,6

38

$420,0

70

$4,1

08,7

27

$477,9

65

Four

Year

sLat

er

$1,2

87,9

36

$1,1

13,0

62

$3,5

23,2

05

$695,3

47

$674,1

24

$4,0

76,6

97

Five

Year

sLat

er

$1,4

36,8

47

$1,1

08,6

43

$3,7

08,1

56

$814,9

76

$837,5

49

Six

Year

sLat

er

$1,5

85,6

75

$1,1

08,6

43

$3,7

48,4

30

$771,5

16

Seve

nYe

ars

Lat

er

$1,5

84,1

75

$1,1

38,6

43

$3,7

23,7

19

Eig

htYear

sLat

er

$1,6

77,3

75

1,1

08,6

43

Nin

eYear

sLat

er

$1,5

82,0

75

6R

eest

imat

ed

Ceded

Cla

ims

and

Expense

s$

452,5

26

$393,2

44

$895,4

47

$575,7

77

$393,8

74

$5,6

52,5

25

$$

1,4

38,5

35

7R

eest

imat

ed

Net

Incu

rred

Cla

ims

and

Expense

s:End

of

Pro

gram

Year

$1,0

90,0

00

$1,2

73,0

00

$1,8

57,0

00

$1,7

59,6

91

$1,6

69,0

00

$2,1

30,0

69

$1,4

96,6

62

$1,2

91,9

04

$1,3

02,7

29

$1,4

84,2

08

One

Yea

rLat

er

$1,8

28,6

71

$1,9

25,0

00

$3,5

79,5

20

$2,2

67,0

00

$1,6

22,4

34

$4,5

04,4

07

$1,0

10,1

15

$2,2

32,3

23

$2,0

65,0

94

Two

Year

sLat

er

$1,8

71,0

00

$1,4

26,9

97

$3,8

79,0

00

$2,2

11,3

03

$1,2

18,7

86

$4,3

55,5

97

$1,2

52,7

73

$3,3

42,3

14

Thre

eYe

ars

Lat

er

$1,7

52,6

71

$1,0

29,0

00

$3,8

31,1

92

$1,5

28,5

03

$970,1

36

$4,5

37,7

13

$1,1

49,7

76

Four

Year

sLat

er

$1,5

88,0

00

$1,2

02,7

35

$3,8

59,5

45

$1,1

05,9

10

$932,9

97

$3,8

52,4

57

Five

Year

sLat

er

$1,8

62,0

36

$1,1

46,8

15

$3,7

79,6

51

$776,6

88

$897,0

64

Six

Year

sLat

er

$1,6

37,1

44

$1,1

39,1

02

$3,7

73,7

07

$1,0

00,8

15

Seve

nYe

ars

Lat

er

$1,6

11,5

07

$1,1

23,6

43

$3,8

53,0

10

Eig

htYear

sLat

er

$1,5

74,1

11

$1,1

44,8

09

Nin

eYear

sLat

er

$1,6

07,9

61

8

Incr

eas

e(D

ecr

ease

)in

Est

imat

ed

Incu

rred

Cla

ims

Expense

fro

mEnd

of

Pro

gram

Year

$517,9

61

$(1

28,1

91)

$1,9

96,0

10

$(7

58,8

76)

$(7

71,9

36)

$1,7

22,3

88

$(3

46,8

86)

$2,0

50,4

10

$762,3

65

$-

CLAIMS DEVELOPMENT INFORMATIONLiability Program - June 30, 2015



200

5/200

6200

6/200

7200

7/200

8200

8/200

9200

9/201

0201

0/201

1201

1/201

2201

2/201

3201

3/201

4201

4/201

5

1R

equi

red

Contr

ibutio

nan

dIn

vest

men

tR

even

ue:

Ear

ned

$4,2

62,

748

$4,5

68,

679

$4,4

49,

455

$4,1

39,

075

$4,2

36,

980

$4,0

18,

631

$4,0

19,

138

$4,3

74,

293

$4,6

00,

740

$5,1

28,

707

Inve

stm

ent

Inco

me

450

,270

530

,726

395

,220

198

,500

120

,768

87,

537

53,

576

64,

550

92,

405

27,

184

Ced

ed962

,808

992

,973

492

,928

585

,087

533

,133

466

,973

504

,676

569

,381

587

,538

749

,950

Net

Ear

ned

$3,

750,

210

$4,

106

,432

$4,

351,

747

$3,

752,

488

$3,

824,

615

$3,

639,

195

$3,

568,

038

$3,

869,

462

$4,

105,

607

$4,4

05,

941

2U

nal

loca

ted

Expe

nse

s$

458

,326

$508

,782

$637

,600

$696

,170

$701

,539

$697

,023

$774

,346

$861

,269

$1,0

24,

128

$1,0

06,

121

3C

um

ulat

ive

Ret

rosp

ective

Pre

miu

mA

dju

stm

ent

4Est

imat

edIn

curr

edC

laim

san

dEx

pense

sEnd

ofY

ear

$2,6

96,

808

$2,8

24,

973

$2,9

13,

928

$3,1

05,

087

$3,0

47,

133

$3,1

16,

913

$2,

947,

775

$3,1

77,

578

$3,1

66,

911

$3,1

96,

846

Ced

ed962

,808

992

,973

492

,928

585

,087

533

,133

466

,973

504

,676

569

,381

587

,538

749

,950

Net

Incu

rred

$1,7

34,

000

$1,8

32,

000

$2,4

21,

000

$2,5

20,

000

$2,5

14,

000

$2,6

49,

940

$2,

443,

099

$2,

608,

197

$2,5

79.

373

$2,

446,

896

5C

um

ulat

ive

Pai

dEnd

ofPro

gram

Year

$122

,134

$209

,397

$188

,276

$317

,371

$219

,656

$327

,068

$259

,023

$450

,566

$506

,452

$65,

369

One

Year

Late

r$

418

,870

$335

,394

$418

,318

$583

,584

$933

,685

$1,0

21,

428

$568

,269

$575

,029

$853

,751

Two

Year

sLa

ter

$600

,144

$433

,593

$656

,480

$990

,616

$1,7

01,

452

$1,6

00,

764

$704

,749

$819

,575

Thre

eYe

ars

Late

r$

668

,837

$443

,898

$872

,320

$1,4

11,

666

$2,2

25,

615

$2,0

63,

292

$902

,159

FourYe

ars

Late

r$

762

,489

$446

,361

$974

,602

$1,5

84,

153

$2,4

46,

438

$2,4

47,

515

Five

Year

sLa

ter

$910

,942

$449

,231

$1,1

17,

677

$1,9

57,

976

$2,4

91,

609

Six

Year

sLa

ter

$899

,127

$454

,407

$1,2

02,

194

$2,0

10,

469

Seve

nYe

ars

Late

r$

899

,778

$455

,391

$1,2

57,

459

Eig

htYe

ars

Late

r$

1,0

13,

933

$459

,611

Nin

eYe

ars

Late

r$

1,0

61,

829

6R

eest

imat

edC

eded

Cla

ims

and

Expe

nse

s$

512

,224

$36,

373

$1,1

72,

705

$133

,948

$2,1

49,

332

$

7R

eest

imat

edN

etIn

curr

edC

laim

san

dExp

ense

s:End

ofPro

gram

Year

$1,7

34,

000

$1,8

32,

000

$2,4

21,

000

$2,5

20,

000

$2,1

54,

000

$2,6

49,

940

$2,

443,

099

$2,6

08,

197

$2,5

79,

373

$2,4

46,

896

One

Year

Late

r$

1,7

83,

000

$1,6

91,

000

$1,9

44,

000

$1,8

32,

000

$3,0

00,

918

$2,8

96,

938

$2,0

23,

709

$1,9

73,

948

$2,1

48,

473

Two

Year

sLa

ter

$1,4

20,

000

$1,1

11,

000

$1,7

35,

000

$2,0

58,

826

$3,0

54,

650

$3,1

27,

162

$2,0

27,

324

$1,7

14,

030

Thre

eYe

ars

Late

r$

1,3

59,

000

$896

,000

$1,8

47,

066

$2,3

31,

346

$3,1

33,

259

$3,9

88,

341

$1,8

22,

596

FourYe

ars

Late

r$

1,2

13,

000

$795

,754

$1,7

85,

062

$2,7

93,

574

$3,0

57,

743

$3,6

38,

269

Five

Year

sLa

ter

$1,1

78,

825

$618

,218

$1,7

50,

385

$3,1

12,

457

$3,0

82,

586

Six

Year

sLa

ter

$1,1

63,

883

$600

,656

$1,8

18,

892

$3,1

99,

890

Seve

nYe

ars

Late

r$

1,1

75,

358

$565

,368

$1,7

37,

158

Eig

htYe

ars

Late

r$

1,2

73,

826

$561

,702

Nin

eYe

ars

Late

r$

1,2

58,

011

8

Incr

ease

(Dec

reas

e)in

Est

imat

edIn

curr

edC

laim

sExp

ense

fro

mEnd

of

Pro

gram

Year

$(4

75,9

89)

$(1

,270

,298

)$

(683

,842

)$

679

,890

$568

,586

$988

,329

$(6

20,5

03)

$(8

94,1

67)

$(4

30,9

00)

$-

CLAIMS DEVELOPMENT INFORMATIONWorkers’ Compensation Program - June 30, 2015

44

2015 2014

Unpaid Claims and Claims Adjustment Expenses,Beginning of Fiscal Year $ 4,584,691 $ 4,796,053

Incurred Claims and Claims AdjustmentExpenses:

Provision for Covered Events ofCurrent Fiscal Year 1,484,208 1,302,729

Change in Provision for Covered Events ofPrior Fiscal Years 1,398,017 727,987

Total Incurred Claims andClaims Adjustment Expense 2,882,225 2,030,716

Payments:

Claims and Claims Adjustment ExpensesAttributable to Covered Events ofCurrent Fiscal Year 428 6,239

Claims and Claims Adjustment ExpensesAttributable to Covered Events ofPrior Fiscal Years 1,893,575 2,235,839

Total Payments 1,894,003 2,242,078

Total Unpaid Claims and Claims AdjustmentExpenses, End of Fiscal Year $ 5,572,913 $ 4,584,691

The components of the unpaid claims and claim adjustment expenses as of June 30,2015 and 2014 were as follows:

2015 2014

Claims Reserves $ 2,998,090 $ 2,398,873

Claims Incurred But Not Reported (IBNR) 2,048,458 1,731,128

Unallocated Loss Adjustment Expenses (ULAE) 526,365 454,690

$ 5,572,913 $ 4,584,691

RECONCILIATIONOF CLAIMS

LIABILITIES BY TYPEOF CONTRACT

Liability ProgramFor the Year Ended

June 30, 2015 and 2014

SUPPLEMENTARY INFORMATION


2015 2014

Unpaid Claims and Claims Adjustment Expenses,Beginning of Fiscal Year $ 10,097,004 $ 8,895,388

Incurred Claims and Claims AdjustmentExpenses:

Provision for Covered Events ofCurrent Fiscal Year 2,446,896 2,579,373

Change in Provision for Covered Events ofPrior Fiscal Years (1,194,712) 1,676,727

Total Incurred Claims and Claims AdjustmentExpense 1,252,184 4,256,100

Payments:

Claims and Claims Adjustment ExpensesAttributable to Covered Events ofCurrent Fiscal Year 65,369 506,452

Claims and Claims Adjustment ExpensesAttributable to Covered Events ofPrior Fiscal Years 1,576,580 2,548,032

Total Payments 1,641,949 3,054,484

Total Unpaid Claims and Claims AdjustmentExpenses, End of Fiscal Year $ 9,707,239 $ 10,097,004

The components of the unpaid claims and claim adjustment expenses as of June 30,2015 and 2014 were as follows:

2015 2014

Claims Reserves $ 4,690,385 $ 5,536,725

Claims Incurred But Not Reported (IBNR) 4,271,906 3,859,707

Unallocated Loss Adjustment Expenses (ULAE) 744,948 700,572

$ 9,707,239 $ 10,097,004

RECONCILIATIONOF CLAIMS

LIABILITIES BY TYPEOF CONTRACT

Workers’Compensation Program

For the Years EndedJune 30, 2015 and 2014

46

LiabilityWorkers’

Comp.Property/

BondBuilding

2015Total

ASSETS

Current Assets:

Cash and Cash Equivalents $ 654,671 $ 626,264 $ 36,532 $ 789 $ 1,318,256

Investments 429,383 617,110 6,185 1,052,678

Receivables:

Interest 50,688 61,952 112,640

Member 348,969 165,290 60,551 574,810

Excess Insurance 210,577 210,577

ERMA Dividend 380,991 380,991

Due From Other Funds 57,609 38,406 96,015

Prepaid Expenses 327 238 44,402 44,967

Total Current Assets 1,922,638 1,719,837 141,485 6,974 3,790,934

Non-Current Assets:

Investments 13,907,962 19,988,544 200,352 34,096,858

Capital Assets 3,002 3,002 765,417 771,421

Total Non-CurrentAssets

13,910,964 19,991,546 965,769 34,868,279

Total Assets 15,833,602 21,711,383 141,485 972,743 38,659,213

Deferred Outfl ow of Resources:

Pension Plan ContributionsMade After theMeasurement Date

77,765 47,662 125,427

Total Deferred Outfl ow of Resources

77,765 47,662 125,427

Total Assets andDeferredOutfl ow of Resources

15,911,367 21,759,045 141,485 972,743 38,784,640

COMBININGSTATEMENT OF NET

POSITION

June 30, 2015



LiabilityWorkers’

Comp.Property/

BondBuilding

2015Total

LIABILITIES & NETPOSITION

Current Liabilities:

Accounts Payable 14,068 40,820 76 54,964

Accrued Expenses 81,879 59,548 7,443 148,870

Committee Training StipendPayable

9,493 6,904 863 17,260

Due to Other Funds 96,015 96,015

Excess PremiumAssessments

24,469 24,469

Retrospective PremiumAdjustment Payable

901,397 1,723,232 2,624,629

Unpaid Claims andAdjustment Expenses

2,128,067 2,223,370 4,351,437

Total Current Liabilities 3,134,904 4,078,343 104,397 7,317,644

Non-Current Liabilities:

Unpaid Claims and ClaimsAdjustment Expenses

3,444,846 7,483,869 10,928,715

Net Pension Liability 346,372 212,293 558,665

Total Non-CurrentLiabilities

3,791,218 7,696,162 11,487,380

Total Liabilities 6,926,122 11,774,505 104,397 18,805,024

Deferred Infl ow of Resources:

Differences between actualandprojected pension relatedearnings and otheradjustments

113,827 69,765 183,592

Total Deferred Outfl ow of Resources

113,827 69,765 183,592

Total Liabilities andDeferredInfl ow of Resources

7,039,949 11,844,270 104,397 18,988,616

Net Position:

Invested in Capital Assets 3,002 3,002 765,417 771,421

Unrestricted 8,868,416 9,911,773 37,088 207,326 19,024,603

Total Net Position $ 8,871,418 $ 9,914,775 $ 37,088 $ 972,743 $ 19,796,024

48

LiabilityWorkers’

Comp.Property/

BondBuilding

2015Total

Operating Revenues:

Premium Contributions $ 4,549,747 $ 4,842,325 $ 1,690,581 $ $11,082,653

Retrospective Adjustment (895,584) (1,399,460) (2,295,044)

CARMA Dividend 482,191 482,191

ERMA Dividend 380,991 380,991

Other 4,761 6,641 505 11,907

Total Revenues 4,522,106 3,449,506 1,691,086 9,662,698

Operating Expenses:

Claims Paid 1,894,003 1,641,949 3,535,952

Change in Claims Liabilities 988,222 (389,765) 598,457

Excess Insurance 1,819,767 749,950 1,630,949 4,200,666

Program Administration 273,757 318,425 592,182

Risk Management 206,113 143,758 349,871

Professional Fees 85,188 65,897 2,107 153,192

Salaries and Benefi ts 526,152 382,839 47,988 956,979

Travel and Meetings 47,943 34,641 4,330 86,914

CARMA Dividend Refunds 392,052 392,052

Facility Expense 32,684 23,770 2,971 59,425

Other General andAdministrative Expenses

50,586 36,790 4,599 91,975

Total OperatingExpenses

6,316,467 3,008,254 1,692,944 11,017,665

Operating Income (Loss) (1,794,361) 441,252 (1,858) (1,354,967)

Non-Operating Revenues(Expenses):

Investment Income 208,842 255,252 464,094

Facility Expense, Net (29,832) (29,832)

Total Non-OperatingRevenues (Expenses)

208,842 255,252 (29,832) 434,262

Change in Net Position (1,585,519) 696,504 (1,858) (29,832) (920,705)

Net Position, Beginning ofYear,as Previously Reported

10,839,222 9,455,597 38,946 1,002,575 21,336,340

Retroactive Restatement forAccounting Change

(382,285) (237,326) (619,611)

Net Position, Beginning ofYear,As Restated

10,456,937 9,218,271 38,946 1,002,575 20,716,729

Net Position, End ofYear $ 8,871,418 $ 9,914,775 $ 37,088 $ 972,743 $19,796,024

COMBININGSTATEMENT

OF REVENUES,EXPENSES AND

CHANGES IN NETPOSITION

For The Year EndedJune 30, 2015



INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS

Board of Directors and MembersPublic Agency Risk Sharing Authority of CaliforniaSacramento, California

We have audited in accordance with the auditing standards generally accepted in the United States of America and thestandards applicable to fi nancial audits contained in Government Auditing Standards issued by the Comptroller General ofthe United States, the fi nancial statements of Public Agency Risk Sharing Authority of California (PARSAC) as of and for the year ended June 30, 2015, and the related notes to the fi nancial statements, which collectively comprise PARSAC’s basic fi nancial statements, and have issued our report thereon dated October 16, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the fi nancial statements, we considered PARSAC’s internal control over fi nancial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for thepurpose of expressing our opinion on the fi nancial statements, but not for the purpose of expressing an opinion on the effectiveness of PARSAC’s internal control. Accordingly, we do not express an opinion on the effectiveness of PARSAC’sinternal control.

A defi ciency in internal control exists when the design or operation of a control does not allow management or employees,in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on atimely basis. A material weakness is a defi ciency, or a combination of defi ciencies, in internal control such that there is a reasonable possibility that a material misstatement of PARSAC’s fi nancial statements will not be prevented, or detected and corrected on a timely basis. A signifi cant defi ciency is a defi ciency, or a combination of defi ciencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the fi rst paragraph of this section and was not designed to identify all defi ciencies in internal control that might be material weaknesses or, signifi cant defi ciencies. Given these limitations, during our audit, we did not identify any defi ciencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identifi ed.

Compliance and other Matters

As part of obtaining reasonable assurance about whether PARSAC’s fi nancial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations and contracts,noncompliance with which could have a direct and material effect on the determination of fi nancial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly wedo not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to bereported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the resultsof that testing, and not to provide an opinion on the effectiveness of PARSAC’s internal control or on compliance. Thisreport is an integral part of an audit performed in accordance with Government Auditing Standards in considering PARSAC’sinternal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Please feel free to contact us for additional information.

Public Agency Risk Sharing Authority of California1525 Response Road, Suite 1Sacramento, California 95815

(800) 400-2642 • www.parsac.org

Accredited with ExcellenceSince 1996 Public Agency Risk Sharing Authority of California

2015 Annual Report

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2015 Annual Report

Government & Nonprofit