Sheriffs' Retirement Fund of Georgia Financial Statements Fiscal Year Ended June 30, 2023 (With Independent Auditor's Report Thereon) The cover photograph is of the location of the new headquarters of the Georgia Sheriffs' Youth Homes Foundation, the Georgia Sheriffs' Youth Homes, the Sheriffs' Retirement Fund of Georgia and the Georgia Sheriffs' Association located in Madison, GA. TABLE OF CONTENTS Page SECTION I FINANCIAL Independent Auditor's Report 1 Basic Financial Statements Statement of Fiduciary Net Position 5 Statement of Changes in Fiduciary Net Position 6 Notes to Financial Statements 7 Required Supplementary Information (Unaudited) Schedule of Employers' and Nonemployers' Net Pension Liability 20 Schedule of Changes in Employers' and Nonemployers' Net Pension Liability 21 Schedule of Employer and Nonemployer Contributions 22 Schedule of Investment Returns 23 Notes to Required Supplementary Information 24 SECTION II REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 26 SECTION I - FINANCIAL Greg S. Griffin State Auditor INDEPENDENT AUDITOR'S REPORT The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Board of Commissioners of the Sheriffs' Retirement Fund of Georgia and Mr. J. Terry Norris, Secretary-Treasurer Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of the Sheriffs' Retirement Fund of Georgia (Fund), a component unit of the State of Georgia, as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Fund's basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the fiduciary net position of the Fund as of June 30, 2023, and the changes in fiduciary net position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Fund and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone (404) 656-2180 In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Fund's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Fund's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit. Required Supplementary Information Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Accounting principles generally accepted in the United States of America require that the required supplementary information listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient appropriate evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 23, 2024 on our consideration of the Fund's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Fund's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Fund's internal control over financial reporting and compliance. A copy of this report has been filed as a permanent record and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, Greg S. Griffin State Auditor July 23, 2024 BASIC FINANCIAL STATEMENTS SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Statement of Fiduciary Net Position June 30, 2023 Assets: Cash and cash equivalents Receivables: Due from brokers for seurities sold Investments at Fair Value: Obligations: U.S. treasury obligations U.S. agency obligations Corporate: Domestic International Asset-backed securities Mortgage investments Equities: Mutual funds: Domestic International Stocks: Domestic International Exchange traded funds: Domestic International Real estate investment trusts Total investments at fair value Total assets Liabilities: Current liabilities Accounts payable and other accruals Accounts payable Due to brokers for seurities purchased Deferred dues payments Total liabilities Net position restricted for pensions See accompanying notes to financial statements. $ 2,791,053 13,737 6,266,516 6,085,963 4,229,717 660,992 3,265,472 3,165,981 23,674,641 12,782,432 9,210,724 23,528,159 4,964,231 25,632,985 2,735,634 488,818 79,342,983 103,017,624 105,822,414 149,912 65,387 8,100 5 223,399 $ 105,599,015 SHERIFFS' RETIREMET FUND OF GEORGIA (A Component Unit of the State of Georgia) Statement of Changes in Fiduciary Net Position Year ended June 30, 2023 Additions: Contributions: Nonemployer Members Investment income: Net increase in fair value of investments Interest, dividends, and other Less investment expense Total additions Deductions: Benefit payments Administrative expenses, net Total deductions Net change in net position Net position restricted for pensions: Beginning of year End of year $ 1,920,330 77,535 11,963,929 2,415,259 (555,129) 13,824,059 15,821,924 6,503,970 322,684 6,826,654 8,995,270 96,603,745 $ 105,599,015 See accompanying notes to financial statements. 6 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Note 1: Plan Description The Sheriffs' Retirement Fund of Georgia (the Retirement Fund) was created in 1963 by the Georgia General Assembly to provide retirement benefits for the sheriffs of the State of Georgia. The Retirement Fund administers a cost-sharing, multiple-employer defined benefit pension plan as defined in Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25. The Retirement Fund is governed by its Board of Commissioners. The Board is comprised of six members and consists of the state treasurer, one former sheriff who is a retired beneficiary of the Retirement Fund, and four persons holding office as sheriffs within the State of Georgia, each of whom are active members of the Retirement Fund and have held office as a sheriff for at least four years. Eligibility and Membership Any qualified and commissioned sheriff of the superior court of any county within the State of Georgia who makes payment of the required contributions is eligible for membership. As of June 30, 2023, participation in the Retirement Fund is as follows: Inactive members and beneficiaries currently receiving benefits 196 Inactive members not yet receiving benefits, vested 8 Active plan members 156 Total 360 Participating Employers and Other Contributing Entities At June 30, 2023, the active members of the Retirement Fund were employed by 156 employers. The Retirement Fund also had one nonemployer contributing entity, which is the State of Georgia. Retirement Benefits The Retirement Fund provides retirement as well as death benefits. Benefit provisions and vesting requirements are established by statute and may be amended only by the General Assembly of Georgia. A description of plan benefits and vesting requirements is as follows: Retirement Conditions: Normal retirement is at age 55 provided the member has at least four years of credited service as a sheriff after and including January 1, 1961. The credited service requirement is eight years for a sheriff who first or again becomes an active member on or after July 1, 1988. A member must have terminated his or her service as sheriff to receive benefits. 7 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Retirement Benefits: The monthly benefit is a single life annuity payable in monthly payments for the life of the member. The maximum monthly payment at June 30, 2023 is equal to $172 per month (plus 1/12 of this amount for each month of any partial year) for each full year of creditable service up to a maximum of $5,174 per month. The Board of Commissioners is authorized to provide for increases effective as of January 1 and July 1 of each year up to 1% of the maximum monthly retirement benefit then in effect. Optional Benefits: Members may elect, as an alternate to the benefit described above, to receive a 100% joint life annuity payable during the life of the member or the member's spouse or a contingency life annuity with a 50% monthly payment to the surviving spouse. The amount of the benefit for these options is an actuarially reduced portion of the single life annuity benefit described above. Death Benefits: Upon the death of a member, the Retirement Fund provides death benefit payments to the member's surviving spouse, named beneficiary, or the member's estate as described in O.C.G.A. 47-16-102. Termination: At any time before a member begins drawing retirement benefits, the member may request a refund of the total sum he or she has paid into the Retirement Fund as membership dues. No interest shall be paid upon amounts so withdrawn. Contributions The Retirement Fund is funded by member and nonemployer contributing entity (Nonemployer) contributions. Contribution provisions are established by statute and may be amended only by the General Assembly. Member Contributions: Members must contribute $45 per month, with a maximum payment period of 30 years. Nonemployer Contributions: The State of Georgia provides nonemployer contributions to the Retirement Fund through the collection of court fines and forfeitures. For each criminal and quasi-criminal case involving the violation of State of Georgia laws, including traffic laws, a sum based upon the scale set forth below is collected by the presiding judge and remitted to the Retirement Fund: For fines or bond forfeitures in excess of $5, in any court where a sheriff of a superior court acts as a sheriff $2 8 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 In addition, the following amounts are required to be collected by the applicable courts and remitted to the Retirement Fund: For civil actions, cases or proceedings filed in superior courts $1 For civil actions, cases or proceedings filed in state courts and magistrate courts where a sheriff of the superior courts acts as a sheriff in those courts $1 The fines and forfeitures are considered employer contributions for the purpose of determining whether the Retirement Fund has met minimum funding requirements specified in O.C.G.A. 47-20-10. This statute also prohibits any action to grant a benefit increase until such time as the minimum annual contribution requirements meet or exceed legislative requirements. The actuarial valuation as of June 30, 2023, calculated the minimum employer contribution for the fiscal year ended June 30, 2023, as $1,929,925. The fines and forfeitures revenue of $1,920,330 for the fiscal year ended June 30, 2023, does not meet the minimum required fund contribution. Administrative Expenses Administrative expenses are generally funded from current member and nonemployer contributions. Investment earnings may be utilized to fund any expenses in excess of contributions. Note 2: Summary of Significant Accounting Policies and Plan Asset Matters Basis of Accounting The Retirement Fund's financial statements are prepared on the accrual basis of accounting, except for the collection of contributions, which are recognized when collected from the members and the courts. Any accrual of these contributions would be immaterial to the Retirement Fund's financial statements. Retirement and refund payments are recognized as deductions when due and payable. Reporting Entity The Retirement Fund is a component unit of the State of Georgia; however, it is accountable for its own fiscal matters and presentation of its separate financial statements. The Retirement Fund has considered potential component units under GASB Statements No. 61, The Financial Reporting Entity's Omnibus an amendment of GASB Statement No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, and determined there were no component units of the Retirement Fund. 9 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Cash and Cash Equivalents Cash and cash equivalents, reported at cost, include cash on deposit at banks, cash on deposit with the investment custodians earning a credit to offset fees, and short-term highly liquid financial securities with maturities of three months or less from the date of acquisition. Cash and cash equivalents also include a money market fund, reported at fair value. Investments Investments are reported at fair value. Equity securities traded on a national or international exchange are valued at the last reported sales price. Fixed income securities are valued based primarily on quoted market prices provided by independent pricing sources. Global foreign exchange holdings are translated using a third-party vendor. Investment income is recognized as earned by the Retirement Fund. There are no investments, in, or loans to, parties related to the Retirement Fund. The Retirement Fund utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, foreign currency, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the financial statements. The Retirement Fund maintains an investment policy that may be amended by its Board of Commissioners both upon its own initiative and upon consideration of the advice and recommendations of its investment consultant. There were no significant changes in the investment policy for the Retirement Fund during the fiscal year. The Retirement Fund's policy in regard to the allocation of invested assets is established on a cost basis in compliance with State law. Plan assets are managed on a total return basis with a longterm objective of achieving and maintaining a fully funded status for the benefits provided through the pension plan. The following was the Retirement Fund's adopted asset allocation policy as of June 30, 2023: Asset Class Fixed income Domestic equities International equities Real estate investment trusts Cash and cash equivalents Total Target Allocation 25% - 40% 50% - 75% 10% - 20% 0% - 5% 0% - 10% 100% Approximately 11.69% of the investments held in trust for pension benefits are invested in debt securities of the U.S. government and its instrumentalities, of which 5.93% are U.S. government debt securities and 5.76% are debt securities of the U.S. government instrumentalities. The 10 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Retirement Fund has no investments in any one organization, other than those issued by the U.S. government and its instrumentalities that represent 5% or more of the Retirement Fund's net position restricted for pensions. For the year ended June 30, 2023, the annual money weighted rate of return on pension plan investments, net of plan investment expense, was 15.43%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts invested. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of fiduciary net position and changes therein. Actual results could differ from those estimates. Related Party Transactions The Retirement Fund has a joint Administrative Services contract with Georgia Sheriffs' Association and Georgia Sheriffs' Youth Homes to perform accounting and administrative duties for the Retirement Fund. Additionally, these organizations provide computer equipment, software and computer support for the Retirement Fund and lease office space in their building to the Retirement Fund. New Accounting Pronouncements In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements (SBITA) effective for fiscal years beginning after June 15, 2022. The objective of this Statement is to improve financial reporting by establishing a definition for SBITAs and providing uniform guidance for accounting and financial reporting for transactions that meet the definition. The adoption and implementation of GASB Statement No. 96 resulted in no impact on the Fund's financial statements. Note 3: Investment Program The Retirement Fund maintains sufficient cash to meet its immediate liquidity needs. Cash not immediately needed is invested as directed by the investment policy of the Retirement Fund. All investments are held by agent custodial banks in the name of the Retirement Fund. State law and the Retirement Fund's investment policy authorize the Retirement Fund to invest in a variety of short-term and long-term securities. Cash and Cash Equivalents The carrying amount of the Retirement Fund's operating account totaled $150,756 at June 30, 2023, with an actual bank balance of $188,527. The Retirement Fund's cash balance is fully insured through the Federal Deposit Insurance Corporation, an independent agency of the U.S. Government. 11 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 The Retirement Fund's investment policy authorizes investment in short-term highly liquid financial securities. At June 30, 2023, the Retirement Fund held $2,640,297 in money market mutual funds. Investments Fixed income investments are maintained in U. S. Treasury obligations, obligations unconditionally guaranteed by agencies of the U.S. Government, obligations of foreign governments, investment-grade corporate bonds, asset-backed securities, and mortgage-related securities. Equity investments are maintained in mutual funds, domestic equities, international equities, and real estate investment trusts. Domestic equities are those securities considered by the O.C.G.A. to be domiciled in the United States. International equities are not considered by the O.C.G.A. to be domiciled in the United States. The equity portfolio is managed by the Retirement Fund in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the investment policy of the Retirement Fund. Equity trades are approved and executed by the independent advisors. Common stocks eligible for investment must meet the Investment Objectives and Guidelines of the Retirement Fund's investment policy. State law limits the total investment in equity securities to 75% of the total invested assets calculated on a historical cost basis. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Retirement Fund does not have a formal policy for managing interest rate risk. 12 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 The following table provides information about the Retirement Fund's interest rate risk: Investment type Cash and cash equivalents subject to interest rate risk: Money market mutual funds Debt securities subject to interest rate risk: U.S. treasury obligations U.S. agency obligations Corporate debt Domestic International Asset-backed securities Mortgage investments Total debt securities Total Fair Value Less than 3 Months 4 - 12 Months Maturity Period 1 - 5 Years 6 - 10 Years $ 2,640,297 2,640,297 - - - $ 6,266,516 6,085,963 4,229,717 660,992 3,265,472 3,165,981 $ 23,674,641 - 154,898 - 154,898 - 156,611 - 156,611 1,253,867 23,488 1,259,399 281,231 619,196 183,520 3,620,701 3,103,745 - 829,034 252,454 1,481,008 269,053 5,935,294 More than 10 Years - 1,908,904 6,062,475 1,829,775 127,307 1,165,268 2,713,408 13,807,137 Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the Retirement Fund. State law limits investments to investment grade securities. The Retirement Fund's investment policy requires that purchases of bonds be restricted to bonds rated as investment grade as defined by a nationally recognized rating agency. Obligations of the U.S. Government or obligations explicitly guaranteed by the U.S. Government are not considered to have credit risk and do not require disclosure of credit quality. 13 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 The quality of ratings of investments in fixed income securities at June 30, 2023, as described by Standard & Poor's, which is a nationally recognized statistical rating organization, are shown in the following table: Quality Ratings of Fixed Income Investments Held at June 30, 2023 Total Fair Investment Type Value AAA AA Cash and cash equivalents subject to credit risk: Money market mutual funds $ 2,640,297 - - A BB - - BBB - Unrated 2,640,297 Debt securities subject to credit risk: U.S. agency obligations Corporate debt Do mes tic International Asset-backed securities Mortgage investments Total debt securities subject to credit risk Debt securities not subject to credit risk: U.S. treasury obligations U.S. agency obligations explicitly guaranteed Total debt securities 4,798,879 4,229,717 660,992 3,265,472 3,165,981 16,121,041 6,266,516 1,287,084 $ 23,674,641 - 78,531 104,941 183,472 - 23,310 - 36,647 - 59,957 - 1,296,052 217,137 1,129,656 123,228 2,766,073 - - 4,798,879 - 2,802,222 108,133 - 443,855 - - 1,323,013 697,625 - 372,447 2,565,365 - 4,941,537 8,170,002 Fair Value Measurement The Retirement Fund categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the inputs used in valuation and gives the highest priority to unadjusted quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest level, Level 1, is given to unadjusted quoted prices in active markets and the lowest level, Level 3, to unobservable inputs. Level 1 Valuations based on unadjusted quoted prices for identical instruments in active markets that the Retirement Fund has the ability to access. Level 2 Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instrument in markets that are not active; and model-derived valuations in which all significant inputs are observable. Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement. 14 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 In instances where inputs used to measure fair value fall into different levels in the fair value hierarchy, fair value measurements in the entirety are categorized based on the lowest level input that is significant to the valuation. The Retirement Fund's assessment of the significance of particular inputs to these fair value measurements requires judgement and considers factors specific to each investment. The following table shows the fair value leveling of the Retirement Fund's investments: Investments by fair value level Cash and cash equivalents: Money market mutual funds Total Fair value measures using Quoted prices in Significant active markets other Significant for identical observable unobservable assets inputs inputs (Level 1) (Level 2) (Level 3) $ 2,640,297 2,640,297 - - Debt securities: U.S. treasury obligations U.S. agency obligations Corporate debt Domestic International Asset-backed securities Mortgage investments Total debt securities $ 6,266,516 6,085,963 4,229,717 660,992 3,265,472 3,165,981 23,674,641 - 6,266,516 - - 6,085,963 - - 4,229,717 - - 660,992 - - 3,265,472 - - 3,165,981 - - 23,674,641 - Equities: Mutual funds Domestic International Exchange traded funds Domestic International Stocks Domestic International Real estate investment trust Total equity securities 12,782,432 12,782,432 - - 9,210,724 9,210,724 - - 25,632,985 25,632,985 - - 2,735,634 2,735,634 - - 23,528,159 23,528,159 - - 4,964,231 4,964,231 - - 488,818 488,818 79,342,983 79,342,983 - - Total investments by fair value level $ 103,017,624 79,342,983 23,674,641 - The Retirement Fund did not have any Net Asset Value (NAV) investments as June 30, 2023. 15 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely impact the fair value of an investment. The Retirement Fund does not have a formal policy for managing foreign currency risk. The Retirement Fund's currency risk exposures, or exchange rate risks, primarily reside within the Retirement Fund's international equity investment holdings. As of June 30, 2023, the Retirement Fund's exposure to foreign currency risk derives from its investments traded on the London Stock Exchange and denominated in British Pounds. The market value of these holdings as of June 30, 2023 totaled $9,210,724 valued in U. S. dollars. Concentration of Credit Risk Concentration of credit risk is the risk of loss that may be attributed to the magnitude of the Retirement Fund's investment in a single issue. On June 30, 2023, the Retirement Fund did not have any debt investments in any one organization, other than those issued or guaranteed by the U.S. Government or its agencies, which represented greater than 5% of the plan's total investments. Note 4: Net Pension Liability of Employers and Nonemployers The components of the collective net pension liability of the participating employers and nonemployers at June 30, 2023, were as follows: Total pension liability Plan fiduciary net position $ 163,609,230 105,599,015 Net pension liability $ 58,010,215 Plan fiduciary net position as a percentage of total pension liability 64.54% Actuarial assumptions The total pension liability was determined by an actuarial valuation as of June 30, 2023, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary increases Investment rate of return Municipal bond index rate Fiscal year fiduciary net position to be depleted Single equivalent interest rate Post-retirement benefit increases 2.50% N / A 6.00%, net of pension plan investment expense, including inflation 3.66% 2045 4.74% 1.50% semi-annually 16 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Mortality rates were based on the PUB-2010 Public Safety Headcount Weighted Below Median Mortality Table projected generationally with the MP-2021 scale for both males and females while in active service. The PUB-2010 Healthy Retiree Below Median Mortality Table projected generationally with the MP-2021 scale was used for service retirements and the PUB-2010 Contingent Survivor Below Median Mortality Table projected generationally with the MP-2021 scale was used for beneficiaries. The actuarial assumptions used in the June 30, 2023 valuation were based on the results of the experience investigation for the six-year period ending June 30, 2021. The long-term expected rate of return on pension plan investments was calculated using a lognormal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-Term Expected Rate of Return Domestic Fixed Encome Domestic Large Cap Equities Domestic Mid Cap Equities Domestic Small Cap Equities Global Equities International Equities Core Real Estate Investment Trusts Total 25% 40% 3.5% 3.5% 10% 15% 3% 100% 3.97% 8.42% 9.61% 9.61% 8.41% 8.38% 10.80% Discount rate The discount rate used to measure the total pension liability was 4.74% as compared with last year's rate of 4.32%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate ($45 per month) and that nonemployer contributions (from fines and fee revenues) will continue to be made at rates currently established by statute. Employer contributions for the fiscal year ending June 30, 2023 were approximately $1.90 million and we assumed this contribution amount will continue over the projected period. Projected future benefit payments for all current plan members were projected through the year 2115. 17 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to the Financial Statements June 30, 2023 Based on those assumptions, the Retirement Fund's Fiduciary Net Position was projected to be depleted during the fiscal year ending June 30, 2045. Therefore, based on the GASB No. 67 provisions, the long-term expected rate of return on pension plan investments of 6.00 percent was applied to all periods of projected benefit payments through 2044 and a municipal bond index rate of 3.66 percent was applied to all periods of projected benefit payments on or after 2045. The Single Equivalent Interest Rate (SEIR) that discounts the entire projected benefit stream to the same amount as the sum of the present values of the two separate benefit payment streams was determined to be 4.74 percent. Therefore, the discount rate used to measure the Total Pension Liability was 4.74 percent. Sensitivity of the net pension liability to changes in the discount rate The following table presents the net pension liability of the Retirement Fund, calculated using the discount rate of 4.74%, as well as what the Retirement Fund's Net Pension Liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3.74%) or 1-percentage point higher (5.74%) than the current rate: Employers' and nonemployers' net pension liability 1% Decrease (3.74%) Current discount rate (4.74%) $ 78,913,685 $ 58,010,215 $ 1% Increase (5.74%) 40,600,418 Note 5: Subsequent Event There were no subsequent events. 18 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 19 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information Schedule of Employers' and Nonemployers' Net Pension Liability For the year ended June 30, 2023 (Unaudited) Total pension liability Plan fiduciary net position Employers' and nonemployers' net pension liability Plan fiduciary net position as a percentage of the total pension liability Covered payroll Employers' and nonemployers' net pension liability as a percentage of covered payroll 2023 $ 163,609,230 105,599,015 $ 58,010,215 64.54% N/A 2022 2021 2020 2019 2018 2017 2016 169,173,012 $ 128,055,086 $ 173,435,805 $ 154,040,038 $ 147,959,066 $ 141,595,208 $ 147,769,336 $ 96,603,745 121,667,012 94,711,612 96,787,375 95,003,603 92,515,568 83,740,659 72,569,267 $ 6,388,074 $ 78,724,193 $ 57,252,663 $ 52,955,463 $ 49,079,640 $ 64,028,677 $ 57.10% 95.01% 54.61% 62.83% 64.21% 65.34% 56.67% N/A N/A N/A N/A N/A N/A N/A 2015 2014 111,637,917 $ 109,279,727 89,589,162 89,477,968 22,048,755 $ 19,801,759 80.25% 81.88% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A See accompanying notes to required supplementary information. 20 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information Schedule of Changes in Employers' and Nonemployers' Net Pension Liability For the year ended June 30, 2023 (Unaudited) Total pension liability: Service cost $ Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Benefit payments Refund of contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position: Contributions - nonemployer Contributions - member Net investment income Benefit payments Refund of contributions Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) $ 2023 3,568,709 $ 7,167,788 (1,489,236) (8,307,073) (6,503,970) (5,563,782) 169,173,012 163,609,230 1,920,330 77,535 13,824,059 (6,503,970) (322,684) 8,995,270 96,603,745 105,599,015 58,010,215 $ 2022 2,389,156 $ 8,109,983 (4,259,508) 41,450,528 (6,572,233) 41,117,926 128,055,086 169,173,012 2021 3,864,136 $ 6,633,762 (6,394,551) (42,805,387) (6,674,719) (3,960) (45,380,719) 173,435,805 128,055,086 2020 3,110,471 $ 7,465,628 (4,038,586) 19,296,781 (6,426,062) (12,465) 19,395,767 154,040,038 173,435,805 2019 2,927,620 $ 7,466,689 (1,335,494) 3,533,755 (6,511,598) 6,080,972 147,959,066 154,040,038 2018 2,893,408 $ 7,084,915 3,487,614 (666,144) (6,433,550) (2,385) 6,363,858 141,595,208 147,959,066 2017 2,598,880 $ 6,603,717 2,779,681 (12,254,463) (5,888,323) (13,620) (6,174,128) 147,769,336 141,595,208 2016 1,622,966 $ 7,076,985 (3,080,707) 36,034,613 (5,522,438) 36,131,419 111,637,917 147,769,336 2015 1,740,512 $ 6,923,391 (773,672) (5,532,041) 2,358,190 109,279,727 111,637,917 2014 1,850,878 6,719,420 (5,332,521) 3,237,777 106,041,950 109,279,727 1,773,375 97,920 (20,069,678) (6,572,233) (292,651) (25,063,267) 121,667,012 96,603,745 72,569,267 $ 1,623,478 126,775 32,165,008 (6,674,719) (3,960) (281,182) 26,955,400 94,711,612 121,667,012 6,388,074 $ 1,828,381 80,145 2,712,401 (6,426,062) (12,465) (258,163) (2,075,763) 96,787,375 94,711,612 78,724,193 $ 2,053,299 89,895 6,419,277 (6,511,598) (267,101) 1,783,772 95,003,603 96,787,375 57,252,663 $ 2,030,767 107,460 7,043,868 (6,433,550) (2,385) (258,125) 2,488,035 92,515,568 95,003,603 52,955,463 $ 1,916,433 109,823 12,907,301 (5,888,323) (13,620) (256,705) 8,774,909 83,740,659 92,515,568 49,079,640 $ 1,970,041 81,445 (2,158,357) (5,522,438) (219,194) (5,848,503) 89,589,162 83,740,659 64,028,677 $ 2,030,097 79,645 3,708,050 (5,532,041) (214,844) 40,287 111,194 89,477,968 89,589,162 22,048,755 $ 2,086,369 116,912 12,531,353 (5,332,521) (216,635) 3,994 9,189,472 80,288,496 89,477,968 19,801,759 See accompanying notes to required supplementary information. 21 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information Schedule of Employer and Nonemployer Contributions For the year ended June 30, 2023 (Unaudited) Actuarially determined employer and nonemployer contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll See accompanying notes to required supplementary information. 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 $ 1,929,925 1,920,330 $ 9,595 1,750,718 1,773,375 (22,657) 2,372,910 1,623,478 749,432 2,248,557 1,828,381 420,176 2,058,960 2,053,299 5,661 1,713,467 2,030,767 (317,300) 1,600,128 1,916,433 (316,305) 1,369,695 1,970,041 (600,346) 1,608,502 2,030,097 (421,595) 1,357,827 2,086,369 (728,542) 1,357,827 2,336,786 (978,959) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 22 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information Schedule of Investment Returns For the year ended June 30, 2023 Annual money-weighted rate of return, net of investment expense 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 15.43% -16.70% 34.88% 3.03% 7.37% 7.86% 15.87% -1.81% 4.60% 16.56% See accompanying notes to required supplementary information. 23 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to Required Supplementary Information For the year ended June 30, 2023 (Unaudited) Note 1: Schedule of Employers' and Nonemployers' Net Pension Liability The components of the net pension liability as of the fiscal year end and the plan fiduciary net position as a percentage of the total pension liability as of that date are presented in this schedule. This trend information will be accumulated to display a ten-year presentation. Note 2: Schedule of Changes in Employers' and Nonemployers' Net Pension Liability Net pension liability which is measured as the total pension liability less the amount of the plan fiduciary net position is presented in this schedule. This trend information will be accumulated to display a ten-year presentation. Note 3: Schedule of Employer and Nonemployer Contributions The schedule presents the required contributions and the percentage of required contributions actually contributed. Note 4: Schedule of Investment Returns The schedule presents historical trend information about the annual money-weighted rate of return on plan investments, net of plan investment expense. This trend information will be accumulated to display a ten-year presentation. Note 5: Actuarial Methods and Assumptions Changes of assumptions: x In 2023, the SEIR was increased from 4.32 percent to 4.74 percent to reflect the changes to the FNP's projected year of depletion. x In 2022, the SEIR was decreased from 6.50 percent to 4.32 percent to reflect the changes to the FNP's projected year of depletion. Also, the rates of withdrawal, retirement, and mortality were adjusted to reflect actual and anticipated experience more closely. In addition, the assumption for price inflation was decreased from 2.75 percent to 2.50 percent, the investment return assumption was lowered from 6.50 percent to 6.00 percent, the administrative expenses assumption was increased from $260,000 to $400,000 and the marriage percentage assumption was decreased from 100% to 90%. These assumptions were recommended as part of the experience investigation for the six-year period ending June 30, 2021 In 2021, the SEIR was increased from 3.90 percent to 6.50 percent to reflect the changes that the FNP is not projected to be depleted. x In 2020, the SEIR was decreased from 4.95 percent to 3.90 percent to reflect the changes to the fiduciary net position's projected year of depletion. x In 2019, the SEIR was increased from 5.16 percent to 4.95 percent to reflect the changes to the fiduciary net position's projected year of depletion. x In 2018, the SEIR was increase from 5.12 percent to 5.16 percent to reflect changes to the fiduciary net position's projected year of depletion. x In 2017, the SEIR was increased from 4.56 percent to 5.12 percent to reflect the changes to the FNP's projected year of depletion. 24 SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to Required Supplementary Information For the year ended June 30, 2023 (Unaudited) x In 2016, rates of withdrawal, retirement, and mortality were adjusted to more closely reflect actual and anticipated experience. In addition, the assumption for price inflation was lowered from 3.00 percent to 2.75 percent. These assumptions were recommended as part of the experience investigation for the seven-year period ending June 30, 2015. x In 2016, the SEIR was lowered from 6.50 percent to 4.56 percent to reflect the changes to the fiduciary net position's projected year of depletion. Changes of benefit terms: Retirement benefit at Normal Retirement Date has increased based on the following table since July 1, 2017. These 1.50 percent increases, every 6 months in the monthly benefit per year of credited service, have regularly occurred since July 1, 2000 up until July 1, 2020. The SRF Board adopted no increases for July 1, 2020 through January 1, 2022. A cost in living adjustment of 1.5% was adopted by the SRF Board as of July 1, 2022 and an additional cost in living adjustment of 1.5% was adopted by the SRF Board as of January 1, 2023. January 1, 2017 July 1, 2017 January 1, 2018 July 1, 2018 January 1, 2019 July 1, 2019 January 1, 2020 July 1, 2022 January 1, 2023 Change $ 2.27 $ 2.27 $ 2.33 $ 2.33 $ 2.40 $ 2.40 $ 2.48 $ 2.51 $ 2.55 Benefit Per Credited Yrs. Svc. $ 153.20 $ 155.47 $ 157.80 $ 160.13 $ 162.53 $ 164.93 $ 167.41 $ 169.92 $ 172.47 Method and assumptions used in calculations of actuarially determined contributions: The actuarially determined contribution rates in the schedule of employer contributions are calculated as of June 30, one year prior to the end of the fiscal year in which contributions are reported (June 30, 2022 valuation for the June 30, 2023 fiscal year end). The following actuarial methods and assumptions were used to determine the most recent contribution rate reported in that schedule: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases Investment rate of return June 30, 2022 Entry age normal Level dollar, closed 21.9 years 5-year smoothed market value 2.50 percent N/A 6.00 percent, net of pension plan investment expense, including inflation 25 SECTION II REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Greg S. Griffin State Auditor INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Board of Commissioners of the Sheriffs' Retirement Fund of Georgia and Mr. J. Terry Norris, Secretary-Treasurer We have audited the financial statements of the Sheriffs' Retirement Fund of Georgia (Fund), a component unit of the State of Georgia, as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Fund's basic financial statements, and have issued our report thereon dated July 23, 2024. We conducted our audit in accordance with the auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Fund's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control. Accordingly, we do not express an opinion on the effectiveness of the Fund's internal control. A deficiency 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 a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Fund's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, 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 first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone (404) 656-2180 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Fund's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported 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 results of that testing, and not to provide an opinion on the effectiveness of the Fund's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Fund's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully submitted, Greg S. Griffin State Auditor July 23, 2024