Annual financial audit, 2022 June 30, Sheriffs' Retirement Fund of Georgia, a component unit of the State of Georgia.

ANNUAL FINANCIAL AUDIT JUNE 30, 2022
Sheriffs' Retirement Fund of Georgia
A Component Unit of the State of Georgia
Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer
Greg S. Griffin | State Auditor Kristina A. Turner | Deputy State Auditor

Greg S. Griffin State Auditor
INDEPENDENT AUDITOR'S REPORT
Members of the Board of Commissioners of the Sheriffs' Retirement Fund of Georgia
and Mr. J. Terry Norris, Secretary-Treasurer Sheriff's Retirement Fund of Georgia
Opinions
We have audited the schedule of employer and nonemployer allocations 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, 2022, and the related notes. We have also audited the total for all entities of the columns titled net pension liability, total deferred outflows of resources, total deferred inflows of resources, and total employer pension expense (specified column totals) included in the accompanying schedule of pension amounts by employer and nonemployer of the Fund as of and for the year ended June 30, 2022, and the related notes.
In our opinion, the Schedules referred to above present fairly, in all material respects, the employer and nonemployer allocations and net pension liability, total deferred outflows of resources, total deferred inflows of resources and total employer pension expense of the Fund as of and for the year ended June 30, 2022 in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Schedules 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 opinions.
Responsibilities of Management for the Schedules
Management is responsible for the preparation and fair presentation of the schedule of employer and nonemployer allocations and the schedule of pension amounts by employer and nonemployer (collectively, the Schedules) 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 the Schedules 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

Auditor's Responsibilities for the Audit of the Schedules Our objectives are to obtain reasonable assurance about whether the Schedules are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. 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 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 Schedules.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the Schedules, 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 Schedules.
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 Schedules.
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.
Other Matter
We have audited, in accordance with the auditing standards generally accepted in the United States of America, the financial statements of the Fund as of and for the year ended June 30, 2022. Our report thereon, dated June 9, 2023, expressed an unmodified opinion on those financial statements.

Restriction on Use Our report is intended solely for the information and use of the Fund's management, the Board of Commissioners, the Fund employers, nonemployer contributing entities, and their auditors and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted,
Greg S. Griffin State Auditor
June 9, 2023


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SHERIFF'S RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer
June 30, 2022
Note 1: Plan Description The Sheriffs' Retirement Fund of Georgia (the Retirement Fund) was created in 1963 by the General Assembly of Georgia to provide retirement benefits to 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.
Each county in the state of Georgia has a sheriff who is eligible to be a member of the Retirement Fund. The counties, as the employers of the members of the Retirement Fund, do not make contributions to the Retirement Fund. The State of Georgia provides nonemployer contributions to the Retirement Fund through the collection of court fines and forfeitures. These nonemployer contributions are recognized as revenue by the Retirement Fund when collected from the courts.

Note 2: Basis of Presentation The Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer (the schedules) are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.

Note 3: Components of Collective Net Pension Liability The components of the collective net pension liability of the participating employers and nonemployers at June 30, 2022 were as follows:

Total pension liability Plan fiduciary net position
Net pension liability

$ 169,173,012 96,603,745
$ 72,569,267

Plan fiduciary net position as a percentage of total pension liability

57.10%

Actuarial Assumptions The collective total pension liability was determined by an actuarial valuation as of June 30, 2022, using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation Salary increases Investment rate of return
Discount Rate

2.50% N/A 6.00%, net of pension plan investment expense, including inflation 4.32%

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SHERIFF'S RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)

Notes to Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer

June 30, 2022

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, 2022 valuation were based on the results of the actuarial experience study for the six-year period ending June 30, 2021.

The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and 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 Income 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%

2.04% 5.94% 7.50% 7.50% 6.78% 8.02% 6.44%

* Rates shown are net of the 2.50% assumed rate of inflation.
Discount Rate The discount rate used to measure the Total Pension Liability was 4.32 percent. The projection of cash flows used to determine the discount rate assumed that plan member contributions (dues) will be made at the current contribution rate ($45 per month) and that Employer contributions (from fines and fee revenues) will continue to be made at rates as summarized in Schedule B. Employer

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SHERIFF'S RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)

Notes to Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer

June 30, 2022

contributions for the fiscal year ending June 30, 2022 were approximately $1.75 million and we have assumed this contribution amount will continue over the projection period. Projected future benefit payments for all current plan members were projected through the year 2115.

Based on those assumptions, the Retirement Fund's Fiduciary Net Position was projected to be depleted during the fiscal year ending June 30 2042. 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 2041 and a municipal bond index rate of 3.37 percent was applied to all periods of projected benefit payments on or after 2042. 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 4.32 percent. Therefore, the discount rate used to measure the Total Pension Liability was 4.32 percent.
Sensitivity of the Collective Net Pension Liability to Changes in the Discount Rate The following table presents the collective net pension liability of the Retirement Fund, calculated using the discount rate of 4.32%, 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 (3.32%) or 1-percentagepoint higher (5.32%) than the current rate:

Collective net pension liability

1%

Current

Decrease

Discount Rate

(3.32%)

(4.32%)

$ 95,426,246 $ 72,569,267 $

1% Increase (5.32%) 53,635,963

Note 4: Special Funding Situation The State of Georgia, although not the employer of the Retirement Fund's members, makes contributions to the Retirement Fund through the collection of court fines and forfeitures as specified by O.C.G.A. 47-16-60 and 47-16-61. The State makes all these contributions to the Retirement Fund on behalf of the employers. Therefore, these employers are considered to be in a special funding situation as defined by GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27.
Since the employers of the Retirement Fund's members do not contribute directly to the Retirement Fund, there is no net pension liability to recognize for each employer. However, the notes to each employer's financial statements must disclose the portion of the nonemployer contributing entity's share of the collective net pension liability that is associated with that employer. In addition, each employer must recognize its portion of the collective pension expense of the State as well as recognize revenue contributions from the State in an equal amount.

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SHERIFF'S RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer
June 30, 2022
Note 5: Allocation Methodology GASB Statement No. 68 requires participating employers and nonemployer contributing entities to recognize their proportionate share of collective net pension liability and pension expense. These schedules are prepared to provide employers and nonemployer contributing entities with their calculated proportionate share.
As discussed in Note 4, the counties, as employers of the Retirement Fund's members, do not make contributions to the Retirement Fund; therefore, the proportionate share allocation for each employer is 0%. The proportionate share attributable to the State of Georgia, as the nonemployer contributing entity, is therefore 100%.
The amounts attributable to the State of Georgia, as the nonemployer contributing entity, have been allocated evenly to each county. Because there are 159 counties, each county's proportionate share allocation percentage is 0.6289308% (1 divided by 159).

Note 6: Collective Deferred Inflows and Outflows of Resources The following presents a summary of changes in the collective deferred outflows of resources and deferred inflows of resources for the year ended June 30, 2022:

Deferred inflows of resources Difference between expected
and actual experience

Year of deferral
2021 2022

Beginning of year

Amortization balance as previously

period

reported

1.67 years $

2,565,479

2.59 years

-

Current Year

Additions -
4,259,508

Deductions 2,565,479 1,644,598

End of year balance 2,614,910

Change of assumptions

2021

1.67 years

17,173,419

-

17,173,419

-

Total deferred inflows of resources

$

19,738,898

4,259,508

21,383,496

2,614,910

Deferred outflows of resources Change of assumptions

2022

2.59 years $

-

41,450,528

16,004,065 25,446,463

Difference between projected and actual investment earnings (1)
Net difference between projected and actual investment earnings (1)

2018 2019 2020 2021 2022

5 years 5 years 5 years 5 years 5 years

(235,684) (157,880) 2,053,896 (20,942,452)
-
(19,282,120)

27,815,742
27,815,742

(235,684) (78,939) 684,632
(5,235,613) 5,563,148

(78,941) 1,369,264 (15,706,839) 22,252,594

697,544

7,836,078

Total deferred inflows of resources

$

(19,282,120)

69,266,270

16,701,609 33,282,541

(1) In accordance with paragraph 71b of GASB Statement No. 68, collective deferred outflows of resources and deferred inflows of resources arising from differences between projected and actual pension plan investment earnings in different measurement periods have been aggregated and included as a net collective deferred inflow of resources related to pensions.

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SHERIFF'S RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Schedule of Employer and Nonemployer Allocations and Schedule of Pension Amounts by Employer and Nonemployer
June 30, 2022
Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended June 30, 2023 2024 2025 2026

$ 15,292,694 9,484,252 327,535 5,563,150

Total

$ 30,667,631

Changes in Proportion The amounts shown in the two preceding tables do not include employer- or nonemployer-specific deferred outflows of resources and deferred inflows of resources related to changes in proportion. Based on the allocation methodology discussed in Note 5, there were no changes in proportion for the year ended June 30, 2022.

Note 7: Collective Pension Expense The components of collective pension expense for the year ended June 30, 2022, are shown in the following table:

Service cost

$

Interest of the total pension liability and net cash flow

Projected earnings on plan investments

Member contributions

Administrative expense

Recognition (amortization) of deferred inflows and outflows of resources

Changes of assumptions

Difference between expected and actual experience

Difference between projected and actual investment earnings

Collective pension expense

$

2,389,156 8,109,983 (7,746,064)
(97,920) 292,651
(1,169,354) (4,210,077)
697,544 (1,734,081)

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