Management report, Georgia Firefighters' Pension Fund, an organizational unit of the State of Georgia, year ended June 30, 2004

STATE OF GEORGIA
DEPARTMENT OF AUDITS AND ACCOUNTS
Russell W. Hinton State Auditor
MANAGEMENT REPORT GEORGIA FIREFIGHTERS' PENSION FUND A COMPONENT UNIT OF THE STATE OF GEORGIA
YEAR ENDED JUNE 30, 2004

GEORGIA FIREFIGHTERS' PENSION FUND -TABLE OF CONTENTS-

LETTER OF TRANSMITTAL

SECTION I

SELECTED FINANCIAL INFORMATION

EXHIBITS

A SCHEDULE OF FIDUCIARY NET ASSETS

PENSION TRUST FUND

2

B SCHEDULE OF CHANGES IN FIDUCIARY NET ASSETS

PENSION TRUST FUND

3

C SELECTED FINANCIAL NOTES

4

SUPPLEMENTARY INFORMATION

SCHEDULES

1 SCHEDULE OF FUNDING PROGRESS

13

2 SCHEDULE OF EMPLOYER CONTRIBUTIONS

14

SECTION II

CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

16

DEPARTMENT OF AUDITS AND ACCOUNTS

254 Washington Street, S.W., Suite 214

RussELL W. HINTON
STATE AUDITOR (404) 656-2174

Atlanta, Georgia 30334-8400

March 8, 2005
Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Trustees of the Georgia Firefighters' Pension Fund
and Honorable James R. Meynard, Secretary-Treasurer
Ladies and Gentlemen:
As part of our audit of the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a Statewide Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2004, we have performed certain audit procedures at the Georgia Firefighters' Pension Fund. Accordingly, the financial statements and compliance activities of the Georgia Firefighters' Pension Fund were examined to the extent necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal controls as required by the Single Audit Act Amendments of 1996.
This Management Report contains information pertinent to the financial and compliance activities of the Georgia Firefighters' Pension Fund as of and for the year ended June 30, 2004. The particular information provided is enumerated in the Table of Contents.
This report is intended solely for the information and use of management of the State of Georgia and members of the Board and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
- ~&~~
: :.11 W. Hinton State Auditor

RWH:ya

SECTION I SELECTED FINANCIAL INFORMATION
-1-

GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF FIDUCIARY NET ASSETS PENSION TRUST FUND JUNE 30, 2004

EXHIBIT"A"

ASSETS
Cash and Cash Equivalents Receivables
Interest and Dividends Investments
Bonds Convertible Bonds Corporate Bonds
Commercial Mortgages Commercial Paper Investment Accounts Mutual Funds Stocks
Common Stock Preferred Stock U.S. Government Securities Capital Assets Land Buildings Less: Accumulated Depreciation Machinery and Equipment Less: Accumulated Depreciation Construction in Progress
Total Assets
LIABILITIES
Accounts Payable and Other Accruals Compensated Absences Payable
Total Liabilities
NET ASSETS
Held in Trust for Pension Benefits

$

1,701,148.14

1,251,614.61

32,798,204.95 21,339,753.92 39,647,541.71
4,243,554.48 31,728,251.87 112,364,387.10
178,946,263.20 8,402,110.23
78,505,970.14
128,655.79 108,723.98 -84,052.17 104,690.04 -104,690.04
20,076.62
$ 511,102,204.57

$

71,169.71

12,488.68

$

83,658.39

$ 511,018,546.18

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GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF CHANGES IN FIDUCIARY NET ASSETS
PENSION TRUST FUND YEAR ENDED JUNE 30, 2004

EXHIBIT"B"

ADDITIONS Member Contributions Insurance Premiums Tax Interest and Other Investment Income Dividends and Interest Net Decrease in Fair Value of Investments Net Gain on Disposal of Investments Other Miscellaneous Total Additions
DEDUCTIONS General and Administrative Expenses Benefits Refunds Total Deductions Changes in Net Assets
NET ASSETS - JULY 1
NET ASSETS - JUNE 30

$

2,035,632.00

17,407,534.04

6,345,002.00 -21,201, 153.98 84,689,739.43

90,971.72

$

89,185,781.77

$

1,589,735.19

17,675,146.00

136,025.00

$

19,400,906.19

$

69,784,875.58

441,233,670.60

$

511,018,546.18

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

A. PLAN DESCRIPTION AND CONTRIBUTION INFORMATION

ORGANIZATION AND PURPOSE The Georgia Firefighters' Pension Fund is a cost-sharing multiple-employer defined benefit pension plan established in 1955 by the General Assembly of Georgia for the purpose of paying retirement benefits to firefighters of the State of Georgia. The Board of Trustees of the Pension Fund is comprised of five (5) members and consists of the Governor or his designee, the Commissioner of Insurance or his designee, two active members ofthe Pension Fund appointed by the Governor and one retired beneficiary of the Pension Fund appointed by the Governor. The Georgia Firefighters' Pension Fund is considered a component unit ofthe State ofGeorgia and is included within the State of Georgia reporting entity for financial reporting purposes because ofthe significance of its legal, operational, and financial relationships with the State of Georgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.

Any person employed as a firefighter or enrolled as a volunteer firefighter within the State of Georgia and any regular employee of the Pension Fund is eligible for membership. The Pension Fund is funded through a combination ofmember contributions paid by the affected firefighters and a tax imposed on gross insurance premiums written by insurance companies, corporations or associations for fire, inland marine and allied lines, lightning extended coverage, and windstorm policies covering property within the State of Georgia.

CURRENT MEMBERSHIP The following analysis compares the membership of the Georgia Firefighters' Pension Fund at June 30, 2004, to that of the prior year:

June 30, 2004 June 30, 2003

Retirees and Beneficiaries Currently Receiving Benefits and Terminated Members Entitled to but not yet receiving Benefits For Disability For Retirement For Survivorship

51 2,237
220

56 2,125
195

2,508

2,376

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

PLAN BENEFITS The Georgia Firefighters' Pension Fund provides retirement as well as death and disability 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:
(A) RETIREMENT CONDITIONS: Normal retirement is at age fifty-five (55) provided the member has twenty-five years of service. Early retirement is permitted after fifteen years of service at age fifty.
(B) RETIREMENT BENEFITS: Normal retirement is $776.00 per month plus two percent (2%) for each full year of credited service in excess oftwenty-five years. If credited service is less than twenty-five years, the monthly amount of $776.00 is reduced by the ratio of completed years to the full twenty-five years of service retirement. Retirement benefits are reduced by six percent (6%) for each year that the member is under the age of fifty-five.
(C) OPTIONAL BENEFITS: The monthly benefits referred to above are payable for the lifetime of the member. Members may elect to receive an actuarially reduced benefit in the form of a Ten Years Certain and Life Annuity or a Joint and Survivor Annuity.
(D) DISABILITY BENEFITS: Subject to the approval ofthe Board ofTrustees, any firefighter or volunteer firefighter who becomes totally and permanently disabled as a result ofbodily injury while actively engaged in the performance ofofficial duties is entitled to a monthly retirement benefit of $508.00 after such disability has continued for at least six months. Any firefighter who has served at least five consecutive years or any volunteer firefighter who has served at least ten consecutive years prior to his/her disablement and who has fifteen years of service as a firefighter or volunteer firefighter will be entitled to a monthly benefit of $508.00 if he/she becomes totally and permanently disabled as a result of heart disease or respiratory disease, provided his/her disability status is approved by the Board of Trustees.
Effective July 1, 1993, active members ofthe Pension Fund on or after July 1, 1993, shall not be entitled to disability benefits. However, any member receiving disability benefits before July 1, 1993, shall continue to be eligible to receive such benefits.
(E) DEATH BENEFITS: (1) In the event ofthe death of a member of the Pension Fund on or after July 1, 2001, who is in good standing and who has not commenced receiving any benefits, the designated beneficiary of such deceased member shall be entitled to be paid the amount of $5,000.00.
(2) In the event ofthe death of a member of the Pension Fund on or after July 1, 2001, who is in good standing and who has commenced receiving benefits, but who has not received total benefits in the amount of $5,000.00, the designated beneficiary of such deceased member shall be entitled to receive the difference between $5,000.00 and the amount of benefits received by such deceased member.
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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

(F) TERMINATION: In the event of the termination of a member prior to the completion of fifteen years of service as a firefighter, 95% ofthe member's contributions will be returned.

FUNDING POLICY The minimum annual employer contribution requirements are set forth in the Official Code of Georgia Annotated (O.C.G.A.) Section 47-20-10 and are not actuarially determined. This statute further 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 July 1, 2004, which reflected the proceeds of the insurance premiums tax as the employer contribution, indicated that the minimum employer contribution level was met. Member contribution requirements are set forth in O.C.G.A. Section 47-7-60 and are not actuarially determined.

A description of contribution requirements is as follows:

(A) MEMBER'S CONTRIBUTIONS: Each member must contribute $15.00 per month, to be paid no later than the tenth day of each month.

(B) INSURANCE PREMIUMS TAX: Each insurance company, corporation, or association doing business within the State of Georgia must pay to the Secretary-Treasurer of the Georgia Firefighters' Pension Fund one percent (1 %) ofthe gross premiums written by such insurance company, corporation, or association for fire, inland marine and allied lines, lightning extended coverage, and windstorm insurance policies covering property within the State of Georgia.

Actual contributions for the year ended June 30, 2004, were as follows:

Member Contributions Insurance Premiums Tax

$ 2,035,632.00 17,407,534.04

$19,443,166.04

B. CASH AND INVESTMENTS
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include currency on hand and demand deposits with banks and other financial institutions.
INVESTMENTS Investments are defined as those financial instruments with terms in excess ofthree months from the date ofpurchase and certain other securities held for the production ofrevenue. In addition, funds on deposit with the Fund's investment custodian for purposes of continual investment are reflected as investments regardless of the term of the instruments.

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. No investment in any one organization, except the U.S. Government, represents 5% or more ofthe net assets available for pension benefits. Approximately 14% ofthe net assets available for benefits are invested in U. S. government securities.
The Official Code of Georgia Annotated (O.C.G.A.) Section 47-7-23 states that the Board of Trustees of the Georgia Firefighters' Pension Fund of Georgia shall have full power to invest and reinvest funds, subject to all terms, conditions, limitations, and restrictions imposed by the "Public Retirement Systems Investment Authority Law" of Georgia. In addition, the Board of Trustees is restricted to invest no more than 60% of the assets of the Pension Fund in equities and may not invest more than 10% of the assets in corporations or in obligations of corporations organized in a country other than the United States ofAmerica or Canada. Statutory provisions governing eligible investments are enumerated in the O.C.G.A. Section 47-20-83 as follows:
(1) Corporations or obligations of corporations organized under the laws of Georgia or any other state or under the laws of Canada, but only if the corporation has a market capitalization equivalent to $100 million; provided, however, that except as provided in O.C.G.A. Section 47-20-84, no fund shall invest in corporations or in obligations of corporations organized in a country other than the United States or Canada; provided, further, that such obligation shall be listed as investment grade by a nationally recognized rating agency;
(2) Repurchase and reverse repurchase agreements for direct obligations ofthe United States government and for obligations unconditionally guaranteed by agencies of the United States government and for investments eligible under paragraph (1) ofthis Code section;
(3) Cash assets or deposits in checking or savings accounts under certificates ofdeposit or in other form in banks and trust companies and in savings accounts, certificates ofdeposit, or similar certificates or evidences ofdeposits in savings and loan associations and building and loan associations which have qualified for the insurance protection afforded by the Federal Deposit Insurance Corporation;
(4) Bonds, notes, warrants, and other evidence ofindebtedness which are direct obligations of the government of the United States of America or for which the full faith and credit of the government of the United States of America is pledged for the payment of principal and interest;
(5) Loans guaranteed as to principal and interest by the government of the United States of America, or by any agency or instrumentality ofthe government of the United States of America, to the extent of such guaranty;

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

(6) Taxable bonds, notes, warrants, and other securities not in default which are the direct obligations of any state of the United States or of the District of Columbia, or of the government of Canada or any province of Canada, or for which the full faith and credit of such state, district, government, or province has been pledged for the payment ofprincipal and interest;
(7) Bonds, notes, warrants, and other securities not in default which are the direct obligations ofthe government of any foreign country which the International Monetary Fund lists as an industrialized country and for which the full faith and credit of such government has been pledged for the payment ofprincipal and interest, provided such securities are listed as investment grade by a nationally recognized rating agency;
(8) Bonds, debentures, or other securities issued or insured or guaranteed by any agency, authority, unit, or corporate body created by the government of the United States of America whether or not such obligations are guaranteed by the United States;
(9) Collateralized mortgage obligations that are listed as investment grade by a nationally recognized rating agency;
(10) Obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development or the International Financial Corporation;
(11) In addition to those investments eligible under paragraph (1) ofthis Code section, bonds, debentures, notes, and other evidences of indebtedness issued, assumed, or guaranteed by any solvent institution existing under the laws of the United States of America or of Canada, or any state or province thereof, which are not in default as to principal or interest and which are secured by collateral worth at least 50 percent more than the par value of the entire issue of such obligations, but only ifnot more than one-third ofthe total value of the required collateral consists of common stocks;
(12) In addition to those investments eligible under paragraph (1) ofthis Code section, secured and unsecured obligations of issuers described in paragraph (11) ofthis Code section other than the obligations described in paragraph (11) ofthis Code section, bearing interest at a fixed rate, with mandatory principal and interest due at specified times, ifthe net earnings of the issuing, assuming, or guaranteeing institution available for its fixed charges for a period offive fiscal years next preceding date ofacquisition by the fund have averaged per year not less than one and one-half times its average annual fixed charges applicable to such period and if during either of the last two years of the period of such net earnings have been not less than one and one-half times its fixed charges for the year; provided, however, that any such obligation shall be listed as investment grade by a nationally recognized rating agency;

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

(13) In addition to those investments eligible under paragraph (1) of this Code section, equipment trust obligations or certificates adequately secured and evidencing an interest in transportation equipment, wholly or in part within the United States ofAmerica, and the right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use or purchase ofthe transportation equipment;
(14) Loans that are secured by pledge or securities eligible for investment under this article;
(15) Purchase money mortgages or like securities received upon the sale or exchange of real property acquired;
(16) In addition to those investments eligible under paragraph (1) of this Code section, a mortgage or a mortgage participation, pass-through, conventional pass-through, trust certificate, or other similar security which represents an undivided, beneficial interest in a pool of loans secured by first mortgages, deeds oftrust, or deeds to secure debt upon fee simple, unencumbered, improved, or income-producing real property located in the United States or Canada, which is improved with a residential building or condominium unit or buildings designed for occupancy by not more than four families, including leasehold estates in such real estate ifsuch first mortgages, deeds oftrust, or deeds to secure debt are fully guaranteed or insured by the Federal Housing Administration, the United States Department of Veterans Affairs, the Farmers Home Administration, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, the Federal National Mortgage Association, or any similar governmental entity or instrumentality;
(17) Land and buildings on such land used or acquired for use as a fund's office for the convenient transaction of its own business; provided, however, that portions of such buildings not used for its own business may be rented by the fund to others; provided, further, that the amount investment by a fund in office property shall not exceed 10 percent of the retirement system assets;
(18) Real property acquired in satisfaction in whole or in part of loans, mortgages, liens, judgments, decrees, or debts previously owing to the fund in the course of its business;
(19) Real property acquired in part payment of the consideration on the sale of other real property owned by the fund if such transaction effects a net reduction in the fund's investment in real estate;
(20) Real property acquired by gift or devise, or through merger or consolidation with another fund; and
(21) Additional real property and equipment incident to real property if necessary or convenient for the enhancement of the marketability or sale value of real property previously acquired or held by the fund under paragraphs (18), (19), and (20) ofthis Code section.

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

C. CAPITAL ASSETS
Capital assets are stated at cost less accumulated depreciation. Depreciation on capital assets is computed using the straight-line method over estimated useful lives of 39 years for Buildings and three to five years for Machinery and Equipment. Depreciation expense is included in administrative expenses. Maintenance and repairs are charged to administrative expenses when incurred.
The following is a summary of changes in capital assets during the fiscal year:

Capital Assets Not Being Depreciated: Land
Capital Assets Being Depreciated: Buildings Construction in Progress Machinery and Equipment
Total Capital Assets Being Depreciated
Less Accumulated Depreciation For: Buildings Machinery and Equipment
Total Accumulated Depreciation
Total Capital Assets, Net

Balance Julr 1, 2003

Increases

Decreases

Balance June 30, 2004

$ 128,655.79 $

$

-$

128,655.79

$

108,723.98 $

$

20,076.62

104,690.04

$ 213,414.02 $

20,076.62 $

$ 0.00 $

108,723.98 20,076.62 104,690.04 233,490.64

$

81,543.15 $

101,107.83

$

182,650.98 $

$

159,418.83 $

2,509.02 $ 3,582.21 6,091.23 $
13,985.39 $

$ $ 0.00 $

84,052.17 104,690.04 188,742.21
173,404.22

D. LONG TERM DEBT

The following is a summary of changes in long-term liabilities during the fiscal year:

Balance July 1, 2003

Increases

Decreases

Balance June 30, 2004

Compensated Absences Payable $

8,734.30 $ 11,562.58 $ (7,808.20) $

12,488.68

=======

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GEORGIA FIREFIGHTERS' PENSION FUND SELECTED FINANCIAL NOTES YEAR ENDED JUNE 30, 2004

EXHIBIT"C"

E. EMPLOYEES' RETIREMENT PLAN
The Georgia Firefighters' Pension Fund participates in a defined contribution money purchase pension plan, in which benefits depend solely on amounts contributed to the plan plus investment earnings. The Georgia Firefighters' Pension Fund Employees' Retirement Plan was established effective July 1, 1998, for the purpose of providing retirement allowances for employees ofthe Georgia Firefighters' Pension Fund. HA&W Benefit Advisors, LLC is custodian and trustee of the plan. Participants shall be fully vested at all times in his or her individual account. This plan is intended to be a participant directed plan. The normal retirement age under the plan is age 59 1/2. For each plan year, the Georgia Firefighters' Pension Fund will contribute for each qualifying participant an amount equal to 10% of the qualifying participant's compensation in the fiscal year. Upon termination or retirement, any vested benefit will be paid to the participant or their beneficiaries in a lump sum or as periodic payments from one of the deferred options available. The Pension Fund's total payroll in fiscal year 2004 amounted to $268,537.79, of which $246,638.68 was for covered employees and used by the Pension Fund for calculating contributions. For fiscal year 2004, the Pension Fund contributed $24,622.48 to this retirement plan. Plan provisions and contribution requirements are established and may be amended by the Board of Trustees of the Georgia Firefighters' Pension Fund.

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SUPPLEMENTARY INFORMATION -12 -

GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF FUNDING PROGRESS YEAR ENDED JUNE 30, 2004

SCHEDULE "1"

ACTUARIAL VALUATION
DATE

ACTUARIAL VALUE OF ASSETS
(a)

ACTUARIAL ACCRUED LIABILITY (AAL) -ENTRY AGE NORMAL
(b)

UNFUNDED AAL
(UAAL) (b-a)

FUNDED RATIO (alb)

07/01/1999 $ 397,720,426.00 $ 364,459,517.00 $ -33,260,909.00

109.1%

07/01/2001 $ 469,473,946.00 $ 428, 155, 154.00 $ -41,318,792.00

109.7%

07/01/2003 $ 500,437,940.00 $ 488,692,735.00 $ -11,745,205.00

102.4%

COVERED PAYROLL
(c)

UAALASA PERCENTAGE OF COVERED
PAYROLL ((b-a)/c)

n/a

n/a

n/a

n/a

n/a

n/a

Information prior to July 1, 1997, is not available.
The information presented in this supplementary schedule is based on the actuarial study prepared as of July 1, 2003. The actuarial value of assets is equal to 114% of market value of assets (including capital assets).
The Georgia Firefighters' Pension Fund (GFPF) is subject to an actuarial study every other year. Therefore, the GFPF is due for another study in July, 2005.

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GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF EMPLOYER CONTRIBUTIONS
YEAR ENDED JUNE 30, 2004

SCHEDULE "2"

FISCAL YEAR
1998 1999 2000 2001 2002

ANNUAL REQUIRED CONTRIBUTION

$ 11,407,344.00

$ 11,749,564.00

$

7,957,616.00

$

4,795,888.00

$

7,299,475.00

PERCENTAGE CONTRIBUTED
101% 102% 161% 271% 209%

Information prior to July 1, 1997, is not available.

The information presented in this supplementary schedule is based on the actuarial study prepared as of July 1, 2003. Additional information of this latest actuarial valuation follows:

Valuation Date

July 1, 2003

Actuarial Cost Method

Entry age normal

Amortization Method

Level Dollar, open

Remaining Amortization Period

30 years

Asset Valuation Method

5-year smoothed market value

Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Includes Inflation at Cost-of-Living Adjustments

6% Not Applicable None None

The Georgia Firefighters' Pension Fund (GFPF) is subject to an actuarial study every other year. Therefore, the GFPF is due for another study in July, 2005.

-14 -

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS
-15-

GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2004

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

INVESTMENTS Investment Earnings and Costs Not Recorded Properly Finding Control Number: FS-950-04-01

Condition:

Funds of the Georgia Firefighters' Pension Fund and the Georgia Class Nine Fire Department Pension Fund are combined for investment purposes. The Georgia Firefighters' Pension Fund and the Georgia Class Nine Fire Department Pension Fund are funded through a combination of member contributions and a tax imposed on insurance premiums. Gains, losses, income, transaction costs, investment advisor fees, or other matters are not allocated between the two pension funds. Rather, they are reported entirely in the Georgia Firefighters' Pension Fund.

Criteria:

The Official Code of Georgia (OCGA), Section 47-7A-20(f) states that "where funds of the fund are combined with the funds of the Georgia Firefighters' Pension Fund for investment purposes, then gains, losses, income, transaction costs, investment adviser fees, and other matters with respect to such combined investments shall be allocated in such manner as the board determines is fair and equitable to each fund ... ".

Cause:

The deficiency described above is a result of management's failure to properly allocate all earnings and costs associated with investments to the respective pension fund.

Effect:

Investment balances for the Georgia Firefighters' Pension Fund are overstated and investment balances for the Georgia Class Nine Fire Department Pension Fund are understated by an undetermined amount.

Recommendation:

The Board should implement procedures to properly allocate all gains, losses, income, transaction costs, investment advisor fees, and other matters with respect to the combined investments between the Georgia Firefighters' Pension Fund and the Georgia Class Nine Fire Department Pension Fund.

- 16 -