Audit report, Georgia Firefighters' Pension Fund, year ended June 30, 2007

STATE OF GEORGIA
Sonny Perdue Governor
AUDIT REPORT GEORGIA FIREFIGHTERS' PENSION FUND
YEAR ENDED JUNE 30, 2007
Prepared by State Accounting Office

GEORGIA FIREFIGHTERS' PENSION FUND - TABLE OF CONTENTS -

SECTION I - FINANCIAL

Independent Auditor's Report on Basic Financial Statements Accompanied by Required

Supplementary Information

1

Basic Financial Statements

Statement of Fiduciary Net Assets

4

Statement of Changes in Fiduciary Net Assets

5

Notes to the Financial Statements

6

Required Supplementary Information

Schedule of Funding Progress

10

Schedule of Employer Contributions

11

Notes to Required Supplementary Information

12

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

GOVERNMENTAUDITING STANDARDS

15

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SECTION I - FINANCIAL

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DEPARTMENT OF AUDITS AND ACCOUNTS

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

270 Washington Street, S.W. Suite 1-156 Atlanta, Georgia 30334-8400

June 19, 2008
Honorable Sonny Perdue, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Board of Trustees of the Georgia Firefighters' Pension Fund
and Honorable James R. Meynard, Executive Director
INDEPENDENT AUDITOR'S REPORT ON BASIC FINANCIAL STATEMENTS ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements of the Georgia Firefighters' Pension Fund, a part of the primary government of the State of Georgia, as of and for the year ended June 30, 2007, as listed in the table of contents. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statements referred to above present fairly, in all material respects, the financial position of the Georgia Firefighters' Pension Fund, as of June 30, 2007, and the changes in plan net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued a report dated June 19, 2008 on our consideration of the Georgia Firefighters' Pension Fund's internal control over

financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Georgia Firefighters' Pension Fund has not presented the management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. The accompanying Schedule of Funding Progress, Schedule of Employer Contributions, and Notes to Required Supplementary Information are not required parts of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We did not audit the information and express no opinion on it.
~~-~-~--- Respectfully submitted, Russell W. Hinton, CPA, CGFM State Auditor
RWH:bp
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BASIC FINANCIAL STATEMENTS

GEORGIA FIREFIGHTERS' PENSION FUND STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2007

Assets Receivables
Interest and Dividends Due from Brokers for Securities Sold Taxes Receivable Investments Mutual Funds Municipal, U. S. and Foreign
Government Obligations Corporate Bonds/Notes/Debentures Asset-Backed Securities Stocks Mortgage Investments Real Estate Investment Trusts Capital Assets Land Buildings Machinery and Equipment Accumulated Depreciation
Total Assets
Liabilities Cash Overdraft Accounts Payable and Other Accruals Due to Brokers for Securities Purchased Compensated Absences Payable
Total Liabilities
Net Assets Held in Trust for:
Pension Benefits

$

1,690,875

9,179,182

95,191

153,442,777

48,037,176 83,800,218 2,554,542 313,872,111 59,773,057
670,612

84,882 1,534,994
73,724 (77,008)

$ 674,732,333

$

589

1,616,835

22,365,609

35,192

$

24,018,225

$ ====65=0=,7=1=4,=10=8=

The notes to the financial statements are an integral part ofthis statement. 4

GEORGIA FIREFIGHTERS' PENSION FUND STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2007

Additions: Contributions Plan Members Insurance Company Premium Taxes Interest and Other Investment Income Dividends and Interest Net Appreciation (Depreciation) in Investments Reported at Fair Value Less: Investment Expense Other Transfers from Other Funds (Note B) Miscellaneous
Total Additions
Deductions: General and Administrative Expenses Benefits Refunds
Total Deductions
Change in Net Assets Held in Trust for Pension Benefits
Net Assets, July 1
Net Assets, June 30

$

2,256,692

22,537,822

15,771,498

76,350,530 {3,848,312)

3,939,169 924,966

$ 117,932,365

$

1,133,633

23,949,940

921,373

$

26,004,946

$

91,927,419

558,786,689

$ ===65=0,=71=4,1=08=

The notes to the financial statements are an integral part of this statement. 5

GEORGIA FIREFIGHTERS' PENSION FUND NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2007

A. PLAN DESCRIPTION

ORGANIZATION AND PLAN DESCRIPTION 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 members and consists of the Governor or his designee, the Commissioner of Insurance or his designee, two active members of the Pension Fund appointed by the Governor and one retired beneficiary of the Pension Fund appointed by the Governor. The Georgia Firefighters' Pension Fund is included within the State of Georgia's basic financial statements as a part of the primary government.

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 of member 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 or 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, 2007, to that of the prior year:

Retirees and Beneficiaries Currently Receiving Benefits For Disability For Retirement For Survivorship
Terminated Members Entitled to, But Not Yet Receiving Benefits

June 30, 2007 June 30, 2006

44 2,761
280
135

45 2,590
254
124

Total

3,220

3,013

Number of Active Members

11,990

11,355

BENEFITS The Georgia Firefighters' Pension Fund provides retirement as well as disability and 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:
(A) RETIREMENT CONDITIONS: A member shall be eligible to receive retirement benefits at age 55 provided the member has 25 years of service. A member may be eligible to receive a pro rata share of benefits, at the latter of age 55 or at the member's termination as a firefighter or volunteer firefighter, after at least 15 years of service (amount received to be the maximum benefit amount times a ratio of years of service to 25 years). At age 50, a member may elect to receive a percentage of benefits to which the member would have been eligible to receive at age 55. A member must have terminated his or her service as a firefighter or volunteer firefighter to receive benefits.

6

GEORGIA FIREFIGHTERS' PENSION FUND NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2007
A. PLAN DESCRIPTION
(B) RETIREMENT BENEFITS: The maximum retirement benefit at June 30, 2007 is $849 per month for the life of the member. The Board of Trustees is authorized to provide for increases effective as of January 1 and July 1 of each year up to 1 percent of the maximum retirement benefit then in effect. Members retiring after July 1, 1984 with service in excess of 25 years are entitled to an additional one percent of the maximum benefit in effect at the time of retirement for each additional full year of service. Members retiring after July 1, 2002 with service in excess of 25 years are entitled to an additional two percent of the maximum benefit in effect at the time of retirement for each additional full year of service.
(C) OPTIONAL BENEFITS: Members may elect, as an alternate to the benefit described above, to receive an actuarially reduced benefit payable during the joint lifetime of the member and the member's spouse, continuing after the death of the member during the lifetime of the spouse or a ten years' certain and life option where an actuarially reduced benefit is received during the member's lifetime and, in the event of the member's death within 10 years ofretirement, the same monthly benefits shall be payable to the member's selected beneficiary for the balance of the 10 year period.
(D) DISABILITY BENEFITS: Subject to the approval of the Board of Trustees, any firefighter or volunteer firefighter who was an active member prior to July 1, 1993, who becomes totally and permanently physically disabled by injuries suffered while performing duties of the position to which he was regularly assigned or who is rendered, by heart disease or respiratory disease, totally and permanently disabled and as a result of such physical disability is separated from his work as a firefighter or his appointment as a volunteer firefighter is entitled to a monthly disability benefit, the amount of which is dependent upon the date of application for disability benefits.
(E) DEATH BENEFITS (1) In the event of the 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.
(2) In the event of the 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, the designated beneficiary of such deceased member shall be entitled to receive the difference between $5,000 and the amount of benefits received by such deceased member.
(3) In the event of the death of a member with 15 years service, prior to commencing benefits, the spouse or beneficiary of the member is entitled to the retirement benefit elected to have been received by the member in accordance with the terms, above.
(F) TERMINATION: In the event of the termination of a member prior to the completion of fifteen years of service as a firefighter, 95 percent of the member's contributions will be returned.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The Pension Fund's financial statements are prepared on the accrual basis of accounting. Contributions from members are recognized as additions in the period in which the members provide services and insurance premiums tax are recognized annually, upon receipt. Retirement benefit and refund payments are recognized as deductions when due and payable.
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GEORGIA FIREFIGHTERS' PENSION FUND NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2007
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS Investments are defined as those financial instruments with terms in excess of three months from the date of purchase and certain other securities held for the production of revenue. In addition, funds on deposit with the Pension Fund's investment custodian for purposes of continual investment are reflected as investments regardless of the term of the instruments.
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.
TRANSFERS On July 1, 2006, the membership, assets and administration of the Class Nine Fire Department Pension Fund were transferred to the Georgia Firefighters' Pension Fund and the Class Nine Fire Department Pension Fund ceased to exist as a separate entity. Net assets of the Class Nine Fire Department Pension Fund of $3,939,169 are reflected as Transfers from Other Funds on the Statement of Changes in Fiduciary Net Assets. All members transferred received creditable service for all service credited under the Class Nine Fire Department Pension Fund and are entitled to all rights and benefits of the Georgia Firefighters' Pension Fund.
C. CONTRIBUTIONS
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, 2005, which reflected the proceeds of the insurance premiums tax as the employer contribution, indicated that the minimum employer contribution was met. Member contribution requirements are set forth in O.C.G.A. Section 47-7-60 and are not actuarially determined. Administrative expenses are paid from funds received by the Pension Fund.
A description of contribution requirements is as follows:
(A) MEMBERS CONTRIBUTIONS: Each member must contribute $15 per month, to be paid no later than the tenth day of each month. In 2007, member contributions were $2,256,692.
(B) INSURANCE PREMIUMS TAX: Every fire insurance company, corporation or association doing business within the State of Georgia must pay to the executive director of the Georgia Firefighters' Pension Fund one percent of the gross premiums, written by such insurance company, corporation, or association for fire, lightning, or extended coverage, inland marine or allied lines, or windstorm insurance policies covering property within the State of Georgia. In 2007, insurance premiums tax contributions were $22,537,822.
D. RELATEDPARTIES
The Georgia Firefighters' Pension Fund retains State Street Corporation as its investment custodian in 2007. In addition, the Pension Fund retains State Street Global Advisors, an affiliate of State Street Corporation, as the investment manager of a portion of the investments held by State Street Corporation. The fair value of the investments managed by State Street Global Advisors, at June 30, 2007, totaled $119,780,072, or 18% of the investments in the custody of State Street Corporation. In fiscal year 2007, the Pension Fund paid $330,529 in custodian fees to State Street Corporation and $240,487 in management fees to State Street Global Advisors.
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REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF FUNDING PROGRESS JUNE 30, 2007

Actuarial Valuation
Date

Actuarial Value of Assets
(a)

Actuarial Accrued Liability (AAL) -Entry Age Normal
(b)

Unfunded AAL/(Funding
Excess) (UAAL)
(b-a)

Funded Ratio (alb)

Covered Payroll
(c)

UAALasa Percentage of Covered
Payroll ((b-a)/c)

July 1, 2003

$

500,437,940 $

488,692,735 $

(11,745,205)

102.4%

n/a

n/a

July 1, 2005

$

527,554,698 $

579,427,484 $

51,872,786

91.0%

n/a

n/a

July 1, 2007

$

604,158,927 $

661,805,609 $

57,646,682

91.3%

n/a

n/a

The actuarial value of assets at July 1, 2007 is equal to 93% ofthe market value of assets.

GEORGIA FIREFIGHTERS' PENSION FUND SCHEDULE OF EMPLOYER CONTRIBUTIONS
JUNE 30, 2007

Fiscal Year
2002 2003 2004 2005 2006 (See Note) 2007

Annual Required Contribution

$

7,299,475

$

7,607,310

$

10,240,234

$

12,011,288

$

16,083,325

$

20,455,866

Percentage Contributed
209% 221% 170% 157% 131% 110%

Note: Actuarial determination ofAnnual Required Contribution includes Class Nine Fire Department Pension Fund. Actual Employer Contributions were presented in separately issued audit reports as follows:

Firefighters' Pension Fund Class Nine Fire Department Pension Fund

$ 20,449,544 584,002

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GEORGIA FIREFIGHTERS' PENSION FUND NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2007

Actuarial Assumptions
The information presented in the required supplementary schedules was determined as part of the actuarial valuation at the dates indicated. Additional information from the actuarial valuation follows:

Valuation Date:

July 1, 2007

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

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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 GOVERNMENTAUDITING STANDARDS

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w. RUSSELL HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W. Suite 1-156 Atlanta, Georgia 30334-8400

June 19, 2008
Honorable Sonny Purdue, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Board of Trustees of the Georgia Firefighters' Pension Fund
and Honorable James R. Meynard, Executive Director
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
We have audited the financial statements of the Georgia Firefighters' Pension Fund, a part of the primary government of the State of Georgia, as of and for the year ended June 30, 2007, and have issued our report thereon dated June 19, 2008.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Georgia Firefighters' Pension Fund's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Georgia Firefighters' Pension Fund's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Georgia Firefighters' Pension Fund's internal control over financial reporting.
A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Georgia Firefighters' Pension Fund's financial statements are free of 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 determination of financial statement amounts. 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. This report is intended solely for the information and use of management, members of the Georgia Firefighters' Pension Fund Board of Trustees, and management of the State of Georgia, and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~~-~=-~~ Russell W. Hinton, CPA, CGFM State Auditor RWH: bp
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