Audit report, Judges of the Probate Courts Retirement Fund of Georgia, year ended June 30, 2011

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I Judges of tne' Probate Courts Retirement Fund

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA
- TABLE OF CONTENTS -
- SECTION I FINANCIAL
Independent Auditor's Report
Basic Financial Statements Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Notes to the Financial Statements
Required Supplementary Information Schedule of Funding Progress Schedule of Contributions from the Employer and Other Contributing Entities
- SECTION I1 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
SECTION 111 - PRIOR YEAR FINDINGS AND QUESTIONED COSTS
Summary Schedule for Prior Year Findings and Questioned Costs

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SECTION I - FINANCIAL

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DEPARTMEONFTAUDITASND ACCOUNTS 270 Washington St. S.W. Suite 1-156 Atlanta, Georgia 30334
RUSSELWL . HINTON
STATE AUDITOR
(404)656-2174
INDEPENDENT AUDITOR'S REPORT
Honorable Nathan Deal, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Judges of the Probate Courts Retirement Fund of Georgia
and Honorable Robert Carter, Secretary/Treasurer
Ladies and Gentlemen:
We have audited the accompanying basic financial statements of the Judges of the Probate Courts Retirement Fund of Georgia, a component unit of the State of Georgia, as of and for the year ended June 30,2011, as listed in the table of contents. These financial statements are the responsibility of the Judges of the Probate Courts Retirement Fund of Georgia's management. Our responsibility is to express opinions 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Judges of the Probate Courts Retirement Fund of Georgia's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the fiduciary net assets of the Judges of the Probate Courts Retirement Fund of Georgia, as of June 30, 2011, and the changes in fiduciary net assets 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 our report dated January 20, 2012 on our consideration of the Judges of the Probate Courts Retirement Fund of Georgia'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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.
The Schedule of Funding Progress and Schedule of Contributions from the Employer and Other Contributing Entities information on pages 12 through 13 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted primarily of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information a d express no opinion on it.
The Judges of the Probate Courts Retirement Fund of Georgia 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.
Respectfblly submitted,

January 20,2012 RWH:bmk

usd dell W. Hinton, CPA, CGFM
State Auditor

BASIC FINANCIAL STATEMENTS

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA STATEMENT OF FIDUCIARY NET ASSETS JUNE 30,2011
Assets Cash and Cash Equivalents Receivables
Due from Brokers for Securities Sold Investments
Mutual Funds Municipal, U. S. and Foreign
Government Obligations Corporate Bonds/Notes/Debentures Stocks Asset-Backed Securities Mortgage Investments Real Estate Investment Trusts Total Assets Liabilities Due to Brokers for Securities Purchased
Net Assets Held in Trust for:
Pension Benefits
The notes to the financial statements are an integral part of this statement.
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JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30,2011
Additions: Contributions Plan Members Other Contributions Fines and Bond Forfeitures Other Fees Interest and Other Investment Income Dividends and Interest Net Appreciation (Depreciation) in Investments Reported at Fair Value Less: Investment Expense Net Investment Income
Total Additions Deductions:
General and Administrative Expenses Benefits Total Deductions Change in Net Assets Held in Trust for Pension Benefits Net Assets, July 1
Net Assets, June 30
The notes to the financial statements are an integral part of this statement.
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JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCJAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2011

A. PLAN DESCRIPTION

ORGANIZATION AND PLAN DESCRIPTION The Judges of the Probate Courts Retirement Fund of Georgia is a cost-sharing multiple-employer defined benefit pension plan established in 1958 by the General Assembly of Georgia for the purpose of paying retirement benefits to judges of the probate courts of the State of Georgia. The Board of Commissioners of the Retirement Fund is comprised of seven members and consists of the Governor or his designee, an appointee of the Governor other than the Attorney General, four judges of the probate courts who are members of the Retirement Fund, and one appointee of the Governor who is a member of the Retirement Fund and a retired judge of a probate court. The Judges of the Probate Courts Retirement Fund of Georgia is included within the State of Georgia's basic financial statements as a part of the primary government.

All duly qualified and commissioned judges of the probate court of the counties of the State of Georgia, any person serving as secretary-treasurer of the Board of Commissioners of the Judges of the Probate Courts Retirement Fund of Georgia and qualified employees of the Board are eligible for membership. The Retirement Fund is funded through a combination of member contributions paid by the affected judges of the probate courts, designated portions of fines and forfeitures for criminal and quasi-criminal cases involving the violation of State of Georgia traffic laws, and designated portions of fees collected for civil filings and the processing of marriage and pistol licenses.

CURRENT MEMBERSHIP The following analysis compares the membership of the Judges of the Probate Courts Retirement Fund at June 30, 20 1I, to that of the prior year:

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

June 30,20 11

June 30,20 10

Total

Number of Active Members Vested Nonvested

Total

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA NOTES TO THE FLNANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2011
A. PLAN DESCRIPTION
BENEFITS The Judges of the Probate Courts Retirement 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: Members prior to July 1, 1995 shall be eligible for retirement at age 60 and must have served at least four years as a regularly qualified and commissioned probate judge, secretarytreasurer or qualified employee of the Board of Commissioners of the Retirement Fund. Members on or after July 1, 1995, shall be eligible for retirement at age 60 and must have served at least eight years. A member must have terminated his or her official capacity as a judge of a probate court or as an employee of the Board to receive benefits.
(B) RETIREMENT BENEFITS: Members prior to July 1, 1995, approved for retirement benefits, shall be paid a monthly benefit equal to 5 percent of his or her average monthly net earnings (subject to a salary cap) for each year served up to, but not exceeding, a total of twenty years, with exceptions. The benefit for members on or after July 1, 1995, is equal to 5 percent of his or her final monthly net earnings (subject to a salary cap) for each year served up to, but not exceeding, a total of twenty years, with exceptions. The Board of Commissioners is authorized to provide for increases in benefits being paid up to 1% percent in a six month period and can increase the salary caps in effect up to 3 percent annually.
(C) OPTIONAL BENEFITS: The monthly benefits referred to above are payable for the lifetime of the member. Members may elect, as an alternate to the benefit described above, to receive an actuarially reduced benefit in the form of a Joint and Survivor Annuity.
(D) DISABILITY BENEFITS: Any member who becomes totally and permanently disabled after completing four years of creditable service is entitled to receive retirement benefits in the amount that the member would receive if their retirement were effective at the time the member became disabled.
(E) DEATH BENEFITS (1) In the event of the death of a member who has not commenced receiving any benefits, the spouse may elect to withdraw the dues paid into the Retirement Fund by the deceased member plus interest, in which case the spouse shall be deemed to have waived any rights to any benefits; or an optional payment plan may be chosen for which benefits will be paid according to the terms of the Plan.
(2) In the event of the death of a member who has commenced receiving benefits, the surviving spouse, upon reaching age 60, may elect to receive a benefit equal to 50 percent of the monthly retirement benefit being paid to the deceased spouse at the time of death. These benefits will be paid for the remainder of the surviving spouse's life.
(F) TERMINATION: In the event of termination, a member is entitled to any retirement benefits that may have been earned. However, the member may waive the right to these benefits and receive all dues paid plus interest.

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OP GEORGIA NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30,2011
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The Pension Fund's financial statements are prepared on the accrual basis of accounting, except for the collection of fines, forfeitures and fees which are recognized when collected from the courts. Any accrual of these fines, forfeitures and fees would be immaterial to the Pension Fund's financial statements. Contributions from members are recognized as additions in the period in which the members provide services. Retirement benefit and refund payments are recognized as deductions when due and payable.
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 Retirement Fund's investment custodian for purposes of continual investment are reflected as investments regardless of the term of the instruments.
lnvestments 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.
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, 201 1, which reflected the proceeds of designated portions of fines and forfeitures for violation of traffic laws and a designated portion of fees collected for civil filings and processing of marriage and pistol licenses as the employer contribution are insufficient to fund the plan in conformity with the minimum funding standards. Member contribution requirements are set forth in O.C.G.A. Section 47- 1 1-40 and are not actuarially determined.
Administrative expenses are generally funded from current member and court fine and fee contributions. Investment earnings may be utilized to fund any expenses in excess of contributions.
A description of contribution provisions are established by statute and may be amended only by the General Assembly of Georgia. A description of contribution requirement is as follows:
(A) MEMBERS CONTRIBUTIONS: Members must contribute $105 per month as dues; provided, however, that requirement for such dues shall cease after the member has paid such dues for a period of 20 years.
(B) PROBATE COURT CONTRIBUTIONS: For each criminal and quasi-criminal case involving the violation of State of Georgia traffic laws, a sum based upon the scale set forth below is collected by the presiding judge and remitted to the secretary-treasurer of the Retirement Fund:
For fines or bond forfeitures in excess of $4, but not more than $25
For fines or bond forfeitures in excess of $25, but not more than $50

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30,2011

C. CONTRIBUTIONS
For fines or bond forfeitures in excess of $50, but not more than $100
For fines or bond forfeitures in excess of $100
For civil filings
(C) LICENSE CONTRIBUTIONS:
For marriage
For pistol
Actual contributions for the year ended June 30,201 1, were as follows:
Member Contributions Fines and Forfeitures Other Fees
Civil Filing Fees Marriage Licenses Fees Courts Interest and Penalties Pistol Licenses Fees
Total

20%of fee $1 .OO

D. CONCENTRATION OF CREDIT RISK
At June 30, 20 11, more than 5 percent of the Retirement Fund's total investments were investments in securities of U. S. agencies not explicitly guaranteed by the U. S. government. These investments represented approximately 7.4 percent of the Retirement Fund's total investments. Also, more than 5 percent of the Retirement Fund's total investments were short term investments held by State Street Bank & Trust Company. These investments represented approximately 5.2 percent of the Retirement Fund's total investments.

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2011

E. FUNDED STATUS AND FUNDING PROGRESS

The funded status of the plan as of July 1,2011, the most recent actuarial valuation date, is as follows:

Actuarial value of Plan
assets
(a)

Acturial accrued liability
(AAL) -
entry age
(b)

Unfunded AAL (UAAL)
(funding excess)
@-a)

Funding ratio (a/b)

Annual covered payroll
(c)

UAAL (funding excess) as a percentage of covered payroll
[(b-a)cl

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the AAL for benefits.

Additional information as of the latest actuarial valuation follows:

Valuation Date

July 1,2011

Actuarial cost method

Entry age normal

Amortization method

Level dollar, open

Remaining amortization period

40 years

Asset valuation method

Five-year smoothed market Value

Actuarial assumptions:

Investment rate of return (includes inflation)

7%

Projected salary increases

N/A

Cost-of-living adjustments

2%

REQUIRED SUPPLEMENTARY INFORMATION

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA SCHEDULE OF FUNDING PROGRESS JUNE 30,201 1

Actuarial Valuation
Date
July 1, 2007
July 1, 2009
July 1,201 1

Actuarial Value of Assets
(a)
$ 62,326,994
55,690,298
57,80 1,942

Actuarial Accrued Liability (AAL)
- Entry Age
Normal (b)
$54,498,885
53,7 14,007
56,937,420

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

Funded Ratio
(a/')

Covered Payroll
(C

$ (7,828,109) 1 14.4% d a

(1,976,291) 103.7% nla

(864,522.00) 101.5% nia

UAAL as a Percentage of Covered
Payroll ((b-a)/c)
n/a
da
n/a

The actuarial value of assets at July 1, 201 1 is equal to 93% of the market value of assets.

JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER AND OTHER CONTRIBUTING ENTITIES
JUNE 30,2011

Fiscal Year

Annual Required Contribution

Percentage Contributed

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SECTION I1 - 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

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RUSSELWL. HINTON
STATE AUDITOR
(404)656-2174

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

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTlNG AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTA UDITING STANDARDS

Honorable Nathan Deal, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Judges of the Probate Courts Retirement Fund of Georgia
and Honorable Robert Carter, Secretary/Treasurer

We have audited the basic financial statements of the Judges of the Probate Courts Retirement Fund of Georgia, a component unit of the State of Georgia, as of and for the year ended June 30,201 1, and have issued our report thereon dated January 20, 2012. 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.

Internal Control Over Financial Reporting

Management of the Judges of the Probate Courts Retirement Fund of Georgia is responsible for establishing and maintaining effective internal controls over financial reporting. In planning and performing our audit, we considered the Judges of the Probate Courts Retirement Fund of Georgia'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 Judges of the Probate Courts Retirement Fund of Georgia's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Judges of the Probate Courts Retirement Fund of Georgia's internal control over financial reporting.

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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identifl any deficiencies in internal control over financial reporting that we consider to be material

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 Judges of the Probate Courts Retirement Fund of Georgia'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 GovernmentAuditing Standards.

W e noted certain matters that we reported to management of the Judges of the Probate Courts Retirement Fund of Georgia in a separate letter dated January 20,2012.

This report is intended solely for the information and use of management, members of the Judges of the Probate Courts Retirement Fund of Georgia Board, 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,

-

January 20,2012 RWH:bmk

~ u s s e wH. inton, CPA, CGFM State Auditor

- SECTION I11 PRIOR YEAR FINDINGS AND QUESTIONED COSTS

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JUDGES OF THE PROBATE COURTS RETIREMENT FUND OF GEORGIA SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2011
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
FINDING CONTROL NUMBER AND STATUS
FS-949-10-01 Previously Reported Corrective Action Implemented