Audit report, Magistrates Retirement Fund of Georgia, year ended June 30, 2011

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MAGISTRATES RETIREMENT FUND OF GEORGIA
- TABLE OF CONTENTS -
SECTION I - FINANCLAL
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 GOWRNMENT AUDITING STANDARDS

Page

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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 Magistrates Retirement Fund
and Honorable Robert Carter, SecretaryITreasurer
Ladies and Gentlemen:
We have audited the accompanying basic financial statements of the Magistrates Retirement Fund, a component unit of the State of Georgia, as of and for the year ended June 30, 201 1, as listed in the table of contents. These financial statements are the responsibility of the Magistrates Retirement Fund'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 Magistrates Retirement Fund'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 Magistrates Retirement Fund, 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 18, 20 12 on our consideration of the Magistrates Retirement Fund's internal control over financial reporting

and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is 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 inforrnation and express no opinion on it.
The Magistrates Retirement 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.
Respectfully submitted,

January 18,2012 RWH:ya

~us'selWl . Hinton, CPA, CGFM State Auditor

BASIC FINANCIAL STATEMENTS

MAGISTRATES RETIREMENT FUND OF GEORGIA
STATEMENT OF FIDUCIARY NET ASSETS JUNE 30,201 1
Assets Cash and Cash Equivalents Receivables
Interest and Dividends Other Investments Mutual Funds Municipal, U.S. and Foreign
Government Obligations Corporate Bonds/Notes/Debentures Total Assets Liabilities Salaries/Withholdings Payable
Net Assets Held in Trust for:
Pension Benefits
The notes to the financial statements are an integral part of this statement.

MAGISTRATES 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 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 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.
5

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

A. PLAN DESCRIPTION

ORGANIZATION AND PLAN DESCRIPTION The Magistrates Retirement Fund of Georgia is a cost-sharing multiple-employer defined benefit pension plan established July 1, 2006 by the General Assembly of Georgia for the purpose of paying retirement benefits to chief magistrates of the magistrate 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, and five full-time chief magistrates who are members of the Retirement Fund. The Magistrates 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 full-time chief magistrates of a county of the State of Georgia and any person serving as secretary-treasurer of the Board of Commissianers of the Magistrates Retirement Fund of Georgia are eligible for membership. The Retirement Fund is funded through a combination of member contributions paid by the affected chief magistrates and designated portions of fees collected for civil filings.

CURRENT MEMBERSHIP
The following compares the membership of the Magistrates Retirement Fund at June 30,201 1, to that of the prior year:

Number of Active Members Vested Nonvested
Total

June 30,20 11 June 30,20 10

0

0

113

111

- - 113

111

BENEFITS The Magistrates 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 shall be eligible for retirement at age 60 and must have served at least eight years as a regularly qualified and commissioned full-time chief magistrate or as a secretarytreasurer of the Board af Commissioners of the Retirement Fund. A member must have terminated his or her oficial capacity as a chief magistrate or as a secretary-treasurer of the Board to receive benefits.
(B) RETIREMENT BENEFITS: A member who is approved for retirement benefits shall be paid a monthly benefit equal to 4 percent of his or her average final monthly compensation (subject to a salary cap) for each year served up to, but not exceeding, a total of twenty years, with exceptions.

MAGISTRATES RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCLAL STATEMENTS FOR THE YEAR ENDED JUNE 30.201 1
A. PLAN DESCRIPTION
(C) 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.
(D) 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, shall 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.
(E) 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.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The Pension Fund's fmancial 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 court fees are recognized as additions in the period collected by the magistrate courts. Retirement benefit and refund payments are recognized as deductions when due and payable.
C. CONTRIBUTIONS AND RESERVES
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 as the employer contribution, indicated that the minimum employer contribution was met. Member contribution requirements are set forth in O.C.G.A. Section 47-25-41 and are not actuarially determined.
Administrative expenses are generally funded From current member and court fee contributions. Investment earnings may be utilized to fund any expenses in excess of contributions.

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

C. CONTRIBUTIONS AND RESERVES
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 $1 05 per month as dues.
(B) MAGISTRATE COURT CONTRIBUTIONS: In addition to all other legal costs, the sum of $3.00 shall be charged and collected in each civil matter or proceeding filed in the magistrate courts. The fees shall be remitted to the secretary-treasurer of the Retirement Fund.
Actual contributions for the year ended June 30,201 1, were as follows:

Member Contributions Civil Filings

$

142,275

1,739,236

Total

$

1,881,511

D. CONCENTRATION OF CREDIT RISK

At June 30,201 1, more than 5 percent of the Retirement Fund's total investments were investments in the mutual f'unds of PIMCO FDS Total Return. These investments represented approximately 9.8 percent of the Retirement Fund's total investments.

E. FUNDED STATUSAND FUNDNG PROGRESS

The funded status of the plan as of July 1,201 1, 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 (alb)

Annual covered payroll
(c)

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

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.

MAGISTRATES RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30,201 1

Additional information as of the latest actuarial valuation follows:
Valuation Date
Actuarial cost method
Amortization method
Remaining amortization period
Asset valuation method
Actuarial assumptions: Investment rate of return (includes inflation) Projected salary increases Cost-of-living adjustments

July 1,2011 Entry age normal Level dollar, open 30 years Five-year smoothed market value
7% NIA N/A

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REQUIRED SUPPLEMENTARY 1NFORMATJON

MAGISTRATES RETIREMENT FUND OF GEORGIA
SCHEDULE OF FUNDING PROGRESS
JUNE 30.2011

Actuarial Valuation
Date

Actuarial Value of Assets
(a)

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

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

Funded Ratio (a/b)

Covered Payroll

UAAL as a Percentage of Covered
Pay roll

July 1, 2007

$

1,369,156 $

700,003 $

(669,153)

195.6%

July 1,2009

3,707,660

2,640,037

(1,067,623) 140.4%

July 1,2011

8,628.445

5,349,392

(3,279,053) 161.3%

The actuarial value of assets at July 1, 20 1 1 is equal to 96% of the market value of assets.

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

Fiscal Year

Annual Requited Contribution

Percentage Contributed

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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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DEPARTMEONF TAUDITSAND ACCOUNTS 270 Washington St. S.W. Suite 1-156 Atlanta, Georgia 30334
RUSSELWL . HINTON
STATE AUDITOR
(404)656-2174
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
Honorable Nathan Deal, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Magistrates Retirement Fund
and Honorable Robert Carter, SecretaryITreasurer
We have audited the basic financial statements of the Magistrates Retirement Fund, 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 18, 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 Magistrates Retirement Fund is responsible for establishing and maintaining effective internal controls over financial reporting. In planning and performing our audit, we considered the Magistrates Retirement 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 Magistrates Retirement Fund's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Magistrates Retirement Fund's internal control over financial reporting.
A dejiciency 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 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 Magistrates Retirement 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 Magistrates Retirement Fund 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 18,20 12 RWH:ya

Russell W. Hinton, CPA, CGFM State Auditor