Audit Report
Peace Officers' Annuity and Benefit Fund of Georgia Fiscal Year Ended June 30, 2013
Prepared by: State Accounting Office
"Thunder Clouds over Atlanta", Photograph by John Mason, Mableton, Georgia

The artwork on the cover was created by Georgia artist, John Mason, and was selected to hang in the Office of the Governor as part of a rotating exhibit "The Art of Georgia". For more information about the exhibit, the artists and their work, visit www.gaarts.org.

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)

- TABLE OF CONTENTS Page
SECTION I - FINANCIAL

Independent Auditor's Report

1

Basic Financial Statements

Statement of Fiduciary Net Position

6

Statement of Changes in Fiduciary Net Position

7

Notes to the Financial Statements

8

Required Supplementary Information (Unaudited)

Schedule of Funding Progress

20

Schedule of Contributions from the Employer and Other Contributing Entities

21

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 GOVERNMENT

AUDITING STANDARDS

25

SECTION III - SCHEDULE OF FINDINGS AND QUESTIONED COSTS

31

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SECTION I - FINANCIAL

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Greg S. Griffin
STATE AUDITOR (404) 656-2180

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

Independent Auditor's Report
The Honorable Nathan Deal, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Peace Officers' Annuity and Benefit Fund of Georgia
and Mr. Robert Carter, Secretary/Treasurer
Report on the Financial Statements
We have audited the accompanying financial statements of the Peace Officers' Annuity and Benefit Fund of Georgia, a component unit of the State of Georgia, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Peace Officers' Annuity and Benefit Fund of Georgia's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these fmancial 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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the fmancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the fmancial statements referred to above present fairly, in all material respects, the fiduciary net position of the Peace Officers' Annuity and Benefit Fund of Georgia, as of June 30, 2013, and the changes in fiduciary net position for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2 to the financial statements, in 2013, Peace Officers' Annuity and Benefit Fund of Georgia implemented new accounting principles GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Schedule of Funding Progress and Schedule of Contributions from the Employer and Other Contributing Entities information on pages 20 and 21 be presented to supplement the basic fmancial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with evidence sufficient to express an opinion or provide any assurance.
2

Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required
by the Governmental Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated July 21, 2014 on our consideration of the Peace Officers' Annuity and Benefit 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 in considering Peace Officers' Annuity and Benefit Fund of Georgia's internal control over financial reporting and compliance.
Respectfully submitted,

July 21, 2014 GSG:rmm

~A-~
Greg S. Griffin State Auditor

3

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BASIC FINANCIAL STATEMENTS

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Statement of Fiduciary Net Position
June 30, 2013

Assets: Cash and cash equivalents
Receivables: Interest and dividends Due from brokers Total receivables
Investments, at fair value: Pooled investments Mutual funds Municipal and U.S. Government obligations Corporate bonds/notes/debentures Asset-backed securities Stocks Mortgage investments Real estate investment trusts Total investments
Capital Assets Land Buildings Machinery and equipment Accumulated depreciation Total capital assets
Total assets
Liabilities: Due to brokers for securities purchased Salary/withholdings payable
Total liabilities
Net position restricted for pensions
See accompanying notes to financial statements.

$

31,026,230

$

110,006

7,231,329

7,341,335

87,445,880 264,479,372
81,547,047 40,037,210
7,427,699 105,556,959
13,843,912 1,499,250

601,837,329

97,510 560,357 155,113 (234,072)

578,908 640,783,802

36,026,682 1,649
36,028,331 . $ 604,755,471

6

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Statement of Changes in Fiduciary Net Position
Year ended June 30, 2013

Additions: Contributions: Members Fines and bond forfeitures
Investment income: Dividends and interest Net increase in fair value of investments Less investment expense Net investment income
Miscellaneous
Total additions
Deductions: General and administrative expenses Benefits Refund of member contributions
Total deductions
Net increase in net position
Net position restricted for pensions:
Beginning of year
End of year
See accompanying notes to financial statements.

$

3,448,819

15,471,981

$

13,117,470

67,176,625

(2,494,378)

77,799,717 84,296
96,804,813

651,266 25,415,632
390,932
26,457,830
70,346,983

534,408,488 $ 604,755,471

7

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013

NOTE 1 - PLAN DESCRIPTION
ORGANIZATION AND PLAN DESCRIPTION The Peace Officers' Annuity and Benefit Fund of Georgia is a cost-sharing multiple-employer defined benefit pension plan established in 1950 by the General Assembly of Georgia for the purpose of paying retirement benefits to peace officers of the State of Georgia. The Board of Commissioners of the Annuity and Benefit Fund is comprised of six members and consists of the Governor or his designee, an appointee of the Governor other than the Attorney General, the Commissioner of Insurance or his designee and three active or retired peace officers appointed by the Governor in accordance with the Official Code of Georgia (O.C.G.A.) Section 47-17-20. The Peace Officers' Annuity and Benefit Fund of Georgia, a component unit of the State of Georgia, is included within the State of Georgia's basic financial statements as fiduciary funds of the primary government.
Individuals eligible to apply for membership in the Annuity and Benefit Fund are defined in O.C.G.A. Section 4717-1 and generally include: any individual employed by the State of Georgia or any municipality, county, or other political subdivision thereof for the preservation of public order, the protection of life and property or the detection of crime; wardens and correction officers of correctional institutions; full-time parole officers; other individuals employed full-time for the purpose of law enforcement and full-time employees of the Annuity and Benefit Fund. The Annuity and Benefit Fund is funded through a combination of member contributions paid by the affected members and designated portions of fines and forfeitures collected for criminal and quasi-criminal cases involving the violation of State of Georgia laws, county ordinances, or municipal ordinances.
CURRENT MEMBERSHIP As of June 30, 2013 participation in the Annuity and Benefit Fund is as follows:

June 30, 2013

Retirees and beneficiaries currently receiving benefits For disability For retirement For survivorship
Terminated members not yet receiving benefits, vested

443 3,764
356 1,010

Total

5,573

Number of active members

12,944

PARTICIPATING EMPLOYERS AND CONTRIBUTING ENTITIES The number of participating employers of the Annuity and Benefit Fund at June 30, 2013 was 863. The number of contributing entities of the Annuity and Benefit Fund at June 30, 2013 was 1,096.

8

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013
NOTE 1 - PLAN DESCRIPTION (continued)
BENEFITS The Peace Officers' Annuity and Benefit Fund of Georgia 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 with ten years of membership service or (15 years of service for members joining on or after July 1, 2010), regardless of age, with thirty years creditable service. A member must have terminated his or her active employment as a peace officer to receive benefits.
(B) RETIREMENT BENEFITS: The monthly benefit is a single life annuity payable in monthly payments for the life of the member only. The monthly payment amount at June 30, 2013 was $24.41 per month (plus 1/12 of this amount for each month of any partial year) for each full year of creditable service up to a maximum of 30 years of total service. The Board of Commissioners is authorized to provide for increases effective as of January 1 and July 1 of each year up to 1 percent of the maximum monthly retirement benefit then in effect.
(C) OPTIONAL BENEFITS: Members may elect, as an alternate to the benefit described above, to receive a 100 percent joint life annuity payable during the life of the member or the member's spouse or, a contingency life annuity with a 50 percent monthly payment to the surviving spouse. The amount of the benefit for these options is an actuarially reduced portion of the single life annuity benefit described, above.
(D) DISABILITY BENEFITS: Any dues paying member who became a member prior to July 1, 1993 who is rendered totally and permanently disabled is entitled to receive disability benefits, the amount of which is dependent upon the date of application for disability benefits.
(E) DEATH BENEFITS (1) Death before Retirement: If a member dies before retirement, the beneficiary is entitled to a lump sum of $3,500.
(2) If a member dies in the line of duty and has a designated beneficiary, that beneficiary is eligible to receive a lump sum benefit of $5,500 to be reduced (to no less than $2,500) by the amount of any disability benefits received for the causative injury, as described above.
(3) Death after Retirement: If a member dies after retirement, the death benefit of the designated beneficiary is dependent on the amount of retirement benefits previously received by the deceased member. If the deceased member had received $1,000 or more, the beneficiary is entitled to receive a lump sum of $2,500. If the deceased member had received less than $1,000, the beneficiary is entitled to receive an amount that when added to the amount previously received by the deceased member will total $3,500.
(F) TERMINATION: At any time before a member begins drawing retirement benefits, the member may request a refund of 95 percent of all member contributions paid into the Annuity and Benefit Fund during creditable service. No interest shall be paid upon amounts so withdrawn.
9

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The Annuity and Benefit Fund's financial statements are prepared on the accrual basis of accounting, except for the collection of fines and forfeitures which are recognized when collected from the courts. Any accrual of these fines and forfeitures would be immaterial to the Annuity and Benefit 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.
During fiscal year 2013, the Annuity and Benefit Fund adopted the provisions of GASB Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. The objective of this Statement is to improve financial reporting for a governmental financial reporting entity by modifying certain requirements for inclusion of component units in the financial reporting entity, amending the criteria for blended component units, and clarifying the reporting entity interests in component units. The Annuity and Benefit Fund did not have any component units for fiscal year 2013.
During fiscal year 2013, the Annuity and Benefit Fund adopted the provisions of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This Statement amends the net asset reporting requirements in Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and renames that measure as net position. The Annuity and Benefit Fund changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable changes to the Annuity and Benefit Fund.
In June 2012, GASB issued Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB No. 25. This Statement improves financial reporting by state and local governmental pension plans. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency. This Statement will be effective for the Fund in fiscal year 2014. Management of the Annuity and Benefit Fund is evaluating the impact on the Annuity and Benefit Fund's financial statements.
CASH AND CASH EQUIVALENTS Cash and cash equivalents, reported at cost, include cash in banks, cash on deposit with the investment custodian earning a credit to offset fees, and short-term highly liquid financial securities with original maturities of three months or less from the date of acquisition.
INVESTMENTS Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price. There are no investments in, loans to, or leases with parties related to the Annuity and Benefit Fund.
The Annuity and Benefit Fund utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
10

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013
NOTE 3 - DEPOSITS AND INVESTMENTS
The Annuity and Benefit Fund maintains sufficient cash to meet its immediate liquidity needs. Cash not immediately needed is invested as directed by the investment policy of the Annuity and Benefit Fund. All investments are held by agent custodial banks in the name of the Annuity and Benefit Fund. State statutes and the Annuity and Benefit Fund's investment policy authorize the Annuity and Benefit Fund to invest in a variety of short-term and long-term securities as follows:
1) U.S. or Canadian corporations or their obligations with limits as to the corporations' size and credit rating. 2) Repurchase and reverse repurchase agreements for direct obligations of the U.S. Government and for
obligations unconditionally guaranteed by agencies. 3) Federal Deposit Insurance Corporation (FDIC) insured cash assets or deposits. 4) Bonds, notes, warrants, loans or other debt issued or guaranteed by the U.S. Government. 5) Taxable bonds, notes, warrants or other securities issued and guaranteed by any state, the District of
Columbia, Canada or any province in Canada. 6) Bonds, debentures or other securities issued or insured or guaranteed by an agency, authority, unit, or
corporate body created by the U.S. Government. 7) Investment grade collateralized mortgage obligations. 8) Obligations issued, assumed or guaranteed by the International Bank for Reconstruction and Development or
the International Financial Corporation. 9) Bonds, debentures, notes and other evidence of indebtedness issued, assumed, or guaranteed by any solvent
institution existing under the laws of the U.S. or of Canada, or any state or province thereof, which are not in default and are secured to a certain level. 10) Secured and unsecured obligations issued by any solvent institution existing under the laws of the U.S. or of Canada, or any state or province thereof, bearing interest at a fixed rate, with mandatory principal and interest due at a specified time with additional limits. 11) Equipment trust obligations or interests in transportation equipment, wholly or in part within the U.S., and the right to receive determinate portions or related income. 12) Loans that are secured by pledge or securities eligible for investment. 13) Purchase money mortgages or like securities received upon the sale or exchange of real property acquired. 14) Secured mortgages or mortgage participation, pass-through, conventional pass-through, trust certificate, or other similar securities with restrictions. 15) Land and buildings on such land used or acquired for use as a fund's office for the convenient transaction of its own business with restrictions. 16) Real property and equipment acquired under various circumstances.
Even though State statute may allow certain securities and investments, the Annuity and Benefit Fund's investment policy states that the following securities and investments are not eligible for the inclusion among the Annuity and Benefit Fund's asset base:
1) Private placements. 2) Unregistered or restricted stock. 3) Option contracts. 4) Future contracts. 5) Uncovered short position. 6) Margin transactions. 7) Warrants.
11

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013

NOTE 3 - DEPOSITS AND INVESTMENTS (continued)

DEPOSITS

The Annuity and Benefit Fund had cash on hand of $200 at June 30, 2013.

The carrying amount of the Annuity and Benefit Fund's deposits totaled $154,103 at June 30, 2013, with actual bank balances of $173,857. The Annuity and Benefit Fund's cash balances are fully insured through the Federal Deposit Insurance Corporation, an independent agency of the U.S. Government.

INVESTMENTS

Short-term highly liquid financial securities are authorized in money market funds rated by a nationally recognized rating agency. This investment is classified as a cash equivalent on the Annuity and Benefit Fund's Statement of Fiduciary Net Position. At June 30, 2013, the Annuity and Benefit Fund held $30,871,927 in money market mutual funds.

Fixed income investments are authorized in the following instruments:



Mutual Funds. At June 30, 2013, the Annuity and Benefit Fund held mutual funds - debt of $32,753,326.



State and municipal government securities. At June 30, 2013, the Annuity and Benefit Fund held

municipal government securities of $2,527,166.



U.S. Government obligations. At June 30, 2013, the Annuity and Benefit Fund held U.S. Treasury bonds

of $31,427,234.



Obligations unconditionally guaranteed by agencies of the U.S. Government. At June 30, 2013, the

Annuity and Benefit Fund held U.S. Government obligations of $47,592,647.



Corporate bonds that are rated as investment grade as defined by a nationally recognized rating agency.

At June 30, 2013, the Annuity and Benefit Fund held U.S. corporate bonds of $37,934,797 and

international corporate bonds of $2,102,413.



Asset-backed securities. At June 30, 2013, the Annuity and Benefit Fund held U.S. asset-backed

securities of $6,608,629 and international asset-backed securities of $819,070.



Mortgage-related securities. At June 30, 2013, the Annuity and Benefit Fund held mortgage-related

securities of $13,843,912.

Equity securities are also authorized (in statutes) for investment as a complement to the Annuity and Benefit Fund's fixed income portfolio and as a long-term inflation hedge. By statute, no more than 75% of the total invested assets on a historical cost basis may be placed in equities. The equity portfolio is managed by the Annuity and Benefit Fund in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the investment policy of the Annuity and Benefit Fund. Equity trades are approved and executed by the independent advisors. Common stocks eligible for investment must meet the Objectives and Policies of the Annuity and Benefit Fund investment policy. Equity investments are authorized in the instruments listed on the following page.
12

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013

NOTE 3 - DEPOSITS AND INVESTMENTS (continued)



Pooled investments are an equity index fund that is managed by Georgia Division of Investment Services.

At June 30, 2013, the Annuity and Benefit Fund had a balance of $87,445,880 in this pooled investment

account.



Mutual funds are those investments made up of a pool of funds collected from many investors for the

purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. At

June 30, 2013, the Annuity and Benefit Fund held mutual funds - equity of $231,726,046.



Domestic equities are those securities considered by The Official Code of Georgia Annotated (O.C.G.A.)

to be domiciled in the United States. At June 30, 2013, the Annuity and Benefit Fund held domestic

equities of $105,535,371.



International equities will be a diversified portfolio including both developed and emerging countries.

These securities are not considered by the O.C.G.A. to be domiciled in the United States. At June 30,

2013, the Annuity and Benefit Fund held international equities of $21,588.



Real Estate Investment Trust (REIT) is a security that sells like a stock on the major exchanges and

invests in real estate directly, either through properties or mortgages. At June 30, 2013, the Annuity and

Benefit Fund held shares of REITs of $1,499,250.

Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the Annuity and Benefit Fund. State law limits investments to investment grade securities. The Annuity and Benefit Fund's investment policy requires that purchases of bonds be restricted to bonds rated as investment grade or higher quality as defined by a nationally recognized rating agency. Obligations of the U.S. Government or obligations explicitly guaranteed by the U.S. Government are not considered to have credit risk and do not require disclosure of credit quality. The quality ratings of investments in fixed income securities as described by Standard & Poor's and by Moody's Investor Services, which are nationally recognized statistical rating organizations, at June 30, 2013 are shown in the following chart:

Investment Type Domestic obligations:
Money market mutual funds

Standard and Poor's/Moody's quality rating

June 30, 2013 fair value

Unrated

$

30,871,927

Mutual funds - debt Total mutual funds - debt

A/A Unrated

445,403 32,307,923 32,753,326

Municipals Total municipals

AA/Aa AA/A
A/A

271,183 420,972 1,835,011 2,527,166

13

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013

NOTE 3 - DEPOSITS AND INVESTMENTS (continued)
Investment Type U.S. Treasuries U.S. Agencies Corporates
Total corporates Asset-backed securities
Total asset-backed securities Mortgages
Total mortgages International obligations:
Corporates
Total corporates Asset-backed securities
Total fixed income investments

Standard and Poor's/Moody's quality rating

June 30, 2013 fair value

$

31,427,234

AA/Aaa

47,592,647

AA/Aa AA/A A/A A/Baa BBB/A BBB/Baa

516,010 2,337,624 9,733,678 6,142,741
947,709 18,257,035 37,934,797

AAA/Aaa AA/Aaa AA/Aa AA/A
A/A

4,697,653 209,590 675,739 779,091 246,556
6,608,629

AAA/Aaa AAA/Aa AA/Aaa AA/Aa
A/A Unrated

8,892,631 719,502 254,342 98,800 716,304
3,162,333 13,843,912

AA/Aa A/A A/Baa
BBB/A BBB/Baa
AAA/Aaa

512,433 377,374 188,101 422,165 602,340 2,102,413
819,070
$ 206,481,121

14

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013

NOTE 3 - DEPOSITS AND INVESTMENTS (continued)

Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Annuity and Benefit Fund does not have a formal policy for managing interest rate risk. The following table provides information about the Annuity and Benefit Fund's interest rate risk:

Total Fair Value

Less than 3 Months

Maturity Period 4 - 12 Months 1 - 5 Years 6 - 10 Years

More than 10 Years

M oney M arket - M utual Funds $ M utual Funds - Debt M unicipal Bonds U. S. Treasury Obligations U. S. Agency Obligations Corporate Debt
Domestic International Asset-backed Securities Domestic International M ortgage-backed Securities
Total Debt S ecurities

30,871,927 $ 30,871,927 $

32,753,326

-

2,527,166

-

31,427,234

-

47,592,647

-

420,972 404,155

$

-

32,753,326

130,591

23,528,246

4,905,487

$

-

-

806,748

1,027,046

1,087,903

$

-

-

1,168,855

6,871,942

41,195,102

37,934,797 2,102,413

312,830 -

1,101,388 14,098,171 14,859,617

-

839,156

433,055

7,562,791 830,202

6,608,629

-

819,070

-

13,843,912

-

-

2,505,998 2,245,561 1,857,070

-

-

819,070

-

-

-

395,695 13,448,217

206,481,121 $ 31,184,757 $ 1,926,515 $ 78,760,975 $ 21,674,695 $ 72,934,179

Georgia Pooled Index Fund M utual Funds - Equity Equity Securities
Domestic International Real Estate Investment Trust

87,445,880 231,726,046
105,535,371 21,588
1,499,250

Total Investments

$ 632,709,256

Concentration of Credit Risk: Concentration of credit risk is the risk of loss attributed to the magnitude of the Annuity and Benefit Fund's investment in a single issue. The Annuity and Benefit Fund's concentration of credit risk policy limits investments to no more than 5% in any one issue with the exception of the U.S. Government and its agencies. At June 30, 2013, the Annuity and Benefit Fund's investment in the Federal National Mortgage Association is 5.4 percent of the Annuity and Benefit Fund's total investment.

15

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements
For the Year Ended June 30, 2013

NOTE 4 - 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, 2012, which reflected the proceeds of designated portions of fines and forfeitures as the employer contribution, indicated that the minimum employer contribution for the fiscal year ended June 30, 2013 was $22,343,059. The fines and forfeitures revenue of $15,471,981 for the fiscal year ended June 30, 2013 does not meet the minimum required fund contribution. Member contribution requirements are set forth in O.C.G.A. Section 47-17-44 and are not actuarially determined.

Administrative expenses are generally funded from current member and court fine and forfeiture contributions. Investment earnings may be utilized to fund any expenses in excess of contributions. Contribution provisions are established by statute and may be amended only by the General Assembly of Georgia. A description of contribution requirements is as follows:

(A) MEMBERS CONTRIBUTIONS: Each member must contribute $20 per month, to be paid no later than the tenth day of each month.

(B) COURT FINES AND FORFEITURES: For each criminal and quasi-criminal case involving the violation of State of Georgia laws, county ordinances, or municipal ordinances, a sum based upon the scale set forth below is collected and remitted to the Annuity and Benefit Fund:

For fines and bond forfeitures in excess of $4,

but not more than $25

$3

For fines and bond forfeitures in excess of $25,

but not more than $50

$4

For fines and bond forfeitures in excess of $50,

but not more than $100

$5

For fines and bond forfeitures in excess of $100

5%

Actual contributions for the year ended June 30, 2013 were as follows:

Member Contributions Fines and Forfeitures

$

3,448,819

15,471,981

Total

$

18,920,800

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PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia) Notes to Financial Statements For the Year Ended June 30, 2013
NOTE 5 - FUNDED STATUS AND FUNDING PROGRESS The funded status of the plan as of July 1, 2012, the most recent actuarial valuation date, is as follows:

Actuarial value of plan assets
(a)
$ 510,974,703

Acturial accrued liability (AAL) entry age
(b)
$ 606,988,960

Unfunded AAL (b-a)
$ 96,014,257

Funded ratio (a/b)
84.2%

Annual covered payroll
(c)
N/A

Unfunded AAL as percentage of covered payroll [(b-a)/c]
N/A

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, 2012

Actuarial cost method

Entry age normal

Amortization method

Level dollar, open

Remaining amortization period

30 years

Asset valuation method

Market-related value

Actuarial assumptions:

Investment rate of return (includes inflation)

7%

Projected salary increases

N/A

Cost-of-living adjustments

N/A

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REQUIRED SUPPLEMENTARY INFORMATION

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Schedule of Funding Progress
June 30, 2013

Actuarial valuation
date

Actuarial value of plan assets
(a)

Actuarial accrued lability (AAL) entry age
(b)

Unfunded AAL (b-a)

July 1, 2008 $ 471,492,476 $

481,711,888 $

10,219,412

July 1, 2010

468,097,441

532,739,382

64,641,941

July 1, 2012

510,974,703

606,988,960

96,014,257

Funded Ratio (a/b)

Annual covered payroll
( c )

97.9% N/A

87.9% N/A

84.2% N/A

Unfunded AAL as percentage of covered payroll [(b-a)/c]
N/A
N/A
N/A

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Fiscal Year
2008 2009 2010 2011 2012 2013

PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Schedule of Contributions from the Employer and Other Contributing Entities
June 30, 2013

Annual required contribution

Percentage contributed

$

12,936,344

136%

14,034,429

115%

14,034,429

123%

19,760,211

82%

19,760,211

82%

22,343,059

69%

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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 GOVERNMENT AUDITING STANDARDS

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Greg S. Griffin
STATE AUDITOR (404) 6562180

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

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
Independent Auditor's Report
The Honorable Nathan Deal, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the Peace Officers' Annuity and Benefit Fund of Georgia
and Mr. Robert Carter, Secretary/Treasurer
We have audited, 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, the financial statements of the Peace Officers' Annuity and Benefit Fund of Georgia, a component unit of the State of Georgia, which include the statement of fiduciary net position as of June 30, 2013, the related statement of changes in fiduciary net position for the year then ended, and the related notes to the financial statements, which collectively comprise Peace Officers' Annuity and Benefit Fund of Georgia's basic financial statements, and have issued our report thereon dated July 21,2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Peace Officers' Annuity and Benefit Fund of Georgia's internal control over fmancial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Peace Officers' Annuity and Benefit Fund of Georgia's internal control. Accordingly, we do not express an opinion on the effectiveness of Peace Officers' Annuity and Benefit Fund of Georgia's internal
control.

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. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify a certain deficiency in internal control, described in the accompanying Schedule of Findings and Questioned Costs that we consider to be a significant deficiency.
1. Accounting Controls (Overall) Financial Reporting and Disclosure Forms Submitted Late to the State Accounting Office FS-947-13-01
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Peace Officers' Annuity and Benefit 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 Government Auditing Standards.
Peace Officers' Annuity and Benefit Fund of Georgia's Response to Findings
Peace Officers' Annuity and Benefit Fund of Georgia's response to the findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. Peace Officers' Annuity and Benefit Fund of Georgia's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
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Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,
,
-h~#,j~
Greg S. Griffin State Auditor July 21,2014 GSG:rmm
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SECTION III - SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of Georgia)
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2013

SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-947-12-01

Further Action Not Warranted

FS-947-12-01 Failure to Meet Deadlines Established by the State Accounting Office

Control Category:
Internal Control Impact: Compliance Impact:

Accounting Controls (Overall) Financial Reporting and Disclosure Significant Deficiency Nonmaterial Noncompliance

This finding was repeated in the current year. Please see finding # FS-947-13-01.

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS-947-13-01 Forms Submitted Late to the State Accounting Office

Control Category:
Internal Control Impact: Compliance Impact:

Accounting Controls (Overall) Financial Reporting and Disclosure Significant Deficiency Nonmaterial Noncompliance

Requested forms and information were not submitted to the State Accounting Office (SAO) by the prescribed deadlines.

Criteria: As prescribed by O.c.G.A. 50-5B-4, "All organizations of state government...shall conform to and comply with the rules, regulations, policies, procedures, and forms devised, promulgated, and installed by the state accounting officer. All organizations of state government shall submit statements, reports, information, and data necessary to enable the state accounting officer to complete the reports required under this code section... All organizations of state government shall provide lease information to the state accounting officer to permit the state accounting officer to properly account for and report all capital and operating leases. All information and reports required in this Code section shall be provided in the form and within the time frame prescribed by the state accounting officer."

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PEACE OFFICERS' ANNUITY AND BENEFIT FUND OF GEORGIA (A Component Unit of Georgia)
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2013
Condition: The Peace Officers' Annuity and Benefit Fund of Georgia (Fund) did not meet deadlines established by SAO for the submission of forms, data, and other information required for the preparation of the Comprehensive Annual Financial Report (CAFR). Our review revealed the following was not submitted to SAO by the prescribed deadlines: - Allowance for Doubtful Accounts - Cash and Deposits - Lease Agreement Data - Year-end Questionnaire - Trial Balance Shell
Cause: In discussing this condition with Fund personnel, they stated that the forms were late due to a lack of personnel and a lack of understanding ofthe forms.
Effect or Potential Effect: Not submitting the required information to SAO by the prescribed deadlines results in delays in the preparation of the CAFR; delays which could result in that report not being issued by its deadline and negatively impact the State's bond rating.
Recommendation: The Peace Officers' Annuity and Benefit Fund of Georgia should implement policies and procedures, as needed, to ensure that all forms, data, and other information required by SAO for the preparation of the CAFR is submitted to SAO by the prescribed deadlines.
View of Responsible Officials and Corrective Action Plans: The Retirement Fund did not have necessary staff to ensure that the reports were filed on time.
Additional staff has been hired and is in training to make sure that in the future the reports are filed on time. Contact Person: Robert Carter, Secretary/Treasurer Telephone: (770)228-8461 Fax: (770)412-1236 email: bcarterpoab@aol.com
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