Audit report, Sheriffs' Retirement Fund of Georgia, year ended June 30, 2006

STATE OF GEORGIA
Sonny Perdue Governor
AUDIT REPORT SHERIFFS' RETIREMENT FUND OF GEORGIA
YEAR ENDED JUNE 30, 2006
Prepared by State Accounting Office

SHERRIFFS' RETIREMENT FUND OF GEORGIA - TABLE OF CONTENTS -
SECTION I - FINANCIAL
Independent Auditor's Report on Basic Financial Statements Accompanied by Required Supplementary Information
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 Employer Contributions Notes to Required Supplementary Information

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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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SECTION I - FINANCIAL

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DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington St. S.W. Suite 1-156 Atlanta, Georgia 30334
RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174
March 7, 2007
Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Commissioners of the Sheriffs' Retirement Fund of Georgia
and Honorable Tracy L. Marchman, Secretary/Treasurer
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 Sheriffs' Retirement Fund of Georgia, a part of the primary government of the State of Georgia, as of and for the year ended June 30, 2006, as listed in the table of contents. These financial statements are the responsibility of the Fund's management. Our responsibility is to express opinions on these financial statements based on our audit.
Except as discussed in the following paragraph, 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 opm1on.
The financial statements of the Sheriffs' Retirement Fund of Georgia for the fiscal year ended June 30, 2005 were not audited in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Since the amount of net assets reported in the Statement of Fiduciary Net Assets as of June 30, 2005 materially affect the amounts reported in the Statement of Changes in Fiduciary Net Assets for the year ended June 30, 2006, the scope of our work was

not sufficient to enable us to express, and we do not express, an opinion on the Statement of Changes in Fiduciary Net Assets for the year ended June 30, 2006. In our opinion, the statement of Fiduciary Net Assets of the Sheriffs' Retirement Fund of Georgia present fairly, in all material respects, the financial position of the Sheriffs' Retirement Fund of Georgia, as of June 30, 2006, 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 March 7, 2007 on our consideration of the Sheriffs' 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 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 Sheriffs' 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. 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,
~-QQ~.4t::;
Russell W. Hinton, CPA, CGFM State Auditor
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BASIC FINANCIAL STATEMENTS

SHERIFFS' RETIREMENT FUND OF GEORIGA STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2006

Assets Cash and Cash Equivalents Receivables
Interest and Dividends Investments
Investment Accounts Mutual Funds Municipal, U.S. and Foreign
Government Obligations Corporate Bonds/Nates/Debentures Stocks
Total Assets
Liabilities Compensated Absences Payable
Net Assets Held in Trust for Pension Benefits

$

24,568

293,479

(39,533) 6,818,636

12,003,188 8,986,554 36,129,886

$

64,216,778

20,179

$

64,196,599

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

SHERIFFS' RETIREMENT FUND OF GEORIGA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006

Additions: Contributions Plan Members Other Contributions Fines and Bond Forfeitures Interest and Other Investment Income Dividends and Interest Net Appreciation (Depreciation) in Investments Reported at Fair Value Less: Investment Expense Other 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

$

102,739

2,422,553

1,514,585

3,078,617 (265,619)

114,404

$

6,967,279

$

266,430

3,412,047

5,040

$

3,683,517

$

3,283,762

60,912,837

$ ====64=,1=96=,5=99=

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

SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2006

A. PLAN DESCRIPTION

ORGANIZATION AND PLAN DESCRIPTION The Sheriffs' Retirement Fund of Georgia is a cost-sharing multiple-employer defined benefit pension plan established in 1963 by the General Assembly of Georgia for the purpose of paying retirement benefits to the sheriffs of the State of Georgia. The Board of Commissioners of the Retirement Fund is comprised of six members and consists of the Director of the Office of Treasury and Fiscal Services, one former sheriff who is a retired beneficiary of the Retirement Fund, and four persons holding office as sheriffs within the State of Georgia, each of whom are active members of the Retirement Fund and have held office as a sheriff for at least four years. The Sheriffs' Retirement Fund of Georgia is included within the State of Georgia's basic financial statements as a part of the primary government.

Any qualified and commissioned sheriff of the superior court of any county within the State of Georgia who makes payment of the required contributions is eligible for membership. The Retirement Fund is funded through a combination of member contributions paid by the affected sheriffs and designated portions of fines and forfeitures for criminal and quasi-criminal cases involving the violation of State of Georgia statutes, including traffic laws.

CURRENT MEMBERSHIP The following analysis compares the membership of the Sheriffs' Retirement Fund of Georgia at June 30, 2006, to that of the prior year:

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

June 30, 2006 June 30, 2005
142 32 171 10

Total

181

174

Total Active Members

Vested

94

Nonvested

64

Total

156

158

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SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2006
A. PLAN DESCRIPTION
BENEFITS The Sheriffs' Retirement Fund of Georgia provides retirement as well as 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: Normal retirement is at age 55 provided the member has at least four years of credited service as a sheriff after and including January 1, 1961. The credited service requirement is eight years for a sheriff who first or again becomes an active member on or after July 1, 1988. A member must have terminated his or her service as sheriff to receive benefits.
(B) RETIREMENT BENEFITS: The monthly benefit is a single life annuity payable in monthly payments for the life of the member. The maximum monthly payment at June 30, 2006 is equal to $110.64 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 $3,319 per month. 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) DEATH BENEFITS (1) In the event of the death of a member before retirement, the total amount of his or her contributions into the funds shall be paid, without interest to the surviving spouse, the named beneficiary or the member's estate.
(2) In the event of the death of a member after retirement, who has yet to receive an amount in benefits equal to the total amount the member paid in as contributions, the difference shall be paid, without interest, to the surviving spouse, the named beneficiary or the member's estate.
(3) Additionally, upon the death of the following, the sum of $7,000 shall be paid to the surviving spouse, the named beneficiary or the members estate:
(a) an inactive member who would otherwise qualify to be carried upon the active membership rolls except that he or she no longer holds office of sheriff;
(b) a member who is receiving retirement benefits;
(c) a member who is otherwise qualified to receive retirement benefits from this Retirement Fund except that he or she has not reached age 55 or has not filed an application or has not been approved for retirement benefits or
(d) any active member.
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SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2006
A. PLAN DESCRIPTION
(4) In addition to the death benefit discussed in item (D)(3), upon the death of an active member, the surviving spouse receives an additional benefit in the form of a 100 percent joint life annuity. In such event, the death benefit discussed in item (D)(l) will not be payable.
(E) TERMINATION: At any time before a member begins drawing retirement benefits, the member may request a refund of the total sum he or she has paid into the Retirement Fund as membership dues. No interest shall be paid upon amounts so withdrawn.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The Retirement 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 fees would be immaterial to the Retirement 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.
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.
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, 2006 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 47-16-43 and are not actuarially determined. Administrative expenses are paid from funds received by the Retirement Fund.
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 $45.00 per month of credited service claimed on or after July 1, 2000, with a maximum payment period of thirty years. Dues of $37.50 must be paid for every month of credited service from July 1, 1994 to June 30, 2000, $30.00 per month of credited service from July 1, 1990 to June 30, 1994 and $25.00 per month of credited service claimed from January 1, 1961 to June 30, 1990. For credited service prior to January 1, 1961, deductions in the amount of $20.00 are made from monthly retirement benefits until all credited months prior to January 1, 1961 are paid, subject, to a twenty-five year maximum.
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SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED .JUNE 30, 2006

C. CONTRIBUTIONS AND RESERVES

(B) COURT FINES AND FORFEITURES: For each criminal and quasi-criminal case involving the violation of State of Georgia statutes, including traffic laws, a sum based upon the scale set forth below is collected by the presiding judge and remitted to the Retirement Fund:

For fines or bond forfeitures in excess of $5,

in any court where a sheriff of a superior

court acts as a sheriff

$2

In addition, the following amounts are required to be collected by the applicable courts and remitted to the Retirement Fund:

For civil actions, cases or proceedings filed in superior courts

$1

For civil actions, cases or proceedings filed in state courts

and magistrate courts where a sheriff of the superior

courts acts as a sheriff in those courts

$1

Actual contributions for the year ended June 30, 2006, were as follows:

Member Contributions Fines and Forfeitures

$

102,739

2,422,553

Total

$ 2,525,292

===============

D. CONCENTRATION OF CREDIT RISK
At June 30, 2006, 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 18.1 percent of the Retirement Fund's total investments.

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REQUIRED SUPPLEMENTARY INFORMATION

SHERIFFS' RETIREMENT FUND OF GEORIGA SCHEDULE OF FUNDING PROGRESS JUNE 30, 2006

Actuarial Valuation
Date
July 1, 2002
July 1, 2004
July 1, 2006

Actuarial Value of Assets
(a)

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

Unfunded AAL
(UAAL) (b-a)

Funded Ratio (alb)

Covered Payroll
( C)

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

$

58,129,062 $

53,045,439 $

(5,083,623)

109.6%

n/a

n/a

$

57,747,906 $

56,989,541 $

(758,365)

101.3%

n/a

n/a

$

60,257,000 $

60,667,000 $

410,000

99.3%

n/a

n/a

The actuarial value of assets at July 1, 2006 is equal to 94% of the market value of assets.

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Fiscal Year
2001 2002 2003 2004 2005 2006

SHERIFFS' RETIREMENT FUND OF GEORIGA SCHEDULE OF EMPLOYER CONTRIBUTIONS
JUNE 30, 2006

Annual Required Contribution

$

0

$

0

$

245,423

$

245,423

$

533,227

$

533,227

Percentage Contributed
0.0% 0.0% 10.3% 10.2% 21.5% 22.0%

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SHERIFFS' RETIREMENT FUND OF GEORIGA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2006

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:
Actuarial Cost Method:
Amortization Method:
Remaining Amortization Period:
Asset Valuation Method:
Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Includes Inflation at Cost-of-Living Adjustments

July 1, 2006
Entry age normal
Level dollar, open
30 years
5 year smoothed market value with 10% corridor
6.5% Not applicable None Assumed None Assumed

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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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DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington St. S.W. Suite 1-156 Atlanta, Georgia 30334
RUSSELL W. HINTON
STATE AUDITOR (404) 656-2174
March 7, 2007
Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Commissioners of the Sheriffs' Retirement Fund of Georgia
and Honorable Tracy L. Marchman, Secretary/Treasurer
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
Ladies and Gentlemen:
We have audited the financial statements of the Sheriffs' Retirement Fund of Georgia, a part of the primary government of the State of Georgia, as of and for the year ended June 30, 2006, and have issued our report thereon dated March 7, 2007. 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, except we did not apply audit procedures necessary to satisfy ourselves about the opening balance (July 1, 2005) on the Statement of Changes in Fiduciary Net Assets.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Sheriffs' Retirement Fund of Georgia's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over

financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Sheriffs' 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 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 Fund 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,
'=R>......ai u.'),4J~
~uJell W. Hinton, CPA, CGFM State Auditor
RWH:dp
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