Audit Report Sheriffs' Retirement Fund of Georgia Fiscal Year Ended June 30, 2012 Prepared by: State Accounting Office "Georgia State Capitol" Artist: GeorgeAnn S. Moore, Gainesville, Georgia The artwork on the cover was created by Gainesville artist GeorgeAnn Moore and will be hanging in the Office of the Governor as part of a rotating exhibit "The Art of Georgia" through January 25, 2013. For more information about the exhibit, the selected artists and their work, visit www.gaarts.org. SHERIFFS' RETIREMENT FUND OF GEORGIA - TABLE OF CONTENTS Page SECTION I - FINANCIAL Independent Auditor's Report 1 Basic Financial Statements Statement of Fiduciary Net Assets 4 Statement of Changes in Fiduciary Net Assets 5 Notes to the Financial Statements 6 Required Supplementary Information Schedule of Funding Progress 12 Schedule of Contributions from the Employer and Other Contributing Entities 13 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 17 (This page intentionally left blank) SECTION I - FINANCIAL (This page intentionally left blank) BASIC FINANCIAL STATEMENTS SHERIFFS' RETIREMENT FUND OF GEORGIA STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2012 Assets Cash and Cash Equivalents Receivables Interest and Dividends Investments Pooled Investments Mutual Funds Municipal, U. S. and Foreign Government Obligations Corporate Bonds/Notes/Debentures Stocks Total Assets Liabilities Accounts Payable and Other Accruals Compensated Absences Payable Total Liabilities Net Assets Held in Trust for Pension Benefits $ 448,001 249,676 4,869,364 16,041,431 5,425,026 14,465,189 32,040,772 73,539,459 17,265 8,643 25,908 $ 73,513,551 The notes to the financial statements are an integral part of this statement. 4 SHERIFFS' RETIREMENT FUND OF GEORGIA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FOR THE YEAR ENDED JUNE 30, 2012 Additions: Contributions Plan Members Other Contributions Fines and Bond Forfeitures Interest and Other Investment Income Dividends and Interest Net Depreciation in Investments Reported at Fair Value Less: Investment Expense Net Investment Income 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 $ 76,160 2,678,871 $ 1,863,123 (926,918) (320,384) 615,821 126,491 3,497,343 186,623 4,552,574 15,600 4,754,797 (1,257,454) 74,771,005 $ 73,513,551 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, 2012 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 state treasurer, 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, 2012, to that of the prior year: Retirees and Beneficiaries Currently Receiving Benefits Terminated Members Entitled to, But Not Yet Receiving Benefits June 30, 2012 June 30, 2011 181 186 6 7 Total 187 193 Number of Active Members 150 153 PARTICIPATING EMPLOYERS AND CONTRIBUTING ENTITIES The number of participating employers at June 30, 2012 was 150. The number of contributing entities at June 30, 2012 was 919. 6 SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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, 2012 is equal to $132.14 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 $3,964.20 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 fund 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 $15,000 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. 7 SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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)(1) 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 forfeitures 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 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 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, with a maximum payment period of thirty years. 8 SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 C. CONTRIBUTIONS (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, 2012, were as follows: Member Contributions Fines and Forfeitures $ 76,160 2,678,871 Total $ 2,755,031 D. 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) Acturial accrued liability (AAL) entry age (b) Unfunded AAL (UAAL) (b-a) Funding ratio (a/b) Annual covered payroll (c) UAAL as a percentage of covered payroll [(b-a)c] $ 69,356,000 $ 77,766,000 $ 8,410,000 89.2% n/a n/a 9 SHERIFFS' RETIREMENT FUND OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2012 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 Five-year smoothed market value with 10% corridor Actuarial assumptions: Investment rate of return (includes inflation) Projected salary increases Cost-of-living adjustments 6.50% N/A N/A 10 REQUIRED SUPPLEMENTARY INFORMATION SHERIFFS' RETIREMENT FUND OF GEORGIA SCHEDULE OF FUNDING PROGRESS JUNE 30, 2012 Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) - Entry Age Normal (b) Unfunded AAL/(Funding Excess) (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll ( c ) July 1, 2008 69,553,000 67,081,000 (2,472,000) 103.7% n/a July 1, 2010 66,897,000 72,755,000 5,858,000 91.9% n/a July 1, 2012 69,356,000 77,766,000 8,410,000 89.2% n/a The actuarial value of assets at July 1, 2012 is equal to 94.3% of the market value of assets. UAAL as a Percentage of Covered Payroll ((b-a)/c) n/a n/a n/a 12 Fiscal Year 2007 2008 2009 2010 2011 2012 SHERIFFS' RETIREMENT FUND OF GEORGIA SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER AND OTHER CONTRIBUTING ENTITIES JUNE 30, 2012 Annual Required Contribution $ 657,100 657,100 401,174 401,174 1,101,385 1,101,385 Percentage Contributed 400.5% 410.1% 697.7% 661.0% 226.8% 243.2% 13 (This page intentionally left blank) 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 (This page intentionally left blank)