Audit report, Sheriffs' Retirement Fund of Georgia, fiscal year ended June 30, 2014

Audit Report
Sheriffs' Retirement Fund of Georgia Fiscal Year Ended June 30, 2014

The photograph on the cover was taken by Lacey Mitchell at Jekyll Island, Georgia.

SHERIFFS' RETIREMENT 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 Financial Statements

8

Required Supplementary Information (Unaudited)

Schedule of Changes in Employers' and Nonemployers' Net Pension Liability

20

Schedule of Employers' and Nonemployers' Net Pension Liability

21

Schedule of Employer and Nonemployer Contributions

22

Schedule of Investment Returns

23

Notes to Required Supplementary Information

24

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

27

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SECTION I - FINANCIAL

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GREG S. GRIFFIN
STATE AUDITOR
(404) 656-2174

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 Sheriffs' Retirement Fund of Georgia
and Mr. J. Terry Norris, Secretary/Treasurer
Report on the Financial Statements
We have audited the accompanying financial statements of the Sheriffs' Retirement Fund of Georgia, a component unit of the State of Georgia, as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Sheriffs' Retirement 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 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 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 financial 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 also 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 financial statements referred to above present fairly, in all material respects, the fiduciary net position of the Sheriffs' Retirement Fund of Georgia, as of June 30, 2014, and the changes in fiduciary net position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2(a) to the financial statements, Sheriffs' Retirement Fund of Georgia adopted, in 2014, Governmental Accounting Standards Board Statement No. 67, Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25. 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 changes in employers' and nonemployers' net pension liability, schedule of employers' and nonemployers' net pension liability, schedule of employer and nonemployer contributions, and schedule of investment returns on pages 20 - 23 be presented to supplement the basic financial 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 sufficient evidence to express an opinion or provide any assurance.
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
2

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BASIC FINANCIAL STATEMENTS

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Statement of Fiduciary Net Position
June 30, 2014

Assets: Cash and cash equivalents
Receivables: Interest and dividends receivable
Investments - at fair value: Obligations: U.S. Treasury obligations U.S. Agency obligations Corporate bonds/notes/debentures Domestic International Equities: Mutual funds Stocks
Total investments
Total assets
Liabilities: Compensated absences payable
Net position restricted for pensions
See accompanying notes to financial statements.

$

1,347,865

194,104

$

2,876,100

6,245,923

12,047,949 206,218 $

31,692,703 34,876,300

21,376,190 66,569,003

87,945,193 89,487,162

9,194 $ 89,477,968

6

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Statement of Changes in Fiduciary Net Position
For the Year ended June 30, 2014

Additions: Contributions: Nonemployer Member
Net investment income: Net increase in fair value of investments Interest, dividends, and other Less investment expense
Other additions
Total additions
Deductions: Benefit payments Administrative expenses, net
Total deductions
Net increase in net position
Net position restricted for pensions: Beginning of year
End of year
See accompanying notes to financial statements.

$

2,086,369

116,912

$ 11,225,033 1,721,533 (415,213)

12,531,353 3,994
14,738,628

5,332,521 216,635
5,549,156
9,189,472

80,288,496 $ 89,477,968

7

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

NOTE 1 Plan Description
The Sheriffs' Retirement Fund of Georgia (Retirement Fund) is a cost-sharing, multiple-employer defined benefit pension plan, as defined in Governmental Accounting Standards Board (GASB) Statement No. 67, Financial reporting for Pension Plans an amendment of GASB Statement No. 25, 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 Retirement Fund, 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.
(a) Eligibility and Membership
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.

As of June 30, 2014, participation in the Retirement Fund is as follows:

Retirees and beneficiaries currently receiving benefits

203

Terminated members not yet receiving benefits, vested

6

Total

209

Number of active members

156

(b) Participating Employers and Other Contributing Entities
At June 30, 2014, the active members of the Pension Fund were employed by 156 employers. The Pension Fund had one nonemployer contributing entity, the State of Georgia.
(c) Retirement Benefits
The Retirement Fund 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:
1) 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.

8

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014
2) 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, 2014 is equal to $140.18 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 $4,205.40 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% of the maximum monthly retirement benefit then in effect.
3) Optional Benefit: Members may elect, as an alternate to the benefit described above, to receive a 100% joint life annuity payable during the life of the member or the member's spouse or a contingency life annuity with a 50% 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.
4) Death Benefits:
a) In the event of the death of a member before retirement, the total amount of his or her contributions into the Retirement Fund will be paid, without interest, to the surviving spouse, the named beneficiary or the member's estate.
b) 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 will be paid, without interest, to the surviving spouse, the named beneficiary or the member's estate.
c) Additionally, upon the death of the following, the sum of $15,000 will be paid to the surviving spouse, the named beneficiary or the member's estate:
(1) 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;
(2) a member who is receiving retirement benefits;
(3) 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
(4) any active member.
d) In addition to the death benefit discussed in item 4) c), upon the death of an active member, the surviving spouse receives an additional benefit in the form of a 100% joint life annuity. In such event, the death benefit discussed in item 4) a) will not be payable.
5) 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 is paid upon amounts so withdrawn.
9

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

(d) Contributions

The Retirement Fund is funded by member and nonemployer contributing entity (Nonemployer) contributions. Contribution provisions are established by statute and may be amended only by the General Assembly of Georgia.

Member Contributions: Member contribution requirements are set forth in Official Code of Georgia Annotated (O.C.G.A.) 47-16-43 and are not actuarially determined. Each member must contribute $45 per month, to be paid no later than the tenth day of each month, with a maximum payment period of thirty years.

Court Fines and Forfeitures: Nonemployer contributions consist of court fines and forfeitures collected and remitted by the courts directly to the Retirement Fund in accordance with O.C.G.A. 4716-60 and 47-16-61. These court fines and forfeitures are considered to be made by the State of Georgia as the nonemployer contributing entity. 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 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

In accordance with O.C.G.A. 47-20-10, the court fines and forfeitures are considered employer contributions for the purpose of determining whether the Retirement Fund has met minimum funding requirements. This statute also 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, 2014, calculated the minimum employer contribution for the fiscal year ended June 30, 2014, as $1,357,827. The fines and forfeitures revenue of $2,086,369 for the fiscal year ended June 30, 2014, meets the minimum required fund contribution.

(e) Administrative Expenses

Administrative expenses are generally paid from current member and court fine and forfeiture contributions. Investment earnings may be utilized to pay any expenses in excess of contributions.

10

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014
NOTE 2 - Summary of Significant Accounting Policies
(a) 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.
During fiscal year 2014, the Retirement Fund adopted the provisions of GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statements No. 25. This Statement establishes new financial reporting standards for state and local governmental pension plans that are administered through a trust or similar arrangement. This Statement resulted in changes to the actuarial calculation of total and net pension liability and the related noted disclosures and required supplementary information. The implementation of GASB Statement No. 67 did not impact the recorded amounts in the financial statements.
(b) Reporting Entity
The Retirement Fund is a component unit of the State of Georgia; however, it is accountable for its own fiscal matters and presentation of its separate financial statements. The Retirement Fund has considered potential component units under GASB Statements No. 61, The Financial Reporting Entity's Omnibus an amendment of GASB Statement No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, and determined there were no component units of the Retirement Fund.
(c) 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.
(d) 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 Retirement Fund.
The Retirement 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 change could materially affect the amounts reported in the financial statements.
11

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

The Retirement Fund maintains an investment policy that may be amended by its Board of Commissioners both upon its own initiative and upon consideration of the advice and recommendations of its investment consultants. There were no significant changes in the investment policy for the Retirement Fund during the fiscal year.

The Retirement Fund's policy in regard to the allocation of invested assets is established on a cost basis in compliance with Georgia Statute. Plan assets are managed on a total return basis with a long-term objective of achieving and maintaining a fully funded status for the benefits provided through the pension plan. The following was the Retirement Fund's adopted asset allocation policy as of June 30, 2014:

Asset class

Target allocation

Fixed income Domestic equities International equities Real Estate Investment Trusts (REITs) Cash and cash equivalents
Total

25% - 40% 50% - 75% 10% - 20% 0% - 5% 0% - 10%
100%

For the year ended June 30, 2014, the annual money weighted rate of return on pension plan investments, net of plan investment expense, was 16.56%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.
The Retirement Fund has no investments in any one organization, other than those issued by the U.S. Government, that represent 5% or more of the Retirement Fund's net position restricted for pensions.
(e) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of fiduciary net position and changes therein. Actual results could differ from those estimates.
NOTE 3 - Investment Program
The Retirement Fund maintains sufficient cash to meet its immediate liquidity needs. Cash not immediately needed is invested as directed by the investment policy of the Retirement Fund. All investments are held by agent custodial banks in the name of the Retirement Fund. State statutes and the Retirement Fund's investment policy authorize the Retirement Fund to invest in a variety of short-term and long-term securities.

12

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

(a) Cash and Cash Equivalents

The carrying amount of the Retirement Fund's deposits totaled ($35,340) at June 30, 2014, with actual bank balances of $76,780. The Retirement Fund's cash balances are fully insured through the Federal Deposit Insurance Corporation, an independent agency of the U.S. Government.

Short-term highly liquid financial securities are authorized in the investment policy of the Retirement Fund in money market funds. This investment is classified as a cash equivalent on the Retirement Fund's Statement of Fiduciary Net Position. At June 30, 2014, the Retirement Fund held $1,383,205 in money market mutual funds.

(b) Investments

Fixed income investments are authorized in the following instruments:



U.S. Government obligations. At June 30, 2014, the Retirement Fund held U.S. Treasury bonds of

$2,876,100.



Obligations unconditionally guaranteed by agencies of the U.S. Government. At June 30, 2014,

the Retirement Fund held U.S. Government obligations of $6,245,923.



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

agency. At June 30, 2014, the Retirement Fund held U.S. corporate bonds of $12,047,949 and

international corporate bonds of $206,218.

Equity securities are also authorized by the Public Retirement System Investment Authority Law for investment as a complement to the Retirement 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 investment policy of the Retirement Fund requires that the equity portfolio have no more than 5% invested in any one issue, based on cost. The equity portfolio is managed by the Retirement Fund in conjunction with independent advisors. Buy/sell decisions are based on securities meeting rating criteria established by the investment policy of the Retirement Fund. Equity trades are approved and executed by the independent advisors. Common stocks eligible for investment must meet the Objectives of the Retirement Fund's investment policy. Equity investments are authorized in the following instruments:



Mutual Funds. At June 30, 2014, the Retirement Fund held equity mutual funds of $31,692,703.



Domestic equities are those securities considered by the O.C.G.A. to be domiciled in the United

States. At June 30, 2014, the Retirement Fund held domestic equities of $31,071,673.



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, 2014, the Retirement Fund held international equities of $3,804,627.

13

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the Retirement Fund. State law limits investments to investment grade securities. The Retirement Fund's investment policy requires that purchases of bonds be restricted to bonds rated as investment grade with no more than 10% of the bond portfolio invested in securities rated lower than "A" as defined by a nationally recognized rating agency. The quality ratings of investments in fixed income securities as described by Moody's Investor Services, which is a nationally recognized statistical rating organization, at June 30, 2014, are shown in the following chart.

Quality Ratings of Fixed Income Investments Held at June 30, 2014

Investment type Domestic obligations:
Money market mutual funds
U.S. Treasury obligations

rating Unrated
*

fair value

$

1,383,205

2,876,100

U.S. Agency obligations

Aa

6,245,923

Corporates
Total corporate debt - domestic International obligations:
Corporates

Aaa Aa A Baa Unrated
Baa

1,031,901 1,499,195 8,017,476 1,293,915
205,462 12,047,949
206,218

Total fixed income investments

$

22,759,395

* Obligations of the U.S. Government are not considered to have credit risk and do not require disclosure of credit quality.
Concentration of Credit Risk: Concentration of credit risk is the risk of loss that may be attributed to the magnitude of a government's investment in a single issue. On June 30, 2014, the Retirement Fund did not have any debt investments in any one organization, other than those issued or guaranteed by the U.S. Government or its agencies, which represented greater than 5% of total investments.

14

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

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

Total Fixed income investment type Fair Value

Maturity Period

Less than

More than

3 Months 4 - 12 Months 1 - 5 Years 6 - 10 Years 10 Years

Money market mutual funds U.S. Treasury obligations U.S. Agency obligations Corporate debt
Domestic International Total fixed income investments

$ 1,383,205 2,876,100 6,245,923
12,047,949 206,218
$ 22,759,395

$ 1,383,205 -
$ 1,383,205

$

-

-

-

1,188,094 -
$ 1,188,094

$

-

1,695,094

1,217,054

6,639,914 206,218
$ 9,758,280

$

-

1,181,006

3,006,156

4,219,941 -
$ 8,407,103

$

-

-

2,022,713

$ 2,022,713

NOTE 4 - Net Pension Liability of Employers and Nonemployers
The components of the net pension liability of the participating employers and nonemployers at June 30, 2014, were as follows:

Total pension liability Plan fiduciary net position
Employers' and nonemployers' nneet tppeennsisoionnlialiabbilitliyty
Plan fiduciary net position as a percentage of the total pension liability

$ 109,279,727 89,477,968
$ 19,801,759
81.88%

Actuarial Assumptions: The total pension liability was determined by an actuarial valuation as of June 30, 2014, using the following actuarial assumptions, applied to all prior periods included in the measurement:

Inflation Salary increases Investment rate of return

3.0%
N/A 6.50%, net of pension plan investment expense,
including inflation

Mortality rates were based on the 1983 Group Annuity Mortality Table (no margins) for the period after retirement, for dependent beneficiaries, and for deaths in active service.

15

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

Retirement benefit at Normal Retirement Date has increased by 1 % every 6 months in the monthly benefit per year of credited service since July 1, 2000 and are assumed to continue into the future.
The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Asset Class Domestic fixed income Domestic large cap equities Domestic mid cap equities Domestic small cap equities Global equities International equities REITs
Total

Targe t Allocation
25.00 % 40.00 3.50 3.50 10.00 15.00 3.00 100.00 %

Long-te rm expected real rate of return
3.50 % 7.50 8.40 8.60 8.50 8.50 8.50

Discount rate: The discount rate used to measure the total pension liability was 6.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions (dues) will be made at the current contribution rate ($45 per month) and that contributions from fines and forfeitures will continue to be made at rates currently established by statute ($2 per fine or bond forfeited in criminal or quasi-criminal cases of at least $5 arising from a court in which a sheriff acts as sheriff to such court. $1 is collected in civil actions filed in superior courts. $1 is collected in civil actions filed in state courts and magistrate courts where a sheriff acts as sheriff to such court.). Fines and forfeitures contributions for the fiscal year ending June 30, 2014 were approximately $2.1 million and it has been assumed this contribution amount will continue over the projection period. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

16

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Financial Statements June 30, 2014

Sensitivity of the net pension liability to changes in the discount rate: The following table presents the net pension liability of employers and nonemployers calculated using the discount rate of 6.50%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentagepoint lower (5.50%) or 1-percentage-point higher (7.50%) than the current rate:

Employers' and nonemployers' net pension liability

1% De cre as e (5.50%)
$ 31,325,847

Curre nt discount rate
(6.50%)
19,801,759

1% Incre as e (7.50%)
10,045,138

Actuarial valuation date: The total pension liability is based on the June 30, 2014 actuarial valuation.

17

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information
Schedule of Changes in Employers' and Nonemployers' Net Pension Liability For the year ended June 30 (Unaudited)

Total pension liability:

Service cost

$

Interest

Changes of benefit terms

Differences between expected and actual experience

Changes of assumptions

Benefit payments

Refunds of member contributions

Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a)

Plan fiduciary net position: Contributions - nonemployer Contributions - member Net investment income Miscellaneous Benefit payments Refunds of member contributions Administrative expenses, net

Net change in plan fiduciary net position

Plan fiduciary net position - beginning

Plan fiduciary net position - ending (b)

Net pension liability - ending (a) - (b)

$

2014
1,850,878 6,719,420
(5,332,521) 3,237,777 106,041,950 109,279,727
2,086,369 116,912
12,531,353 3,994
(5,332,521) -
(216,635) 9,189,472 80,288,496 89,477,968 19,801,759

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
See accompanying notes to required supplementary information and accompanying independent auditor's report.

20

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Required Supplementary Information Schedule of Employers' and Nonemployers' Net Pension Liability
For the year ended June 30 (Unaudited)
Total pension liability Plan fiduciary net position Employers' and nonemployers' net pension liability Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll Employers' and nonemployers' net pension liability as a percentage of
covered-employee payroll

2014

$ 109,279,727 89,477,968

$

19,801,759

81.88%

N/A

N/A

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
See accompanying notes to required supplementary information and accompanying independent auditor's report.

21

SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information
Schedule of Employer and Nonemployer Contributions For the year ended June 30 (Unaudited)

Actuarially determined employer and nonemployer contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

$ 1,357,827 $ 1,357,827 $ 1,101,385 $ 1,101,385 $

401,174 $

401,174 $

657,100 $

657,100 $

533,227 $

533,227

2,086,369

2,336,786

2,678,871

2,498,355

2,651,756

2,799,016

2,694,857

2,631,678

2,422,553

2,477,261

$ (728,542) $ (978,959) $ (1,577,486) $ (1,396,970) $ (2,250,582) $ (2,397,842) $ (2,037,757) $ (1,974,578) $ (1,889,326) $ (1,944,034)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

See accompanying notes to required supplementary information and accompanying independent auditor's report.

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SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia) Required Supplementary Information Schedule of Investment Returns For the year ended June 30 (Unaudited)

Annual money-weighted rate of return, net of investment expense

2014 16.56%

Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

See accompanying notes to required supplementary information and accompanying independent auditor's report.

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SHERIFFS' RETIREMENT FUND OF GEORGIA (A Component Unit of the State of Georgia)
Notes to Required Supplementary Information For the Year June 30, 2014 (Unaudited)

(1) Schedule of Changes in Net Pension Liability

The total pension liability contained in this schedule was provided by the Retirement Fund's actuary, Cavanaugh Macdonald Consulting, LLC. The net pension liability is measured as the total pension liability less the amount of the fiduciary net position of the Retirement Fund.

(2) Actuarial Methods and Assumptions

Changes of benefit terms: Retirement benefit at Normal Retirement Date has increased based on the following table since July 1, 2012. These 1.50 percent increases every 6 months in the monthly benefit per year of credited service have occurred since July 1, 2000 and are assumed to continue into the future.

Date
July 1, 2012 January 1, 2013 July 1, 2013 January 1, 2014 July 1, 2014

Change
$1.95 $2.01 $2.01 $2.07 $2.07

Total Benefit per Year of Service
$134.09 $136.10 $138.11 $140.18 $142.25

Changes of assumptions: None

Methods and assumptions used in calculations of actuarially determined contributions: The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, one year prior to the end of the fiscal year in which contributions are reported. The following actuarial methods and assumptions were used to determine the most recent contribution rate reported in that schedule:

Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases Investment rate of return

Entry age Level dollar, open 30 years 5-year smoothed market value with 10% corridor 3.0 percent N/A 6.5 percent, net of pension plan investment expense, including inflation

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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) 656-2174

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 Sheriffs' Retirement Fund of Georgia
and Mr. J. Terry Norris, 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 Sheriffs' Retirement Fund of Georgia, a component unit of the State of Georgia, which include the statement of fiduciary net position as of June 30, 2014, 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 Sheriffs' Retirement Fund of Georgia's basic financial statements, and have issued our report thereon dated June 12, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Sheriffs' Retirement Fund of Georgia's internal control over financial 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 Sheriffs' Retirement Fund of Georgia's internal control. Accordingly, we do not express an opinion on the effectiveness of Sheriffs' Retirement 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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
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