Loading...
HomeMy WebLinkAboutAgenda Fire Pension 020712THE RESOURCE CENTERS, LLC 4360 Northlake Boulevard, Suite 206 ❖ Palm Beach Gardens, FL 33410 Phone (561) 624 -3277 ❖ Fax (561) 624 -3278 ❖ www.REsOURCECENTERS.COM PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND Special Meeting of Tuesday February 7, 2012 Location: Council Chambers, Palm Beach Gardens City Hall 10500 North Military Trail Palm Beach Gardens, FL 33410 Time: 2 P.M. AGENDA 1. Call Meeting to Order 2. Approval of the revised September 30, 2011 Audited Financial Statements 3. Approval to Bind Coverage — 2012 Fiduciary Insurance Renewal 4. Other Business 5. Next Scheduled Meeting: Monday, March 12, 2012 at 9:00 A.M. 6. Adjourn PLEASE NOTE: Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact The Resource Centers, LLC no later than four days prior to the meeting. CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2011 AND 2010 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2010 AND 2009 TABLE OF CONTENTS Page No. MANAGEMENT'S DISCUSSION AND ANALYSIS 1 -4 INDEPENDENT AUDITOR'S REPORT 5 -6 FINANCIAL STATEMENTS • Statements of plan net assets 7 • Statements of changes in plan net assets 8 NOTES TO FINANCIAL STATEMENTS 9 -14 SUPPLEMENTAL INFORMATION • Schedules of administrative expenses 15 • Schedule of contributions from employer and other contributors 16 • Schedule of funding progress 17 COMPLIANCE REPORT • Report of Independent Certified Public Accountant on Internal Control over financial reporting and compliance and other matters based on an audit of financial statements performed in accordance with government auditing standards 18 -19 MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the annual financial report presents the Management Discussion and Analysis (MD &A) of the City of Palm Beach Gardens Firefighters' Pension Fund (Plan) financial performance. This analysis provides an overview of the financial activities and funding conditions for fiscal years ended September 30, 2011 and 2010. Please read it in conjunction with the Plan financial statements, which immediately follow. Financial highlights: The Plan net results from operations for fiscal year 2011 reflected the following financial activities: ➢ Total plan net assets were $37,906,384 which was 10% greater than 2010 total plan net assets. This increase was mainly due to current year contributions less current year net loss and deductions. ➢ Total contributions were $5,042,201 , which was 5% greater than the 2010 contributions. ➢ Total interest and dividend earnings were $1,092,488 , which was 45% greater than the 2010 earnings. ➢ Net investment loss was $541,262, which was $2,897,932 lower than the 2010 income. ➢ Total pension benefit payments were $871,805 which was 54% greater than 2010 Overview of the financial statements The financial section of this annual report consists of four parts: MD &A, the basic financial statements, notes to the financial statements and other required supplemental information. The financial statements provide both long -term and short-term information about the Plan's overall financial status. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of other supplemental information that further explains and supports the information in the financial statements. The Plan's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Under GAAP, revenues are recognized in the period in which they are earned, expenses are recognized in the period in which they are incurred and appreciation (depreciation) of assets is recognized in the Statement of Changes in Plan Net Assets. All assets and liabilities associated with the operation of the Plan are included in the Statement of Plan Net Assets. The Statement of Plan Net Assets reports net Plan assets and how they have changed. A net asset is the difference between the asset and any related liabilities. It is one measurement of the financial health or current position of the Plan. The increase in net assets during 2010 is one indicator of improving financial circumstances. The Plan was established by the City in accordance with a City ordinance and state statues to provide retirement, disability and death benefits for the firefighters of the City. 1 Financial hiiihliahts Employer and employee contributions for the year were $5,042,201 combined, which was 5% greater than the 2010 contributions. The amount of employer contributions varies from year to year and is actuarially determined. Member contributions were 6% of compensation. Statement of Plan Net Assets The following condensed comparative Statements of Plan Net Assets are a snap shot of account balances at the fiscal year end of the Plan. It reports the assets available for future payments to retirees and any current liabilities that are owed as of the financial statement date. The resulting net asset value, or assets minus liabilities, represents the value of assets held in trust for pension benefits. The Plan continues to be actuarially sound as determined by the actuary of the Plan. It is important to remember that retirement system funding is based on a long -term perspective and that temporary ups and downs in the market are to be expected. ➢ Net Plan Assets at September 30, 2011 were $37,906,384 , a 10% increase from Net Plan Assets at September 30, 2010. ➢ Total cash and short-term investments at September 30, 2011 were $871,633 a 76% decrease from the same assets at September 30, 2010. Statement of Changes in Plan Net Assets The Statement of Changes in Plan Net Assets presents the effect of pension plan transactions that occurred during the fiscal year. On the statement, additions to the Plan minus deductions from the Plan equal net increase or decrease in Plan Net Assets. The funding objective is to meet long -term obligations and fund all pension benefits. ➢ Revenues (additions to the plan net assets) for the Plan were $4,505,249 which was made up of employer and employee contributions of $5,042,201 minus a net investment loss of $(541,262) plus miscellaneous income of $4,310 . ➢ Expenses (deductions from the plan net assets) increased from $656,558 during 2010 to $945,533 in 2011. 2 2011 2010 % Change Cash & short term investments $ 871,633 $ 3,574,524 (76)% Receivables 1,207,750 184,017 556 Investments, at fair value 36,451,992 30,889,245 18 Prepaid expense 1,217 - 100 Total assets 38,532,592 34,647,786 11 Accounts payable 81,253 56,438 44 Other liabilities 544,955 244,680 123 Total liabilities 626,208 301,118 108 Plan net assets $37,906,384 $34,346,668 10 Statement of Changes in Plan Net Assets The Statement of Changes in Plan Net Assets presents the effect of pension plan transactions that occurred during the fiscal year. On the statement, additions to the Plan minus deductions from the Plan equal net increase or decrease in Plan Net Assets. The funding objective is to meet long -term obligations and fund all pension benefits. ➢ Revenues (additions to the plan net assets) for the Plan were $4,505,249 which was made up of employer and employee contributions of $5,042,201 minus a net investment loss of $(541,262) plus miscellaneous income of $4,310 . ➢ Expenses (deductions from the plan net assets) increased from $656,558 during 2010 to $945,533 in 2011. 2 Asset allocation The table below indicates the Plan investment policy target and actual asset allocations as of September 30, 2011: Type of Investment 2011 2010 % Change Total contributions $ 5,042,201 $ 4,803,312 5% Net investment (loss) income (541,262) 2,356,670 (123) Other income 4,310 3,295 31 Total additions 4,505,249 7,163,277 (37) Total deductions 945,533 656,558 44 Net increase 3,559,716 6,506,719 (45) Net assets — beginning 34,346,668 27,839,949 23 Net assets — ending 37,906,384 34,346,668 10 Asset allocation The table below indicates the Plan investment policy target and actual asset allocations as of September 30, 2011: Type of Investment Investment policy Actual allocation Equity 45 -65% 48% International 5 -25% 13% Fixed income 15 -25% 29% Real estate 5 -15% 8% Cash and cash equivalents 0 -15% 2% The investment guidelines provide for the appropriate diversification of the portfolio. Investments have been diversified to the extent practicable to control risk of loss resulting from over - concentration of a specific maturity, issuer, instrument, dealer or bank through which financial instruments are bought and sold. The Board recognizes that some risk must be assumed to achieve the Plan's long -term investment objectives. In establishing the risk tolerances, the Plan's ability to withstand short and intermediate term variability has been considered. However, the Plan's financial condition enables the Board to adopt long- term investment perspective. Investment activities Investment income is vital to the Plan for current and future financial stability. Therefore, the Trustees have a fiduciary responsibility to act prudently when making Plan investment decisions. To assist the Board of Trustees in this area, the Board retains investment managers who supervise and direct the investment of the assets. The Board also retains an investment monitor to evaluate and report on quarterly basis compliance by the investment managers with the investment policy of the Board and investment performance of the Plan. The investment policy statement was last amended on September 20, 2011. The Board and its investment consultant review portfolio performance in compliance with the investment policy statement quarterly. Performance is evaluated both individually by money manager style and collectively by investment type and for the aggregate portfolio. 9 Financial analysis summary The investment activities, for the fiscal year ended September 30, 2011 are a function of the underlying market, money managers' performance and the investment policy's asset allocation model. The Plan has a consistently implemented a high quality, conservative approach. Contactin1l the Plan's financial management This financial analysis is designed to provide the Board of Trustees, Plan participants and the marketplace credit analysts with an overview of the Plan's finances and the prudent exercise of the Board's oversight. If you have any questions regarding this report or you need additional financial information, please contact the administrator of the City of Palm Beach Gardens Firefighters' Pension Fund, The Resource Center, LLC, 4360 Northlake Boulevard, Suite 206, Palm Beach Gardens, FL 33410. F Steven I. Gordon Certified Public Accountant American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants INDEPENDENT AUDITOR'S REPORT Board of Trustees City of Palm Beach Gardens Firefighters' Pension Fund Palm Beach Gardens, Florida I have audited the accompanying statements of plan net assets of City of Palm Beach Gardens Firefighters' Pension Fund ( "Plan ") as of September 30, 2011 and 2010, and the related statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the Trustees. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits 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 of America. Those standards require that I plan and perform the audits 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 the Trustees, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the Plan's net assets as of September 30, 2011 and 2010, and the changes in the Plan's net assets for the years then ended in conformity with accounting principles generally accepted in the United States of America. My audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedules of administrative expenses are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The schedules have been subjected to the auditing procedures applied in the audits of the financial statements, and, in my opinion, are fairly stated in all material respect in relation to the basic financial statements as a whole. 4600 W. Commercial Blvd. Suite 5 Tamarac, FL 33319 Voice (954) 485 -5788 Fax (954) 485 -8988 In accordance with Government Auditing Standards, I have also issued my report dated November 30, 2011 on my consideration of City of Palm Beach Gardens Firefighters' Pension Fund internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts and grants. The purpose of that report is to describe the scope of my testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit. The supplemental schedules of funding progress and the schedule of contributions from the employer and other contributors, which show historical pension information, are not a required part of the basic financial statements, but are supplementary information required by the Government Accounting Standards Board. I have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the supplementary information. However, I did not audit the information and Teress on it. 19teven I. Gordon, CPA November 30, 2011 6 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND STATEMENTS OF PLAN NET ASSETS SEPTEMBER 30, 2011 AND 2010 ASSETS LIABILITIES Accounts payable DROP benefit liability Total liabilities 2011 2010 Cash and cash equivalents $ 871,633 $ 3,574,524 Investments, at fair value (Notes 2 and 3): Common stocks 17,791,459 14,222,217 Government securities 5,097,139 4,761,887 Corporate bonds 51639,441 4,412,613 Mutual funds 1,377,138 - International funds 3,371,437 5,223,393 Real estate funds 3,175,378 2,269,135 36,451,992 30,889,245 Total investments Receivables: Employees contributions 30,991 31,204 Employer contributions 936,374 - Chapter 175 tax contributions 94,734 42,854 Accrued investment income 145,651 109,959 1,207,750 184,017 Total receivables Prepaid expense 1,217 - Total assets $ 38,532,592 $ 34,647,786 LIABILITIES Accounts payable DROP benefit liability Total liabilities $ 81,253 544,955 $ 56,438 244,680 $ 626,208 $ 301,118 PLAN NET ASSETS HELD IN TRUST FOR PENSION BENEFITS Plan net assets held in trust for pension benefits $ 37,906,384T$ 34,346,668 READ THE NOTES TO THE FINANCIAL STATEMENTS 7 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND STATEMENTS OF CHANGES IN PLAN NET ASSETS FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 Additions: Contributions - Employer Florida Chapter 175 taxes Employees Total contributions Investment income - Net (depreciation) appreciation in fair value of investments Interest and dividend income Total investment (loss) income Less: Investment expenses Net investment (loss) income Miscellaneous income Total additions Deductions: Benefits paid Administrative expenses (See Schedule) Total deductions Increase in plan net assets Plan net assets held in trust for pension benefits: Beginning of year End of year 2011 $ 3,745,497 704,573 592,131 5,042,201 (1,402,535) 1,092,488 (31 0,047) 231,215 (541,262) 4,310 4,505,249 871,805 73,728 945,533 3,559,716 34,346,668 37,906,384 READ THE NOTES TO THE FINANCIAL STATEMENTS 8 2010 $ 3,550,238 658,617 594,457 4,803,312 1,771,610 754,800 2,526,410 169,740 2,356,670 3,295 7,163,277 567,897 88,661 656,558 6,506,719 27,839,949 34,346,668 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (1) DESCRIPTION OF THE PLAN: The following description of the City of Palm Beach Gardens Firefighters' Pension Fund ( "Plan ") provides only general information. Participants should refer to the City's ordinance for more complete information. . General - The Plan is a single - employer combined defined benefit and money purchase plan covering all eligible firefighters. The Plan was established by the City in accordance with a City ordinance and state statutes. . Eligibility - All firefighters as of the effective date, and all future new firefighters, become members of the Plan as a condition of employment. . Number of participants — The Plan had 114 active participants, 6 retired participants, 5 disabled participants and 2 participants that have terminated with vested benefits due. . Benefits - Defined Benefit portion: The Plan provides retirement, death and disability benefits. The benefit provisions are established and may be amended under the authority of City Ordinance. Normal retirement age is age 52 with 10 years of credited service or upon completion of 25 years of credited Service, regardless of age. The Plan provides a normal retirement benefit equal to 2.75% of the participants average final compensation, for each year of credited service, provided however, that the benefit shall not exceed 75% of average final compensation but shall, in any event, average at least 2% for each year of credited service. The monthly retirement benefit for members retiring on or after January 1, 2005 will be equal to 3% of average final compensation for each year of credited service, provided, however, that the benefit does not exceed 99% of average final compensation. Early retirement age is age 50 with 10 years of credited service. Early retirement benefit shall be determined by reducing the normal retirement benefit by 3% for each year by which the commencement of benefits precedes age 52. 0j CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (1) DESCRIPTION OF THE PLAN (CONTINUED): The death benefit for a member who was partially or fully vested, but had not attained at least age 50, is a payment to the member's beneficiary for 10 years, beginning on the date that the member would have attained age 52 for a normal retirement benefit or age 50 for an early retirement benefit, at the option of the beneficiary. The disability benefit for a service - incurred disability is 60% of the average final compensation. The disability benefit for a non - service incurred disability, for participants with 10 or more years of service only, is 2.5% of average final compensation multiplied by the credited service. Money purchase portion: Upon death, disability or termination as described above, the participant is also entitled to the value of their individual account in the money purchase portion of the plan. Funding - All participants are required to contribute 6.00% of pretax earnings. Pursuant to Florida law, the City of Palm Beach Gardens is ultimately responsible for the actuarially soundness of the Plan. Therefore, each year, the City of Palm Beach Gardens must contribute an amount determined by the Trustees in conjunction with the Plan's actuary to be sufficient, along with the employee's contribution, to fund the defined benefits under the Plan. Pursuant to Chapter 175, Florida Statutes, the City imposes a 1.85% tax on fire insurance premiums paid to insure real or personal property within its corporate limits. The proceeds of this tax are contributed to the Plan and allocated to the individual participants' accounts to fund the money purchase portion of the benefits. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investment valuation and income recognition - Investments are reported at fair value (see Note 3). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Purchases and sales of securities are recorded on a trade -date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex- dividend date. Net appreciation (depreciation) includes the Plan's gains and losses on investments bought and sold as well as held during the year. 10 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): . Income taxes - The Plan is exempt from federal income taxes under the Internal Revenue Code and, accordingly, no provision for federal income taxes has been made. . Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. . Accounting principles - The Plan applies all GASB pronouncements as well as FASB pronouncements issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. (3) INVESTMENTS: Investments at fair value as determined by quoted market price During the year ended September 30, 2011 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $1,402,535 (reported as Net deprecation in fair value of investments in the Statements of Changes in Plan Net Assets) as follows: Common Stock Government Securities Real Estate Funds International Funds 11 $(1,245,653) 188,562 274,482 (281,199) 2011 2010 Common Stocks $17,791,459 $14,222,217 Government Securities 5,097,139 4,761,887 Corporate Bonds 5,639,441 4,412,613 Mutual Funds 1,377,138 - International Funds 3,371,437 5,223,393 Real Estate Funds 3,175,378 2,269,135 Total Investments $36,451,992 $30,889,245 During the year ended September 30, 2011 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $1,402,535 (reported as Net deprecation in fair value of investments in the Statements of Changes in Plan Net Assets) as follows: Common Stock Government Securities Real Estate Funds International Funds 11 $(1,245,653) 188,562 274,482 (281,199) CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (3) INVESTMENTS (CONTINUED): Corporate Bonds (338,727 140 535 The term "interest rate risk" refers to the portfolio's exposure to fair value losses arising from increasing interest rates. Interest rate risk disclosures are required for all debt investments, as well as investments in mutual funds, external investment pools and other pooled investments that do not meet the definition of a 20-like pool. The Board of Trustees determines the Plan's investment policy. The policy has been designed by the Board to maximize the Plan's asset value, while assuming a risk that is consistent with the Board's risk tolerance. As is prudent, the Board has adopted a policy to diversify investment risk among several institutionally acceptable asset classes including bonds, debentures and other corporate obligations, equity securities and domestic real estate. The Plan's investment policy does not use limits on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Plan's investments in government securities and corporate bonds had maturities as follows: State law limits investments in corporate bonds and commercial paper to the top three ratings listed by nationally recognized statistical rating organizations. The Plan's corporate bonds and money market funds were rated by Moody's Investors Services as follows: Rating Investment Maturities Aaa $1,414,029 Investment type Fair value Less than 1 1 -5 6 -10 More than 10 Corporate bonds $ 5,639,441 $ 15,284 $817,482 $4,151,683 $ 654,992 US Treasuries 803,258 - - 724,723 78,535 US Agencies 4,293,881 - - 185,774 4,108,107 Mutual Funds 1,377,138 583,356 531,989 197,895 63,898 Totals $12,113,718 $598,640 $1,349,471 $5,260,075 $4,905,532 State law limits investments in corporate bonds and commercial paper to the top three ratings listed by nationally recognized statistical rating organizations. The Plan's corporate bonds and money market funds were rated by Moody's Investors Services as follows: Rating Fair Value Aaa $1,414,029 Aa 27,267 A 599,606 Aa2 459,033 Aa3 631,951 Al 386,695 A2 732,416 A3 1,464,511 Bal 5,535 12 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (3) INVESTMENTS (CONTINUED): Ba2 5,377 Baal 890,800 Baal 483,918 Baa3 193,653 BBB 275,152 BB 122,841 B 35,943 Government securities 4,384,991 Total $12,113 ,718 "Concentration of credit risk" is the risk inherent with investing a significant amount of Plan assets in particular issuers. The Plan limits investments that may be invested in any one issuer to no more than 5% of Plan Net Assets, other than those issued by the US Government or its Agencies. More than 5% of the Plan's plan net assets are invested in debt securities issued by the United States Agencies. This investment represented 13.45% of Plan Net Assets. "Custodial credit risk" is the risk that in the event of the failure of the counterparty, the Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Consistent with the Plan's investment policy, the investments are held by the Plan's custodial bank and registered in the Plan's name. "Foreign currency risk" is the risk that fluctuations in currency exchange rate that may affect transactions conducted in currencies other than US Dollars as well as the carrying value of foreign investments. The Plan's exposure to foreign currency risk derives mainly from its investments in international equity funds and international fixed income funds. The Plan participates in international equity funds and international fixed income funds but does not own any foreign individual securities. The Plan's exposure to foreign currency risk related to foreign equity funds and international fixed income funds are as follows: RBC International Fund $1,859,887 Manning & Napier Overseas Fund 1,511,550 Templeton Global Bond 1,377,138 $4.748.575 The investment policy limits the foreign investments to no more than 25% of the Plan's investment balance. As of year -end, the foreign investments were 13% of total investments. 13 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (4) ACTUARIAL VALUATION: The most recent actuarial valuation was done as of October 1, 2010. At that date the actuaries determined that the unfunded accrued actuarial liability for benefits was $18,097,678 while the actuarial value of the assets available to pay benefits was $31,110,381. They further determined that the required City contribution for the year ended September 30, 2011 was $3,745,497, which was contributed in full. Additional information regarding major assumptions used by the actuaries and funding progress is included in the attached supplemental information. (5) RISKS AND UNCERTAINTIES: Plan contributions are made and the actuarial present value of accumulated plan benefits are reported based on certain assumptions pertaining to interest rates, inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least 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 statement of net assets available for benefits. (6) SUBSEQUENT EVENTS: In May 2009, the Financial Accounting Standards Board (FASB) issued a new accounting standard which established general accounting standards and disclosure for subsequent events. In accordance with this standard, we evaluated subsequent events through December 5, 2011, after the date that the financial statements were available to be issued. 14 CITY OF PALM BEACH GARDENS' FIREFIGHTERS PENSION FUND SCHEDULES OF ADMINISTRATIVE EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 READ THE NOTES TO THE FINANCIAL STATEMENTS 15 2011 2010 Accounting $ 4,355 $ 6,245 Actuarial fees 11,350 14,950 Administrative fees 20,319 20,154 Conferences 3,090 6,585 Insurance 6,664 6,629 Legal fees 23,968 31,588 Miscellaneous 3,982 2,510 Total expenses $ 73,728 $ 88,661 READ THE NOTES TO THE FINANCIAL STATEMENTS 15 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND SCHEDULE OF CONTRIBUTIONS FROM EMPLOYER AND OTHER CONTRIBUTORS AS OF SEPTEMBER 30, 2010 (UNAUDITED) Year Ended September 30 Annual Required Contribution Actual Contribution Percentage Contributed 2010 $3,550,238 $3,550,238 100.00% 2009 3,180,731 3,180,731 100.00 2008 3,055,991 3,055,991 100.00 2007 2,247,828 2,247,828 100.00 2006 1,542,934 1,542,934 100.00 2005 1,188,002 1,188,002 100.00 2004 739,310 739,310 100.00 2003 731,241 731,241 100.00 2002 594,562 594,562 100.00 2001 423,628 423,628 100.00 2000 227,154 227,154 100.00 1999 200,759 200,759 100.00 The information presented in the required supplemental information was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation is as follows: Valuation date October 1, 2010 Mortality rates RP 2000 Mortality Table Actuarial cost method — Funding Projected Unit Credit Actuarial Cost Method Remaining amortization period 27 years Actuarial assumptions: Investment rate of return 8.25% Projected salary increases 4.50% Postretirement benefit increases None Inflation 4.50% 16 O a A w W W a W V O O N O M W H a W 0 A W H �I z 'TJ O O U O 0 cd Cd vi O O U U bA cd .S_; U I 0 oo t� 00 V) - rn �,c O d N 00 � O\ a p cd Cl r-- 00 [-- N l— M 110 N l— l— O\ M � A kn O d a; N N M N ZT d- ^ O O_ cr C C C� 00 �\16 d' d M M O 6R U � a 0 ^ N ['- oo O� oo ,zt rMi M 41 \,D M .c 00 o0 - -- C1 4 ,u \O kn Vn kn d' M M d' 00 rl- rl- f-� 00 Vn 00 N N 00 00 M O to - O� l� � rl- 01 O V) N �10 V•) [- ^ O 0o C �n 00 N— N 00 N N M ^ Cb o0 - l- a \,O vl •- Ln -- l- -- M -- O -- �c •� •� -, bA U O Ln O N 't 00 V) - c�j oA N M rf OO o0 O U Q Q O,� zt a\ m O\ 00 .-a l'- N \O 1,0 Ln �Cd - U a t— 00 'T -- \O M It Ln O M -- 00 O � C,- d 00 Ln •-a � M N O t � - [- C \O N 00 M O 00 [-- kn In � M � O U U ^ O O\ o0 [l Ln M N -- O 0 0 0 0 0 0 0 O� � •y � � � � � � O O O O O O � O O O O O Cd 'TJ O O U O 0 cd Cd vi O O U U bA cd .S_; U I Steven I. Gordon Certified Public Accountant American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Trustees City of Palm Beach Gardens Firefighters' Pension Fund Palm Beach Gardens, Florida I have audited the financial statements of City of Palm Beach Gardens Firefighters' Pension Fund, as of and for the year ended September 30, 2011, and have issued my report thereon dated November 30, 2011. I conducted my audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether City of Palm Beach Gardens Firefighters' Pension Fund financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws and regulations, 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 my audit and, accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing my audit, I considered City of Palm Beach Gardens Firefighters' Pension Fund internal control over financial reporting in order to determine my auditing procedures for the purpose of expressing my opinion on the financial statements and not to provide assurance on the internal control over financial reporting. My consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. 4600 W. Commercial Blvd. Suite 5 Tamarac, FL 33319 Voice (954) 485 -5788 Fax (954) 485 -8988 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 the administrator in the normal course of performing its assigned functions. I noted no matter involving the internal control over financial reporting and its operation that I consider to be material weaknesses. Steven I. Gordon Certified Public Accountant November 30, 2011 19 From: Sandie Kyser To: Audrey Ross Subject: Palm Beach Gardens Firefighters Pension Fund, Fiduciary Liability Policy # UFL 0003326 00 - Renewal Quote for 3/10/2012 Date: Monday, January 23, 2012 10:37:41 AM Attachments: RenewalOuote.odf Hi Audrey: Attached you will find a renewal Fiduciary Liability Insurance Quote for the above referenced Fund, from Ullico Insurance Group with Hudson Insurance Company. The total annual premium for the 2012 -2013 term is $6,327.13, which is $17.56 lower than expiring premium. The coverage /limits are the same as expiring. If you would like to bind coverage, please confirm via email, or fax. If you have any questions, please don't hesitate to call. As always, we at United Members appreciate your business. Sincerely, Sandie Kyser, Account Executive United Members Insurance Phone: 813 - 265 -2300, ext. 8 Fax: 813 - 265 -2323 Email: sandie(@umi91.com ULLICO LABOR PROTECTION GROUP a voluntary membership organization operating pursuant to the Liability Risk Retention Act of 1986 and whose principal office is: 4323 Warren Street, NW, Washington, DC 20016 -2437 Date Issued: Quotation No: Issued by: Insurance Representative: Address: Trust(s) or Plan(s): FIDUCIARY LIABILITY INSURANCE PREMIUM QUOTATION 01/19/2012 QT0000007453 Hudson Insurance Company 17 State Street New York, NY 10004 United Members Insurance, Inc. 6826 Linebaugh Avenue Tampa, FL 33625 Underwriter: Ann Hughes Renewal: Y Palm Beach Gardens Firefighters Pension Fund Address: 4360 Northlake Blvd Suite 206 Palm Beach, FL 33410 Policy Period: 03/10/2012 to 03/10/2013 Pending or Prior Proceeding Date: 03/10/2006 Continuity Date: NONE, FULL PRIOR ACTS COVERAGE Limits of Liability: (a) $1,000,000 AGGREGATE LIMIT: aggregate limit of liability for all loss (b) $50,000 VOLUNTARY COMPLIANCE PROGRAM EXPENDITURE SUB - LIMIT: aggregate limit of liability for all Voluntary Compliance Program Expenditures (included within and not in addition to the maximum aggregate limit of liability set forth in ITEM 4(a) above) (c) $50,000 502(c) CIVIL PENALTIES SUB - LIMIT: aggregate limit of liability for all loss in the form of civil penalties or excise tax imposed pursuant to Section 502(c) of ERISA and the Pension Protection Act of 2006 (included within and not in addition to the maximum aggregate limit of liability set forth in ITEM 4(a) above) (d) $1,000,000 HIPAA FINES AND PENALTIES SUB - LIMIT: aggregate limit of liability for all loss in the form of civil fines and penalties imposed pursuant to HIPAA (included within and not in addition to the maximum aggregate limit of liability set forth in ITEM 4(a) (e) $250,000 TRUSTEE CLAIM EXPENSES SUB - LIMIT: aggregate limit of liability for all Claim Expenses in connection with Claims solely alleging Wrongful Acts as defined in Section II.N.4 (included within and not in addition to the maximum aggregate limit of liability set forth in ITEM 4(a) above) Deductible Amount: $5,000 Each Claim Coverage: Hudson Insurance Company Fiduciary Liability Insurance Claims -Made Policy Form (LFL- 1004), Claims Expenses Inclusive Premium: (a) $6,125.00 Basic Premium (b) Waiver of Recourse Premium (not to be paid by plan) (c) $202.13 Tax/Other (d) $6,327.13 Total (e) $6,125.00 Additional Premium for Extended Reporting Period, subject to Section IV.B. Conditions /Coverage Subject to: Nothing else required The following endorsements will attach to the policy: 1. HFL (08/07) Florida Amendatory Endorsement 2. HAE (02/04) Manuscript Endorsement - Waiver of Recourse This quotation is valid for a period of thirty (30) days from the Issue Date shown above unless amended or withdrawn by Hudson Insurance Company, with or without cause, prior to its acceptance and binding, and is subject to the terms and conditions of the policy (ies) to be issued. If the information supplied by the trust or plan in the application changes between the date of the application for this insurance and the effective date of the insurance or the time when the policy is bound (whichever is later), the trust or plan must immediately notes Hudson Insurance Company in writing of such changes and Hudson may withdraw or amend any outstanding quotations based upon such changes. CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2011 AND 2010 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND AUDITED FINANCIAL STATEMENTS SEPTEMBER 30, 2011 AND 2010 TABLE OF CONTENTS Page No. MANAGEMENT'S DISCUSSION AND ANALYSIS 1 -4 INDEPENDENT AUDITOR'S REPORT 5 -6 FINANCIAL STATEMENTS • Statements of plan net assets 7 • Statements of changes in plan net assets g NOTES TO FINANCIAL STATEMENTS 9 -14 SUPPLEMENTAL INFORMATION • Schedules of administrative expenses 15 • Schedule of contributions from employer and other contributors 16 • Schedule of funding progress 17 COMPLIANCE REPORT • Report of Independent Certified Public Accountant on Internal Control over financial reporting and compliance and other matters based on an audit of financial statements performed in accordance with government auditing standards 18 -19 MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the annual financial report presents the Management Discussion and Analysis (MD &A) of the City of Palm Beach Gardens Firefighters' Pension Fund (Plan) financial performance. This analysis provides an overview of the financial activities and funding conditions for fiscal years ended September 30, 2011 and 2010. Please read it in conjunction with the Plan financial statements, which immediately follow. Financial highlights: The Plan net results from operations for fiscal year 2011 reflected the following financial activities: ➢ Total plan net assets were $37,906,384 which was 10% greater than 2010 total plan net assets. This increase was mainly due to current year contributions less current year net loss and deductions. ➢ Total contributions were $5,042,201 , which was 5% greater than the 2010 contributions. ➢ Total interest and dividend earnings were $1,092,488 , which was 45% greater than the 2010 earnings. ➢ Net investment loss was $541,262, which was $2,897,932 lower than the 2010 income. ➢ Total pension benefit payments were $871,805 which was 54% greater than 2010 Overview of the financial statements The financial section of this annual report consists of four parts: MD &A, the basic financial statements, notes to the financial statements and other required supplemental information. The financial statements provide both long -term and short-term information about the Plan's overall financial status. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of other supplemental information that further explains and supports the information in the financial statements. The Plan's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Under GAAP, revenues are recognized in the period in which they are earned, expenses are recognized in the period in which they are incurred and appreciation (depreciation) of assets is recognized in the Statement of Changes in Plan Net Assets. All assets and liabilities associated with the operation of the Plan are included in the Statement of Plan Net Assets. The Statement of Plan Net Assets reports net Plan assets and how they have changed. A net asset is the difference between the asset and any related liabilities. It is one measurement of the financial health or current position of the Plan. The increase in net assets during 2010 is one indicator of improving financial circumstances. The Plan was established by the City in accordance with a City ordinance and state statues to provide retirement, disability and death benefits for the firefighters of the City. Financial highlights Employer and employee contributions for the year were $5,042,201 combined, which was 5% greater than the 2010 contributions. The amount of employer contributions varies from year to year and is actuarially determined. Member contributions were 6% of compensation. Statement of Plan Net Assets The following condensed comparative Statements of Plan Net Assets are a snap shot of account balances at the fiscal year end of the Plan. It reports the assets available for future payments to retirees and any current liabilities that are owed as of the financial statement date. The resulting net asset value, or assets minus liabilities, represents the value of assets held in trust for pension benefits. The Plan continues to be actuarially sound as determined by the actuary of the Plan. It is important to remember that retirement system funding is based on a long -term perspective and that temporary ups and downs in the market are to be expected. ➢ Net Plan Assets at September 30, 2011 were $37,906,384 , a 10% increase from Net Plan Assets at September 30, 2010. ➢ Total cash and short-term investments at September 30, 2011 were $871,633 a 76% decrease from the same assets at September 30, 2010. Statement of Chan1jes in Plan Net Assets The Statement of Changes in Plan Net Assets presents the effect of pension plan transactions that occurred during the fiscal year. On the statement, additions to the Plan minus deductions from the Plan equal net increase or decrease in Plan Net Assets. The funding objective is to meet long -term obligations and fund all pension benefits. ➢ Revenues (additions to the plan net assets) for the Plan were $4,505,249 which was made up of employer and employee contributions of $5,042,201 minus a net investment loss of $(541,262) plus miscellaneous income of $4,310 . ➢ Expenses (deductions from the plan net assets) increased from $656,558 during 2010 to $945,533 in 2011. FA 2011 2010 % Change Cash & short term investments $ 871,633 $ 3,574,524 (76)% Receivables 1,207,750 184,017 556 Investments, at fair value 36,451,992 30,889,245 18 Prepaid expense 1,217 - 100 Total assets 38,532,592 34,647,786 11 Accounts payable 81,253 56,438 44 Other liabilities 544,955 244,680 123 Total liabilities 626,208 301,118 108 Plan net assets $37,906,384 $34,346,668 10 Statement of Chan1jes in Plan Net Assets The Statement of Changes in Plan Net Assets presents the effect of pension plan transactions that occurred during the fiscal year. On the statement, additions to the Plan minus deductions from the Plan equal net increase or decrease in Plan Net Assets. The funding objective is to meet long -term obligations and fund all pension benefits. ➢ Revenues (additions to the plan net assets) for the Plan were $4,505,249 which was made up of employer and employee contributions of $5,042,201 minus a net investment loss of $(541,262) plus miscellaneous income of $4,310 . ➢ Expenses (deductions from the plan net assets) increased from $656,558 during 2010 to $945,533 in 2011. FA Asset allocation The table below indicates the Plan investment policy target and actual asset allocations as of September 30, 2011: Type of Investment 2011 2010 % Change Total contributions $ 5,042,201 $ 4,803,312 5% Net investment (loss) income (541,262) 2,356,670 (123) Other income 4,310 3,295 31 Total additions 4,505,249 7,163,277 (37) Total deductions 945,533 656,558 44 Net increase 3,559,716 6,506,719 (45) Net assets — beginning 34,346,668 27,839,949 23 Net assets — ending 1 37,906,'3841 34,346,668 10 Asset allocation The table below indicates the Plan investment policy target and actual asset allocations as of September 30, 2011: Type of Investment Investment policy Actual allocation Equity 45 -65% 48% International 5 -25% 13% Fixed income 15 -25% 29% Real estate 5 -15% 8% Cash and cash equivalents 0 -15% 2% The investment guidelines provide for the appropriate diversification of the portfolio. Investments have been diversified to the extent practicable to control risk of loss resulting from over - concentration of a specific maturity, issuer, instrument, dealer or bank through which financial instruments are bought and sold. The Board recognizes that some risk must be assumed to achieve the Plan's long -term investment objectives. In establishing the risk tolerances, the Plan's ability to withstand short and intermediate term variability has been considered. However, the Plan's financial condition enables the Board to adopt long- term investment perspective. Investment activities Investment income is vital to the Plan for current and future financial stability. Therefore, the Trustees have a fiduciary responsibility to act prudently when making Plan investment decisions. To assist the Board of Trustees in this area, the Board retains investment managers who supervise and direct the investment of the assets. The Board also retains an investment monitor to evaluate and report on quarterly basis compliance by the investment managers with the investment policy of the Board and investment performance of the Plan. The investment policy statement was last amended on September 20, 2011. The Board and its investment consultant review portfolio performance in compliance with the investment policy statement quarterly. Performance is evaluated both individually by money manager style and collectively by investment type and for the aggregate portfolio. 3 Financial analvsis summa The investment activities, for the fiscal year ended September 30, 2011 are a function of the underlying market, money managers' performance and the investment policy's asset allocation model. The Plan has a consistently implemented a high quality, conservative approach. Contacting the Plan's financial management This financial analysis is designed to provide the Board of Trustees, Plan participants and the marketplace credit analysts with an overview of the Plan's finances and the prudent exercise of the Board's oversight. If you have any questions regarding this report or you need additional financial information, please contact the administrator of the City of Palm Beach Gardens Firefighters' Pension Fund, The Resource Center, LLC, 4360 Northlake Boulevard, Suite 206, Palm Beach Gardens, FL 33410. Li Steven I. Gordon Certified Public Accountant American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants INDEPENDENT AUDITOR'S REPORT Board of Trustees City of Palm Beach Gardens Firefighters' Pension Fund Palm Beach Gardens, Florida I have audited the accompanying statements of plan net assets of City of Palm Beach Gardens Firefighters' Pension Fund ( "Plan ") as of September 30, 2011 and 2010, and the related statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the Trustees. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits 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 of America. Those standards require that I plan and perform the audits 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 the Trustees, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the Plan's net assets as of September 30, 2011 and 2010, and the changes in the Plan's net assets for the years then ended in conformity with accounting principles generally accepted in the United States of America. My audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary schedules of administrative expenses are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The schedules have been subjected to the auditing procedures applied in the audits of the financial statements, and, in my opinion, are fairly stated in all material respect in relation to the basic financial statements as a whole. 4600 W. Commercial Blvd. Suite 5 Tamarac, FL 33319 Voice (954) 485 -5788 Fax (954) 485 -8988 In accordance with Government Auditing Standards, I have also issued my report dated November 30, 2011 on my consideration of City of Palm Beach Gardens Firefighters' Pension Fund internal control over financial reporting and on my tests of its compliance with certain provisions of laws, regulations, contracts and grants. The purpose of that report is to describe the scope of my testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of my audit. The supplemental schedules of funding progress and the schedule of contributions from the employer and other contributors, which show historical pension information, are not a required part of the basic financial statements, but are supplementary information required by the Government Accounting Standards Board. I have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the supplementary information. However, I did not audit the information and Teress n opinion on it. Steven I. Gordon, CPA November 30, 2011 11 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND STATEMENTS OF PLAN NET ASSETS SEPTEMBER 30, 2011 AND 2010 ASSETS LIABILITIES Accounts payable DROP benefit liability Total liabilities 2011 2010 Cash and cash equivalents $ 871,633 $ 3,574,524 Investments, at fair value (Notes 2 and 3): Common stocks 17,791,459 14,222,217 Government securities 5,097,139 4,761,887 Corporate bonds 5,639,441 4,412,613 Mutual funds 1,377,138 - International funds 3,371,437 5,223,393 Real estate funds 3,175,378 2,269,135 36,451,992 30,889,245 Total investments Receivables: Employees contributions 30,991 31,204 Employer contributions 936,374 - Chapter 175 tax contributions 94,734 42,854 Accrued investment income 145,651 109,959 1,207,750 184,017 Total receivables Prepaid expense 1,217 - Total assets $ 38,532,592 $ 34,647,786 LIABILITIES Accounts payable DROP benefit liability Total liabilities $ 81,253 544,955 $ 56,438 244,680 $ 626,208 $ 301,118 PLAN NET ASSETS HELD IN TRUST FOR PENSION BENEFITS Plan net assets held in trust for pension benefits 17 37,906,384 $ 34,346,668 READ THE NOTES TO THE FINANCIAL STATEMENTS 7 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND STATEMENTS OF CHANGES IN PLAN NET ASSETS FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 READ THE NOTES TO THE FINANCIAL STATEMENTS 8 2011 2010 Additions: Contributions - Employer $ 3,745,497 $ 3,550,238 Florida Chapter 175 taxes Employees 704,573 592,131 658,617 594,457 5,042,201 4,803,312 Total contributions Investment income - Net (depreciation) appreciation in fair value of investments (1,402,535) 1,771,610 Interest and dividend income 1,092,488 754,800 (310,047) 2,526,410 Total investment (loss) income Less: Investment expenses 231,215 169,740 (541,262) 2,356,670 Net investment (loss) income Miscellaneous income 4,310 3,295 4,505,249 7,163,277 Total additions Deductions: Benefits paid Administrative expenses (See Schedule) 871,805 73,728 567,897 88,661 945,533 656,558 Total deductions 3,559,716 6,506,719 Increase in plan net assets Plan net assets held in trust for pension benefits: Beginning of year 34,346,668 27,839,949 End of year $ 37,906,384 $ 34,346,668 READ THE NOTES TO THE FINANCIAL STATEMENTS 8 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (1) DESCRIPTION OF THE PLAN: The following description of the City of Palm Beach Gardens Firefighters' Pension Fund ( "Plan ") provides only general information. Participants should refer to the City's ordinance for more complete information. . General - The Plan is a single- employer combined defined benefit and money purchase plan covering all eligible firefighters. The Plan was established by the City in accordance with a City ordinance and state statutes. Eligibility - All firefighters as of the effective date, and all future new firefighters, become members of the Plan as a condition of employment. Number of participants — The Plan had 114 active participants, 6 retired participants, 5 disabled participants and 2 participants that have terminated with vested benefits due. . Benefits - Defined Benefit portion: The Plan provides retirement, death and disability benefits. The benefit provisions are established and may be amended under the authority of City Ordinance. Normal retirement age is age 52 with 10 years of credited service or upon completion of 25 years of credited Service, regardless of age. The Plan provides a normal retirement benefit equal to 2.75% of the participants average final compensation, for each year of credited service, provided however, that the benefit shall not exceed 75% of average final compensation but shall, in any event, average at least 2% for each year of credited service. The monthly retirement benefit for members retiring on or after January 1, 2005 will be equal to 3% of average final compensation for each year of credited service, provided, however, that the benefit does not exceed 99% of average final compensation. Early retirement age is age 50 with 10 years of credited service. Early retirement benefit shall be determined by reducing the normal retirement benefit by 3% for each year by which the commencement of benefits precedes age 52. I CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (1) DESCRIPTION OF THE PLAN (CONTINUED): The death benefit for a member who was partially or fully vested, but had not attained at least age 50, is a payment to the member's beneficiary for 10 years, beginning on the date that the member would have attained age 52 for a normal retirement benefit or age 50 for an early retirement benefit, at the option of the beneficiary. The disability benefit for a service - incurred disability is 60% of the average final compensation. The disability benefit for a non - service incurred disability, for participants with 10 or more years of service only, is 2.5% of average final compensation multiplied by the credited service. Money purchase portion: Upon death, disability or termination as described above, the participant is also entitled to the value of their individual account in the money purchase portion of the plan. Funding - All participants are required to contribute 6.00% of pretax earnings. Pursuant to Florida law, the City of Palm Beach Gardens is ultimately responsible for the actuarially soundness of the Plan. Therefore, each year, the City of Palm Beach Gardens must contribute an amount determined by the Trustees in conjunction with the Plan's actuary to be sufficient, along with the employee's contribution, to fund the defined benefits under the Plan. Pursuant to Chapter 175, Florida Statutes, the City imposes a 1.85% tax on fire insurance premiums paid to insure real or personal property within its corporate limits. The proceeds of this tax are contributed to the Plan and allocated to the individual participants' accounts to fund the money purchase portion of the benefits. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investment valuation and income recognition - Investments are reported at fair value (see Note 3). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Purchases and sales of securities are recorded on a trade -date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex- dividend date. Net appreciation (depreciation) includes the Plan's gains and losses on investments bought and sold as well as held during the year. 10 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Income taxes - The Plan is exempt from federal income taxes under the Internal Revenue Code and, accordingly, no provision for federal income taxes has been made. . Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. . Accounting principles - The Plan applies all GASB pronouncements as well as FASB pronouncements issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. (3) INVESTMENTS: Investments at fair value as determined by quoted market price During the year ended September 30, 2011 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $1,402,535 (reported as Net deprecation in fair value of investments in the Statements of Changes in Plan Net Assets) as follows: Common Stock Government Securities Real Estate Funds International Funds 11 $(1,245,653) 188,562 274,482 (281,199) 2011 2010 Common Stocks $17,791,459 $14,222,217 Government Securities 5,097,139 4,761,887 Corporate Bonds 5,639,441 4,412,613 Mutual Funds 1,377,138 - International Funds 3,371,437 5,223,393 Real Estate Funds 3, 175,378 2,269,135 Total Investments $36,451.992 $30,889,245 During the year ended September 30, 2011 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value by $1,402,535 (reported as Net deprecation in fair value of investments in the Statements of Changes in Plan Net Assets) as follows: Common Stock Government Securities Real Estate Funds International Funds 11 $(1,245,653) 188,562 274,482 (281,199) CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (3) INVESTMENTS (CONTINUED): Corporate Bonds (338,727 1 402 535 The term "interest rate risk" refers to the portfolio's exposure to fair value losses arising from increasing interest rates. Interest rate risk disclosures are required for all debt investments, as well as investments in mutual funds, external investment pools and other pooled investments that do not meet the definition of a 2a7 -like pool. The Board of Trustees determines the Plan's investment policy. The policy has been designed by the Board to maximize the Plan's asset value, while assuming a risk that is consistent with the Board's risk tolerance. As is prudent, the Board has adopted a policy to diversify investment risk among several institutionally acceptable asset classes including bonds, debentures and other corporate obligations, equity securities and domestic real estate. The Plan's investment policy does not use limits on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Plan's investments in government securities and corporate bonds had maturities as follows: State law limits investments in corporate bonds and commercial paper to the top three ratings listed by nationally recognized statistical rating organizations. The Plan's corporate bonds and money market funds were rated by Moody's Investors Services as follows: Rating Investment Maturities Aaa $1,414,029 Investment type Fair value Less than 1 1 -5 6 -10 More than 10 Corporate bonds $ 5,639,441 $ 15,284 $817,482 $4,151,683 $ 654,992 US Treasuries 803,258 - - 724,723 78,535 US Agencies 4,293,881 - - 185,774 4,108,107 Mutual Funds 1,377,138 583,356 531,989 197,895 63,898 Totals $12,113,718 $598,640 $1,349,471 $5,260,075 $4,905,532 State law limits investments in corporate bonds and commercial paper to the top three ratings listed by nationally recognized statistical rating organizations. The Plan's corporate bonds and money market funds were rated by Moody's Investors Services as follows: Rating Fair Value Aaa $1,414,029 Aa 27,267 A 599,606 Aa2 459,033 Aa3 631,951 Al 386,695 A2 732,416 A3 1,464,511 Bal 5,535 12 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (3) INVESTMENTS (CONTINUED): Ba2 5,377 Baal 890,800 Baal 483,918 Baa3 193,653 BBB 275,152 BB 122,841 B 35,943 Government securities 4,384,991 Total $12,113.718 "Concentration of credit risk" is the risk inherent with investing a significant amount of Plan assets in particular issuers. The Plan limits investments that may be invested in any one issuer to no more than 5% of Plan Net Assets, other than those issued by the US Government or its Agencies. More than 5% of the Plan's plan net assets are invested in debt securities issued by the United States Agencies. This investment represented 13.45% of Plan Net Assets. "Custodial credit risk" is the risk that in the event of the failure of the counterparty, the Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Consistent with the Plan's investment policy, the investments are held by the Plan's custodial bank and registered in the Plan's name. "Foreign currency risk" is the risk that fluctuations in currency exchange rate that may affect transactions conducted in currencies other than US Dollars as well as the carrying value of foreign investments. The Plan's exposure to foreign currency risk derives mainly from its investments in international equity funds and international fixed income funds. The Plan participates in international equity funds and international fixed income funds but does not own any foreign individual securities. The Plan's exposure to foreign currency risk related to foreign equity funds and international fixed income funds are as follows: RBC International Fund $1,859,887 Manning & Napier Overseas Fund 1,511,550 Templeton Global Bond 1,377,138 $4,748,575 The investment policy limits the foreign investments to no more than 25% of the Plan's investment balance. As of year -end, the foreign investments were 13% of total investments. 13 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 (4) ACTUARIAL VALUATION: The most recent actuarial valuation was done as of October 1, 2010. At that date the actuaries determined that the unfunded accrued actuarial liability for benefits was $18,097,678 while the actuarial value of the assets available to pay benefits was $31,110,381. They further determined that the required City contribution for the year ended September 30, 2011 was $3,745,497, which was contributed in full. Additional information regarding major assumptions used by the actuaries and funding progress is included in the attached supplemental information. (5) RISKS AND UNCERTAINTIES: Plan contributions are made and the actuarial present value of accumulated plan benefits are reported based on certain assumptions pertaining to interest rates, inflation rates and employee demographics, all of which are subject to change. Due to uncertainties inherent in the estimations and assumptions process, it is at least reasonably possible that changes in these estimates and assumptions in the near term would be material to the financial statements. The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least 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 statement of net assets available for benefits. (6) SUBSEQUENT EVENTS: In May 2009, the Financial Accounting Standards Board (FASB) issued a new accounting standard which established general accounting standards and disclosure for subsequent events. In accordance with this standard, we evaluated subsequent events through December 5, 2011, after the date that the financial statements were available to be issued. 14 CITY OF PALM BEACH GARDENS' FIREFIGHTERS PENSION FUND SCHEDULES OF ADMINISTRATIVE EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2011 AND 2010 READ THE NOTES TO THE FINANCIAL STATEMENTS 15 2011 2010 Accounting $ 4,355 $ 6,245 Actuarial fees 11,350 14,950 Administrative fees 20,319 20,154 Conferences 3,090 6,585 Insurance 6,664 6,629 Legal fees 23,968 31,588 Miscellaneous 3,982 2,510 Total expenses $ 73,728 1 $ 88,661 READ THE NOTES TO THE FINANCIAL STATEMENTS 15 CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND SCHEDULE OF CONTRIBUTIONS FROM EMPLOYER AND OTHER CONTRIBUTORS AS OF SEPTEMBER 30, 2010 (UNAUDITED) Year Ended September 30 Annual Required Contribution Actual Contribution Percentage Contributed 2010 $3,550,238 $3,550,238 100.00% 2009 3,180,731 3,180,731 100.00 2008 3,055,991 3,055,991 100.00 2007 2,247,828 2,247,828 100.00 2006 1,542,934 1,542,934 100.00 2005 1,188,002 1,188,002 100.00 2004 739,310 739,310 100.00 2003 731,241 731,241 100.00 2002 594,562 594,562 100.00 2001 423,628 423,628 100.00 2000 227,154 227,154 100.00 1999 200,759 200,759 100.00 The information presented in the required supplemental information was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation is as follows: Valuation date October 1, 2010 Mortality rates RP 2000 Mortality Table Actuarial cost method — Funding Projected Unit Credit Actuarial Cost Method Remaining amortization period 27 years Actuarial assumptions: Investment rate of return 8.25% Projected salary increases 4.50% Postretirement benefit increases None Inflation 4.50% Wo O z w 0 w a A x t/ O 0 N O M w w a w w 0 w z w 0 O l'- 00 00 0\ "o \,O a1 O� 06 N cr'M N �t M O� �1 � 00 N O vl '-• d- � U c,3 a 0 � o o M Q\ M O O �,O M 00 00 r-+ Vl 01 kn N kn M M d" 00 [- l-- w a 00 Ct Vl 00 N N 00 00 M O tn -- O\ a1 r- r- a1 (= kf) N�,o W .-� O 00 17 In oo N N 0o N N M 00 l-- N \�O �,o M M U bA N M M 00 00 O N CF v> �O O M a 6q +� U a to O M cn �3 � O U N Q O a1 00 [� O O V) O N O U O 0 N Z$ vi O O Q.. 4; N N ,.O N GJJ cd U 7-� N Sff Steven I. Gordon Certified Public Accountant American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Trustees City of Palm Beach Gardens Firefighters' Pension Fund Palm Beach Gardens, Florida I have audited the financial statements of City of Palm Beach Gardens Firefighters' Pension Fund, as of and for the year ended September 30, 2011, and have issued my report thereon dated November 30, 2011. I conducted my audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether City of Palm Beach Gardens Firefighters' Pension Fund financial statements are free of material misstatement, I performed tests of its compliance with certain provisions of laws and regulations, 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 my audit and, accordingly, I do not express such an opinion. The results of my tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing my audit, I considered City of Palm Beach Gardens Firefighters' Pension Fund internal control over financial reporting in order to determine my auditing procedures for the purpose of expressing my opinion on the financial statements and not to provide assurance on the internal control over financial reporting. My consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. 4600 W. Commercial Blvd, Suite 5 Tamarac, FL 33319 Voice (954) 485 -5788 Fax (954) 485 -8988 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 the administrator in the normal course of performing its assigned functions. I noted no matter involving the internal control over finaycial re,)orting and its operation that I consider to be material weaknesses. November 30, 2011 untant 19