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
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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%
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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