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11-02-2011 MinutesMinutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES' RETIREMENT TRUST FUND BOARD OF TRUSTEES (GERB) Held on November 2, 2011 At 150 N. Lakeshore Drive Ocoee, FL 34761 CALL TO ORDER — Chairman Wainer Chairman Russ Wagner called the meeting to order at 10:01 a.m. in the Commission Chambers at City Hall. Roll Call Chairman Wagner called the roll and the recording clerk declared that a quorum was present. Present were Chairman Russ Wagner, Trustees Jean Grafton, David Wheeler, and Wendy West with Trustee Pat Gleason arriving shortly after the meeting started. Also present were GERB Attorney Lee Dehner, Mr. Tim Nash of Bogdahn Consulting, LLC, Mr. Richard Cristini and Ms. Jeanine Bittinger, the board's auditors, Human Resources Director Gene Williford, Pension Technician Junelli Maher and GERB Recording Clerk Stella McLeod who declared that a quorum was present. Approval of Minutes Chairman Wagner directed the board's attention to the minutes for the August 3, 2011 meeting (Exhibit #1). Compliments were conveyed to Pension Technician Maher for her work on the agenda packets. A motion having been made by Trustee Wheeler and seconded by Trustee Grafton, and that motion having carried unanimously, the board RESOLVED to approve the August 2011 minutes. Chairman Wagner asked the Board Auditor Richard Cristini about documentation, specifically, if it was alright that certain references which appear in the minutes do not appear on the board's website. Mr. Cristini answered that it did not matter to the auditors; they are more concerned about when there is a reference to an attachment within the board's minutes. If the minutes contain referenced items that are not included with the minutes, those minutes would be deemed General Employees Retirement Board November 2, 2011 Page 2 of 11 incomplete, and the auditors will bring the matter to the board. Further discussion ensued. Mr. Cristini concluded that, just like in contract law, in order for a reader to fully understand the minutes, he or she needs to have the benefit of reviewing the attachments. NEW BUSINESS Annual Audit Report Mr. Cristini gave the highlights of the report for the fiscal year ending September 30, 2010 (Exhibit #2). Page 1 contains the independent auditor's report which verifies that in all material respects, all of the assets, liabilities, revenues and expenses were fairly stated. Page 2 contains the statement that the Governmental Accounting Standards Board (GASB) requires that all such reports contain a management discussion and analysis (MD&A). The State of Florida, however, does not require it. The MD&A is simply a rehash of the information contained in the financial statements of the audit report. Not having the MD&A saves the board the time and money it would take to prepare it. The MD&A does not affect the auditors' opinion; it is an optional component. Page 3 contains the statement of planning and assets. The cash is the holding dollars in the accounts as of the end of September. Receivables were about the same as the previous year. Mr. Cristini explained that transactions have to be reported as of the `trade day' rather than the `settlement date' which can be several days after a transaction has been made. Mr. Cristini brought up a matter to the board. He said that last year the custodian (Fifth Third Bank) did a good job of organizing the investments by natural type or category. The transactions were organized as well. This year it was decided to mix them all up. So the auditor had to go through and carefully pull out each type of security, bond, etc., to come up with the inventory to match to the total inventory stated as of September 301h. The auditors' suggestion is that the custodian return to organizing the reports as was done previously in order to save the board the money that will be paid to the auditors for having to take the extra time to prepare the report. Total assets at the end of the year amounted to $18,700,000. The majority of the payables were for the money managers. Net assets held in trust went from $15,000,000 to $18,645,000 which is a heads up to the reader that the fund had a good year. General Employees Retirement Board November 2, 2011 Page 3 of 11 Page 4 shows that the employer's contribution increased which is in accordance with actuary's advice. Employee contributions are about the same. Appreciation of investment went from $400,000 to $1,450,000. Interest was up a bit and dividends down a little. Investment expenses were down a little. Administrative expenses were also down as of the reporting period. Expenses were less than 1 % of net assets which is the rule of thumb for pension funds. Mr. Cristini said for investment expenses the board is at .54%, and .2 for administrative expenses. He added that this is a good report. Page 5 and onward basically gives boiler plate such as plan description. On page 6 and 11 there is a reference to disability benefits which will be removed since the fund has no such component. This will not affect numbers. The board's accounting policy did not change during the reporting period. There were actuarial cost changes which were approved by the board as noted on page 10. Under previous accounting standards the fund was considered a component of the City's comprehensive annual financial report (CAFR). Under the new rules, the fund is a stand-alone entity. Mr. Cristini continued reviewing the report. Page 19 shows the cost and fair value of invested assets. This data is pulled from the custodial report. The custodian is the legal title holder to these investments. Page 20 shows a schedule which lists the realized appreciation (sold some securities and had a gain or loss) and unrealized appreciation of securities (increase in value of the security's market value over the cost of the securities held by the end of the reporting period). Again, the information shows that the fund had a good year and was position positively. Page 21 gives a summary of the plan's investments. Each expenditure is documented with an invoice and is in the plan's file. The auditors discovered that there was a small difference in market value in securities between the City's numbers and the auditors' calculations. It turned out to be a journal entry mistake. The City was using the number from the actuarial valuation provided by the actuary. This is not the same as the fair market value used by the auditors. Now that the City is aware of it, they have said that they will take care of it. There were no plan amendments for the period. Page 24 shows designations (set asides with dollars earmarked for an individual for a specific purpose) for DROP. There is a total of $192,000 which is earmarked to specific individuals. Mr. Cristini closed the report after saying that the report was excellent; the board has addressed the administrative issues as previously discussed. Chairman Wagner thanked Mr. Cristini. He verified with Mr. Cristini that the board has resolved the administrative issues. Mr. Cristini responded affirmatively. The chairman said General Employees Retirement Board November 2, 2011 Page 4 of 11 that the board does have much better business records. He asked if any of the board members have any questions. Trustee Grafton asked if the plan's tax exemption status was demonstrated in the report. Mr. Cristini answered that he thought the board used the City's tax exemption status. Trustee Grafton said that the board has its own which Pension Tech. Maher verified. Chairman Wagner thanked Mr. Cristini again for the report. Mr. Cristini added that the board will have to put the unfunded actuarial liability on the City's financial statement as part of new rules of the GASB. This will be difficult to explain to the public. Chairman Wagner said that the board will certainly seek the assistance of the plan's actuary. Investment Consultant Report — Mr. Tim Nash of Bogdahn Consulting, LLC Mr. Nash reported that the last quarter of the reporting period basically collapsed. There was a lot of uncertainty in the market, he said, and the markets hate uncertainty. Mr. Nash reported that the markets dropped almost 300 points yesterday. He said that if the current volatility continues, they will have few to no tools to predict what the market will do. Using a graph (page 11) from his report (Exhibit #3) of the market's activity over the 64 days of the past quarter, he stated that the volatility illustrated by the graph is the same kind of volatility seen during the last quarter of 2008. Mr. Nash continued by saying that even with today's conditions, the world is in a much better position today than it was in 2008. Savings rate has grown from almost 0 to 6%. Chairman Wagner asked Mr. Nash to talk about: 1) why the money managers did not reach the benchmark(s) and 2) what the board can anticipate happening when Congress ends up doing nothing about the budget. Mr. Nash told the board what he is hearing. One of the big issues out there for business is continued regulation. It is perceived that this is a non -business friendly environment. Another `wild card' for business is the certainty about healthcare and regulation, and until these matters are settled, business is refraining from doing acquisitions or hiring. Mr. Nash made mention of the Dodd Frank law. Mr. Jamie Diamond, CEO of JP Morgan Chase, has bought several different banks. He has said based upon the regulations that have been put forward, I don't see how my bank can make any money. Banks will be prohibited from trading the assets of their reserve accounts, nor will they be able to enact interchange fees on debit cards. Mr. Nash said that there will be a presidential election soon which another `wild card' for business. Chairman Wagner said that all of the other things pale in comparison to the fact that our country cannot pass a budget. He asked if there's going to see another dramatic drop, and is there anything the board can do to protect the fund. Mr. Nash said market timing will be key, but no one has the General Employees Retirement Board November 2, 2011 Page 5 of 11 tools to evaluate this kind of risk. One would have to know somehow when to take the money out and when to put it back in. Mr. Nash said the big picture answer is that the plan has diversification as well as several different investment strategies. Page 3 of the report shows what the benchmarks did. They protected the plan well. The EAFA was down 19%. Mr. Nash added that despite the nation's recent downgrade, the US is still one of the securest investments. The Russell 2000 was down 22%; emerging markets were down 22.5%. There was not anywhere in equities where one could be `safe'. Page 5 of the report shows the rate of return for each sector. Financials were the worst performing. Rockwood's bright spot was healthcare. Healthcare was negative for the quarter but positive for the year. On page 9, treasury bonds for the quarter were up 6.5%. It is better to own high quality corporate bonds over the longer term for now. Plan went from $18,000,000 to $21,000,000. It then dropped by 2 percentage points to $19,000,000. As of October 1" the plan went back up to $20 million. On page 17, the plan was down more than the index which was not the desired result. The median public plans were down and the board's plan was right around the median. The combination of Rockwood and ICC together (which was thought that the two managers would balance each other) were down for the year. The plan is not in the top tier now. Mr. Nash said that when there's an 8% assumption and we don't meet it, we ask are we doing something wrong. He said that he believes that the board is doing the proper things. Chairman Wagner said that it makes it difficult when you have to explain this to a commission or city manager. Mr. Nash added that everyone is in the same boat across the nation. He referred the board to page 19 of the report to see the plan's historical data. Most of the plans his firm handles are fallen by around 11 %. Ocoee's plan has dropped by 6%. Chairman Wagner solicited questions from the board. When there were none, the chairman thanked Mr. Nash for his report. General Employees Retirement Board November 2, 2011 Page 6 of 11 Discussion — Ordinance Amendments — State Statute / 5 Year Vesting (Trustee West leaves the meeting — 11: 22 a.m. ) Chairman Wagner introduced this topic. He said that changes need to be made to the pension ordinance due to changes in the state statute. There have been meetings with the City including the Finance Department and HR. Direction as to how to proceed was obtained by the board's legal counsel, Board Attorney Lee Dehner. An employee gets credit for personal time up to Julyl, 2011. Pension Tech. Maher got the report which shows what each employee has in their bank. It is now documented in the pension plan's records. The question is which salary to use in the calculation. Does one use the present salary or the future salary? Board Attorney Dehner said that it is up to the City to decide that. The salary that they make at the time that they retire will be used. If you have more hours in your bank when you retire, you get the amount you had in your bank as of July I". If you have less time in you bank you get the lesser time. Chairman Wagner asked if there is a way that the board can update the ordinance so that it follows the state statute and then leave it to the operating rules? Board Attorney Dehner answered `yes'. It will be drafted in a way that the minimum necessary is placed in the ordinance which in this case is referring to period of credited service prior to July 1" in terms of lump sums and the periods after that and then the procedures can be outside of the ordinance. He said that what the chairman has described is what most cities are doing. It is better for the employees and easier administratively. He said to Trustee Grafton that one can use those hours that were accumulated before the effective date, but they can be restored using the accumulations after the effective date and then bring it back up to the maximum that it was on the effective date. Trustee Grafton asked if that meant that one has that time in one's bank but it is not used for vacation. Further discussion ensued. Trustee Grafton restated that you are using those days on the books at today's rate but if you get a raise you can replace those hours at the new rate. Chairman Wagner said `right'. He continued that they are trying to ensure that the employee doesn't lose anything but it means that employees will have to watch where they are at when they retire. It eliminates a huge burden on the City to have to keep track of those hours. The chairman asked if the attorney had any boilerplate language to add to the ordinance. Because circumstances vary, language has to be developed for a plan's specific conditions. Once the board has the language, this will require that the actuary produce an impact statement. Chairman Wagner asked if the board will have the language by the next meeting. Attorney Dehner said he should have the language by then. The attorney added that because the change General Employees Retirement Board November 2, 2011 Page 7 of 11 became effective as of July 1 st, any retirements after that should be handled according to the policy that the chairman just described. The maximum overtime hours also need to be reflected. It will need to be noted whether it is fiscal year or calendar year. There will need to be some sort of tickler in the payroll system of when one hits the 300 hour threshold. Attorney Dehner said that he will draft the language and have it ready by the next meeting. Chairman Wagner asked about the other provisions that affect reporting for the fund. Will that need to be identified in the ordinance as well, he asked? Board Attorney Dehner said `no'. Further discussion ensued between the HR director, the chairman and the board attorney. Chairman Wagner brought up the 5-year vesting. He said that he believes that all employees should be vested for 5 years in the program. The chairman suggested that the language be changed to reflect that in order to be eligible for retirement one must be vested with at least 5 years in order to receive pension benefits. Board Attorney Dehner said the board would r1mlly be amending the retirement age to 60 with a minimum of five years vested. Further discussion ensued. Trustee Grafton asked what current employees would be affected. Further discussion ensued. HR Director Gene Williford said he would research and bring that information back to the board. A motion having been made by Trustee Wheeler, seconded by Trustee Gleason, that to be eligible to receive retirement benefits, the employee must be at least 60 years old and be vested in the plan for a minimum of five (5) years, and that motion having passed unanimously, the board RESOLVED amend the retirement eligibility to age 60 with a minimum of 5 years vested. Board Attorney Dehner said that he will incorporate the language into the ordinance that they had discussed earlier. Chairman Wagner brought up changing the DROP to being a standard percentage rather than a variable one. He said it appeared to be an extreme administrative burden rather than using the fixed rate. Trustee Wheeler reminded the board that at the last meeting Ms. Bertling (of HR) had said no one had ever asked that the variable rate be used. A motion having been made by Trustee Wheeler, seconded by Trustee West to remove the provision that allows the variable rate to be used in calculating DROP, and that motion having passed unanimously, the board RESOLVED to amend the ordinance to remove the provision to calculate DROP based on the variable rate. The chairman asked that the attorney forward the changes to him and then he will forward them to the rest of the board. General Employees Retirement Board November 2, 2011 Page 8of11 Discussion — Agreement with American Realty Advisor Chairman Wagner reminded the board that it was determined at a previous meeting that the board would add real estate to the portfolio. The chairman is concerned that an agreement has not been signed after four or five months. He feels that consultants should have been on top of this. Nobody is telling the board what needs to be done. Chairman Wagner said that he does not feel as though the matter has been managed properly. Mr. Nash offered to explain what the normal flow would have been. Typically his firm contacts the real estate fund and asks them to forward the agreement to the board's attorney. The forms were forwarded to the board's attorney and were reviewed by him. Mr. Nash continued his remarks about the real estate fund process. He described what was needed from the board for the forms to be complete. He said that the fund has to call its client in order for things to move ahead once the forms are signed. Mr. Nash offered to take the forms today, overnight them to the real estate fund, and then wait for the fund to request payment. Set Board Meetings The board agreed on the following meetings for 2012. February 1, 2012 May 2, 2012 August 1, 2012 November 7, 2012 Trustee Grafton asked if these dates worked around the FPPTA meeting dates. The chairman responded affirmatively. A motion having been made by Trustee Grafton, seconded by Trustee Wheeler, to accept the proposed meeting dates as the official board meeting dates for 2012, and that motion having passed unanimously, the board RESOLVED to accept the proposed meeting dates as the official meeting dates for 2012. General Employees Retirement Board November 2, 2011 Page 9 of 11 OTHER BUSINESS Payment of Invoices Ratification Chairman Wagner reviewed with the board payment of invoices (Exhibit #4). Trustee Grafton asked if there were any invoices in the packet that were not listed. Pension Tech. Maher replied that the Foster & Foster invoice came in after the report was compiled. A motion having been made by Trustee Grafton, seconded by Trustee Wheeler, to ratify the invoices presented and that motion having carried unanimously, the board RESOLVED to ratify the payment of the invoices presented in the handout. Quarterly Activity Report Review / Adjustments Activity Report (Pension Board Member Records) The board reviewed the activity report prepared by Pension Tech. Maher. After asking the,board members if there were any questions, and the board posing no questions, the chairman solicited the board for a motion concerning the invoices. A motion having been made by Trustee Grafton, seconded by Trustee Wheeler, to ratify the activity report presented, and that motion having carried unanimously, the board RESOLVED to ratify the activity report. Trustee Wheeler asked why they needed to approve the report when it is already being enacted. The chairman replied that it is necessary to comply with the auditors' rules. Trustee Wheeler made a recommendation that there be a consent agenda added to the agenda to take care of all items requiring an administrative okay in compliance with auditors' requirements. Pension Tech. Maher is going through the records and finding that some of the calculations are incorrect. She explained how the errors were discovered. The chairman declared that the payments have not been paid yet. Further discussion ensued. Chairman Wagner solicited a motion to pay the people listed. A motion was made by Trustee Wheeler, seconded by Trustee Grafton to make payment to those contained who were not fully paid, and that motion having passed unanimously, the board RESOLVED to make payment to the people on the Adjustment Activity Report. Trustee Wheeler asked what would be done if someone on the list asks for interest. The attorney replied that there is no such provision in the pension rules. General Employees Retirement Board November 2, 2011 Page 10 of 11 Retiree Payment List Review The board acknowledged their review of the Fifth Third Bank RPS Report (Pension Board Bank Records). Florida Public Pension Trustees Association (FPPTA) The next conference is February 5 — 9, 2012. The chairman asked that the schedule be added to the packet for the next meeting. He told the board members that Pension Tech. Maher needs to know a month in advance if a board trustee is going to attend the conference. The next class will be in Jacksonville, Florida. Chairman Wagner, Trustee Grafton, and Trustee Wheeler plan to attend. Trustee Gleason just received her FPPTA certification. The board congratulated her. The entire board is now certified. Further discussion ensued. ATTORNEY'S COMMENTS Chairmann Wagner said that he received the revised Summary Plan Description from the attorney's office. Board Attorney Lee Dehner advised that the board hold on to the description given that additional changes will be made to the document. The chairman said that he will put the item back on the agenda for the next meeting. Board Attorney Lee Dehner said that the legislative session will start in January 2012. House Bill 365 will be discussed. He will have more legislation to discuss at the board's next meeting. COMMENTS FROM TRUSTEES / CITY LIAISON None. AGENDA FOR NEXT MEETING Summary Plan Actuarial Report General Employees Retirement Board November 2, 2011 Page 11 of 11 COMMENTS FROM PUBLIC.— None. ADJOURNMENT There being no other business, the meeting was adjourned at 12:27 p.m. App ed by' Russell B. Wagner, bERB Chairman uh" Kecoramg t-,iem Minutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES' RETIREMENT TRUST FUND BOARD OF TRUSTEES (GERB) Held on August 3, 2011 At 150 N. Lakeshore Drive Ocoee, FL 34761 CALL TO ORDER — Chairman Wagner Chairman Russ Wagner called the meeting to order at 10:03 a.m. in the Commission Chambers at City Hall. Roll Call Chairman Wagner called the roll and the recording clerk declared that a quorum was present. Present were Chairman Russ Wagner, Trustees Jean Grafton, David Wheeler, Wendy West and Pat Gleason. Also present were GERB Attorney Lee Dehner, Mr. Tim Nash of Bogdahn Consulting, LLC, Human Resources Director Gene Williford, HR Specialist Debbie Bertling, and GERB Recording Clerk Stella McLeod. Approval of Minutes Chairman Wagner directed the board's attention to the minutes for the May 4, 2011 meeting (Exhibit 41). Trustee Jean Grafton cautioned the recording clerk to be careful not to use `the City' when referring to the pension board. A motion having been made by Trustee West and seconded by Trustee Gleason, and that motion having carried unanimously, the board RESOLVED to approve the May 2011 minutes. Chairman Wagner introduced Pension Technician Junelli Maher to the board. Board members welcomed Ms. Maher and commended her on the improvements that they have seen since she came aboard. General Employees Retirement Board August 3, 2011 Page 2 of 7 NEW BUSINESS Investment Consultant Report — Mr. Tim Nash of Bogdahn Consulting, LLC Mr. Nash reported that the past quarter was a good one for the pension fund (Exhibit #2). The June quarter (page 3) international stocks up 1.8%. The S & P 500 was barely positive. The bond market was up over 2.3% over the quarter. The last few days of June were positive. Page 4 of the report shows the large mid and small value stocks were negative for the quarter. Mr. Nash noted that the ICC multicap fund (which looks at large mid and small cap stocks) is opportunistic and goes where it needs to go. It was negative for the quarter. On page 8 of the report the different countries of the EAFA Index are listed. The Japanese stock market was up about 20 basis points. Other countries were up over 30%. Barings International stock has about a 15% allocation to Japan which affected Baring's overall performance. Cashflows are on page 16. Mr. Nash reported that there was $2.1 million gained for the fund which translates to a 11.61 % rate of return. Chairman Wagner asked if the percentage increase is simply the earnings income. Is the City's contribution calculated in that increase? Mr. Nash replied `no'. The calculation is the ending balance minus the beginning balance. Contributions or withdrawals are not included the calculation. Any income is factored in. Pages 16 and 17 list the quarterly returns which show the fund up 30 data points. Indices were up 1.01 %. The median manager was up 1.07%. Why was the fund behind for the quarter, Mr. Nash asked? The domestic equities pulled the fund back. The chairman remarked at how Rockwood and ICC have switched positions in terms of their performance. At one point in the past, Rockwood was the problem performer. The board and Mr. Nash began a discussion regarding measures taken by the consultant to monitor ICC's performance. On the bond side, Mr. Nash continued reporting, Agincourt continues to do a very nice job being up 2.38% for the quarter, 1.73% for the fiscal year-to-date. There are no recommendations for change; the portfolio is doing quite well. The fund is beating the index by almost 300 basis points per year. The fund's ranking (among 447 public pension plans across the country) in the fiscal year is the top 45t" percentile. In the three year term the fund is in the top 3rd percentile and in the five-year the fund is in the 2nd percentile. Mr. Nash commended the board for the fine performance of the fund. General Employees Retirement Board August 3, 2011 Page 3 of 7 Chairman Wagner asked where the fund stood with contracts with real estate companies (adding real estate to the portfolio had been previously approved by the board). Board Attorney Lee Dehner said that an agreement will be signed as part of the necessary documents. Chairman Wagner said that he had just recently received contracts in the mail, but was not quite sure what to do with them. Mr. Nash said that once the board selects the real estate manager, the manager contacts the board's attorney. Then the board will be contacted if all is well. (HR Director Williford and HR Specialist Debbie Bertling enter the meeting 10: 31 a.m. ) Pension Technician Report — Junelli Maher Chairman Wagner announced that in the future, the pension technician will be giving a quarterly report. He updated the board regarding the set-up of the technician's office and her office hours (8:00 a.m. to 2:00 p.m., Monday through Thursday). Trustee Grafton congratulated Pension Technician Maher. In addition to further discussion, the chairman reported that 100% of verification letters had been returned to the pension office [the letters verify that the pensioner is not deceased]. Discussion - Ordinance Amendments Discussion began about the need for amendments to the pension ordinance. The board attorney concurred that amendments will need to be made. Attorney Dehner noted that numerous proposals have been made to the Senate Bill 1128 in the legislature. The bill has been significantly watered down. The most significant amendment with impact to the City is the compensation definition for benefit calculation purposes. Further discussion ensued. With respect to the computation, the statute says that it is a fixed computation that allows up to 300 hours of overtime for service rendered after July 1, 2011. This change will need to be reflected in the pension ordinance according to the board attorney. Chairman Wagner said the question that the board has had is if the hours are based on a monetary amount or is if it is based on the number of hours at the time that they retire. Attorney Dehner said it is based on hours, and the City can determine whether or not it is going to use average compensation in effect as of June 30th or average compensation at time of termination from employment. This will be up to the City to determine. The board may make a recommendation to the commission. Attorney Dehner added that there can be no lump sum payments of unused sick or vacation pay included for retirement calculations for periods of service after July I". The attorney continued that there is now a requirement as a disclosure item that the actuary, with each valuation, calculate the cost of benefits in the plan utilizing a 73/4 % investment return assumption. This is the Florida Retirement System rate so that the state can compare apples to General Employees Retirement Board August 3, 2011 Page 4 of 7 apples. Foster & Foster has sent a letter to the City requesting a corresponding change in their contract with the City in order to meet this requirement. Chairman Wagner asked if this is a fairly simple plan. Attorney Dehner said it will differ from plan to plan. Ultimately, it must comply with the requirements of the statute. The board will discuss and develop an amendment and make recommendations to the City commission. The attorney confirmed for the chairman that as long as the board is working on compliance, and not doing anything in conflict with the statute, it should stand the board in good stead. Chairman Wagner asked if the current rule is fair (under current pension rules, if a sixty -year old joins the pension plan, he/she is automatically vested). Attorney Dehner answered that there is a distinction between the years required to vest and the retirement age. Further discussion ensued. Chairman Wagner said that the actuary should weigh in on the matter. Regarding the DROP program, one of two selections could be made: 1) the set interest rate of 6.5% per quarter, or 2) value of investments made. Chairman Wagner said that it is a lot cheaper for the board to have a set interest rate. Having two choices is very cumbersome to administer. When Trustee Wheeler asked how many have taken the variable rate versus the fixed rate, HR Specialist Debbie Bertling answered `none'. Trustee Wheeler concluded that the board should remove the variable rate as an option. Further discussion ensued. HR Director Williford asked if the attorney saw anything wrong with the language of the City's personnel Rules and Regulations. The attorney responded that as long as the changes comply with the statute, HR should be in a good position. Further discussion ensued. (11: 29 - Trustee West exits to the foyer) The board discussed the purchase of service time. Air time requires employee to be vested before purchase of additional service time can be made. After discussion with the board attorney and HR staff, it was concluded that the board probably does not want to make changes. Chairman Wagner said that he will chat with the actuary and the city manager to discuss items that might need to be placed in the pension ordinance. (11: 34 — Trustee West returns) The board discussed the actuary's request for an increase in fees. A motion having been made by Trustee Wheeler, seconded by Trustee Grafton, to approve the increase to the fees as requested by actuary Foster & Foster, and that motion having carried unanimously, the board RESOLVED to increase the fees as requested by the actuary Foster & Foster. General Employees Retirement Board August 3, 2011 Page 5 of 7 OTHER BUSINESS Payment of Invoices Ratification Chairman Wagner reviewed with the board the auditor's reporting requirements as it relates to the board's payment of invoices (Exhibit #3). Trustee Grafton asked about the Florida Public Retirees Organization (FPRO). Discussion ensued. Chairman Wagner stated that the board is paying for the board members to become members. Trustee Gleason said that she had already paid for her own. Trustee Grafton said that the FPRO will refund the money if the board pays for its members. A motion having been made by Trustee Grafton, seconded by Trustee Gleason, to ratify the invoices presented and that motion having carried unanimously, the board RESOLVED to ratify the payment of the invoices presented in the handout. Quarterly Activity Report Review The board reviewed the activity report prepared by HR Specialist Bertling (Exhibit #4). Trustee Grafton commended Ms. Bertling for her work regarding the activity report. After asking the board members if there were any questions, and the board posing no questions, the chairman solicited the board for a motion concerning the invoices. A motion having been made by Trustee Wheeler, seconded by Trustee Grafton, to ratify the activity report presented, and that motion having carried unanimously, the board RESOLVED to ratify the activity report. Trustee Grafton said that the folks on the activity report should be given an opportunity to join the FPRO. Florida Public Pension Trustees Association (FPPTA) Chairman Wagner pondered the idea of commission members attending the FPPTA which could be conflict of interest. Trustee Grafton suggested that the pension technician attend an FPPTA conference. She said that the commissioner (who approached a trustee about attending the conference) said that he believed that attending the conference would help him be a better commissioner. General Employees Retirement Board August 3, 2011 Page 6 of 7 Trustee Gleason said that while it would be nice for commissioners to attend, she does not think that it is necessary. Additional discussion ensued during which Chairman Wagner mentioned that at any point the board could be asked to report to the commission about the board's handling of the fund, but he is confident that the board can show that it has been prudent in the handling of the pension funds. Chairman Wagner was selected by the FPPTA to go to The Wall Street Program in March of 2012. ATTORNEY'S COMMENTS Helps 2 legislation — not expected to come back to the floor this session. Attorney Dehner reminded board members that financial disclosure filings were due 7/1/2011; the penalty date is September 1, 2011. He advised that board members could check the supervisor of election's website to verify their forms have been received. COMMENTS FROM TRUSTEES / CITY LIAISON Trustee Gleason said that she was very impressed with Pension Tech Junelli Maher and thanked her for her work. HR Director Williford commended Ms. Maher as well; he also thanked the board for allowing him to attend the FPPTA training. AGENDA FOR NEXT MEETING Ordinance changes; possibly bring in the actuary The auditor may have a report COMMENTS FROM PUBLIC.— None. General Employees Retirement Board August 3, 2011 Page 7 of 7 ADJOURNMENT There being no other business, the meeting was adjourned at 12:06 p.m. ��sPectfully submi d by: 41-1 Stella McLeod, Municipal RIZ7WQrdipator GERB Recording Clerk App ued by: Russell B. Wagner, 5FRB Chairman r r O N i A L M r � � N E r tz 0M O I-z a) L a) ja •� w E LL a) W -0 ^Wa` -w -S� U) L a) 5� _0 G w Q 0 _0 a) 0- u o cq M 0 co L6 o o o O, V N N 0-0 O O 0 01 0 M o 1- M t N � 0 0 o O O1 00 m CO o o 0 0 N N N WO OOOmO oamN lL� m�LL-t� m O o Qi5 _ Q FLLLI 0 U 5d0 U) = NO U Q (n N N N T N N i j� O LLl 7 U m M 2 CL (6 m a3 m CO m 0 o o o M � � o N � L, V V 0 0 0 o 0 N O1 O O ......... 17 0 01 O i o N (M 0-0 0 00 V O 0 O� N LW . 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U N N U dj N O U m b�A cz C 'o 8czo 0 cz Z CZ u U s . cUi �, x cUi bA bA o cz 5 cz � b cz o �" cut O � � •o .� � � �, � = � tea' O � °' °�' � °�' O o O •'" 0 pip cz , U o cc cc cz U U U cz ro Cl 4, o o o o 0 �Dy u U c O cz O O N cz CZ CZ cc 0 '� • �"" O 'C U cr U U U O U O cC cut U N U u N u N U o c� o' U O o w w ��.' � � +�-' ,� � � N iUi ..U-i N �" O iUi � iUi U iUi � ^'O •O N U .Ui .U-i yN., O 'C O 'C 0 O CA u OU y� sU- u cz C-Z �cz cz cz . cz cz o o U Q cz W cz P� � ro U r U c U cz O i L U Ln cz CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND) FINANCIAL STATEMENTS September 30, 2010 DAVIDSON, JAMIESON & CRISTINI, P.L. Certified Public Accountants CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND September 30, 2010 and 2009 TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT ....................................... I FINANCIAL STATEMENTS STATEMENTS OF PLAN NET ASSETS ................................ 3 STATEMENTS OF CHANGES IN PLAN NET ASSETS ................... 4 NOTES TO FINANCIAL STATEMENTS ............................... 5 REQUIRED SUPPLEMENTAL INFORMATION SCHEDULES OF FUNDING PROGRESS ............................... 25 SCHEDULES OF CONTRIBUTIONS FROM THE CITY ................... 26 NOTES TO THE ADDITIONAL SCHEDULES ........................... 27 8 Davidson, Jamieson & Cristini, P.L. Certified Public Accountants 1956 Bayshore Boulevard Dunedin, Florida 34698-2503 (727)734-5437 or 736-0771 FAX (727) 733-3487 Members of the Firm John N. Davidson, CPA, CVA Harry B. Jamieson, CPA Richard A. Cristini, CPA, CPPT, CGFM The Board of Trustees City of Ocoee Municipal General Employees' Retirement Trust Fund Ocoee, Florida INDEPENDENT AUDITOR'S REPORT Member American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants We have audited the accompanying statements of plan net assets of the City of Ocoee Municipal General Employees' Retirement Trust Fund (Plan) as of September 30, 2010 and 2009, and the related statements of changes in plan net assets for the years then ended. These financial statements are the responsibility of the Board of Trustees. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we 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 management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the plan net assets of the City of Ocoee Municipal General Employees' Retirement Trust Fund as of September 30, 2010 and 2009 and the changes in plan net assets for the years then ended in conformity with accounting principles generally accepted in the United States of America. The Board of Trustees City of Ocoee Municipal General Employees' Retirement Trust Fund Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying required supplementary information on pages 25 through 27 of the City of Ocoee Municipal General Employees' Retirement Trust Fund is required by the Govermnental Accounting Standards Board Statement No. 25 and is not a required part of the basic financial statements. Such information has been subj ected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The City of Ocoee Municipal General Employees' Retirement Trust Fund has not presented the Management's Discussion and Analysis that the Governmental Accounting Standards Board under its Statement No. 34 has determined is necessary to supplement, although not required to be a part of the basic financial statements. August 31, 2011 2 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND STATEMENTS OF PLAN NET ASSETS September 30, 2010 and 2009 Cash Receivables: Employer Participants Interest Dividends Broker -dealer Total receivables Prepaid insurance Investments at fair value: U.S. Government obligations U.S. Government agency obligations Domestic corporate bonds International corporate bonds Domestic stocks International stock International equity mutual fund Temporary investment fund Total investments Total assets Assets Liabilities 2010 $ 146,375 $ 1,465 55,958 41,792 20,583 24,606 71,199 64,392 8,391 5,552 37,655 - 193,786 136,342 1,566 1,903 790,766 271,855 2,641,711 2,743,849 3,316,882 3,171,659 619,316 - 7,779,453 6,700,990 595,252 - 1,977,663 1,804,119 647,491 931,982 18,368,534 15,624,45 18,710,261 15,764,164 Accounts payable 22,877 24,971 Accounts payable, broker -dealer 41,870 - Total liabilities 64,747 24,971 Plan net assets held in trust for Pension benefits $ 18.645.514 $ 15.739,193 See Notes to Financial Statements. 3 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND STATEMENTS OF CHANGES IN PLAN NET ASSETS Years ended September 30, 2010 and 2009 2010 2009 Additions Contributions: Employer $ 1,324,799 $ 1,088,192 Employee 631,376 619,761 Total contributions 1,956,175 1,707,953 Investment income (Loss): Net appreciation (depreciation) in fair value of investments 1,458,548 416,881 Interest 403,320 367,652 Dividends 132,573 178,568 Litigation records 4,721 - Total investment income 1,999,162 963,101 Less investment expenses 101,495 104,644 Net investment income 1,897,667 858,457 Total additions 3,853,842 2,566,410 Deductions Benefits: Age and service 769,774 751,512 PLOP 2,191 38,131 Refund of contributions 138,898 146,808 Administrative expenses 36,658 51,473 Total deductions 947,521 987,924 Net increase 2,906,321 1,578,486 Plan net assets held in trust for pension benefits: Beginning of year 15,739,193 14,160,707 End of year $ 18,645,514 $ 15,739,193 See Notes to Financial Statements. 4 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 1. Description of Plan The following brief description of the City of Ocoee Municipal General Employees' Retirement Trust Fund (Plan) is provided for general information purposes only. For more complete information participants should refer to the Plan Ordinance which was adopted pursuant to the provisions of Ordinance No. 2009-020 of the City of Ocoee, Florida. The plan is a defined benefit pension plan covering all full-time general employees' of the City of Ocoee. At September 30, 2010, the Plan's membership consisted of: Retirees and beneficiaries: Currently receiving benefits 61 Drop participants 3 Terminated employees entitled to benefits but not yet receiving them 37 Total 101 Current employees: Vested 87 Nonvested 96 183 At September 30, 2009, the date of the most recent actuarial valuation, there were 56 retirees and beneficiaries receiving benefits. General - The Plan is a defined benefit pension plan covering all full-time employees (except for public safety employees) of the City of Ocoee, Florida. Participation in the Plan is required as a condition of employment except that the City Manager, Assistant City Manager and directors may elect not to be participants in the Plan. Effective October 1, 2006 current and future mayors and commissioners may elect to enter the Plan as non-contributory participants and receive credited service determined as if they had been 5 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 1. Description of Plan (Continued) participants in the Plan on the date they took office subject to completing nine years of credited service. Originally effective on October 1, 1991 and substantially amended in 1999, 2005, 2006, 2007 and 2008 the Plan provides for pension, death and disability benefits. The Plan is subject to provisions of Chapter 112 of the State of Florida Statutes and the oversight of the Florida Division of Retirement. The Plan, in accordance with the above statute, is governed by a five member pension board, two of whom are legal residents of the City who are appointed by the City Commission, two of whom are vested participants of the Plan who are elected by a majority vote of the full-time general employees who are participants in the Plan and a fifth Trustee who is chosen by a majority of the first four Trustees. The City of Ocoee is obligated to fund all Plan costs based upon actuarial valuations. The City of Ocoee is authorized to establish benefit levels and the Plan's Board of Trustees approves the actuarial assumptions used in the determination of contribution levels. Pension Benefits - Under the Plan, participants are entitled to annual pension benefits upon the attainment of age 60. A mayor or commissioner participant's normal retirement date on the attainment of age 60 and the completion of nine years of credited service regardless of years of credited service. Benefits are equal to 3.00 percent of the participant's average final compensation times the number of years of service provided however, in no event shall the monthly benefit exceed 81 % of average final compensation. A participant's monthly retirement benefit ceases upon the later of death or one hundred twenty months from the date of commencement. The average final compensation for purposes of calculating benefits is 1/12 of the participant's average salary during the highest five years of the last ten years of credited service prior to termination. A participant is eligible for early retirement upon the attainment of age 50 and the completion of five years of credited service. A mayor or commissioner participant is eligible for early retirement upon the attainment of age 50 and the completion of nine years of credited service. Refund of Contribution- If a participant has less than five years of credited service upon termination of employment with the City, the participant shall be entitled to a refund of his or her accumulated contributions. 0 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 1. Description of Plan (Continued) Partial Lump -Sum Option (PLOP) - A participant may elect to receive a retirement income and a percentage of a benefit in a lump sum as follows: (1) Five (5) percent lump sum benefit with ninety-five (95) percent paid under the normal form. (2) Ten (10) percent lump sum benefit with ninety (90) percent paid under the normal form. (3) Fifteen (15) percent lump sum benefit with eighty-five (85) percent paid under the normal form. (4) Twenty (20) percent lump sum benefit with eighty (80) percent paid under the normal form. Deferred Retirement Option Plan (DROP) - Any Plan participant who is eligible to receive a normal retirement pension may elect to participate in a deferred retirement option plan (DROP) while continuing his or her active employment. Upon participation in the DROP, the participant becomes a retiree for all Plan purposes so that he or she ceases to accrue any further benefits under the pension plan. Normal retirement payments that would have been payable to the participants as a result of retirement are accumulated and invested in the DROP to be distributed to the participant upon his or her termination of employment. Participation in the DROP ceases for a Plan participant after 84 months from their normal retirement date. Death Benefits - For any deceased participant who had been an actively employed participant eligible for early or normal retirement, the manner of benefit payable shall be at least equal to the annuity of ten years calculated as of the date of death. The benefit shall be calculated as for normal retirement based on the participant's credited service and average final compensation as of the date of death and reduced as for early retirement, if applicable. CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 I. Description of Plan (Continued) Buy -Back Additional Years of Credited Service - In additionto credited service actually earned in the employment of the City, the Plan provides that a participant may also buy-back credited service under the following alternatives: A. Buy-back for prior government service. B. Buy-back for military service prior to employment. C. Buy-back for air time. 2. Summary of Significant Accounting Policies Basis of Accountins7 - Basis of accounting is the method by which revenues and expenses are recognized in the accounts and are reported in the financial statements. The accrual basis of accounting is used by the Plan. Under the accrual basis of accounting, revenues are recognized when they are earned and collection is reasonably assured, and expenses are recognized when the liability is incurred. Participants' contributions are recognized in the period in which the contributions are due. The City of Ocoee contributions to the plan, as calculated by the Plan's actuary, are recognized as revenue when due and the City has made a formal commitment to provide the contributions. Benefits are recognized when due and payable in accordance with the terms of the plan. Basis of Presentation - The accompanying financial statements are presented in accordance with Governmental Accounting Standards Board (GASB) Statement 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and the Codification of Governmental Accounting and Financial Reporting Standards which covers the reporting requirements for defined benefit pensions established by a governmental employer. The accompanying financial statements include solely the accounts of the Plan which include all programs, activities and functions relating to the accumulation and investment of the assets and related income necessary to provide the service and death benefits required under the terms of the Plan as amended. CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 2. Summary of Significant Accounting Policies (Continued) Valuation of Investments - Investments in common stock and bonds traded on a national securities exchange are valued at the last reported sales price on the last business day of the fiscal year; securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices; investments in securities not having an established market value are valued at fair value as determined by the Board of Trustees. The fair value of an investment is the amount that the Plan could reasonably expect to receive for it in a current sale between a willing buyer and a willing seller, other than in a forced or liquidation sale. Purchases and sales of investments are recorded on a trade date basis. Investment income is recognized on the accrual basis as earned. Unrealized appreciation in fair value of investments includes the difference between cost and fair value of investments held. The net realized and unrealized investment appreciation or depreciation for the year is reflected in the Statement of Changes in Plan Net Assets. The Plan has no undue investment concentrations. Custody of Assets - Custodial and certain investment services are provided to the Plan under contracts with a custodian having trust powers in the State of Florida. The PlaWs investment policies are governed by investment objectives governed by the Florida State Statutes and ordinances of the City of Ocoee, Florida. Authorized Plan Investments - The Board recognizes that the obligations of the Plan are long- term and that its investment policy should be made with a view toward performance and return over a number of years. The general investment objective is to obtain a reasonable total rate of return defined as interest and dividend income plus realized and unrealized capital gains or losses commensurate with the prudent investor rule and Chapter 112 of the Florida Statutes. Permissible investments include obligations of the U.S. Treasury and U.S. agencies, high capitalization common or preferred stocks, pooled equity fiends, high quality bonds or notes and fixed income funds. In addition, the Board requires that Plan assets be invested with no more than 70 percent in stocks and convertible securities measured at cost. CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 2. Summary of Significant Accounting Policies (Continued) In addition, the Plan limits investment in common stock (equity investments) as follows: a. No more than 5 percent at cost of an investment manager's portfolio may be invested in the common or capital stock of any single corporation. b. The Plan's investment in the common stock of any single foreign corporation shall not exceed 25 percent of the Plan's total value. The Plan has no instrument that, in whole or in part, is accounted for as a derivative instrument under GASB statement No. 53, Accounting and Financial Reportingfor Derivative Instruments during the current Plan year. Actuarial Cost Method - The Plan uses the entry age normal cost method. This method involves the systematic funding of the normal cost (current year's cost for benefits to be funded) and the unfunded actuarial accrued liability. In accordance with a new actuarial standard of practice the actuarial value of the Plan's assets as of October 1, 2008 included a one time increase of $221,425. This one-time increase is intended to ensure the removal of any differences between actuarial and market value given the hypothetical future investment returns of 8%. At the request of the Florida Division of Retirement the City of Ocoee is now required to fund the Plan based on an actuarially calculated percentage of payroll. This change is designed to avoid actuarial shortfalls associated with increasing liabilities. For the purpose of compliance with legislative intent and to maximize the likelihood of state acceptance, additions to the unfunded actuarial accrued liability will be amortized as follows: Existing Based on and Bases after 10/l/08 (Years) (Years) Gains and losses 20 10 Methods/assumptions No change 20 Amendments No change 30 10 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 Summary of Significant Accounting Policies (Continued) The actuarially calculated contribution for the fiscal year ended September 30, 2010 is shown as follows: Annual payroll $ 8,102,359 Actuarial percentage of payroll 24.1% Total required contribution 1,956,175 Less participant contributions 631,376 Total employer contribution $ 1,324,799 ReportingEntity_ - The financial statements presented are only for the Plan and are not intended to present the basic financial statements of the City of Ocoee, Florida. The Plan is included in the City's Comprehensive Annual Financial Report (CAFR) for the years ended September 30, 2010 and 2009, which are separately issued documents. Anyone wishing further information about the City is referred to the City's CAFR. The Plan is a pension trust fiend (fiduciary find type) of the City which accounts for the single employer defined benefit pension plan for all frill -time general employees. The provisions of the Plan provide for retirement, disability, and survivor benefits. Administrative Costs - All administrative costs of the Plan are financed through investment earnings. Cash - The Plan considers money market fiends held by custodians as cash. Temporary investments shown on the balance sheet are composed of investments in short-term custodial proprietary money market funds. Federal Income Taxes - The Plan has not applied for a favorable determination letter from the Internal Revenue Service indicating that the Plan is qualified and exempt from Federal income taxes. The Board believes that the Plan is designed and continued to operate in compliance with the applicable requirements of the Internal Revenue Code. 11 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 2. Summary of Significant Accounting Policies (Continued) 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 amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risk and Uncertainties - The Plan invests in a variety of investment funds. Investments in general are exposed to various risks, such as interest rate, credit, and overall volatility risk. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits. Subsequent Events - Management has adopted the provisions set forth in GASB statement No. 56 and FASB ASU No. 2010-09. Subsequent Events, and considered subsequent events through the date of the audit report which is the date that the financial statements were available to be issued. Reclassification - Certain figures for the fiscal year ended September 30, 2009 were reclassified to conform to the presentation used in the financial statements for the fiscal year ended September 30, 2010. 3. Funding; Policy Each participant of the Plan, except Mayors and Commissioners shall be required to make regular contributions to the Plan in the amount of seven and four -tenths (7.4%) of his or her salary. Participant contributions withheld by the City on behalf of the participant shall be deposited with the Board at least monthly. The contributions made by each participant to the Plan shall be designated as employer contributions pursuant to §414(h) of the Code. Such designation is contingent upon the contributions being excluded from the participant's gross income for federal income tax purposes. For all other purposes of the Plan such contributions shall be considered to be Member contributions. Notwithstanding the preceding, when the participant's accrued benefit is equal to 81% of average final compensation, the participant may make a one time irrevocable election at anytime after the 81 % limit is met to discontinue making participant contributions to the Plan and have his or her benefit calculated and frozen at the time of election. If no such election is made, participant contributions to the Plan shall continue. The City of Ocoee's funding policy is to make fixed, actuarially computed annual contributions to the Plan in amounts such that all employees' benefits will be fully provided for by the time they retire. The City's actuarially calculated contribution rate for the year ended September 30, 2010 and 2009 was 16.35% and 13.4%, respectively. 12 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 3. Funding Policy (Continued) This rate consists of 11.38% of member salaries to pay normal costs plus 4.97% to amortize the unfunded actuarially accrued liability pursuant to the September 30, 2008 actuarial valuation as amended. The Plan also provides for the purchase of credited service for prior govermnental and military service or air time through payroll deductions (6 months or less) or paying for it at one time (lump sum payment). 4. Plan Funded Status The Plan's funded status as of October 1, 2009 actuarial valuation is presented below: Actuarial Value of Actuarial Unfunded Assets as a Ratio of the Valuation Actuarial Actuarial Actuarial Percentage of the Annual Unfunded Actuarial Date Value of Accrued Accrued Actuarial Accrued Covered Liability to Covered September 30, Assets Liability Liability Liability Payroll Payroll 2009 $ 17,570,369 $ 24,514,314 $ 6,943,945 71.67% $ 8,506,240 81.63% The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The actuarial methods and significant assumptions used are summarized as follows: (a) Actuarial cost method - Entry Age Normal (b) Asset valuation method - Four years smoothed market (c) Actuarial assumptions: Investment rate of return - 8.00% Post retirement benefit increases - None Projected salary increases - 6.00% Inflation rate - 3.00% (d) Amortization method - Level percent of payroll - closed (e) Remaining amortization period - 29 years 13 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 5. Plan Termination Although it has not expressed an intention to do so, the City of Ocoee may terminate the Plan at any time by a written resolution of the Authority's Board of Directors, duly certified by an official of the Authority. In the event that the Plan is terminated or contributions to the Plan are permanently discontinued, the benefits of each employee in the Plan at such termination date would be non-forfietable. 6. Deposits and Investments Deposits Fifth -Third Bank periodically hold uninvested cash in its respective capacity as custodian of the Plan. These funds exist temporarily as cash in the process of collection from the sale of securities. Investments Investments that are not evidenced by securities that exist in physical or book -entry form include investments in open-ended mutual or pooled investment funds. The Plan's investments are segregated into four separate accounts and managed under separate investment agreements with Fifth -Third Bank, Rockwood Capital Advisors, L.L.C., ICC Capital Management, Inc., and Agincourt Capital Management, L.L.C. These accounts give Fifth - Third Bank the custodianship but give Rockwood Capital Advisors, L.L.C., ICC Capital Management, Inc. And Agincourt Capital Management, L.L.C. the authority to manage the investments. These assets are invested in accordance with the specific investment guidelines as set forth in the Plan's Investment Policy. Investment management and custodial fees are calculated quarterly as a percentage of the fair market value of the Plan's assets managed. Further, the Plan's investments included an alternative investment and a mutual fund. The alternative investment fund invests primarily in foreign securities and funds. The investments in the underlying funds are generally valued at fair value as determined by the management of the fund by reference to the value of the underlying securities and fund's assets, if available, or by the valuation of a fund's underlying assets as provided by the general partner or investment manager, if the assets are not publicly traded. The funds may also hold certain investments which may be valued by a single market marker. While the fund managers use their best judgment in estimating the fair values of underlying fiends, there are inherent limitations in any estimation technique. 14 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 6. Deposits and Investments (Continued) Investments (Continued) Accordingly, the fair values of alternative investment funds have been estimated by the Plan's management in the absence of readily ascertainable market values. Therefore, the values of such funds are not necessarily indicative of the amount that could be realized in a current transaction. The fair values may differ significantly from the values that would have been used had a ready market for the underlying funds existed, and the differences could be material. Future confirming events will also affect the estimates of fair value, and the effect of such events on the estimates of fair value could be material. The alternative investment find exposes the Plan to certain risks, including liquidity risks, counterparty risks, foreign political, economic, and governmental risks, and market risk. In addition, these investments may have initial lock -up periods, as well as restrictions for liquidating positions in these funds, that make the investment non -current and non -marketable. The Plan's investments are uninsured and unregistered and are held in a custodial account in the Plan's name. 15 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 6. Deposits and Investments (Continued Investments (Continued) The Plan held no investments that individually represent 5% or more of the Plan's net assets available for benefits during the years ended September 30, 2010. The Plan held the following fixed investments as of September 30, 2010: Overall Credit Rating Average % (Standards & Effective of Fair Value Poor's and Duration Investment Type Fund 9/30/10 Moody's) (Years) U.S. Government obligations 4.2% $ 790,766 A -AA 8.3 U.S. Government agency obligations 14.2 2,641,711 A -AA 5.9 Domestic corporate bonds 17.8 3,316,882 A -AA 3.4 International corporate bonds 3.5 619,316 A -AA 2.8 Temporary Investment Fund 8.5 647,491 AAA N/A Total 44.0% $ 8.016.166 Credit Risk - Credit risk is the risk that a debt issuer will not fulfill its obligations. Consistent with state law the Plan's investment guidelines limit its fixed income investments to a quality rating of `A' or equivalent as rated by one or more recognized bond rating service at the time of purchase. Fixed income investments which are downgraded to `BAA' or equivalent must be liquidated within a reasonable period of time not to exceed twelve months. Fixed income investments which are downgraded below `BAA' shall be liquidated immediately. 16 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 6. Deposits and Investments (Continued) Investments (Continued) The Plan's investment policy which conforms to the Florida Statutes was adopted and contains the following sections: I. Scope 2. Investment objectives 3. Performance measurement 4. Investment and fiduciary standards 5. Authorized investments 6. Maturity and liquidity requirements 7. Portfolio composition 8. Risk and diversification 9. Expected annual rate of return 10. Third -party custodial agreements 11. Master repurchase agreement 12. Bid requirement 13. Internal controls 14. Continuing education 15. Reporting 16. Filing of investment policy 17. Valuation of illiquid investments Interest Rate Risk - Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment in debt securities. Generally, the longer the time to maturity, the greater the exposure to interest rate risk. Through its investment policies the Plan manages its exposure to fair value losses arising from increasing interest rates. In this regard the Plan adopted the Merrill Lynch Government Corporate Bond Index (MLGC) bench mark. The Plan further limited the effective duration of its fixed investment portfolio to between 50% and 150% of the duration of the MLGC duration. 17 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 6. Deposits and Investments (Continued) Investments (Continued) Custodial Credit Risk - Custodial credit risk is defined as the risk that the Plan may not recover cash and investments held by another party in the event of a financial failure. The Plan requires all securities to be held by a third party custodian in the name of the Plan. Securities transactions between a broker -dealer and the custodian involving the purchase or sale of securities must be made on a "delivery vs. payment" basis to ensure that the custodian will have the security or money, as appropriate, in hand at the conclusion of the transaction. The investments in mutual funds are considered unclassified pursuant to the custodial credit risk categories of GASB Statement No. 3, because they are not evidenced by securities that exist in physical or book entry form. Investment in Foreign Markets - Investing in foreign markets may involve special risks and considerations not typically associated with investing in companies in the United States of America. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and future adverse political, social, and economic developments. Moreover, securities of foreign governments may be less liquid, subject to delayed settlements, taxation on realized or unrealized gains, and their prices are more volatile than those of comparable securities in U.S. companies. Foreign Tax Withholdings and Reclaims - Withholding taxes on dividends from foreign securities are provided for based on rates established via treaty between the United States of America and the applicable foreign jurisdiction, or where no treaty exists at the prevailing rate established by the foreign country. Foreign tax withholdings are reflected as a reduction of dividend income in the statement of operations. Where treaties allow for a reclaim of taxes, the Fund will make a formal application for refund. Such reclaims are included as an addition to dividend income. 18 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 6. Deposits and Investments (Continued) Investments (Continued) The Plan's investments at both fair value and cost or adjusted cost as of September 30, 2010 and 2009 are summarized as follows: 2010 2009 Investments Cost Fair Value Cost Fair Value U.S. Government obligations $ 718,113 $ 790,766 $ 261,005 $ 271,855 U.S. Government agency obligations 2,532,884 2,641,711 2,660,170 2,743,849 Domestic corporate bonds 3,059,396 3,316,882 3,038,611 3,171,659 International corporate bonds 561,703 619,316 - - Domestic stock 6,961,138 7,779,453 6,489,581 6,700,990 International stock 433,502 595,252 - - International equity mutual fund 1,266,785 1,977,663 1,266,785 1,804,119 Temporary investment funds 647,491 647,491 931,982 931,982 Total $ 16,181,012 $ 18,368,534 $ 14,648,134 $ 15,624,454 19 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 7. Net Increase (Decrease) in Realized and Unrealized Appreciation of Investments The Plan's investments appreciated (depreciated) in value during the years ended September 30, 2010 and 2009 as follows: 2010 2009 Realized Unrealized Realized Unrealized Appreciation Appreciation Appreciation Appreciation (Depreciation) (Depreciation) Total (Depreciation) (Depreciation) Total Investments at fair value as determined by quoted market price: U.S. Government obligations $ 9,944 61,803 71,747 $ (3,338) $ 16,226 $ 12,888 U.S. Government agency 19,344 25,148 44,492 21,297 114,565 135,862 Domestic corporate bonds 37,622 154,220 191,842 (81,738) 359,955 278,217 International corporate bonds 9,055 27,831 36,886 - - - Equity mutual fund - - - (1,027,645) - (1,027,645) Domestic stock 230,196 539,980 770,176 (560,023) 1,040,248 480,225 International stock 8,111 161,750 169,861 - - - International equity mutual fund - 173,544 173,544 - 537,334 537,334 Net increase (decrease) in realized and unrealized appreciation of investments $ 314,272 $ 1,144,276 $ 1,458,548 $ (1,651,447) $ 2,069,328 $ 416,891 The calculation of realized gains and losses is independent of the calculation of net appreciation (depreciation) in the fair value of plan investments. Unrealized gains and losses on investments sold in 2010 that had been held for more than one year were included in net appreciation (depreciation) reported in the prior year. FA CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 S. Investment and Administrative Expenses Investment and administrative expenses for the years ended September 30, 2010 and 2009 are slunmarized as follows: 2010 2009 Investment Administrative Investment Administrative Expenses Expenses Expenses Expenses Actuary $ - $ 12,366 $ - $ 18,532 Audit - - - - Dues and subscriptions - 650 - 600 Fiduciary insurance - 4,636 - 2,248 Custodial fees 5,734 - 6,401 - Investment management fees: Rockwood Capita Advisor 23,559 - 25,001 - ICC Capital Management, Inc. 22,671 - 20,115 - Baring Asset Management, Inc. 12,587 - 7,263 - Agingcourt Capital Management, L.L.C. 17,944 - 22,114 - Legal - 6,743 - 11,912 Office expense - - - 1,523 Performance monitor 19,000 - 23,750 - Seminars and travel - 11,769 - 16,013 Secretarial - 494 - 645 Total $ 101,495 $ 36,658 $ 104,644 $ 51,473 Percent of net assets 0.54% 0.20% 0.66% 0.32% 21 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 9. Plan Amendments There were no Plan amendments during the fiscal year ended September 30, 2010. The Plan was amended during the fiscal year ended September 30, 2009 as follows: A. Members with at least 25 years of credited service who elect to retire on or before September 1, 2009 will receive an immediate unreduced retirement benefit. B. Members who terminate employment with the City of Ocoee prior to October 1, 1991 and became or will become reemployed on or after October 1, 1991 shall be grated credited service for the total number of years and fractional parts of years of service as a General Employee with the City of Ocoee prior to October 1, 1991. C. The Mayor and City Commissioners shall have a Plan entry date equal to the date of election to office. The current ordinance provides a Plan entry date which is the later of election to office and October 1, 1997. Current Adjusted Participant Plan Entry Plan Entry Anderson, Scott 10/01/1997 11/27/1995 Hood, Gary 10/19/2005 10/19/2005 Johnson, Jr., Leon 10/01/1997 3/16/1988��� Keller, Joel 03/21/2006 03/21/2006 Vandergrift, Scott 10/01/1997 11/04/1988(2) Mr. Johnson's current term in office began March 16, 1999. The adjusted Plan entry date shown above accounts for 11 years of credited service from 1986 though 1997. (2) Mr. Vandergrift's current term in office began November 4, 1992. The adjusted Plan entry date shown above accounts for 4 years of credited service from 1967 - 1969 and 1973 - 1975. The actuarial impact statement provided that the above changes increased the City's contribution rate from 15.30% to 15.37% of annual payroll. 22 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 10. Actuarial Assumption Changes In conjunction with the Plan's actuarial valuation dated October 1, 2009, the Plan's mortality assumption was changed from the 1983 Group Annuity Mortality Table to the RP2000 (combined health) table. This change did not increase the City's contribution rate. 11. Mortgage -Backed Securities The Plan invests in mortgage -backed securities representing interest in pools of mortgage loans as part of its interest rate risk management strategy. The mortgage -backed securities are not used to leverage investments in fixed income portfolios. The mortgage -backed securities held by the Plan were guaranteed by federally sponsored agencies such as: Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. All of the Plan's financial investments are carried at fair value on the Statement of Plan Net Assets included in investments. The gain or loss on financial instruments is recognized and recorded on the Statement of Changes in Plan Net Assets as part of investment income. 12. Commitments As described in Note 1, certain members of the Plan are entitled to refunds of their accumulated contributions, without interest, upon termination of employment with the City prior to being eligible for pension benefits. At September 30, 2010, aggregate contributions from active members ofthe Plan were approximately $3,900,000. The portion of these contributions which are refundable to participants who may terminate with less than five years of service has not been determined. 23 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO FINANCIAL STATEMENTS September 30, 2010 and 2009 13. Designation A portion of the plan's net assets are designated for benefits that accrue in relation to the DROP accounts as further described in Note 1. Allocation to DROP plan accounts for the year ended September 30, 2010 are presented below as determined in the most recent actuarial information available: Designated for DROP accounts (fully funded) $ 192,347 Total designated plan net assts 192,347 Undesignated plan net assets 18,453,167 Total plan net assets $ 18,645,514 24 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND SCHEDULE OF FUNDING PROGRESS September 30, 2003 through September 30, 2009 Actuarial Accrued UAAL as Actuarial Actuarial Liability Unfunded Percentage Valuation Value (AAL) AAL Funded Covered of Covered Date of Assets Entry Age (UAAL) Ratio Payroll Payroll September 30 (a) (b) (b-a) a/b (c) (b-a)/c) 2009 $ 17,570,369 $ 24,514,314 $ 6,943,945 71.67% $ 8,506,240 81.63 % 2008 16,439,261 21,522,873 5,083,612 76.38 7,904,794 64.31 2007 15,159,555 19,313,744 4,154,189 78.58 7,347,632 56.54 2006 13,421,299 16,368,182 2,946,883 82.00 6,685,539 44.08 2005 11,741,104 15,493,289 3,752,185 75.78 5,885,653 63.74 2004 10,604,164 12,214,901 11,610,737 86.81 5,835,922 27.60 2003 9,609,758 11,270,865 1,661,107 85.26 5,802,144 28.63 25 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND SCHEDULE OF CONTRIBUTIONS FROM THE CITY September 30, 2003 through September 30, 2010 Year Annual Actual Ended Required Percentage September 30 Contribution Contributed 2010 $ 1,324,799 100.0% 2009 108,192 100.0 2008 901,342 100.0 2007 627,790 100.0 2006 708,823 100.0 2005 673,190 100.0 2004 695,565 100.0 2003 617,788 100.0 26 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND NOTES TO THE ADDITIONAL SCHEDULES September 30, 2003 through September 30, 2010 The information presented in the required supplementary schedules on pages 22 and 23 was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: September 30, 2009 Entry Age Normal Level percentage of payroll, closed 29 years Four year smoothed market Investment rate of return 8.0% Post retirement benefit increases 0.0 Projected salary increases 6.0 Inflation rate 3.0 27 CITY OF OCOEE MUNICIPAL GENERAL EMPLOYEES' RETIREMENT TRUST FUND MEMORANDUM ON REVIEW OF INTERNAL CONTROL STRUCTURE September 30, 2010 DAVIDSON, JAMIESON & CRISTINI, P.L. Certified Public Accountants Davidson, Jamieson & Cristini, P.L. Certified Public Accountants 1956 Bayshore Boulevard Dunedin, Florida 34698-2503 (727)734-5437 or 736-0771 FAX (727) 733-3487 Members of the Firm John N. Davidson, CPA, CVA Harry B. Jamieson, CPA Richard A. Cristini, CPA, CPPT, CGFM August 31, 2011 Board of Trustees City of Ocoee Municipal General Employees' Retirement Trust Fund Ocoee, Florida Member American Institute of Certified Public Accountants Florida Institute of Certified Public Accountants In planning and performing our audit ofthe financial statements of City of Ocoee Municipal General Employees' Retirement Trust Fund (Plan) for the year ended September 30, 2010, we considered the Plan's internal control structure to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal control structure. However, during our audit, we observed certain matters that are opportunities for strengthening internal controls and operating efficiency. We present our observations and recommendations under the following captions for your consideration: CURRENT YEAR Board Minutes Travel and Training Authorization Letters Paid Invoices Control Structure CURRENT YEAR Board Minutes During the course of our audit procedures of the Plan's financial statements for the fiscal year ended September 30, 2009 we reviewed the Board's minutes for completeness and disclosure issues. Our findings are presented below: A. The approved minutes did not clearly disclose and identify by the payee and amount approved payments for refunds, partial lump sum payments (to include the percentage elected) and age and service retiree benefits. B. The minutes failed to disclose the Board's approval of the sale of the Voyageur investment, the purchase of the Baring Focused Investment or the sale of the Vanguard investment. C. Although the Board's minutes documented the Board's approval for payment of the Plan's operating invoices a detail schedule of the payees and the amount approved was not attached to or listed in the minutes. We were therefore unable to trace any paid invoice to the Board's minutes. During our audit procedures for the fiscal year ended September 30, 2010 and subsequently we observed that the above findings were being addressed through the preparation and approval of the Plan's invoice report and activity report. The primary way that the Board documents its due process procedures to meet its fiduciary responsibility is through the proper preparation of the minutes of the Board's meetings. We also reminded the Board that it can request and receive a certificate of sales tax exemption from the state which can be provided to hotels and other vendors. The plan is a legally constituted entity that is a political subdivision of the United States government which according to the IRS and the State of Florida is exempt from Florida sales tax. 2 Travel and Training Authorization Letters In order to improve the Board's control and the audit trail over travel and training letters of authorization we recommend that these letters reflect not only the individuals' traveling and the amounts of the respective checks to be drawn but should disclose the overall total for the expenditure. The custodian frequently records the total of the amount requested without listing individual checks issued. (See attached documents.) This matter has been addressed by the board. I � cll Nsiv, TnnrmCiitrct< *111 rtW, 111sYt�l Yfi EYa Idi9 led Emluf, Riris Petal- �, luait 1iabeilsh. TEA Atkiphl'SIpl Jun►Isry 6]�209 Kimbtrly K-irlm:LN Fillb Third Ilu1k f�a2iWlinn�l;1e:?, V+UN i 144,-31147 III n.fiiiA tliht Qan;1t 34bl1 far (Q,)WMII) 1�'euc find iP.c eeixiiiiny ijtw!s-wiira oa for iitrcioiu.G a1.Ibe riarida i:'ubtic Fr=cinri'1_vsiea x1maf rr� Neld In Sr ,g9901140 N Y�'ruky I "- l", 7009, Tho blu sigpw= zt do ballma of t�Js I ltr Frtigi'r ic. 1tqulPLNl; ulhuriceliuu by two rm Jxvi. (7-4t"_k aucded: Lodging: Comfort $uitei M Unminpree U. a Dum! :it.�7d1y�11c�IFlC,FI, 1317�3 J04��111`95;�? Advarg 17r c�`�,r a pcxlwa: (ru viid Iral�il� in l6a amcnnl n� �l� 4' Ir trie �11OWti p t:kl ki 11jr )bitk Ann 0:1110e A'sdy West WVid 4%'llftfiff ffyxu shauld lave any ifi esam,: nr,:anali 9, filr0e rt+ra Gta locx1flaci lip l xnycella(r��"�7 Atli -}lie;► M ICH1, whir i311itplain Adlnillf.;Iurrr, .r1' I`L"11C T, Kendy David Wheelar, 'Irss!tc P I no s o rr,ki.1dwda to %rLr. jjiiir:i} i- #}• cif 1 �� 4'1., Ye LtitN i"Yxnr:, fir, 3JFF1 4 MUM S. 'qmItV'fAMeerEfI Qity'Kinqu 84.'�'-Tt nma im rf Cary fryf (WE 11 7 Ainjqlx Guy Hoed, Dirtric.� I 8-'ZI Amdetwn, IYHT-Let 2 '301A F. Rvlltr, mstr...-tI Fl,-Yida Public PULsibl) Trj-%Iccs Awiciation Tiuitee Schnol St, 21 ngmstbte. Fl. February ] L FOx-my 4, 2009 RtSiLitrarlonprid 1,lop atiorhok] Lod.�qg.- Reimissawe Resni $199.00 per nij,.ht 500 Legacy Trail St. kigustine, IL 32091 904-90-800 Advance for atbu npcases: (N--d and tnm%LI) $ ADD gm,01[cs $11410 mI]P.gc AIDU9 mcals $272.59 'C it" CT L'k-2 - 150 N UkPihom Drive - Cow , f3InrfJn-,i47Fj I *rg: (407 ) 4 0 )6-56- 0 3 1) V'pW W, C.. j, J) U Paid Invoices Our audit of the fiscal year ended September 30, 2009 included an examination of the Plan's paid invoices. The Plan's paid bills for all years and periods were filed together in a single file pocket folder. The Plan's paid bills must be segregated and filed by year. To avoid or at least reduce the possibility of misfiling invoices we recommended that an alpha pocket file be set up for each year's paid bills. We also noted that the current paid bill file contained other documents like the summary listing of investments held by the Plan. We recommended that the paid bill file be maintained separately from other Plan correspondence and documents. Finally, we recommended that each invoice be marked with the date approved for payment by the Board. This matter has been addressed by the Board. Control Structure It appears that the Plan does not currently have an administrator who is assigned all of the duties of an administrator. One of those duties is to review the monthly pension check register as well as the monthly 5/3 custodial statements and the Plan's monthly reports of its alternative investment. During the 2009 year an unidentified expenditure for $1,511.40 was charged to the Plan's receipts and disbursement (R&D) custodial report. There was also a charge for an overnight posting for $15.00 which was charged with no explanation in the Plan's file. Upon further investigation the custodian admitted that a Plan travel and training invoice had been charged to another customer's account. The $15.00 charge covered an overnight delivery charge of a check for an FPPTA registration to the St. Augustine School. Control Structure (Continued) We also noted that the central plan files are maintained by different employees yet no one keeps a copy of the monthly 5/3 custodial investment reports. The HR department keeps copies of the paid bills, monthly pension check records and the travel, training and dues invoices. On further examination we learned that the only copy of the custodian's monthly statements received are sent to the City's finance department for its use. No copies are maintained under the control of the Plan for the Board's review. A control deficiency occurs when the design or operation of a control does not allow management or staff during the performance of their normally assigned duties to prevent or detect a financial statement misstatement. While the items described above did not result in a financial loss to the Plan, we recommended that the Board revisit and restructure its controls in each of these systems. We further recommended that absent an administrator, that a Board member review each monthly custodial statement and further the Board should approve these statements and order them held for audit. This matter has been addressed by the Board. 7 We will review the status of these comments during our next audit engagement. We have already discussed many of these comments and suggestions with Plan personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. DAVIDSON, JAMIESON & CRISTINI, P.L. Ocoee General Employees' Pension Plan Investment Performance Review September 30, 2011 WV7W.B0GDA1-1NCRQUI'.001M THE BOGDAHN _.. W/ GRoup, simplifying your investment and frducim y decisions 3rd Quarter 2011 Market Environment Page 2 TIIE BOGDAHN GROUP. Law Offices Christiansen & Dehne r, P.A. 63 Sarasota Center Blvd. Suite 107 Sarasota, Florida 34240 • 941-377.2200 9 Fax 941-377.4848 MEMORANDUM TO: PENSION BOARD CLIENTS FROM: CHRISTIANSEN & DEHNER, P.A. RE: SENATE BILL l 128: BENEFIT CALCULATION ISSUES DATE: AUGUST 22, 2011 Recently adopted Senate Bill 1128 amends Chapters 112, 175 and 185, Florida Statutes. Section 112.66(l 1), which is applicable to general employee, police and fire plans, now provides as follows: "For non -collectively bargained service earned on or after July 1, 2011, or for service earned under collective bargaining agreements entered into on or after July 1, 2011, when calculating retirement benefits, a defined benefits system or plan sponsored by a local government may include up to 300 hours per year of overtime compensation as specified in the plan or collective bargaining agreement, but may not include any accrued unused sick leave or annual leave. For those members whose terms and conditions of employment are collectively bargained, this Section is effective for the first agreement entered into on or after July 1, 2011 ..." Chapter 175, covering firefighters, has been amended to revise Section 175.032(3) to amend the definition of "salary" or "compensation" to read: "Compensation" or "salary" means, for noncollectively bargained service earned before July 1, 2011, or for service earned under collective bargaining agreements in place before July 1, 2011, the fixed monthly remuneration paid a firefighter. If remuneration is based on actual services rendered, as in the case of a volunteer firefighter, the term means the total cash remuneration received yearly for such services, prorated on a monthly basis. For noncollectively bargained service earned on or after July 1, 2011, or for service earned under collective bargaining agreements entered into on or after July 1, 2011, the term has the same meaning except that when calculating retirement benefits, up to 300 hours per year in overtime compensation may be included as specified in the plan or collective bargaining agreement, but payments for accrued unused sick or annual leave may not be included. MEMORANDUM Page 2 August 22, 2011 Chapter 185, covering police officers, has been amended to revise Section 185.02(4) to amend the definition of "salary" or "compensation" to read: "Compensation" or "salary" means, for noncollectively bargained service earned before July 1, 2011, or for service earned under collective bargaining agreements in place before July 1, 2011, the total cash remuneration including "overtime" paid by the primary employer to a police officer for services rendered, but not including any payments for extra duty or special detail work performed on behalf of a second party employer. A local law plan may limit the amount of overtime payments which can be used for retirement benefit calculation purposes; however, such overtime limit may not be less than 300 hours per officer per calendar year. For noncollectively bargained service earned on or after July 1, 2011, or for service earned under collective bargaining agreements entered into on or after July 1, 2011, the term has the same meaning except that when calculating retirement benefits, up to 300 hours per year in overtime compensation may be included as specified in the plan or collective bargaining agreement, but payments for accrued unused sick or annual leave may not be included. Pursuant to its terms, Section 112.66(11) becomes effective on July 1, 2011 for those plans which do not have a collective bargaining agreement and on the effective date that a new bargaining agreement is entered into (when all parties sign) on or after July 1, 2011 for those that have a collective bargaining agreement. ("Effective Date") Plans that do not currently include lump sum payments of sick and vacation time or overtime in the definition of "compensation" or "salary" are not affected by these changes. While this change is effective on the applicable effective date even if the plan has not been amended, changes will have to be made to all affected police officer, firefighter and general employee pension plans in order to comply with the restrictions set forth in the above section. Additional issues arise with respect to the application of the rules regarding the calculation of lump sum payments of sick and vacation time in order to comply with the new restrictions. In order to deal with these issues, it will be necessary for the Board, the union (if applicable), and the City to agree on the means by which the above restrictions will be applied. We would recommend that the pension plan be amended to incorporate the procedures which have been agreed upon in order to comply with the new restrictions. We recommend that the following be considered: MEMORANDUM Page 3 August 22, 2011 First, we recommend that the Board ask the City to run a calculation of all sick and vacation time that each member of the pension plan has accrued as of the applicable effective date. Anyone who retires on or after the effective date and who receives lump sum payments of sick and vacation time which would otherwise be included for pension purposes as "salary" under the current definition, may receive pension credit for such sums, subject to the following considerations. 2. Example 1. An individual who has 200 hours of accrued vacation time (or sick time) as of the effective date and retires one month after the effective date after having accrued an additional five hours of vacation time and who has not used any additional vacation time during this subsequent month would be permitted to receive credit for the 200 hours of vacation time accrued as of the effective date, but would not be permitted to receive pension credit for the 5 hours accrued after the effective date. Example 2. if an individual had 200 hours of vacation time as of the effective date and accrues another 80 hours of vacation time during the next year and then retires, he would again be permitted to receive pension credit for the 200 hours of vacation time accrued as of the effective date, but not for any additional accruals after that date. 4. Example 3. Assume the same as Example 2., above, but after having accrued the additional 80 hours, the member takes 40 hours of vacation during the subsequent year leaving him with 240 hours of accrued vacation time. In this example, the Board would have to consider whether the 40 hours which is actually used would deplete the accruals prior to the effective date, or deplete the accruals after the effective date. In other words, First -In First -Out (FIFO) or Last -In First -Out (LIFO). Either option is legally acceptable. Interpreting this provision in the most advantageous way for plan members would dictate using the LIFO method, which means that the 40 hours of vacation time used would be deducted from accruals after the effective date, and therefore, would not reduce the 200 hours of vacation accrued as of the effective date. This methodology must be determined by the Board/City/Union. Exam Ip e 4. Assume the same as Example 3., above, but instead of using 40 hours of vacation time, the member uses 100 hours of vacation time, so that his accrued vacation time is reduced to 180 hours. In this instance, if he retired at this point, the City would pay him for 180 hours of accrued vacation time and he would receive pension credit for only 180 hours. MEMORANDUM Page 4 August 22, 2011 6. Example S. Assume the same as Example 4., above, but after he took the 100 hours of vacation to reduce his accrued time to 180 hours, he continued to work and earned another 40 hours of vacation time, thereby restoring his lump sum accrued vacation time to 220 hours. If he retired at this point, he still would only be able to receive pension credit for 180 hours of lump sum vacation time because the restoration of the accrued vacation time from its low of 180 hours is attributable to accruals after the effective date and therefore, cannot be counted for pension purposes. An additional decision needs to be made concerning the value of the lump sum sick and vacation time to be included for pension purposes at the time of retirement. Will the accumulated lump sum sick or vacation hours be valued at the hourly rate earned at the time of retirement, or at the hourly rate in effect on the effective date? Either option is legally acceptable. The position which would be most advantageous to the individual members would be to calculate the sick and vacation time based upon his rate of pay at the date of retirement, particularly since this is the actual amount which is received by the individual for the unused sick and vacation time. This issue must also be determined by the Board of Trustees, the City and any union, so that we can establish a consistent basis for calculating retirement benefits. 8. There may be other acceptable methods for handling these issues, such as freezing all or part of the accumulated sick/vacation time as of the effective date and not allowing this time to be used by the member until it is paid out in a lump sum at retirement, at which time pension credit will be given. 9. With regard to the limitation on overtime,we need to determine whether we will apply the 300 hour annual limitation on a fiscal or calendar year basis. Either option is legally acceptable. Also, we would recommend not including any hours treated as overtime pursuant to the Fair Labor Standards Act (FLSA) when calculating the 300 hours of includible overtime. Once agreement is reached on the three benefit calculation issues above, we can prepare an ordinance to amend the plan to incorporate the new legislation and the three benefit calculation issues. Law Offices Christiansen & Dehner, I.A. 63 Sarasota Center Blvd. Suite 107 Sarasota, Florida 34240 • 941-377-2200 • Fax 941.377.4848 MEMORANDUM TO: PENSION BOARD CLIENTS FROM: CHRISTIANSEN & DEHNER, P.A. RE: SENATE BILL 1128: BENEFIT CALCULATION ISSUES - SUPPLEMENT DATE: OCTOBER 12, 2011 Based on further guidance received from the State the following information is provided to supplement our August 22, 2011 memorandum. Paragraph 6 of our August 22, 2011 memorandum provided: 6. Example 5. Assume the same as Example 4., above, but after he took the 100 hours ofvacation to reduce his accrued time to 180 hours, he continued to work and earned another 40 hours of vacation time, thereby restoring his lump sum accrued vacation time to 220 hours. If he retired at this point, he still would only be able to receive pension credit for 180 hours of lump sum vacation time because the restoration of the accrued vacation time from its low of 180 hours is attributable to accruals after the effective date and therefore, cannot be counted for pension purposes. The State has now indicated that it is permissible, but not mandatory, to set the amount of sick or annual leave accrued on the effective date as the maximum amount that can be used for pension purposes. Accordingly, the pension calculation can include the lesser of the amount of sick or annual leave time accrued on the effective date or the actual amount of sick or annual leave time for which the retiree receives payment at the time of retirement, regardless of whether the amount of sick or annual leave was at some time prior to retirement, reduced below the amount on the effective date. CORPORATE HEADQUARTERS 801 North Brand Boulevard Suite 800 Glendale, CA 91203 818.545.1152 Fax: 818.545.8460 A M E R I CA N www.americanreal.com REALTY ADVISORS. Institutional Real Estate Investment Management May 5, 2011 Via Electronic Mail Lee Dehner, Esq. Christiansen & Dehner, P.A. 63 Sarasota Center Boulevard, Suite 107 Sarasota, FL 34240 Re: City of Ocoee Municipal General Employees' Retirement Trust Fund American Core Realty Fund, LLC — Documents Dear Lee: American Realty Advisors is pleased to welcome the City of Ocoee Municipal General Employees' Retirement Trust Fund to the American Core Realty Fund, LLC and appreciates the Trust Fund's confidence in American demonstrated by its commitment to the Core Fund. In regard to the Trust Fund's commitment to the Core Fund, we enclose the following documents, for your review: ❖ The Core Fund's Offering Memorandum No. 520, revised March 21, 2011; ❖ The Core Fund's Fourth Amended and Restated Operating Agreement, dated March 12, 2008; ❖ A copy of the Amended and Restated Investment Management Agreement between American and the Core Fund, dated March 12, 2008; ❖ The Core Fund's Adoption Agreement; ❖ The Core Fund's Service Provider Disclosure Statement; ❖ American Realty Advisors' current Form ADV Part 2; A form of Consent and Authorization for Electronic Delivery; and An Investor Questionnaire. Please have the Trust Fund execute two original copies of the Core Fund Adoption Agreement and return them to me. After execution by American, one original copy of this document will be returned to the Trust Fund for its records. The Consent and Authorization for Electronic Delivery would allow American to deliver certain information that is required to be sent to clients, such as the quarterly reports, by Los Angeles a Atlanta o Chicago a San Francisco Lee Dehner, Esq. May 5, 2011 Page 2 AMERICAN REALTY ADVISORS:. electronic means, increasing the efficiency of distribution. To authorize this option, please have the Trust Fund review and execute the attached form and return it to my attention. Of course, should the Trust Fund require a hard copy of any such material, we would be happy to provide it promptly upon request. In addition, please have the Trust Fund complete the attached Investor Questionnaire which assists us in gathering important information related to the Trust Fund. If you have any questions or would like additional information, please contact me. Best regards, AMERICAN REALTY ADVISORS, a California corporation Mki Jay Butterfield, CFA Principal/Managing Director Direct Dial: (818) 409-3243 E-Mail: butterfield(@americanreal.com JB: mo Enclosures cc: Ms. Kristin Adrian Mr. Scott Darling Ms. Richelle Hayes Mr. Kirk Helgeson Mr. Stanley Iezman Mr. Tim Nash F:\F\W\ASVF_Client\Clients\Prospects\City of Ocoee Municipal General Emplo),ees' Retirement Trust Fund\Cover Letter 05.05.11.doc Law Offices Christiansen ,& Dehnelr9 P.A. 63 Sarasota: treater Blvd. Suiie 107 Sarasota, Florida 34240 • 941.377.2200 • Fax 941-377-4848 MEMORANDUM TO: City of Ocoee Municipal General Employees' Retirement Trust Fund FROM: Kristin Hill RE: Proposed 2012 Meeting Dates Listed below are the proposed 2012 meeting dates based on the previous year's schedules. Should they meet with the Board's approval, please let us know and we will put them on our calendar. Should there be any discrepancies with any of the dates and/or times, please do not hesitate o contact Kristin at the office, via phone at 941-377-2200 or E-Mail at kristin@edpension.com, and we will do the best we can to comply with your requests. ALL MEET ,,,cis VVILL BE HELD AT 10:00AM: February 1, 2012 May 2, 2012 August 1, 2012 November 7, 2012 Thank you. City of Ocoee Municipal General Employees' Retirement Trust Fund Activity from August 3rd 2011 through November 1 st 2011 DROP Participants- None for this period Retirees - 1 William T. Brown - Terminated his employment on 08/02/11 - Started Retirement Benefits 09/01/2011 Discontinued Retiree's Benefit Kendall D Fisher - Retired 10/01/2008 Refunded Contributions- 3 (Not vested) Joel W. Yoder (Not vested - employed from 9/30/2008 to 9/2/2011) Brett E. Butler (Not vested - employed from 8/28/2006 to 1/31/2011) Miguel A. Lugo (Not vested - employed from 10/18/2010 to 10/11/2011) Rollover Contributions- 1 (vested) Brian M. Pauline (Vested - employed froml0/10/1994 to 07/19/2011) Purchase of Service Credit - None this period Monthly Benefit Monthly Benefit $ 1,289.79 (Early Retirement Lifetime Only) (Plus 20 % PLOP Option in the amount of $42,331.43) $ 91.76 (Social Security to Age 63) (Discontinued benefit as of 9/1/11, reached age 63 08/10111) Refund Amount $ 5,461.63 $ 8,736.58 $ 2,234.14 Refund Amount $ 46,825.58 (Rollover to an IRA) City of Ocoee Municipal General Employees' Retirement Trust Fund Adjustments Report Activity from August 3rd 2011 through November 1st 2011 Amount Owed Adjustment for Retirees' Benefits - 2 to 11/30/2011 Calculation Judie Lewis - Terminated her employment 05/03/2002- Started retirement benefits on 06/01/2002 in the amount of $488.75. Benefits were calculated, and started, using estimates only. Final calculations after termination of employment were not issued. Monthly benefit should have been $513.28, difference of $24.53 per month. Correct monthly benefits should start on December 1st 2011. $ Martin Velie - Terminated his employment 8/12/2002. Started retirement benefits on 09/01/2002 in the amount of $285.29. Benefits were calculated, and started, using estimates only. Final calculations after termination of employment were not issued. Monthly benefit should have been $288.82, difference of $3.53 per month. Correct monthly benefits should start on December 1st 2011. $ Adjustment for Refunded Contributions- 1 Johnny Calvert- First hired on 06/22/1990 with first date of termination 08/18/1993. Returned to work 10/06/1993 and left on 05/31/1994. Refunded contributions were only for last period in the amount of $521.12. First period of employment, with contributions in the amount of $1,545.83 were not refunded to employee. Information confirmed with SunTrust, Bank Custodian at the time. Dennis R. Foltz- Hired on 03/19/2001. Refunded contributions were in the amount of $5,968.52 as per report received from Finance on 08/23/2002. Actual date of termination is 09/03/2002. Total amount of contributions refunded should have been $6,350.40. Amount confirmed with Finance and SunTrust confirmed no other checks issued for him. 2,796.42 $24.53 * 114 months 391.83 $3.53 * 111 months Amount Owed 1,545.83 381.88 SUMMARY OF INVOICES August 3rd 2011-November 1st 2011 REQUESTED FOR PERIOD PAYMENT DATE 08/04/11 08/01/2011 - 08/01/2011 08/09/11 04/30/2010 - 06/30/2010 08/10/11 04/01/2011 - 06/30/2011 08/11/11 07/14/2011 - 07/14/2011 08/22/11 03/28/2012 - 03/31/2012 09/01/11 04/01/2011 - 06/30/2011 09/13/11 08/01/2011 - 08/31/2011 09/23/11 07/01/2011 - 09/30/2011 09/28/11 10/02/2011 - 10/05/2011 09/28/11 10/02/2011 - 10/05/2011 10/12/11 10/02/2011 - 10/05/2011 10/12/11 07/01/2011 - 09/30/2011 10/12/11 09/01/2011 - 09/30/2011 10/13/11 08/03/2011 - 08/03/2011 10/25/11 07/01/2011 - 09/30/2011 COMPANY TOTAL AMOUNT Davidson, Jamieson & Cristini- Progress Bill $ 4,000.00 Barings Asset Management, Inv# 4968- 2nd Qtr $ 3,990.77 Agincourt Capital Management 2nd Qtr $ 5,079.91 Christiansen & Dehner Inv 19948 $ 102.34 FPPTA- Wall Street Program- Registration Fee Reimbursement for Russell Wagner $800.00 Barings Asset management, Inv# 10361- 2nd Qtr $ 5,007.99 Christiansen & Dehner, PA- Inv 20115 $ 1,347.00 The Bogdahn Group- Inv# 6791 $ 5,500.00 FPPTA- Trustees' School in Tampa- Registration for Pat Gleason $ 450.00 FPPTA- Trustees' School in Tampa- Expenses Reimbursement (Hotel, Travel, Food) $ 897.22 FPPTA- Trustees' School in Tampa- Expenses Reimbursement Adjustment (Hotel) $ 48.04 ICC Capital - Inv 57531589 $ 6,041.79 Christiansen & Dehner, P.A.- Inv# 20277 $ 239.85 Stella W. McLeod- Inv# 113 $ 100.00 Fifth Third Bank- Inv# 3458226 $ 1,695.21