CGFO Finanical Administration

Measure of risk-adjusted performance

http://www.investopedia.com/video/play/trading-with-alpha/

The measure of a fund's or a stock's risk in relation to the market or to an alternative benchmark

The ratio of a change in the option delta to a small change in the price of the asset on which the option is written

Public Employee Retirement System

Comprehensive Annual Financial Report

A CAFR for a PERS

The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note

The graphic depiction of the relationship between the yield on bonds of the same credit quality but different maturities

A measure of a portfolio's excess return relative to the total variability of the portfolio.

http://www.investopedia.com/video/play/sharpe-ratio/

A stock with a small capitalization, meaning a total equity value of less than $500 million

A Person or company that estimates the value of claims pending and the estimated reserves needed

Is the process of assessing the viability of a PERS

Net Pension Obligation

A pension plan obliging the sponsor to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor

A pension plan where a sponsor is responsible only for making specified contributions into theplan

A pension plan where a sponsor is responsible only for making specified contributions into theplan

An index that uses the capital asset pricing model to determine whether a money manager outperformed a market index

An indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Investors use ROE as a measure of how a company is using its money

Generally, book income as a proportion of net book value

Annual Required Contribution

Fire

Police

• Cover firefighters that perform state and municipal function
• Firefighters entitled to benefits in state
• Established minimum benefits and standards for operating and funding (Pension Trust Fund

5 best years of the last 10 years of credible service

• Can override statutes
• *Statute can cover public safety officers that include officers responsible for both police and fire
• *Described in 175.351

• Special FundƒíRecord Additions and Deductions
• ƒíNPO ¡
• VNet Pension Obligation.Calculated by actuary.
• Arises when ARC (Annual Required Contribution) is not fully funded
• ¡VSee GAAFR Chapter 12.NotUAAL
• ¡VUnfunded Actuarial Accrued Liability.Future value ¡VPresent value of assets

• Five Members.
• Two .full-time Firefighters (175.032).
• Two .legal residents appointed by a governing body.
• One .chosen by majority of the other four members
• .Each serve a two-year term .may succeed himself

• A legal entity that maintains Retirement Plan Assets.
• Employer .deposit quarterly
• .Employee .deposit immediately.
• State .excise tax (1.85% on real and personal property insurance).
• Must be deposited with trustwithin 5 days of receipt.
• Investment income.
• Meet at least quarterly

• Invest ¡ not more than 5% in common stock or capital stock from any one company, not more than 5% of aggregate
• ƒíInvest ¡Vnot more than 25% in foreign securities.
• ƒíHire professional consultants to assist

• Actuary.
• Legal Counsel.
• Technical Advisors.
• Performance Review .at least every 3 years.
• Money Manager .can have more than one
• .Custodians .reports, pay retirees

• 10 years age 55
• 25 years age 52
• 2% x years of credited service x average final compensation
• .Received first day of the month

• Some options may reduce monthly income
• Payable based on option selected
• Death before eligible (175.201)
• Contributions .100% of employee contributions.
• Based on early or normal retirement age (at least 10 years)

• Separation before eligible (175.211).
• Prior to 10 years (accumulated aggregate) 100% of employee contributions.
• Greater than 10 years .after age 50 become eligible based on 175.162
• .Impairment of health (175.231).
• Disease in line of duty .presumption.Accident suffered in the line of duty, tuberculosis, hypertension, heart disease

• Send to Division of Retirement
• Actuarial valuation –every 3 years
• Actuarial impact for plan changes
• Agree with CAFR –part of entity or separate report21

• Long-term investors
• Virtually perpetual
• Articulate specific goals
• ◦Is plan mature or new?
• ◦Is the plan under funded or fully funded?

• Exercise due diligence
• Key risk management tool.
•     * Can respond to sudden legislative changes
• Express asset allocation strategy to manage external and internal risks

• Statement of goals, purpose, mission –100%
• 2.Identification of decision makers –100%
• 3.Performance measurement (benchmark
• )4.Manage risk on individual securities
• 5.Manage risk on overall portfolio
• 6.Money manager guidelines
• 7Guidelines for other investment professionals
• 8.Legal standards.
• 9.Cost management
• 10.Transacting or brokering trades 

• Asset allocation -overall portfolio
• Manage risk -part of asset allocation
• .Strategy, level of risk.
• Can tolerate.
• Single security vs. diversification

• 1.Purpose
• 2.Roles/responsibilities
• 3.Standard of care
• 4.Asset allocation
• 5.Rebalancing
• 6.Investment guidelines
• 7.Reporting and monitoring
• 8.Corporate government

• *Based on age, years of services and compensation
• *At a future date, use mortality table28

• Process of managing an organization’s activities to minimize adverse effects of certain types of losses◦
• GASB 10

• Claims > Premiums = Loss
• Claims < Premiums = Gain

Assumes the risk and sets premiums accordingly

• Premium = Revenue
• Catastrophic losses minus revenue plus reserve pool equity
• IBNR-incurred but not reported claims

• 1.Record when event triggers coverage under policy
• 2.Based on estimate to settle claim
• 3.Accrue based on probable loss that can be reasonably estimated, record expense/liability

• ƒíUse experience factors
• ƒíImpact of inflation and other economic factors
• ƒíAllowed to discount to present value
• ƒíFixed amount on structured or contract settlements

• *Create a safe workplace
• *Prevent financial losses
• *Provide stability (budget)

• ƒíReduce lost workdays
• ƒíPrevent day for accidental losses
• ƒíEliminate concerns associated with future projects

• Risk identification
• Risk evaluation
• Risk treatment
• Implementation

• Approach to managing operational and financial risk.
• *Investment portfolio policies (long-and short-term).
• *Diversification strategies (spread risk).
• *Custody of assets (procedures)

CLEOPPS

• .Physical.
• Legal.
• Operational.
• Political.
• Social.
• Economic.
• Cognitive

• Legislation that aims to curb the growing number of civil lawsuits and their attendant costs
• ƒíAttempt to make the legal environment more favorable (Caps or Limits)

Change in behavior due to purchase of insurance

• Industry has incentive
• ◦Require deductible
• ◦Higher deductible -reduce premium
• ◦Loss control program

Risk transfer –shift burden to another, purchase insurance or risk pool

Risk retention –assume risk responsibilities internally

Risk avoidance –Do not provide service

Loss Prevention and Control

• Protect and indemnify City against:
• Direct loss (garbage disposal)
• Indirect loss (workers’ compensation)

• Hold-harmless provisionNon-insurance risk
• Certain situations in contract Negligence
• Joint negligence

Agreements are not the panacea to transfer risk

• Create risk management policy
• Develop inspection programs
• Design safety
• Create claims investigation system
• Identify safety measures
• Develop disciplinary procedureEstablish review boards

Get staff involved

Gain employee "buy-in"

Investigate serious injury and accidents to provide safer environment and reduce risk