of the oakland municipal employees’ retirement system ... · action to approve a report and...

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- - - ORDER OF BUSINESS - - -

1. Action to approve the meeting minutes of the September 29, 2011 special board meeting.

2. Action to approve a report and recommendation from staff regarding over budgeted amounts listed on OMERS administrative expenses report for June 30, 2011.

3. Action to approve a report and recommendation from Williams-Adley and Company, OMERS financial auditor, regarding financial audit of OMERS fund for the fiscal year ending June 30, 2011.

4. Informational Report from staff regarding a memorandum for City Council review explaining the OMERS Board’s plan to assess the fesibility of annuties for OMERS retirees.

5. Informational report from staff regarding OMERS administrative expenses report through September 30, 2011.

6. Resolutions to be adopted # 4822 - 4824:

Resolution #4822

Resolution approving disability retirement continuance payments to Edna Clark, Spouse of Harld Clark.

Resolution #4823

Resolution approving death benefit payment to James Coon, Brother to Virginia Barcus.

Resolution #4824

Resolution approving service retirement continuance payments to Eugene Bissell, Spouse of Virginia Bissell.

7. Action to elect OMERS Board Officers and appoint Board Secretary for 2011-12.

8. Open Forum.

9. Future Scheduling.

Thursday, December 15, 2011 - 11:30am Sequoia Golf Club, Sequoia Room

4550 Heafey Rd, Oakland, California 94605

SPECIAL MEETING of the BOARD OF ADMINISTRATION of the OAKLAND MUNICIPAL EMPLOYEES’ RETIREMENT SYSTEM (“OMERS”)

Retirement Systems 150 Frank H. Ogawa Plaza Oakland, California 94612

All persons wishing to address the Board must complete a speaker's card, stating their name and the agenda item (including "Open Forum") they wish to address. The Board may take action on items not on the agenda only if findings pursuant to the Sunshine Ordinance and Brown Act are made that the matter is urgent or an emergency. Presentations are limited to three minutes. Oakland Municipal Employees’ Retirement Board meetings are held in wheelchair accessible facilities. Contact Retirement Systems, 150 Frank Ogawa Plaza, Suite 3332 or call (510) 238-7295 for additional information.

RETIREMENT BOARD MEMBERS

William C. Russell President, Elected Member

Carl E. Gilmore Vice President, Bank Rep

Appointed Member

James E. Hill Insurance Rep, Appointed Member

Courtney A. Ruby City Auditor, Member

Joseph T. Yew, Jr. City Treasurer, Member

Vacant Elected Member

Vacant Elected Member

AGENDA

SPECIAL OMERS Board Meeting September 29, 2011

Page 1 of 2

D R A F T

D R A F T

A SPECIAL MEETING OF THE BOARD of Administration of the Oakland Municipal Employees’ Retirement System (“OMERS”) was held Thursday, September 29, 2011 in One Frank H. Ogawa Plaza, Hearing Room 1, Oakland, California.

Board Members Present: • William C. Russell, President • Joseph T. Yew, Ex-Officio • Courtney Ruby, Ex-Officio • James E. Hill, Member

Board Members Absent: • Carl E. Gilmore, Vice President • Vacant x2

Additional Attendees: • Teir Jenkins, Staff Member • David Low, Staff Members • Tracy Chriss, Deputy City Attorney • David Sancewich, Pension Consulting Alliance (“PCA”) Meeting was called to order at 1:01 pm.

1. Approval of minutes from the June 30, 2011 Board Meeting – Member Ruby made a motion to approve the meeting minutes of the June 30, 2011 Board meeting, second by member Hill. Member Yew abstained due to his non-attendance at the June 30, 2011 meeting. Motion passed.

GILMORE – Absent / RUSSELL – Y / YEW – Abstain / RUBY – Y / HILL – Y ( AYES: 2 / NOES: 0 / ABSENT: 1 /ABSTAIN: 1 )

2. Informational Report regarding scope of work from Williams-Adley and Company – Audrey Elbert from Williams-Adley and Company reviewed the scope of their work as auditor of the OMERS fund for the fiscal year ending June 30, 2011. Member Ruby made a motion to approve the report from Ms. Elbert, second by member Yew. Motion passed.

GILMORE – Absent / RUSSELL – Y / YEW – Y / RUBY – Y / HILL – Y ( AYES: 4 / NOES: 0 / ABSENT: 1 /ABSTAIN: 0 )

3. OMERS investment fund 2nd Quarter 2011 performance report – David Sancewich from Pension Consulting Alliance (“PCA”) provided a comprehensive review of the OMERS investment fund through the quarter ending June 30, 2011. Mr. Sancewich reported that the OMERS fund had an investment return of 1.6% for the calendar quarter, compared to the policy benchmark return of 0.8%. Also, the one-year investment return showed a 21.9 percent return, trailing the policy benchmark by 40 basis points. Mr. Sancewich proceeded with an in-depth review of the investment portfolio. Member Yew asked Mr. Sancewich if an asset liability study would be necessary due to the current volatility of the investment markets and OMERS current plan of 70% equity/30% fixed income. Mr. Sancewich recommended no change to the asset liability mix of the OMERS portfolio due to the plan by the OMERS board to seek to annuitize the OMERS fund. Member Hill made a motion to accept the report from PCA, second by member Ruby. Motion passed.


SPECIAL OMERS Board Meeting September 29, 2011

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D R A F T

D R A F T

4. Board letter to City Council explaining plan to consider annuitizing of OMERS plan – Teir Jenkins presented the OMERS board with a draft letter to be sent to the City Council describing OMERS plan to consider converting the member benefits payments to an annuity plan. Member Yew asked if an annual audit would be required. Teir Jenkins said he would look for an answer for Member Yew and report later. Member Yew wanted the letter to be amended to clearly state the annuitizing of the OMERS fund would reduce the administrative expenses to the OMERS fund and that realized savings would flow back to the fund. Member Ruby suggested the verbiage indicate that “all cost savings would remain with the OMERS members”. President Russell asked staff to make that change.

5. Administrative Expenses report from July 1, 2010 through June 30, 2011 – Mr. Jenkins reviewed the administrative expense report through June 30, 2011. President Russell asked for a definition of the item labeled “death refunds”. Mr. Jenkins said he would provide a clear explanation of the “death refunds” item at the next meeting. Member Ruby asked Mr. Jenkins to review the staff salaries items and explain why the actual amount of salaries exceeded the budgeted amount by 29.1%. Mr. Jenkins said a reporting challenge continues with the staff salaries category due to the methodology in which the vacations have been calculated towards this category. Also, there were some staff changes during this administrative expenses reporting period. Mr. Jenkins said it is an annual challenge to reconcile the staff salaries item because of the vacation calculation model used. Ms. Ruby asked how much staff salaries were overstated for the last year (i.e., July 1, 2009 through June 30, 2010). Mr. Jenkins was did not have that information available but said the stated overage has existed for many years. Member. Ruby asked staff for a full accounting of the last few fiscal year end staff salaries budget report. Mr. Jenkins said he’d reply at the October Board meeting. Member Yew made a motion to accept the administrative expenses report, second by member Hill. Motion passed.


6. Plan for Offsite December 15, 2011 OMERS Board Meeting – President Russell reported his reservation of the Sequoia Room at the Sequoia Golf Club for December 15, 2011 at 11:30 am. He suggests the meeting first followed by a luncheon.

7. Conference Attendance Report – President Russell reported on his attendance at the Conference for Corporate Reform held in early September 2011 in Half Moon Bay, CA.

8. Open Forum – No Report. 9. Future Scheduling – David Low reported the next regular OMERS board meeting is

scheduled for Thursday, October 27, 2011 at 2:00 PM in Hearing Room 1, City Hall. The meeting adjourned at 1:36 pm.

WILLIAM C. RUSSELL, PRESIDENT DATE

CITY OF OAKLAND

To: OMERS Board From: Téir Jenkins, Retirement Systems Accountant Date: November 30, 2011 RE: OMERS Staff Salaries The purpose of this memo is to respond to a request from the OMERS Board Member Courtney Ruby asking for a detailed accounting of the OMERS Staff salaries and to provide additional explanation regarding the OMERS salaries being over the approved FY 2010/2011 Budget. At the July 15, 2010 OMERS Board Meeting, the OMERS approved a FY 2010/2011 Budget of $343,977. This approved budget included an allocation for staff salaries that totaled $212,377. At the end of the FY 2010/2011, the actual OMERS Administrative Salaries was $274,136. The OMERS Staff salaries was over the approved budget by $61,786 or 29.1% (Table 1). A reconciliation of all OMERS FY 2010/2011 salaries is provided on Table 2. The reason that staff salaries were over budget was due to incorrect staff allocations and the allocation of additional staff members not approved by the OMERS Board. Staff worked with the Budget, Accounting and Payroll departments along with the Auditors to correct the OMERS allocations. The corrections are detailed on Table 3 and are as follows :

Director of the Department of Human Resources Management (DHRM) ‐ $21,799 moved from OMERS Fund (7120) to General Fund (1010)

Executive Assistant to the Director of DHRM ‐ $17,444 moved from OMERS Fund (7120) to General Fund (1010)

Human Resources Manager, $29,411 moved from OMERS Fund (7120) to General Fund (1010)

Retirement Benefits Representative, $12,271 from OMERS to PFRS

The above corrections were made as an Audit Adjustment for FY 2010/2011 and resulted in a reduction in OMERS staff salaries of $56,383. The revised OMERS FY 2010/2011 budget is $291,138 and the was OMERS FY 2010/2011 salaries are $217,780.

Table 1

OAKLAND MUNICIPAL EMPLOYEESʹ RETIREMENT SYSTEMAdministrative Budget Expense to Date

Fiscal Year End as of June 30, 2011

Approved Fiscal Year to date (6/30/2011)Budget Actual Remaining Percent Remaining

Staff Salaries 212,377$ 274,163$ (61,786)$ ‐29.1%

Operation & Maintenance CostBoard Travel Expenditures 35,000$ 3,804$ 31,196$ 89.1%Staff Training 6,000 ‐ 6,000 100.0%Accounting & Auditing 25,000 20,265 4,735 18.9%Actuary ( Bartel ) 25,000 25,353 (353) ‐1.4%Annual Report 5,000 ‐ 5,000 100.0%Miscellaneous Expenditures 7,500 1,079 6,421 85.6%O&M Cost 103,500 50,501 52,999 51.2%Total Administrative Budget 315,877$ 324,664$ (8,787)$ ‐2.8%

Additional Operating Costs (a)Trustee/ Custodial Fee (Bank of NY) 6,000$ 5,120$ 880$ 14.7%Measurement/Evaluation Fee (PCA) 15,000 13,500 1,500 10.0%

Highmark 7,100 6,733 367 5.2%Total Additional Operating Costs 28,100.00$ 25,353$ 2,747$ 9.8%

Total Operating Budget 343,977$ 350,017$ (6,040)$ ‐1.8%

BEFORE CORRECTION

Table 2

OAKLAND MUNICIPAL EMPLOYEES RETIREMENT SYSTEMAdministrative Salaries Reconciliation

FY 2010/2011

Approved OMERS Board AllocationTotal Percentage Salary Actual

Employee Positions Salaries Benefits (b) Labor Allocation Allocation Allocation Variance

Andrea Renee Gourdine Director of DHRM ‐$ ‐$ ‐$ 0% ‐$ 21,799$ (21,799)$ (a)

Sonia Lara Executive Assistant ‐ ‐ ‐ 0% ‐ 17,444 (17,444) (a)Yvonne Hudson Human Resources Manager 142,841 90,215 233,056 30% 69,917 99,327 (29,410) (b)Sandra Tong Accountant II 70,099 44,273 114,371 30% 34,311 35,414 (1,103) Teir Jenkins Retirement System Accountant 92,067 58,147 150,214 30% 45,064 45,693 (629) Carol Kolenda Retirement Benefits Representative 65,594 39,356 104,950 20% 20,990 8,719 12,271 (c)David Low Administrative Assistant II 55,441 35,016 90,457 20% 18,091 19,522 (1,431) Tracy Chriss City Attorney 147,117 92,916 240,033 10% 24,003 26,244 (2,241)

Subtotal Staff Cost Subtotal Staff Cost 573,158$ 359,923$ 933,081$ 212,377$ 274,162$ (61,785)$

(a) Incorrectly Allocated. Should be allocated to General Fund (1010)(b) Incorrectly Allocated at 40% of Salary. Should have been 60% PFRS, 30% OMERS and 10% General Fund (c) Incorrectly Allocated at 10% of Salary. Should have been 80% PFRS and 20% OMERS.

Table 3

OAKLAND MUNICIPAL EMPLOYEES RETIREMENT SYSTEMAdministrative Salaries Adjustments

FY 2010/2011

Approved OMERS Board AllocationTotal Percentage Salary Actual

Employee Positions Salaries Benefits (b) Labor Allocation Allocation Allocation Variance

Andrea Renee Gourdine Director of DHRM ‐$ ‐$ ‐$ 0% ‐$ 21,799$ (21,799)$ (a)Sonia Lara Executive Assistant ‐ ‐ ‐ 0% ‐ 17,444 (17,444) (a)Yvonne Hudson Human Resources Manager 142,841 90,215 233,056 30% 69,917 99,327 (29,410) (b)Carol Kolenda Retirement Benefits Representative 65,594 39,356 104,950 20% 20,990 8,719 12,271 (c)

Subtotal Staff Cost Subtotal Staff Cost 208,434$ 129,571$ 338,005$ 90,907$ 147,289$ (56,383)$

(a) Incorrectly Allocated. Should be allocated to General Fund (1010)(b) Incorrectly Allocated at 40% of Salary. Should have been 60% PFRS, 30% OMERS and 10% General Fund (c) Incorrectly Allocated at 10% of Salary. Should have been 80% PFRS and 20% OMERS.

Table 4

OAKLAND MUNICIPAL EMPLOYEESʹ RETIREMENT SYSTEMAdministrative Budget Expense to Date

Fiscal Year End as of June 30, 2011


Staff Salaries 212,377$ 217,780$ (5,403)$ ‐2.5%

Operation & Maintenance CostBoard Travel Expenditures 35,000$ 3,804$ 31,196$ 89.1%Staff Training 6,000 ‐ 6,000 100.0%Accounting & Auditing 25,000 20,265 4,735 18.9%Actuary ( Bartel ) 25,000 22,858 2,143 8.6%Annual Report 5,000 ‐ 5,000 100.0%Miscellaneous Expenditures 7,500 1,079 6,421 85.6%O&M Cost 103,500 48,005 55,495 53.6%Total Administrative Budget 315,877$ 265,785$ 50,092$ 15.9%

Additional Operating Costs (a)Trustee/ Custodial Fee (Bank of NY) 6,000$ 5,120$ 880$ 14.7%Measurement/Evaluation Fee (PCA) 15,000 13,500 1,500 10.0%

Highmark 7,100 6,733 367 5.2%Total Additional Operating Costs 28,100.00$ 25,353$ 2,747$ 9.8%

Total Operating Budget 343,977$ 291,138$ 52,839$ 15.4%

AFTER CORRECTION

December 15, 2011 To the Board of Administration of the Oakland Municipal Employees’ Retirement System We have audited the financial statements of the Oakland Municipal Employees’ Retirement System (the System) for the year ended June 30, 2011, and have issued our report thereon dated November 22, 2011. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated July 7, 2011. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Findings

Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the System are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended June 30, 2011. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. There are no sensitive accounting estimates in the financial statements. The disclosures in the financial statements are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit.

2

Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. The following material misstatements detected as a result of audit procedures were corrected by management: Administrative expenses were overstated by approximately $56,000 due to the City allocating personnel costs to the System that were not in accordance with the amounts approved by the Board. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated November 9, 2011. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the System’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

3

Other Information in Documents Containing Audited Financial Statements With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and compared the information for consistency with management’s responses to our inquiries, the financial statements, and other knowledge we obtained during the audit of the financial statements. We did not express an opinion or provide any assurance on the information because the limited procedures did not provide us with sufficient evidence to express an opinion or provide any assurance. This information is intended solely for the use of the Board of Administration and management of the System and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Williams, Adley & Company-CA, LLP

Oakland Municipal Employees’ Retirement SystemYears Ended June 30, 2011 and 2010

Table of Contents

Page(s)

Independent Auditors’ Report................................................................................................................... 1

Management’s Discussion and Analysis ................................................................................................... 3

Financial Statements

Statements of Plan Net Assets ................................................................................................................. 9

Statements of Changes in Plan Net Assets............................................................................................. 10

Notes to Basic Financial Statements...................................................................................................... 11

Required Supplementary Information.................................................................................................... 17

Oakland Municipal Employees’ Retirement SystemManagement Discussion and Analysis - Unaudited

June 30, 2011

3

As management of the Oakland Municipal Employees’ Retirement System (the System), we offer readers of the System’s financial statements this narrative overview and analysis of the financial activities of the System for the fiscal years ended June 30, 2011 and 2010. We encourage readers to consider the information presented here in conjunction with the System’s financial statements that follow this section. This management discussion and analysis is presented in the following sections:

� Organizational Overview

� Overview of the Financial Statements

� Financial Analysis: 2011 vs. 2010

� Financial Analysis: 2010 vs. 2009

� Requests for Additional Information

The City of Oakland City Charter (Oakland Charter) established the System and provides for its funding. Accordingly, the System is an integral part of the City of Oakland (City) and its operations have been reported as a Pension Trust Fund in the City’s basic financial statements. The System is a closed single- employer, defined benefit pension plan that provides service and disability retirement, and survivor benefits for eligible employees of the City. The System covers the City’s non-uniformed employees hired prior to September 1970 who have not elected to transfer to the California Public Employees’ Retirement System (CalPERS). The System is governed by a seven-member Board of Administration composed of the City Treasurer, the City Auditor, three members elected from the retired and deferred membership of the System, and Mayor appointed representatives of a local life insurance company and a local bank in accordance with Section 2002 of the Oakland Charter.

ORGANIZATIONAL OVERVIEW

The System’s funding policy provides for periodic employee and City contributions at actuarially determined amounts sufficient to accumulate the necessary assets to pay benefits when due as specified in the City Charter. The System no longer receives employee contributions as all members of the System have retired or transferred to CalPERS.

The System uses the Aggregate Cost Method to determine City contributions and the Entry Age Normal Cost Method for its disclosure and reporting. The Actuarial Accrued Liability (AAL) is the present value of all future benefits for current plan participants. The System’s current membership is 37, which includes 15 retirees, 16 beneficiaries, and 6 Alameda County Health Department transferees.

The following are the significant assumptions used to compute the funded status as of July 1, 2010:

� 6.50% investment rate of return

� 3.00% future benefit increases

� 3.25% inflation rate


June 30, 2011

4

OVERVIEW OF THE FINANCIAL STATEMENTS

This report consists of three parts – management discussion and analysis (this section), the financial statements and other required supplementary information. The financial statements include Statements of Plan Net Assets; Statements of Changes in Plan Net Assets; and the Notes to the Basic Financial Statements.

The Statements of Plan Net Assets and the Statements of Changes in Plan Net Assets report information to assist readers in determining whether the System’s finances as a whole have improved or deteriorated as a result of the year’s activities. These statements report the net assets held in trust for pension benefits and the activities that cause the changes in the net assets during the year, respectively.

The Statements of Plan Net Assets present information on all System assets and liabilities, including the difference between the two reported as net assets held in trust for pension benefits. Over time, increases or decreases in net assets held in trust for pension benefits may serve as a useful indicator of whether the financial condition of the System is improving or deteriorating.

While the Statements of Plan Net Assets provide information about the nature and amount of resources and obligations at year-end, the Statements of Changes in Plan Net Assets present the results of the System’s activities during the fiscal year and information as to how the net assets held in trust for pension benefits have changed during the year. The Statements of Changes in Plan Net Assets measure the results of the System’s investment performance as well as any additions from contributions and deductions for payment of benefits and administrative expenses. The Statements of Changes in Plan Net Assets can be used as indicators of how the System has progressed to or regressed from the twin goals of fully funding all current and past service costs along with having sufficient additional revenue to pay for current refunds of contributions and administrative and investment expenses.

The Notes to the Basic Financial Statements and Required Supplementary Information provide explanations and other information that is helpful to a full understanding of the data provided in the financial statements. The Notes to Financial Statements and Required Supplementary Information are found starting on page 11 and on page 17, respectively.


June 30, 2011

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Table 1Summary of Plan Net Assetsas of June 30, 2011 and 2010

June 30 June 30

2011 2010 Dollars PercentageAssets: Cash and cash equivalents $ 135,348 $ 45,086 $ 90,262 200.2 Receivables 5,656 146 5,510 3,774.0 Investments 4,784,756 4,740,928 43,828 0.9 Total assets 4,925,760 4,786,160 139,600 2.9

Liabilities: 52,401 57,900 (5,499) (9.5)

Net assets held in trust for pension benefits $ 4,873,359 $ 4,728,260 $ 145,099 3.1

Change

FINANCIAL ANALYSIS: 2011 VS. 2010

Table 1 summarizes the System’s net assets as of June 30, 2011 and 2010:

Net assets held in trust for pension benefits increased $145,099 from June 30, 2010 to June 30, 2011.The main source of this increase was due to an increase in the System’s investment portfolio.

As of June 30, 2011, the System’s investment portfolio consists of shares of two investment funds:the American Century Equity Mutual Fund and the HighMark Employee Benefit Flexible Bond Commingled Fund.


June 30, 2011

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Table 2 summarizes changes in the System’s net assets for the years ended June 30, 2011 and 2010:

The System’s investment income during the years ended June 30, 2011 and 2010 was $919,015 and $706,489, respectively. The actual returns for these two years were 21.9% and 14.9%, respectively, which compares to benchmark returns of 22.3% and 10.6%, respectively.

The System’s benefit expenses for the year ended June 30, 2011 were $514,153, a decrease of $67,751 from the prior year. This decrease reflects the ongoing reduction in the System’s membership.

Table 2Summary of Changes in Net Assets

as of June 30, 2011 and 2010

June 30 June 30 Change

2011 2010 Dollars PercentageAdditions: Investment income $ 919,015 $ 706,489 $ 212,526 30.1Other income 6,022 - 6,022 100.0 Total additions 925,037 706,489 218,548 30.9

Deductions: Benefits to members and beneficiaries 514,153 581,904 (67,751) (11.6) Administrative expenses 265,785 377,336 (111,551) (29.6) Total deductions 779,938 959,240 (179,302) (18.7)

Change in net assets 145,099 (252,751) 397,850 157.4

Net assets held in trust for pension benefits Beginning of year 4,728,260 4,981,011 (252,751) (5.1) End of year $ 4,873,359 $ 4,728,260 $ 145,099 3.1


June 30, 2011

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Table 3Summary of Plan Net Assetsas of June 30, 2010 and 2009

June 30 June 30

2010 2009 Dollars PercentageAssets: Cash and cash equivalents $ 45,086 $ 125,111 $ (80,025) (64.0) Receivables 146 3,781 (3,635) (96.1) Investments 4,740,928 4,913,045 (172,117) (3.5) Total assets 4,786,160 5,041,937 (255,777) (5.1)

Liabilities: 57,900 60,926 (3,026) (5.0)

Net assets held in trust for pension benefits $ 4,728,260 $ 4,981,011 $ (252,751) (5.1)

Change

FINANCIAL ANALYSIS: 2010 VS. 2009

Table 3 summarizes the System’s net assets as of June 30, 2010 and 2009:

Net assets held in trust for pension benefits decreased $252,751 from June 30, 2009 to June 30, 2010.The main source of this decrease was due to a reduction in the System’s investment portfolio and the payment of benefit payments.

As of June 30, 2009, the System’s investment portfolio consists of shares of three commingled mutual fund investments: the Western Asset Core Bond Fund, the Barclays Aggregate Bond Fund and the American Century Equity Fund.


June 30, 2011

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Table 4 summarizes changes in the System’s net assets for the years ended June 30, 2010 and 2009:

The System’s investment income (loss) during the years ended June 30, 2010 and 2009 was $706,489and $(1,429,406), respectively. The actual returns for these two years were 14.9% and -19.8%, respectively, which compares to benchmark returns of 10.6% and -14.2%, respectively.

The System’s benefit expenses for the year ended June 30, 2010 were $581,904, a decrease of $102,903 from the prior year. This decrease reflects the ongoing reduction in the System’s membership.

REQUESTS FOR ADDITIONAL INFORMATION

This financial report is designed to provide a general overview of the System’s finances and to account for the money that the System receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to:

Office of PersonnelRetirement Systems

City of Oakland150 Frank H Ogawa Plaza

Oakland, CA 94612

Table 4Summary of Changes in Net Assets

as of June 30, 2010 and 2009

June 30 June 30 Change

2010 2009 Dollars PercentageAdditions: Investment income (loss) $ 706,489 $ (1,429,406) $ 2,135,895 149.4 Total additions 706,489 (1,429,406) 2,135,895 149.4

Deductions: Benefits to members and beneficiaries 581,904 684,807 (102,903) (15.0) Administrative expenses 377,336 286,686 90,650 31.6 Total deductions 959,240 971,493 (12,253) (1.3)

Change in net assets (252,751) (2,400,899) 2,148,148 89.5

Net assets held in trust for pension benefits Beginning of year 4,981,011 7,381,910 (2,400,899) (32.5) End of year $ 4,728,260 $ 4,981,011 $ (252,751) (5.1)

9

Oakland Municipal Employees' Retirement SystemStatements of Plan Net Assets

June 30, 2011 and 2010

Assets 2011 2010

Cash and cash equivalents:Cash held by City Treasury $ 135,348 $ 45,086

Receivables:Interest receivable 67 146Collections 5,589 -

Total receivables 5,656 146

Investments, at fair value:Short-term investments 47,323 46,814Mutual funds 4,737,433 4,694,114

Total investments 4,784,756 4,740,928

Total assets 4,925,760 4,786,160

Liabilities

Accounts payable 6,224 3,722Benefits payable 39,060 47,322Accrued investment management fees 7,117 6,856

Total liabilities 52,401 57,900

Net assets held in trust for pension benefits $ 4,873,359 $ 4,728,260

See accompanying notes to financial statements.

10

Oakland Municipal Employees' Retirement SystemStatements of Changes in Plan Net Assets

Years Ended June 30, 2011 and 2010

Additions 2011 2010Investment income:

Net appreciation in fair value of investments $ 834,678 $ 617,960Interest 71,132 34,835Dividends 38,558 75,309

Total investment income 944,368 728,104Less: Investment expenses (25,353) (21,615)

Net investment income 919,015 706,489

Other income 6,022 -Total additions 925,037 706,489

DeductionsBenefits to members and beneficiaries:

Retirement 435,504 491,302Disability 75,649 86,602 Death 3,000 4,000

Total benefits to members and beneficiaries 514,153 581,904

Administrative expenses 265,785 377,336

Total deductions 779,938 959,240

Change in net assets 145,099 (252,751)

Net assets held in trust for pension benefits:Beginning of year 4,728,260 4,981,011End of year $ 4,873,359 $ 4,728,260

See accompanying notes to financial statements.

Oakland Municipal Employees’ Retirement SystemNotes to the Basic Financial Statements


11

1. Description of the Oakland Municipal Employees’ Retirement System

The Oakland Municipal Employees’ Retirement System (the System) is a closed, single-employer defined benefit pension plan (the Plan) established by the City of Oakland (the City) Charter. The System is governed by a board of seven trustees, composed of the City Treasurer, the City Auditor, three members elected by the retired and deferred membership of the System, and Mayor appointed representatives of a local life insurance company and a local bank in accordance with Section 2002 of the Oakland Charter. Trustees receive no compensation. The System covers the City’s non-uniformed employees hired prior to September 1970 who have not transferred to the State of California Public Employees’ Retirement System (CalPERS).

The System is exempt from the regulations of the Employee Retirement Income Security Act of 1974 (ERISA). The System is also exempt from federal income taxes and California franchise tax.

System Membership

At June 30, 2011 and 2010, the System membership consisted of:

2011 2010Membership:

Retirees 17 25Beneficiaries 20 20

Total 37 45

Basic Benefit Provisions

The City Charter establishes plan membership, contribution, and benefit provisions. The System provides that any member who completes at least 20 years of service and has attained age 52 or completes at least five years of service and attains age 60 is eligible for retirement benefits. The member shall receive a service retirement allowance that is calculated on a basis that takes into account the final three years average compensation, age, and the number of years of service. In addition, the System provides disability, death and survivors benefits for the members.

Upon the retiree’s death, payments are continued to the retiree’s eligible spouse at the 50% level. The plan provides an automatic cost-of-living adjustment based on changes in the CPI up to a maximum of 3% per year. Disability benefits are paid to eligible members who became disabled prior to retirement. If the member’s disability is work related, then the member or widow is paid a pension equivalent to an immediate service retirement. The disability pension is paid at a level no less than 50% of the pay attached to the rank. When a death occurs after retirement, a one-time payment of $1,000 is paid to the member’s designated beneficiary.



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2. Summary of Significant Accounting Policies

Basis of Presentation

The System is reported as a pension trust fund in the City’s basic financial statements. The financial statements of the System present only the financial activities of the System and are not intended to present the financial position and changes in financial position of the City in conformity with accounting principles generally accepted in the United States of America.

Measurement Focus and Basis of Accounting

The financial statements are prepared on a flow of economic resources measurement focus using the accrual basis of accounting. Contributions are recognized in the period in which the contributions are due, pursuant to formal commitments as well as statutory or contractual requirements, and benefits and refunds are recognized when payable under plan provisions.

Methods Used to Value Investments

Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

3.

All active non-uniformed City employees hired prior to September 1970 have transferred to CalPERS or retired. Accordingly, the System did not receive any employee contributions during the years ended June 30, 2011 and 2010 and will not receive any employee contributions in the future.

Contributions

The City contributes, at a minimum, such amounts as are necessary as determined on an actuarial basis using the aggregate actuarial cost method, to provide assets sufficient to meet benefits to be paid to plan members. The contributions are established using various assumptions as to inflation, rate of return on investments and mortality. As of July 1, 2010 (the date of the System’s last actuarial valuation), the actuarial accrued unfunded liability is approximately $743,000.



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4.

Investment Policy

Cash and Investments

The System’s investment policy authorizes investment in domestic common stocks and bonds. The investment policy states that the asset allocation of the System’s investment portfolio shall be a target of 70% Domestic Equities and 30% Domestic Fixed Income. As of June 30, 2011, the System’s investment portfolio consists of shares of two investment funds (Funds). The System is invested in the American Century Equity Mutual Fund and the HighMark Employee Benefit Flexible Bond Commingled Fund. Specific guidelines for the Funds are detailed in the prospectus or Declaration of Trust, for each individual Fund.

The following table summarizes the System’s investment portfolio as well as the interest ratesand the weighted average maturities of the System’s investments as of June 30, 2011:

FY 2011

Fair Value YieldMaturity (Years)

Equity InvestmentsAmerican Century Equity Mutual Fund 3,256,433$ - -

Fixed Income InvestmentsHighMark Employee Benefit Flexible Bond Commingled Fund 1,481,000

3.0% 4.6

4,737,433$

The following table summarizes the System’s investment portfolio as well as the interest ratesand the weighted average maturities of the System’s investments as of June 30, 2010:

FY 2010

Fair Value YieldMaturity (Years)

Equity InvestmentsAmerican Century Equity Mutual Fund 2,991,983$ - -

Fixed Income InvestmentsHighMark Employee Benefit Flexible Bond Commingled Fund 1,702,131 2.9% 5.4

4,694,114$



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Cash and Cash Equivalents

As of June 30, 2011 and 2010, cash and cash equivalents consisted of cash in treasury held in the City’s cash and investment pool. These funds are invested according to the investment policy adopted by the City Council. Interest earned on these pooled accounts is allocated monthly to all funds based on the average daily cash balance maintained by the respective funds. It is not possible to disclose relevant information about the System’s separate portion of the investment pool. Information regarding the characteristics of the entire investment pool can be found in the City’s June 30, 2011 basic financial statements. A copy of that report may be obtained by contacting the City Treasurer. As of June 30, 2011 and 2010, the System’s share of the City’s investment pool totaled $135,348 and $45,086, respectively.

Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation. The System’s investment policy states that the fixed income portfolio shall not exceed 8% investment in below investment grade securities (rated Ba/BB or below by at least one Nationally Recognized Statistical Rating Organization (NRSRO)) in fair value.

The System was invested in the HighMark Employee Benefit Flexible Bond Commingled Fundwhich had a credit quality rating of AA as of June 30, 2011 and June 30, 2010.

Custodial Credit Risk

Custodial credit risk is the risk that, in the event of the failure of a depository financial institution or counterparty to a transaction, there will be an inability to recover the value of deposits, investments, or collateral securities in the possession of an outside party.

The California Government Code requires that governmental securities or first trust deed mortgage notes be used as collateral for demand deposits and certificates of deposit at 110 percent and 150 percent, respectively, of all deposits not covered by federal deposit insurance. As the City holds all cash and certificates of deposit on behalf of the System, the collateral must be held by the pledging financial institution’s trust department and is considered held in the City’s name.

The System does not have any investments that are not registered in the name of System and are either held by the counterparty or the counterparty’s trust department or agent but not in the System’s name.



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Implementation of New Accounting Principle – Derivatives

The System adopted GASB Statement No. 53 Accounting and Financial Reporting for Derivative Instruments, effective July 1, 2009. The statement addresses hedge accounting requirements and improves disclosures, providing a summary of the government’s derivative instrument activity, its objectives for entering into derivative instruments, and their significant terms and risks. Implementation of GASB No. 53 had no effect on the System because the Plan had no derivatives as of June 30, 2011 and 2010.

5. Actuarial Assumptions and Funded Status

Information regarding the funded status of the System as of the most recent valuation date is shown below.

Dollars in ThousandsOverfunded

Actuarial AAL as aAccrued Actuarial Unfunded Percentage of

Actuarial Valuation

Liability (AAL)

Value of Assets

(Overfunded)AAL

Funded Ratio

Covered Payroll

Covered Payroll

Date (a) (b) (a-b) ( b/a) (c) ((a-b) / c)7/1/2010 $5,471 $4,728 $743 86.4% - N/A

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 is presented in the Required Supplementary Information immediately following the notes to the basic financial statements.

A summary of the actuarial methods and significant assumptions used to calculate the funded status and the funding progress for the year ended June 30, 2011 is as follows:

Valuation Date July 1, 2010Actuarial Cost Method Entry Age Normal Cost MethodAsset Valuation Method Market ValueInvestment Rate of Return 6.50%Inflation Rate 3.25%Cost-of-living Adjustments 3.00%Amortization Method Closed Level DollarAmortization Period 6 Years



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A summary of the actuarial methods and significant assumptions used to calculate the annual required contribution for the year ended June 30, 2011 is as follows:

Valuation Date July 1, 2007Actuarial Cost Method Entry Age Normal Cost MethodAsset Valuation Method Market ValueInvestment Rate of Return 8.00%Inflation Rate 3.25%Cost-of-living Adjustments 3.00%Amortization Method Closed Level DollarAmortization Period 6 Years

6.

Reserves are established from member and employer contributions and the accumulation of investment income after satisfying investment and administrative expenses. The System’s major reserves are as follows:

Reserves

Retired Member Contribution Reserve represents the total accumulated transfers from active member contributions and investments, less payments to retired members.

Employer Reserve represents the total accumulated employer contributions for retirement payments. Additions include contributions from the employer and investment earnings; deductions include payments to retired members.

The aggregate total of the System’s major reserves as of June 30, 2011 and 2010 equals net assets held in trust for pension benefits and comprises the following:

7. Administrative Expenses

The City provides the System with accounting and other administrative services. Staff salaries included in administrative expenses for the years ended June 30, 2011 and 2010 were $217,780and $321,122, respectively. Other administrative expenses including accounting and audit services, legal fees, annual report and miscellaneous expense for the years ended June 30, 2011and 2010 were $48,005 and $56,214, respectively.

2011 2010Retired Member Contribution Reserve 651,778$ 681,128$Employer Reserve 4,221,581 4,047,132

4,873,359$ 4,728,260$

Oakland Municipal Employees’ Retirement SystemRequired Supplementary InformationYears Ended June 30, 2011 and 2010

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The information presented in the required supplementary schedule was determined as part of the actuarial valuations as of the dates indicated.

Schedule I: Schedule of Funding ProgressDollars in Thousands

Accrued Value of AAL Funded Covered Percentage ofActuarial Liability (AAL) Assets (UAAL) Ratio Payroll Covered Payroll

Valuation date (a) (b) (a-b) (b/a) (c) ((a-b) / c)7/1/2005* 5,277 10,595 (5,318) 200.8% - N/A

7/1/2007 ** 7,516 9,371 (1,855) 124.7% - N/A7/1/2009 ** 5,499 4,981 518 90.6% - N/A7/1/2010 ** 5,471 4,728 743 86.4% - N/A

* The aggregate actuarial cost method was used to calculate results.** The decline in the funded ratio was primarily due to explicit recognition of future administrative expenses in the Plan’s

actuarial accrued liability, investment performance in FY 2008/2009, and strengthening of the interest and mortality assumptions. The entry age normal cost method was used for disclosure and annual required contribution rates starting with the July 1, 2009 valuation.

Schedule II: Schedule of Employer Contributions

Year Ended June 30,Annual Required Contribution ($)

Percentage (%) Contributed

2006 $0 100%2007 0 1002008 0 1002009 0 1002010 0 1002011 0 100

MEMORANDUM

TO: HONORABLE MAYOR AND FROM: Oakland Municipal CITY COUNCIL Employees Retirement System

(OMERS) Board

SUBJECT: Information Regarding the OMERS DATE: October 27, 2011 Board Plan to Assess the Feasibility of Annuities for OMERS Retirees

Approval Date This is to inform you that the OMERS Board is assessing the feasibility of converting from the current system of a monthly payroll administered through the City Payroll system to Annuities paid through a third party administrator. OMERS is a closed defined benefit plan with 37 members receiving pensions at an average age of 89.5. OMERS expected payroll for FY 2011-2012 is approximately $480,750. The decision to explore annuities is based primarily on the current cost to administer the Plan under the current system. The annual staff salaries cost budgeted for FY 2011-2012 is $209,426; the total annual operating budget is $339,526. By moving to an annuity structure, it is expected that staff cost will be reduced substantially along with elimination of costs for a fund custodian, investment manager, consulting and actuary. The savings would remain in the OMERS fund and any excess after the annuity process is complete will revert to the City’s General Purpose Fund. It is projected that the research and analysis of moving to annuities will continue until the end of the calendar year. At that time, the Board plans to make a recommendation. If the decision is to pursue annuities, we understand that will require a Charter change and will work closely with the City Attorney’s office on that effort. Please be assured that the OMERS Board will keep you apprised of any decisions made with regard to the annuity issue well in advance of taking any action.

Respectfully submitted, Andrea R. Gourdine Director, Human Resources Management

DISTRIBUTION DATE: ___________

Table 1

OAKLAND MUNICIPAL EMPLOYEESʹ RETIREMENT SYSTEMAdministrative Budget Expense to DateFiscal Year End as of September 30, 2011


Staff Salaries 209,426$ 66,663$ 142,763$ 68.2%

Operation & Maintenance CostBoard Travel Expenditures 35,000$ 1,764$ 33,236$ 95.0%Staff Training 6,000 ‐ 6,000 100.0%Accounting & Auditing 25,000 840 24,160 96.6%Actuary ( Bartel ) 25,000 ‐ 25,000 100.0%Annual Report 5,000 ‐ 5,000 100.0%Miscellaneous Expenditures 7,500 346 7,154 95.4%O&M Cost 103,500 2,950 100,550 97.2%Total Administrative Budget 312,926$ 69,613$ 243,314$ 77.8%

Additional Operating Costs (a)Trustee/ Custodial Fee (Bank of NY) 6,000$ ‐$ 6,000$ 100.0%Measurement/Evaluation Fee (PCA) 15,000 ‐ 15,000 100.0%

Highmark 7,100 ‐ 7,100 100.0%Total Additional Operating Costs 28,100.00$ ‐$ 28,100$ 100.0%

Total Operating Budget 341,026$ 69,613$ 271,414$ 79.6%

Table 2

OAKLAND MUNICIPAL EMPLOYEESʹ RETIREMENT SYSTEMCash in Treasury (Fund 7120)

As of September 30, 2011

FY 2011-2012

Cash in Treasury as of 6/30/11 (a) 78,866$

AdditionsIncoming Wires 300,000$ Death Refunds 0Misc. Receipts 262

Total additions: 300,262$

Deductions:Pension payments (July 1 - August 31, 2011) (b) (78,817)$ Expenses to date (see Table 1) (69,613) Previous year accruals on June 10 pension payments (39,060) Previous year accruals on investment managers fee (7,117) Previous year accounts payable (6,224)

Total deductions: (200,830)$

Cash in Treasury as of 9/30/2011 178,298$

(a) As reported in OMER June 30, 2011 Audited Financal Statements.(b) The amount did not include September 2011 pension payments, which was paid on October 1, 2011

Table 3

Oakland Municipal Employees' Retirement SystemCensus

As of September 30, 2011

COMPOSITION City Health TOTAL

MembershipRetiree 13 2 15Beneficiary 16 4 20

Total Membership 29 6 35

OAKLAND MUNICIPAL EMPLOYEES’ RETIREMENT BOARD CITY OF OAKLAND, CALIFORNIA

RESOLUTION NO. 4822

ON MOTION OF MEMBER SECONDED BY MEMBER

RESOLUTION APPROVING THE CONTINUANCE OF ONE-HALF OF DECEASED RETIRED MEMBER’S UNMODIFIED ALLOWANCE TO EDNA CLARK.

WHEREAS, a certain member of the Oakland Municipal Employees’ Retirement System, named in the following Column (1) died on the date stated in the following Column (2), and

WHEREAS, one-half of deceased’s unmodified allowance is continued automatically to

the qualifying widow, Edna Clark, now, therefore, be it RESOLVED: That the Board of Administration fix and it does hereby fix, the allowance

to continue to said widow, as the amount stated in Column (4):

(1) (2) (3) (4) Name of

Deceased Member Date of Death Effective Date of Allowance

Monthly Allowance

Harold Clark December 25, 2010 December 26, 2010 $966.01

IN BOARD MEETING, CITY HALL, OAKLAND, CA DECEMBER 15, 2011

PASSED BY THE FOLLOWING VOTE:

AYES: CARL GILMORE WILLIAM RUSSELL COURTNEY RUBY

JOSEPH YEW, JR. JAMES HILL

NOES:

ABSENT:

ATTEST: PRESIDENT

ATTEST: SECRETARY


RESOLUTION NO. 4823


RESOLUTION APPROVING DEATH BENEFIT ROLL NO. 4735 AND DIRECTING WARRANTS THEREUNDER IN THE TOTAL SUM OF $1,000.00

WHEREAS, due proof having been received of the death of certain retired members of the

Oakland Municipal Employees’ Retirement, on the date set opposite the respective name(s); listed in the following Column (1); and

WHEREAS, said member(s) were credited with the number of completed years of service credited under the Oakland Municipal Employees’ Retirement, set opposite the respective name(s); and

WHEREAS, said member(s) have heretofore nominated as the beneficiaries to receive the death benefit provided by Section 18.2 of Ordinance No. 713 C.M.S., as amended, the person whose name(s) are shown in Column (3) hereinafter appearing opposite said member’s respective name(s); now, therefore, be it

RESOLVED: That the Board of Administration approves, and it does hereby approve payment of the amount shown in the following Column (5) to the respective beneficiary whose name(s) appears in the following Column (3):

(1) (2) (3) (5)

Names of Deceased Retired Member

Date of Retired

Member’s Death

Name of Beneficiaries Nominated by

Retired Member

Amount of Death Benefit Payable

Virginia Barcus May 13, 2011 James Coon, Brother $1,000.00



AYES: Carl Gilmore, William Russell, Courtney Ruby,

Joseph Yew, Jr., James Hill

NOES:

ABSENT:

ATTEST: PRESIDENT

ATTEST: SECRETARY


RESOLUTION NO. 4824


RESOLUTION APPROVING THE CONTINUANCE OF ONE-HALF OF DECEASED RETIRED MEMBER’S UNMODIFIED ALLOWANCE TO EUGENE BISSELL.

WHEREAS, a certain member of the Oakland Municipal Employees’ Retirement System, named in the following Column (1) died on the date stated in the following Column (2), and

WHEREAS, one-half of deceased’s unmodified allowance is continued automatically to

the qualifying widow, Eugene Bissell, now, therefore, be it RESOLVED: That the Board of Administration fix and it does hereby fix, the allowance

to continue to said widow, as the amount stated in Column (4):

(1) (2) (3) (4) Name of

Deceased Member Date of Death Effective Date of Allowance

Monthly Allowance

Virginia Bissell October 28, 2011 October 29, 2011 $493.46



AYES: CARL GILMORE WILLIAM RUSSELL COURTNEY RUBY

JOSEPH YEW, JR. JAMES HILL

NOES:

ABSENT:

ATTEST: PRESIDENT

ATTEST: SECRETARY