financial audit of the department of public safety_part7 pdf

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Chapter 3: Financial Audit
of the departments of the County Prosecuting Attorney and the Attorney
General, narcotics enforcement investigators, and public safety
investigators are required to contribute 12.2% of their salary. The
funding method used to calculate the total employer contribution
requirement is the Entry Age Normal Actuarial Cost Method. Under this
method, employer contributions to the ERS are comprised of normal cost
plus level annual payments required to liquidate the unfunded actuarial
liability over the remaining period of 27 years from June 30, 2002.
Contributions by the department for the fiscal years ended June 30, 2005,
2004 and 2003 were approximately $11,269,000, $8,893,000 and
$8,568,000, respectively, which are equal to the required contributions.
The contribution rate for the fiscal year ended June 30, 2005 was
10.82%. The contribution rate was 9.14% and 8.87% for the fiscal years
ended June 30, 2004 and 2003, respectively.
Postretirement Health Care and Life Insurance Benefits
In addition to providing pension benefits, the State provides certain
health care and life insurance benefits to retired state employees.
Contributions are financed on a pay-as-you-go basis. The department’s
share of the postretirement health care and life insurance benefits
expense for the fiscal year ended June 30, 2005 was approximately
$6,863,000.
Deferred Compensation Plan
The State offers its employees a deferred compensation plan created in
accordance with Internal Revenue Code Section 457. The plan, available
to all state employees, permits employees to defer a portion of their
salary until future years. The deferred compensation is not available to
employees until termination, retirement, death, or unforeseeable
emergency.
All plan assets are held in a trust fund to protect them from claims of

general creditors. The State has no responsibility for loss due to the
investment or failure of investment of funds and assets in the plan, but
does have the duty of due care that would be required of an ordinary
prudent investor. Accordingly, the assets and liabilities of the State’s
deferred compensation plan are not reported in the State’s or the
department’s basic financial statements.
The State generally retains the first $250,000 per occurrence of property
losses and the first $4 million with respect to general liability claims.
Note 12 – Risk
Management
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Chapter 3: Financial Audit
Losses in excess of those retention amounts are insured with commercial
insurance carriers. The limit per occurrence for property losses is
$100 million for named hurricane, $25 million for earthquake and flood,
$50 million for terrorism, and the annual aggregate for general liability
losses per occurrence is $10 million. The State also has an insurance
policy to cover medical malpractice risk in the amount of $30 million per
occurrence with no annual aggregate limit. Losses not covered by
insurance are paid from legislative appropriations of the State’s general
fund and are not included in the department’s basic financial statements.
The State is generally self-insured for workers’ compensation and
automobile claims. The State’s estimated reserve for losses and loss
adjustment costs includes the accumulation of estimates for losses and
claims reported prior to fiscal year-end, estimates (based on projections
of historical developments) of claims incurred but not reported, and
estimates of costs for investigating and adjusting all incurred and
unadjusted claims. Amounts reported are subject to the impact of future

changes in economic and social conditions. The State believes that,
given the inherent variability in any such estimates, the reserves are
within a reasonable and acceptable range of adequacy. Reserves are
continually monitored and reviewed, and as settlements are made and
reserves adjusted, the differences are reported in current operations. A
liability for a claim is established by the State if information indicates
that it is probable that a liability has been incurred at the date of the
financial statements and the amount of the loss is reasonably estimable.
Accumulated Sick Leave
Employees earn sick leave credits at the rate of one and three-quarters
working days for each month of service without limit, but can be taken
only in the event of illness and are not convertible to pay upon
termination of employment. However, a public employee who retires or
leaves government service in good standing with 60 days or more of
unused sick leave is entitled to additional service credit in the ERS.
Accumulated sick leave as of June 30, 2005 amounted to approximately
$20,581,000.
The Governmental Accounting Standards Board (GASB) has issued the
following statements applicable to the department:
• Statement No. 42, Accounting and Financial Reporting for
Impairment of Capital Assets and for Insurance Recoveries,
establishes accounting and financial reporting standards for the
impairment of capital assets and clarifies and establishes
accounting requirements for insurance recoveries. This
Note 13 –
Commitments and
Contingencies
Note 14 – New
Pronouncements for
Financial Reporting

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Chapter 3: Financial Audit
statement is effective for financial statements for periods
beginning after December 15, 2004 and is not expected to have a
material effect on the department’s financial statements.
• Statement No. 45, Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions,
establishes standards for the measurement, recognition, and
display of other post employment benefits (OPEB) expense/
expenditures and related liabilities/assets, note disclosures, and,
if applicable, required supplementary information in the financial
reports of state and local governmental employers. This
statement is effective for financial statements for periods
beginning after December 15, 2007. The department has not yet
analyzed the effect on the financial statements of adopting
Statement No. 45.
• Statement No. 46, Net Assets Restricted by Enabling Legislation
– An Amendment of GASB Statement No. 34, clarifies the
definition of the legal enforceability of an enabling legislation
restriction, specifies the accounting and financial reporting
requirements if new enabling legislation replaces existing
enabling legislation or if legal enforceability is reevaluated, and
requires governments to disclose the portion of total net assets
that is restricted by enabling legislation. This statement is
effective for financial statements for periods beginning after June
15, 2005 and is not expected to have a material effect on the
department’s financial statements.
• Statement No. 47, Accounting for Termination Benefits,

establishes standards for the measurement, recognition, and
display of termination expense/expenditures and related
liabilities/assets, note disclosures, and, if applicable, required
supplementary information in the financial reports of state and
local governmental employers. This statement is effective for
financial statements periods beginning after June 15, 2005 and is
not expected to have a material effect on the department’s
financial statements.
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