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<br />, State of Minnesota \ <br />e <br /> <br />..-- <br /> <br />e <br /> <br />e <br /> <br />- <br /> <br />L~~ ~U ~L L~;4J IU:~~~(~~J9 <br /> <br />F RlJ/'l: C 1/ Y UF BKL YN PARK T - 33':1 P. 05 <br /> <br />LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT <br /> <br />....,~ ~, '. ".. <br /> <br />.' <br /> <br />TO: <br />FROM: <br /> <br />~ cf 111 f;.~", <br />~' ~"'" I), <br />"f" 0( '.. <br /> <br />(i:&~l <br />\~=QI\"J< <br />~~~~... <br /> <br />Members of the Volunteer Fire Subcomm'~e <br />Lawrence A. Marlin, Executive Direclo~ 4; <br /> <br />RE: Incomplete or Erroneous Date In State Auditor's 1989 Compilation of Volunteer <br />Firefighters Relief Association Reports . . <br /> <br />DATE: ~vember 22~ <br /> <br />IntrocJuctiQO <br /> <br />During the November 18-19, 1991, Volunteer Fire Subcont..'lllUee hearing, the Subconuniuee <br />reviewed the compilation preparecJ by the Office of tho State Auditor of the annual Hnandaf <br />information reported by the various volunteer firefighter relief associations. <br /> <br />As the Commission staff examined that compilation report more closely durJng the course of <br />the Subcommittee hearing, it became clear that the compilation report contained a <br />considerable volume of incomplete or erroneous data and indicated substantial lack of <br />compliance with the requirements of state law for the funding of volunteer firefighter relief <br />associations. <br /> <br />J.nrompJet~ aDd ErroneQus Data <br /> <br />There are nine different categories of incomplete or erroneous data set forth in the State <br />Auditor's 1989 Compilation. Tb'e categories, matching the a~tached lists of volunteer firefjghter <br />relief associations, are as follows: <br /> <br />List A: Erron~ously Computed Actuarial Liabilities <br />(4 Relief Associations) <br />The reported actuarial liability calculation is such a nominal amount that it is <br />unlike"ty to have been a~curately computed. <br /> <br />List B: Identical Assets and Actuarial Liabilities <br />(7 Relief Associations) <br />The reported actuarialliabiJity calculation is ~dentlcal to the reported aSSet <br />figure, which is a sufficient coincidence to raise a suspicion that the actuarial <br />liability is miscomputed or that the assets are misreported. <br /> <br />Ust C: Normal Cost Unreporled <br />(135 ReHef Associations) <br />The reported figures omit a calculated normal cost (annual accruing liability) <br />figure, which occurs with every defined benefit plan (lump sum or monthly <br />benefit). <br /> <br />List D: Indicated Unfunded Accrued LfabHlty. But Amortization Requirement <br />Unreported . <br />(164 ReHer Associations) <br />The relief association indicates an unfunded aCluarialliabllity, which must be <br />amortized under state law, but fails to indicate any amortizatJon contribution, <br />thus understating the relief association's financial requirements. <br /> <br />List E: Improperly Calculated Amortization Requirement <br />(61 Relief Associations) <br />The rep()rted amortization requirement does not match the expected figure, <br />given the indicated unfunded accrued liability, with state law requiring an <br />amortization contribution of approximately one-tenth of the unfunded accrued <br />liability amount. <br /> <br />List F: Amortization Requirement Reported for Relief Association With no Unfunded <br />Accrued Liability <br />(30 Relief Associations) <br />The relief association does not indicate the presence of an unfunded accrued <br />liability, but inappropriately indicates an amortizatJon requirement. <br /> <br />Page 1 <br /> <br />151191LM <br />