1-16-14 Ltr to Dallas Police & Fire Pension System (1) | Valuation (Finance) | Securities (Finance)

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City of Dallas
January 16,2014

VIA U.S. FIRST CLASS and CMRRR and via EMAIL TO JOSH MOND, ESQ. (imond@dpfp.org)
Board of Directors, Combined Plan Dallas Police & Fire Pension System c/o Josh Mond, General Counsel, Dallas Police & Fire Pension System 4100 Hany Hines Boulevard, Ste. 100 Dallas, Texas 75219 Board of Directors, Supplemental Plan Dallas Police & Fire Pension System c/o Josh Mond, General Counsel, Dallas Police & Fire Pension System 4100 Harry Hines Boulevard, Ste. 100 Dallas, Texas 75219

In their respective below-listed official capacities on the Boards of the Dallas Police & Fire
Pension System: George Tomasovic, Board Chairman Dan Wojcik, Vice Chairman Rick Salinas, Deputy Vice Chairman Tennell Atkins, Trustee Gerald "Jerry" Brown, Trustee Samuel L. Friar, Trustee Scott Griggs, Trustee Ken Haben, Trustee Philip T. Kingston, Trustee lre Kleinman, Trustee Joe Schutz, Trustee
Each c/o Josh Mond, General Counsel, Dallas Police

& Fire Pension System

4100 Harry Hines Boulevard, Ste. 1.00, Dallas, Texas 75219

Re:
Gentlemen:

Independent Actuarial Audit of City of Dallas Pensions

The City of Dallas (the "City") respectfully demands that on or before 5:15 PM Dallas time on the tenth business day following the date of this letter, the Dallas Police & Fire Pension System Combined Plan and the Dallas Police & Fire Pension System Supplemental Plan

OFFICEOFTHECITYATTORIIEY

CITYHATL OALLAS.TEXASTs2Ol PHONE214{7G35I9 FA)(2144704A22

Board of Directors, Combined plan Board of Directors, Supplemental plan Dallas Police & Fire Pension System January 16,2014 Page2

(together "PFPS") provide to independent actuary Jason L. Franken, of the independent actuarial firm Foster & Foster, who has been retained by the City for the purpose of performing the audit of actuarial valuations, studies, and reports required by Tex. Gov't bode gSO-Z.tOtZ1c;, documents containing the information described on exhibit A to this letter to enabli said actuary to perform his audit. The City has elected to have its independent actuary perform a fuit replication actuarial audit. The information listed on Exhibit A is what the iaid independent actuary advises the City that he requires to perform the said engagement, and to identify appropriate assumptions for the audit. The independent actuary will endeavor to meet with the Mr. Richard Tettamant as manager of PFPS, and whatever additional managers the boards may designate to discuss the full range of actuarial assumptions used by the plairs' actuary and any issues that may support the independent actuary's detlrmination of the aipropriate asiumptions to use in conducting the audit. But because the initial document - production is merely preparatory to conducting the actuarial audit, if there is a delay in that meeting respecting actuarial assumptions, the document production should not also be delayed.

_ PFPS is a public retirement system within the meaning of Tex. Gov't Code $802.001(3). The City is the unit of government that is the employer of the active members of pfpS. fne iiiy has engaged independent actuaries Jason Franken anO amy Strickland through the actuarial firm of Foster & Foster for the purpose of conducting the actuaiial audit by the Ciiy; and Mr. Franken and Ms. Strickland each has the credentials required for an actuary under Tex. Gov't Code $802.101(d).
If any of this information is not in PFPS'possession and is in the possession of another entity, the City respectfully demands that PFPS immediately (a) specify such information in writing to the City and (b) direct the custodians of such informltion to provide it to the

independent actuary in accordance with this letter. We have already provided you with a copy of the City's contract with Foster & Foster. The City will also cooperate fully with this uuait, promptly providing to the actuary whatever information that the actuary may request.

As the City has discussed with the PFPS Administrator and pFpS' attorney the City is required by Texas Government Code $802.1012(c) to perform an actuarial audit of it. p.nrion, every five years. Government Code $802.1012(c) mandates that this actuariat audit includes an audit of the subject-matters of all reports filed by PFPS during the previous five years pursuant to requirements including any requirements under Government Code chapter 802. Since Tex. Gov't Code $802.103(a) requires PFPS to file annual financial reports, and such reports by definition cover both assets and liabilities, the independent aciuarial audit will include examination of PFPS assets as well as its liabilities and other categories of information as indicated on Exhibit A. It is the City's overarching duty and right to Iearn about all aspects of the Police Fire Pension finances on both the asset una ti.Uitity sides of the ledger as the sponsor of the plans administered by the board, the employer of system members, and the issuer of municipal securities the ratings of which could potentially be prejudiced by unknown risks to PFPS about which the City is obligated to leain and that the U.S. Securities and Exchange Commission would assert that the City would be obligated to disclose if they exist under Section

Board of Directors, Combined plan Board of Directors, Supplemental plan Dallas Police & Fire Pension System January 76,2014
Page 3

10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. The City has additional obligations under federal and state law that further necessitate and warrant th; full replication actuarial audit in the City's judgment.
Therefore, to meet our obligations under section 802.1012 and other relevant obligations of the City, the City has engaged Foster & Foster to perform and in-depth actuarial audit of both of the City's pension systems for the most recent five-year period. The audit performed by Foster & Foster will include all of the valuations, studiei, und reports prepared by the pension systems since the last audit in 2008. The Foster & Foster actuarial audit will inquire into pension system assets and liabilities. We need and appreciate your assistance in getting this project moving.

You should contact Mr. Franken (Foster & Foster, One Oakbrook Terrace, Suite 720 Oakbrook Terace, IL 60181, (630) 620-020A, Fax (239) 481-0634,jason@foster-foster.com), or City of Dallas Controller Edward Scott ((214) 670-3856, edward.icott@dallascityhall.com) to resolve any questions about scope or format of the documents to be provided. Please use email or fax for your communications to avoid delay.

Mr. Franken or Mr. Scott can also arrange for an FTP site into which you can copy voluminous data to avoid the volume limitations of email. During the audit, the actuary may contact PFPS for additional information or clarifications to avoid any misunderstandings or incorrect results. We appreciate your assistance in this project.
As shown by the copy of the agreement that we provided to PFpS, the City has entered a written agreement with Foster & Foster to maintain the confidentiality of any nonpublic into information provided by PFPS as required by section 802.t0L2(d). If you prlfq not to diiclose specific information directly to Foster & Foster, we will be glad to arrange io, you to transmit it directly to the City and the City will accept responsibility for tttr dutu and the related legal obligations. The City has the same obligations- as PFPS to protect non-public information obtained from PFPS in connection with this actuarial audit, and ihe ,u-, po*rrs to protect that information from further disclosure. No additional confidentiality provision is necessary or appropriate given the protections that state law recognizes as confidential that is accorded in both section 8O2..lOl2 and the Public Information Act.
Sincerely,

V&/4,,1^tmnWD e[nne Chipperfield
cc:
Warren Ernst Chief Financial Officer

EXHIBIT A
ACTUARIAL DATA REQUEST
1.

J.

4. 5. 6.

Plan documents or ordinances (with amendments) outlining the provisions for each of the pension plans Personnel files used by the actuaries in each of the five last valuations (200g-201,2) that we will be replicating. These files should include standard data fields such as birth date, hire date, gender, salary, etc. plus any additional information required to determine the liabilities of each plan. Copies of full tables (i.e. decrements, salary increases, etc.) for any assumptions that are plan specific Any experience studies completed during the period. The last 10 benefit calculations performed for each plan. Any relevant correspondence with the retirement systems or City regarding the pension systems, including available documentation surrounOing selection of-assum"ptions and/or methodologies used in the valuations from 200g_2012

PRELIMINARY ASSET REVIEW DATA REQUEST

3' Most recent audited financial statements for all noncustodial investment managers 4. 1213111,2 custodial bank statements 5. Contact information for all investment managers 6. 12/31/72 consultant report due diligence and on-going monitoring policies and procedures 7 Initial 8' Valuation policies
and procedurei, particurarry

1. organization chart & investment 2. Investment Policy Statement

staff contact information

for private market investments

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