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HomeMy WebLinkAboutDocumentation_Regular_Tab 13_06/09/2005 TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL BOARD OF TRUSTEES MEETING FEBRUARY 14, 2005 I. CALL TO ORDER AND ROLL CALL The Tequesta General Employees' Pension Trust Fund Boazd of Trustees held a regular quarterly meeting in the Emergency Operations Center (EOC) of the Tequesta Public ; Safety Facility, 357 Tequesta Drive, Tequesta, Florida, on February 14, 2005. The meeting was called to order at 8.08 a.m. A roll call was taken by Gwen Cazlisle, Pension Coordinator. Boazdmembers in attendance at the meeting were: Chair Jeff Newell, Secretary Tom Paterno, Boardmember Carl Hansen and Boazdmember Bob Garlo. Boardmember Greg Corbitt was absent from the meeting. Also in attendance were Attorney Bonni Jensen, Consultants, and staff. II, APPROVAL OF AGENDA MO TIUN: Boardmember Hansen made a motion to approve the agenda as submitted. Boardmember Paterno seconded the motion, which carried by unanimous 4-Q vote. III. APPROVAL OF MINUTES MOTION: Boardmember Hansen made a motion to approve the minutes of t6e December 13, 20Q4 meeting as submitted. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. IV. PRESENTATION BY MS. JOANN FORSYTHE, FINANCE DIRECTOR Ms. Forsythe commented issues came up in the Finance Department that had prompted her to ask questions regazding inconect recommendations, missing money, and the lack of proper tracking of funds, and requested information of how the transfer fram Northstar/Wachovia to the new money manager and custodian had taken place. Ms. Forsythe indicated she hoped this fund had remained within State statutes, and that this trust had not been told they had to incur additional expenses that were not required under the statutes. Attorney 3ensen responded that first, the board had hired her, and then one of BOARD OF TRUSTEES TEQUESTA GENERAI� EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February 14, 2oog PAGE 2 the issues was that they were interested in looking at their money manager, which she did not do, so she had suggested to them they look to hire an investment consultant, and Mr. Bogdahn had been hired through an RFP pracess. Mr. Bogdahn did an initial review of money managers and the board went through an RFP process as well as conducted follow a� up conversations with the presenter they were interested in, and then went through the process of hiring the investment manager. Attorney Jensen explained that the custodian came with the investment manager. The product chosen by the boazd had a corruningled fund, and that fund had a custodian where the funds had to be custodied in order to be in , that commingled fund. Ms. Forsythe commented that when she tried to verify that, she had found that in the contract with the money manager, the money manager was the custodian, which was a direct violation of the plan and Florida State statute. Attomey Jensen advised that the money manager through the contract was providing custody services through Penn Trust, which was specifically mentioned in the contract. Joe Bogdahn commented that actually happened in many places, and gave other examples. Mr. Bogdahn explained that in this case, Rockwood Capital was creating a commingled fund, and they had independent custodial services which were all packaged together and priced tagether. Ms. Forsythe commented that item 8 of the contract, custodianship of the securities, stated the manager shall provide custody, but that this particular manager did not meet the State requirement to be a custodian. Attorney Jensen explained that this fund did not have a relationship with the custodian—that they had a relationship with the manager, and the manager was providing custody services through Penn Trust. Ms. Forsythe commented the manager could change their relationship with A. G. Edwazds to another company, and explained how the manager could move money around and the fund would not even see it. Ms. Forsythe commented that there was no account in the fund's name and Rockwood did not meet the State criteria required to be a"Public Depository", and the fund did not have a relationship with A. G. Edwards . Mr. Bogdahn commented that it may very well be that A. G. Edwards could provide the auditing function and a direct statement of the total fund, but that would have to be reseazched. Mr. Gallagher commented that Rockwood had told him A. G. Edwards did not have the ability to provide checking account services, so the Village would not have the ability to write checks to pay expenses the way they had with Wachovia. Mr. Gallagher explained that the Village would have to instruct A. G. Edwards who to write checks to and the amounts. Mr. Bogdahn advised that of the 97 funds his company represented, he would say 94 of them had that type of situation. Bills would be submitted to A. G. Edwards and they would write the checks. Mr. Gallagher commented the procedure would be that two txustees would approve a bill and that approval would be sent along with the bill for payment, and a copy of the bill would go to Rockwood. A. G. Edwards would actually have to call Rockwood to get approval before they paid any bills. Ms. Forsythe explained ii> �1 BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES= PENSION TRUST FUND SPECTAL MEETING MINUTES February �4, 2005 PAGE 3 that the auditors were upset that the fund now had assets not in their name and that inter- accounting controls were unavailable. Mr. Bogdahn commented this was the first time he had heard these questions being asked, and there were a number of auditing firms azound � the State that represented many funds, many of which were commingled funds, and he did ?� not know what mechanism was used there to make the auditors comfortable, but he was :� sure it was something different than what the fund now had. Discussion ensued. Ms. Forsythe expressed concern that the maney manager was doing everything instead of only managing the account, and also wanted to write checks. Mr. Bogdahn commented the fund needed to hav� a relationship with the custodian, and assets in the plan name, and if it could not be done in the commingled funds, another option could be considered. Ms. Forsythe indicated she was very concerned, and the auditors, Rachlin Cohen, were very concerned and wanted to know the results of this meeting. Mr. Bogdahn indicated he would have to reseazch to provide answers to the questions raised, and noted the Public Safety Officers' Pension Board had requested more information to be provided at a meeting on Friday, and suggested this board hold a meeting on the same day. Ms. Forsythe commented the money that was transferred from Wachovia was not shown going in anywhere under the Village's name; there was an account in the name of Rockwood with A. G. Edwards, but nothing in the Village's name. Ms. Forsythe indicated the Public Safety O�cers' Pension Board wanted assets to be in the name of the fund and the account to be individually managed rather than in commingled funds, amd to have a separate custodian. Boardmember Garlo asked if the auditors were happy with a cash management account where the Village could write checks. Mr. Bogdahn explained that was really not good accounting practice since theoretically two trustees could write a check for the amount of the fund; also liability premiums were higher. Ms. Forsythe explained in the past the trustees did not hold the checkbook, and before a check was prepared Finance verified the board had followed the accepted procedure. Mr. Bogdahn commented ownership was the issue in this case, and the solution was to clean it up or have a separate direct relationship. Ms. Forsythe pointed out that under State requirements the board was not required to have a monitor. Mr. Bogdahn confirmed that the General Employees' fund was not required to have monitoring; the police and fire fund was required to have monitoring once every three yeazs. Ms. Forsythe commented there was a custodial agreement with A. G. Edwazds, but in reading through it, it seemed Rockwood would not accept securities, but required that all � s BOARD OF TRUSTEES TEQUESTA GENERAI. EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February �4, 2005 PAGE 4 of the securities be liquidated, and there had been talk about it being expensive. As a result, a custodial agreement with A. G. Edwards was set up for the sole purpose of transferring securities to them so they could liquidate them and the cash could be given to Rockwood,who would then purchase securities. Ms. Forsythe asked if that was what had happened and if there was anything to show that had happened. Mr. Bogdahn advised he had a note to show reconciliation of shazes. Ms. Forsythe requested statements from both A. G. Edwazds and Rockwood. Ms. Forsythe expressed concern that administrative power had been taken from the trustees and making Rockwood the administrator. Attorney Jensen advised the boazd had delegated their responsibilities to the manager. Mr. Bogdahn noted the intent was to make sure this board was not the investment manager, not to delegate the board's administrative role. Attorney Jensen advised the contract did not delegate any responsibility for the payment of assets or benefits or expenses. Ms. Forsythe indicated she was seeing the board totally out of it and Rockwood controlling everything. Boardmember Paterno commented he assumed there would be a cash management account so the Village could write checks, that the ability to get to the funds was needed. The process was discussed. Boardmember Hansen asked how this had been handled with Northstar, which Ms. Forsythe explained. There had been internal accounting controls and a checkbook with Wachovia, and minutes were checked for board approval before a check was issued. Mr. Hansen asked if this was a problem for the Public Safety Board as well, to which the response was they had not gone with the commingled fund because of these concerns. Boardmember Paterno explained that the Public Safety Officers' fund had enough money that they could have an individually managed account. Because the General Employees did not have a lot of funds, they went with the commingled fund, because the transaction costs with Narthstar were too high. Mr. Bogdahn summarized that the board wanted to assure that the boazd had control over the assets, which was the primary issue, and tliat Rockwood provide a statement for reconciliation of those assets. At the meeting on Friday, he could provide suggestions and alternatives. Boardmember Garlo commented there needed to be a cash management account. Mr. Bogdahn responded that a cash management account would not be necessary if there was a direct custodial relationship. Boardmember Paterno commented A. G. Edwazds had to provide a sta.tement directly and a sub-account was needed to hold cash in, into which $10,000 could be transferred and each month the amount brought back up to $10,000 from which to pay bills, which he believed would satisfy everybody. It was pointed out the charge for having the account in the proposal for the sub-account would be � $1,750. Attorney: Jensen advised the proposal appeared to be just for having a cash management account and in Florida the $1,750 fee was low. Mr. Bogdahn commented the commingled fund was cheaper than an individually managed account, but the level of � BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES= PENSION TRUST FUND � SPECIAL MEETING MINUTES February 14, 2005 { PAGE 5 control might cost more. Ms. Forsythe advised that Wachovia's costs would be compared to these fees. Mr. Bogdahn commented this was a lump sum charge in place of Wachovia's $55 per transaction fee. Discussion ensued. Mr. Bogdahn commented it sounded like the ideal situation for a fund this size would be to lock down the custodial relationship between Rockwood and the commingled fund to only direct the trades, and a separate direct custodial agreement between the boazd and whoever the custodian was, with an account in cash and payments out to be only at direction of this board. To do that and have a separate account the chazge would be $1,750 per year, but that might still be less expensive than an individually managed account. That was assuming that Rockwood's controls for the commingled fund could be made tight enough that they could not transfer funds in and out, but they could only effect purchases of sales and securities. Discussion ensued. Boardmember Paterno commented Rockwood should reduce their fee if they were no longer handling the custodial relationship, with which Mr. Bogdahn agreed. Attorney Jensen advised the finance department concern needed to be addressed to assure an individual relatianship with a custodian and that the assets were accurately reported. Mr. Bogdahn noted SunTrust had a commingled account and the auditors were happy, so he needed to find out the mechanism they used. Attorney Jensen advised with a proper statement from A. G. Edwards stating the fund's balance, that the fund had this many shares of the Rockwood Strategic Equity Fund which were valued at "X", the problem might be taken care of because then A. G. Edwards Trust would be on the hook to make sure the fund's balance was actually what was they reported. After further discussion, Mr. Bogdahn commented by Friday's meeting he should have answers to the board's questions and be able to provide alternatives in case the answers did not satisfy the needs of the board. He would see what different costs wauld be. Ms. Forsythe asked why not have mutual funds, to which Mr. Bogdahn responded that would be 60-70 basis points as opposed to 3Q-40; fees were less expensive with commingled or individual funds, and this fund was not large enough to get into institutional purchases. Mr. Bogdahn recalled the second alternative to Rockwood had been Dana, and they did not have a commingled fund. Boardmember Paterno commented to go back to an individual manager would increase costs but it would make it easier to sleep at night. Mr. Bogdahn commented that the intent with the change in management was to actually have a more balanced equity portfolio that would do better in both up and down markets, and in the process to reduce overall fees; however, fees were not going to be reduced to the extent hoped. Chair Newell asked for a recommendation from Ms. Forsythe. Ms. Forsythe recommended that before the boazd did anything to wait and see what happened Friday with the Public Safety Board, hear the additional information, and there might be things BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES� PENSION TRUST FUND SPECIAL MEETING MINUTES February �4, aoo5 PAGE 6 that came up in that meeting that would apply here. Ms. Forsythe recommended going back to the board's original thought of an individually managed account. Mr. Bogdahn commented this was the first boazd to review Rockwood's commingled fund, and expressed his opinion that in the next 12 months that Rockwood might institute : accounting controls, and the board could always go back into the fund at that time. Chair Newell called for a break before making a conference call to the money manager. Ms. Forsythe indicated she did not need a conference call; Boazdmember Paterno indicated he wished to make the call. Boardmember Garlo thanked Ms. Forsythe and Ms. Maqueda for their time. MOTION Boardmember Hansen made a motion to recess for 15 minutes. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. The meeting reconvened at 9:43 a.m. V. CONFERENCE CALL WITH INVESTMENT MANAGER, ROCKWOOD CAPITAL ADVISORS Chair Newell reported the board had been unable to make conta.ct with anyone from Rockwood Capital Advisors. Mr. Bogdahn advised when he got back to his o�ce that afternoon he would find out who at A. G. Edwards he needed to speak to about an individual account and he would have a reconciliation statement on Friday. Ms. Forsythe commented she believed everybody was headed in the right direction, . Holding a meeting on Friday was discussed. Since Boazdmember Hansen would be out of town and Chair Newell might not be available, it was decided a meeting on Friday would not be possible. Boazdmember Garlo commented a meeting could be scheduled at some point, to be announced. Boardmember Paterno requested Mr. Bogdahn send the reconciliation to Ms. Forsythe and a copy to Mr. Gallagher. VI. CONSENT AGENDA a) Payments to be reviewed and approved: 1 i � t ; 5 BO�ItD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February iq., 2005 PAGE � Northstar Capital Management $ 408.00 Business Services Connection $ 401.20 Hanson, Perry, & Jensen $5,333.52 Gabriel, Roeder, Smith (in place of $5,031.00) $4,000.00 Attorney Jensen advised the correct amount for her bill was $2,308.32. Mr. Gallagher advised he had spoken with Mr. Palmquist at Gabriel, Roeder, Smith, who was to issue a credit, making the balance due them $4,000. Mr. Paterno indicated payments should not be authorized without a means to write checks. Chair Newell commented then he would move to agenda item VII. VII. UNFINISHED BUSINESS Acceptance for Transfer of Funds into 5ub Account in the amount of $12,000 Mr. Gallagher reported A. G. Edwards had established an account, which they called a sub account, and he called the operating account. Chair Newell asked if checks could be written on that account today. Mr. Gallagher explained funds had to be in that account by the 25�' of the month in order for A. G. Edwards to process any invoices for payment. Their policy was to pay bills once a month and to receive cash once a month. $12,000 had been placed in the account based on the letter from Chair Newell directing Rockwood to send $12,000 to A: G. Edwards to be available. Boardmember Gazlo asked how this money could be used to pay bills. Mr. Gallagher explained that it could be done the way A. G. Edwards had outlined, to send a check requisition along with the supporting bill directly ta A. G. Edwazds, send a copy to Rockwood, and the check requisition would be approved by two members of the boazd of trustees. Mr. Bogdahn asked if by having the sub account only two or three weeks and then closing the account, would the $1750 fee be incurred, and if so, that was a very expensive way to pay bills. Ms. Forsythe suggested going to Wachovia first to see if they could still write off that account or writing the checks from one of the Village funds and just owe the Village. Ms. Maqueda advised there was still one contribution at Wachovia of approximately $5,000.00 and the other contributions made out to A. G. Edwazds had cleared and were endorsed by A. G. Edwards. Ms. Forsythe suggested the bills be approved to be paid once it was figured out how it could be done. Boardmember Garlo cautioned against using the sub account because it might incur a$1,750 fee. Boardmember Hansen commented some action needed to be taken on this today because unless there was a special meeting, the boazd would not have another meeting for three months. Ms. Forsythe BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February �4, 2oog PAGE 8 commented if the boazd approved the bills probably all the bills except Gabriel Roeder Smith could be paid from the $5,000 in Wachovia. Mr. Gallagher indicated he did not yet have a bill from Gabriel Roeder Smith. Boazdmember Gazlo agreed, commenting that by the next quarterly meeting a mechanism should be in place to pay bills. MOTION Boardmember Paterno made a motion to pay the bills out of the Wachovia account as applicable, and authorize payment for the rest as soon as a method became available, as soon as possible, and authorize the Chair and the Secretary to sign those checks. Boardmember Hansen seconded the motion, which carried by unaniinous 4-0 vote. VIII. FINANCIAL REPORTS a) Statement of Accounts (October 2004-December 31, 2044) b) Schedule of Activities for the Quarter ending Deceunber 31, 2004 c) Consolidation Account Statement – Recap of Activity for Calendar Year 2004 Mr. Gallagher reported there were three statements in the packets—October, November, and December. The number of stocks transferred and the quantity of each stock transferred was available, but not the value of each stock, and he was now trying to get that information. Mr. Gallagher stated the number of shazes was correct. Ms. Forsythe commented it went into Rockwood's account, not ours. Mr. Gallagher commented he was at the point of reconciling to make sure everything was in order, as soon as he had all the information. Mr. Gallagher noted item VIII(c), the schedule of activity with Wachovia, was all there—income, quantities, dates purchased, etc. Ms. Maqueda pointed out item VIII(b) was a balance sheet from the accounting system and normally she prepared a schedule of activities for Mr. Gallagher to present to the board. The schedule was absent because she did not have the information, so she was presenting what the Village had as of 12/31/04, and reported with Wachovia there was only $24,000. Ms. Forsythe noted the figures could not be reconciled with nothing to reconcile to. VI. RETURN TO CONSENT AGENDA Chair Newell commented the following items on the Consent Agenda still needed approval: i' �; < < : � so�xn oF �us�Es TEQUESTA GENERAL EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February 14, 2005 PAGE 9 b) Approval of new applicants through Ol/31/05 1) Matthew G. Anderson, Meter_Reader Hire 12/06/04 2) Brittany Bouse, Police Dispatcher Hire Ol/03/05 3) Anne Koch, Administration Secretary Hire Ol/10/OS - -� c) Ratification of withdrawals made since the last meeting on two signature basis (under $100) – None MOTION: Boardmember Hansen made a motion to approve items b and c of the Consent Agenda. Boardmember Paterno seconded the motion, which carried by unanimous 4-0 vote. IX. ANY OTHER MATTERS Boardmember Garlo reported Mr. Corbitt was resigning from the board, and Gwen Carlisle had expressed interest in becoming a member of the boazd. Greg represented the full-time members, so was elected by the employees. Mr. Garlo asked what procedure should be followed if there was only one employee interested. Attorney Jensen advised that in most circumstances, notice was provided with a deadline for members to indicate their interest to run. She recommended against taking nominations because it was better for emplayees to sign up themselves—then you had a commitment and you avoided electing someone who was not interested. At that point a ballot would be drawn up, and a write-in vote should not be placed on the ballot. If only one person expressed interest it was not necessary to have an election. The notice could be placed on a bulletin board or in paychecks. Mr. Gallagher noted in the past ballots were taken around to the employees who voted and handed in their vote, and it was all done in one day. Boardmember Garlo commented it would be di�cult to talk with Gwen about agenda items because of the Sunshine Law. Attorney Jensen cautioned it would create issues—items could be submitted in writing but Gwen could not respond back. Ms. Carlisle noted she had spoken with Betty Laur on the phone and she was willing to do the agenda as in the past, and she and Beriy could converse. Boazdmember Paterno commented he had expected something possibly today regarding non-work related disability. Attorney Jensen provided a non-duty disabilifiy handout. Attorney Jensen reported at the last meeting the board discussed a non-duty disability BOARD OF TRUSTEES TEQLTESTA GENERAL EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February �q., 2005 PAGE io benefit and Charles Slavin had provided a overview of what a non-duty disability benefit did for various municipalities in Palm Beach County. Most had a 10-year requirement. Attorney Jensen provided a draft change to the General Employees' pension plan which ; had a 6-year service requirement in order to be eligible for the non-duty disability benefit. Examples were things that could happen when not on duty and not classified as workers' comp. The book which Attorney Jensen had brought was put out by the Local Retirement Section, Division of Retirement of the State. Mr. Slavin was the State's actuary and : reviewed all the State's pension plans. This plan's minimum benefit was 25% because that was what Public Safety was when the plans were combined. Attorney Jensen reported Stuart had a non-duty disability benefit which was 5 yeazs at 25%. She had ' drafted 6 years because of the current 6-year vesting requirement. Discussion ensued. Attorney Jensen advised an actuarial impact statement of the change would have to be obtained and then the change in the plan would have to be approved by Village Council. MOTION Boardmember Hansen made a motion to put a change in the pension plan which would put a vesting requirement into the non-duty disability benefit. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. Chair Newell noted this was dependent upon Village Council approval. Boazdmember Hansen commented a member of the board was going on Village Council, and he did not know if Mr. Patemo planned to leave the board or stay, and recalled that when he had been on the Village Council he had served on this board at the same time. Chair Newell commented that was an option, but the Village Council would have to approve. Chair Newell stated he would like Boardmember Paterno to stay on this board, but it was his decision. Boazdmember Paterno commented he had to decide, but he was leaning toward stepping away because he felt it was not a fair position to put the other members in because he did not want to influence their decisions; which in the past had been a concem of employees more than people on the outside. That was why he would probably step aside, but planned to wait until the next 5` person could be appointed to the boazd. Chair Newell asked if he stepped aside whether he could recommend someone. Boardmember Paterno commented in the past it was advertised. Boardmember Hansen commented he understood what Boardmember Paterno was saying, because there were times when he served that he felt awkward in making decisions not knowing how the Village Council would feel about what was being considered. Boardmember Paterno responded he was very outspoken and he did not want to take over or push,his ideas on the other members. Chair Newell commented Mr. Paterno had been a very valuable member of the board, and thanked him for his service. Boardmember Paterno commented � BOARD OF TRUSTEES TEQUESTA GENERAI� EMPLOYEES= PENSION TRUST FUND SPECIAL MEETING MINUTES February �4, 2005 PAGE �� first he wanted to get the money straight. X. COMMUNICATIONS FROM CITIZENS There were no comments from the public. XI. ADJOURNMENT _ Boardmember Hansen made a motion to adjourn, seconded by Boazdmember Garlo, and . unanimously approved. Therefore, the meeting was adjourned at 10:21 a.m. Respectfully submitted, ���� Betty Laur Recording Secretary