December 2021 Board of Trustees Meeting Summary
The Budget and Audit Committee of the Board of Trustees convened December 6, 2021 at 8:30 a.m. with the regular session of the Board of Trustees meeting following at 9:45 a.m. In attendance were Board members Jason Steliga, Beth Knes, Dr. Kyle Collins, and Dr. Melinda Moss. Trustee Dr. Eric Park participated virtually, and trustee Sharon Kissinger was absent. Also present were Executive Director Dearld Snider; Assistant Executive Director, Operations Bill Betts; Assistant Executive Director, Investments Craig Husting; General Counsel Sarah Swoboda; Chief Financial Officer Anita Brand; Director of Legislation and Policy Maria Walden; Chief Technology Officer Lisa Scheulen; Human Resources/Benefit Plan Administrator Kim Harris; Director of Executive and Board Administration Jennifer Martin; and various other PSRS/PEERS staff members.
Budget and Audit Committee
The open session minutes from the June 8, 2021, Budget and Audit Committee meeting were approved by unanimous vote.
Review of the Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR)
Ms. Anita Brand from PSRS/PEERS reviewed the purpose of the ACFR. The ACFR is an accumulation of all activity conducted by the Systems during the fiscal year and becomes a historical document for current and future users. The ACFR is prepared in compliance with accounting requirements established by the Governmental Accounting Standards Board (GASB). The Government Finance Officers Association (GFOA) also provides guidance on the content of the ACFR. The Systems strive for excellence in reporting and transparency, therefore the ACFR exceeds the GFOA requirements. Ms. Brand focused on the report's five distinct sections: 1. Introductory, 2. Financial, 3. Investment, 4. Actuarial and 5. Statistical. The full version is also found on the PSRS/PEERS website at www.psrs-peers.org/About-Us#Annual-Report-PanelID
Report of the External Auditor and Review of the June 30, 2021 Independent Auditors' Report
Mr. Nick Mestres, Ms. Kim Skarda and Ms. Kristen Brown from Williams-Keepers, LLC discussed the recent June 30, 2021 audit of the Systems. Mr. Mestres indicated that Williams-Keepers, LLC had issued an unqualified audit opinion on the June 30, 2021 financial statements. Mr. Mestres indicated an unqualified audit opinion represents the following: the "highest opinion" available, that the financial statements are fairly presented in all material respects in accordance with U.S. Generally Accepted Accounting Principles, and the financial statements can be relied upon. Mr. Mestres briefly reviewed the audit process, financial statements, and footnotes. Ms. Brown reviewed the Audit Communications Letter to the Board of Trustees. She indicated they found no significant deficiencies or material weaknesses in internal controls. Mr. Mestres also briefly discussed the Governmental Accounting Standards Board Statement No. 68 audit. He reviewed the roles of PSRS/PEERS' staff and Williams-Keepers, LLC during this process and the joint effort made with participating employers.
The audit report was approved and recommended for acceptance by unanimous vote by the Budget and Audit Committee.
Ms. Brand reviewed a memo regarding a budget amendment request. The budget amendment included costs related to the September 2021 security incident. As previously discussed with the Board of Trustees, the Systems engaged the assistance of external professional service firms including external legal counsel and a third-party provider for credit monitoring and notification assistance. In addition, the budget amendment included enhancing the Systems' Microsoft Office licensure and email gateways. The budget adjustment was approved and recommended for acceptance by unanimous vote by the Budget and Audit Committee.
Regular Board Meeting
The open session minutes from the October 25, 2021 meeting were approved by unanimous vote.
Order of Business
Investment Performance Report (9/30/21)
Mr. Craig Husting from PSRS/PEERS and Ms. Margaret Jadallah from Verus (virtual) reviewed the investment performance for the period ended September 30, 2021. The one-year PSRS/PEERS investment return was reported as 23.8%, while the fiscal year return (July 1, 2021 through September 30, 2021) was reported as 1.3%.
Ongoing Investment Activity
Mr. Husting and Ms. Jadallah reviewed ongoing investment activities, which included estimated investment performance through November 30, 2021. Mr. Husting discussed the current asset allocation of the PSRS/PEERS portfolio, in which he reviewed the long-term strategy and broad portfolio expectations.
Investment Policy Changes
The Investment Policy was originally adopted in 1995. The investment staff periodically conducts a full review of the Investment Policy and recommends changes to the Board. The last full review was conducted in December 2020.
Mr. Husting discussed proposed changes to the General Policy, the Portfolio Rebalancing Policy, the Service Providers Policy and the Implementation Manuals for Public Risk, Safe Assets, Private Equity, Private Real Estate and Private Credit. The recommended changes were primarily considered 'clean-up.' Within the Private Credit and Private Equity Implementation Manuals, the cap (or restriction) on co-investments and direct investments associated with a single partnership was removed. Following discussion, the proposed investment policy changes were approved by unanimous vote.
Report of the External Auditor and Review of the Fiscal Year 2021 Annual Comprehensive Financial Report (ACFR)
Ms. Anita Brand briefly reviewed the purpose of the ACFR which was previously shared with the Budget and Audit Committee.
Ms. Anita Brand and Mr. Nick Mestres from Williams-Keepers, LLC briefly reviewed the recent June 30, 2021 audit of the Systems as previously shared with the Budget and Audit Committee.
The audit report was approved as recommended by the Budget and Audit Committee by unanimous vote.
Ms. Brand reviewed the budget amendment request presented to the Budget and Audit Committee for professional services related to the September 2021 security incident and enhanced security protocols. The budget adjustment was approved as recommended by the Budget and Audit Committee by unanimous vote.
Ms. Maria Walden from PSRS/PEERS and Mr. Jim Moody, legislative consultant, updated the Board on the current legislative session. Mr. Moody reported briefly on state revenue and gave an update to the Board. Ms. Walden updated the Board on the 2022 pre-filed legislation and potential bills that will be filed. The Missouri General Assembly allows elected officials to pre-file legislation starting on December 1 for the upcoming legislative session. Currently, there have been over 791 bills pre-filed. The 2022 Missouri Legislative Session will begin on January 5, 2022.
Mr. Dearld Snider from PSRS/PEERS reviewed the COLA policy that was set by the Board of Trustees at their November 3, 2017 meeting. According to the policy, COLAs may be granted based on the Consumer Price Index for Urban Consumers (CPI-U) as follows:
|CPI-U||COLA per Board-Approved Funding Policy|
|Less than 0.0%||0.0%|
|0.0%-2.0%||0.0% when CPI-U is cumulatively below 2.0%|
|0.0%-2.0%||2.0% when CPI-U cumulatively reaches 2.0% or more*|
|2.0%-5.0%||2.0% when the CPI-U is at least 2.0%, but less than 5.0%|
|5.0% or more||5.0%|
|*resets cumulative calculation after a COLA is provided|
Mr. Snider explained that the CPI-U is calculated by the Bureau of Labor Statistics (BLS). The CPI-U is the measure of the change in prices of goods and services purchased by urban consumers between any two time periods. PSRS/PEERS' regulations require that the time period for the CPI-U calculation used in the determination of a COLA be from June to June. Based on the values provided by the BLS, the CPI-U is up 1.8009% through October 31, 2021.
The November reading for the CPI-U will not be released until December 10, 2021.
The Board went into closed session at 11 a.m.
The Board adjourned at 12 p.m.
This summary is not official minutes of the PSRS/PEERS Board of Trustees meeting. The official minutes will be approved at the next PSRS/PEERS Board of Trustees meeting and will posted to our website at that time