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part of the roll call
j_j_ johnson
here
priya mathur
shes someplace
technical recruiter
george dear
robbed
you someplace
wendy jones
okay so we've got a quorum
comp so we will bonded executive report
thank you in good afternoon mister chair and committee members
i'm here to present my second if report for the risk an audit committee
this is my first report to the committee so let me begin by sharing my to live in
joining the calpers organization
i look forward to building strong relationships with the board my
colleagues and staff to support and enhance our financial initiatives
mismanagement and compliance efforts
high also one i think the executive team and staff for all of their support over
these three year three weeks of continued transition
to my new role as well of special thank you goes to russell farm for his role as
i could see a fall in the support he has given me since my start at calpers
the formation of the risk an audit committee this year
coupled with the creation of the c_f_o_ position and the alignment of the risk
and compliance programs under the financial office
presents the ideal environments to build an implement a robust and balanced
governance risk and compliance model
one designed for calpers needs to further enhance our capacity
to meet and fulfil our fiduciary and stewardship responsibilities for those
we serve
at a future meeting i'd look forward to providing a ninety day report
outlining my activities observations and recommendations
to further enhance the development and operation of the enterprise-wide rick
smith
risk management and compliance programs
to ensure comprehensive coordinated approach across the organization
further cultivate as strong risk intelligent culture with effective
processes for risk management in compliance
and refine and enhance the financial and risk reporting activities
to ensure the information fully supports the committee's role in overseeing the
effectiveness of risk
ethics compliance and other reassurance activities
for today's meeting
as an update to the personal trading regulation deregulation was approved by
the office of the ministry to flock and was filed that the secretary of state
with an effective date of december first two thousand twelve
congratulations to all those that were involved with the cheating this
important milestone
on behalf of cal for
calpers and goes we serve
this was a long journey
but at the dedication commitment and efforts of many
to realize the successful completion
calpers has thirty days from the december first effective date to achieve
compliance
the enterprise compliance division will be following up with covered persons as
defined by the regulation to ensure registration in the personal trading
system as well as to provide relevant training information
included in today's agenda we will be presenting for action by the board the
comprehensive annual financial report financial section
the external auditors report on the audited financial statements and
revisions to the audit
resolution policy
looking forward to at that wards july
uh... sorry january off-site meeting the office of enterprise risk management
will be coordinating with the actuarial office on the asset liability management
session to present information on risk appetites and tolerances
mr chair this concludes my report
thank you and no discussion about how long you could
claimed to be the new person then three years was definitely
longer than
we had discussed so that you order
officially no longer the new person nagar but item three is concerned and
part of the only acts
on the order is the approval xd
will play resettlement play michael
and discussion
posed for saarc
so dr
concern ardham
um...
information consent items
anyone everything they want a pool
world
worn out
scott someplace in the annual calendar we will
had any review of the
pierce our
and what we've lessons learned and i see rob
their style
thank you mr jeroen a couple of questions for f_b_i_ patrol helpline
sober to pull it off castles questions please
we can do that
anne
any other comments questions
take that up the end
casper
good afternoon mister chair members of the risk an audit committee
dave clinical calpers staff item five is an action item in represents the
financial section of the annual financial report
consistent with governor government code calpers management compiles the basic
financial statements which is included an attachment any of this agenda item
statues also require the filing of the report the statements with the governor
and the legislature
historically these statements were approved um... at the finance committee
however sparked of the boards comprehensive review of governance
policies and practices
committees where restructuring in february of this year and the risk an
audit committee assumed as part of its delegate authority approval
the financial section and capture
the governmental accounting standards board requires the annual financial
reports be prepared to allow users to assess the government's accountability
by assisting them in determining compliance with thanks finance related
laws rules and regulations
the statements have been prepared in accordance with accounting principles
generally except in the united states
and are presented in accordance with the guidelines of casting
these statements are unique because this was the first year at the micelle per
system populated data into our accounting system
which is our primary source of fiscal information for the financial statements
with mike helped her
earth's we now have much better data
because of the data integrity requirements that were built into the
mike helper system which were not as robust
public are polled legacy systems
i do want to point out one suggested revision on page sixty one of your
attachment eight
uh... there's a sentence which reads
a few provision such as cost-sharing
elimination of air time and pension holidays
applying to current members of in the system
i'd like to recommend of the committee delete the word
pension holidays
as this is not a current provision for any members in our system
i'd like to also share a few statistics as of june thirtieth
the net assets of deep public employees retirement
seinfeld approx
to approximately two hundred and thirty seven billion
on which is our reduction of four point eight million four point eight billion
from last year
and that was primarily due to poor performance of international equity
investments
using the actuarial value of assets we ended the year funded eighty two point
six percent
using the market value of assets we ended that year funded at seventy three
point six percent
in the prior fiscal year we paid fifteen point four billion in retirement
benefits
that's about one point two billion more than in the previous year
and the benefits went over five hundred and forty three thousand a new accounts
that's an increase of approximately fifteen thousand u_n_ newton's
from the year before
the sense my presentation and i'll be happy to answer any questions you may
have
you have a change
was pre sixty one of something
yes pate sixty one of the eighty four
succinic on the left side
uh... the last paragraph at the bottom
there was a sentence that had to do with the applicable in the of certain pension
reform changes to the current members we have in the system
and one of those
uh... changes was actually not applicable to the members
so out we've requested the elimination of the words
tension holidays
as that is not an exclusion is existing systems to any of our members of the
current time
and given that this is management statement
do we need a motion to do better
abuse regis unilaterally change i would request your approval with that
modification
any objection to the change
okay any other questions before i start
yeah george s
or what pages
pages one dash six sixty one eight eighty four
uh... i guess mike my questions
the use of airtime we were going to
so perhaps that
call it what it is
where it is but
i guess uh... right suggestion to suspect statements reviews
ditional retirement service clerk
mister
any objection
we can do that
e in the footnotes
the you talked about tradition fiduciary funds and proprietary funds
it's on page eighteen financial section
discussed so that what that differences
and the other question is do we have a pretty sure responsibility on
proprietary funds
okay so uh...
yet uh... some of the proprietary funds to uh... there there is a quick wifi
fiduciary responsibility proprietary funds are used to account for
governments business type activities such as likely long-term care where your
charging a specific fee
uh... traditional fiduciary funds uh... for uh... ghastly purposes are used to
account for resources at that are strictly held on and cannot be used to
support government's own programs
on so in the case of uh...
some of our funds as we are collecting he and
that is held
uh... e in anticipation as opposed to just for the use of the specific purpose
it's it's considered about
proprietary font
i was gonna ask you to explain intrinsic
verses rebates on the uh...
securities fund
the in the interest entry intrinsic result we have on securities lending his
that amount that we collect
on
opt for the participation in the securities lending program
that's the intrinsic returnees what we actually receive on from the entity
uh... is parking our securities
andy
uh... californian players retirement benefit trust fund
do we decide who the beneficially
actually s
uh... it's on page thirty two of the
club statement
eighteen of the attachment
so uh...
specific research funds
or received from the employers
and they may only be used to pay health and health related costs
so they are held
based on rules
uh... start program articles to plant benefit programs
they are held and they may only be used by
uh... to pay
they health carriers directly sold the the the beneficiaries of coca are the
members because they cannot be returned to the employer wants their deposit into
our program
that they're not spurs e boers
that's correct
think the receipt conference
thrust request
we had discussed
identifying rico orson non recourse to because they're significantly different
uh... we discussed are not interest in having changed here that going forward
i think we should
seriously consider identifying them
since they have very good different atx
the vessel leave
so
abrir
idle move
and
approval at the draft caffrey with the anand
cat
segue michael
any other discussion
if not holds a favor say aye
opposed
little recommended to abort thank you
are going to get your
during the introduction
yes thank you dan
mr chairman this is a gender item six a this is an action item and stats
recommendation is to accept the auditor's report on the draft basic
financial statements for the year ended june thirty two thousand twelve
any company required communications report and improve the letter of
transmittal certainly today for the presentation
are a bit green
we're going to take part and it seems to be no connell
debbie chan and greg maddie and she like directors witnessed sixteen com
and so um...
with that uh... because dad
bulk of the presentation um... related to attachment one attachment to and
after making debbie and greg are done i'll i'll have a quick wrapped up
that what thank you margaret and mister chair member of staff of the committee
when i think you for the opportunity
to uh... present the results for work today
because you are a newly
uh... establish committee
um... we're going to little more detail
that what i've done in the past and i recognize that for a long day published
not welcome news we'll try to go through this quickly as possible but
i wanted to make sure it and uh... address sixty points of that i think are
important for uh... at least the
portion is committed to that
to understand about the independent audit process alberta course or
presentation
if we start born into a little too much detail please feel free to uh... iraq to
sell
kintu abbreviated
um...
uh... with that said we were hired to perform
the audit of the finest emsa calpers for the year indian
june thirtieth
two thousand and twelve
uh... as a result of that work
we issue three products three primary products the first is the independent
auditors report which is pretty legend item six a attachment one
and then we uh... the second item as a reporter risking our committee protested
too
to be agenda item six a
and then finally we use shooting management comment and recommendation
letter
uh... which is not part of the agenda package because we'll be reporting this
to the committee
at the next meeting which i believe is in in march that document their out will
contain our observations that we made during the course of our work
as a relates to the intro uh... intro controls and operations i think in that
will have that ford
at that point in time bienen march
i wanna not touch a little bit about on uh...
the subject of responsibilities
uh... the mansions independent respond independent auditors responsibilities
verses managements
as independent auditors
we perform are working accordance
with audit standards that it generally accepted united states of america
promulgated by the american institute of certified public accountants more
commonly known as the cpa
those standards require us to plan for four more work to obtain reasonable
assurance that the financial statements
free material
misstatement
and i'll go into more those concepts in a bit when i talk about the awning
approach
uh...
and that once we perform our work
as we planned it
we uh... should the products that i just had indicated ah...
a few minutes ghostly products
excuse me
but uh...
i want attention
point out that
piled committee is new i think almost everybody here has was on the finance
committee c probably don't need
go to the details of the sense that they are what the alan everything in lots of
the people
uh...
refer
i would certainly encourage you not
uh...
or you don't have
mr chairman one of the reasons why i chose to go into more detail
even even though the point natives as i recognize the names i'm sitting here
uh... is because of a conversation we ever my guilt benefits with a little
more detail
so um...
i will continue on to meet you you let me know if it's a little too much detail
uh...
so those are primary responsibilities
we you contrast that with management for management is responsible for the
safeguarding the system assets
in ensuring the integrity and comprehensive s of the data flows to the
financial accounting system
where and whereas the internal control structure is a rico as a primary means
to accomplish that objective
as a result of that management is responsible for the design
implementation and modern
of internal controls over the furnace reporting process
and management is also responsible for
preparing the funniest statements complied with the gap
since they are the stewart's of uh... to find that the public financial resources
of the system
and finally manager is responsible for
implementing or designing a corrective action plan implementing the corrective
action plan
related to the audit findings and comments that we produce as a result
won't work
alone now briefly highlight the audit process
we use our respects on approach
the first step in that process is to assess
do risk assessment i want to talk about respect are referred to
army the rip up on interest
the risk of material misstatement in the finest let's begin we plan at before
work to obtain to provide reporters the finest himself
freedom internal students so clearly
part of our initial steps to design or work
is to do a risk assessment
toward delphi those areas within the financial system reporting process of
present the audit risk with a risk would term a statement
there's a in it
isp is doing that the first dibs information gathering stage four we go
up and obtain understanding of the entity it's operating environment
both external an internal in the intro control structure
uh... and then we marry that with the financial reporting that we will be all
tingly astral pinar
some of the indicators that we want to during this process
or things like the counting she's others unocal munitions
you know for example implementation ita system we know we know we employment
uh... the up my calpers
so that becomes an area where we now know at this present some significant
audit risk for us
areas where we have complex accounting uh... standards or issues workout
balances or disclosures a little more complex
occur prepare or if you have the implementation of new standards
these type of things under accounting issues would create in her personal plan
would give us process of uh... onerous
then exit if we have a reason for rest of us with a significant judgments that
to be made uh... such as estimates will look at that as presented higher onerous
i think uh... transactions that are largely voluminous and other everywhere
we will look to past present and certain types of audit risk
uh... that would be considered significant
as a result would catch our attention and focus of a lot of the audit energy
on
again because that's where
duberstein term statement lines
once we complete the risk assessment
we design or or procedures for me our procedures makin report
the results of our work
that is thirty thousand foot level
summary
opr process
now what i was
prepared to do
to identify some of the significant honored areas that we identified as a
result of this risk assessment and to talk to you about our response to the
audit procedure process
if this is getting into a little too much detail
uh... because let me know now will bypass that
however i would
actually like to present that so you have a coke expected
um... so right now to trim representation over today buchanan uh...
director on the engagement
and she will uh...
angry will go through those areas uh... and in turn precipitation back over to
me
get afternoons thirteen animals
of god at their place in congress convenes
so in addition to the on it seizures
we perform all what the other financially steam in line items
for the purpose of this meaning
we would like to highlight the five most significant
audit areas and was summarize the key
money is he serious
they'll be performed to respond to these terrorists that we identified
the first items and that lesson if the night and here is leaving to they
implementation of my calculus
indeed every act is to aspect of com on at least on spellman mighty at the just
realists
e there are two pcs years leading to the financial statements
we have claimed that he or she did allenby peter that uh... he will go over
out the anti side of guarding com response spectacularly committee members
evening
the implementation of my calpers sisters presents in area risk of continue and
customize system
incorporate the functionality of several legacy systems
and several systems of data
that those who since maintained
nor to evaluate or insurance
that that information the financial information used for financial
statements was maintained
accurately throughout the process we evaluate several different areas
here the first unite e-governance
now the words how dizzy i t function being manage within the system
next system acquisition implementation and change control management
we evaluate those controls to ensure that the system changes not adversely
affect the information
next computer operations controls in those controls to assure that system
application availability was maintained as well as systems could be recovered in
the event of a disaster
and lastly
evaluator controls a solution with access to systems
applications and data those security control issues to assure that only
authorized persons have access to the systems and the data met those persons
with access to the system so we got the ability to perform those functions which
were needed in order to maintain a proper segregation of duties within the
system
uh... we conducted this inner that this work two interviews with both i key
staff and management as well as systems op-art observations and testing
and uh... documentation reviews ultimate that papa debbie priddy the audit
procedure side
so as you know where the implementation of might help us impacted several funds
weeding be basic financial statements
as well as several finance his team in line items
uh... will respect you doubt the finances damon audit we first obtain in
understanding of this significant challenges in key shoes surrounding the
implementation of the system and determines
how the impact of finance his statements so that's out there at first they have
to numerous in increasing a meeting with management would be no organizations
as holiday at we testdata conversions uh... in which we verified that accuracy
of member data transfer of fonda o legacy systems
to the new system might help roads
s of hopi a we also perform tests if significant controls
that's active was is shield we do use al substantive testing it yet and
and not to go prying on hold
internal controls
of the organizations
we also um...
penn state interface of finances transactions from my countless system
two of the people soft geno nature all at their financial reporting system
because not this is an ananta face concepts
and so we look at that area its wealth certainly though subject he
uh... audit
stamps that we'd be foam we respected the implementation of this
he was speaking system
now the second significant audit area as a policy investments being the most
significant uh... line items on the basic financial statements
uh... particularly those investments that are not publicly traded
such a sealed by the equity
your we last says which include with the state's forest lane in infrastructure of
rs
soap fought those
but those areas need refunds asking in understanding of
internally management's internal control and policy a c all look at the
determination of fair value we respect your those um... investments
we confront directly with the channel partners the if evaluate u_n_
we also we do with the audited financial statements of the general harness
to make sure that that
you know anime qualifying opinion with rent on those financial statements
and that that the valuations but you know quoting week gap all of the
international financial reporting sam
stay indoors
s_l_ as well as making sure that there was no significant contingency
you'll going concern
and so i mean that partnerships
we was chill i'm going to stay investment we sample a half to be
selected sample of
appraisals kane
week um... compare that to you
with the the estimated value reporting in the systems general ledger
we also tested um...
transactions leading to those investments such as your capital costs
of contribution distributions
it's really stand funded commitments
that there are significant body area here is a leading to the estimated
liabilities
for the health care and long-term care five minutes
in this areas of me
as well i think we need these in health specialist
and esp
peace when we deal with the estimated uh... i'd been offered to help you find
it's released the and dancing made it and doing teeth with future policy
n_s_a_
but the long term care funds
he's revealed for reasonableness
as well as some compliance with accounting and financial reporting
standards
the four areas here it is uh... leading tibet actuarial valuations
because the funded status
of that instance and all conserve finds
ankara d in bedford noting the nose to the basic financial statements
esperar our neighbor being patient
this update actuarial consulting
one is specialize in that pension valuations for the fall uh... pension
plans that this is a man named mister
and the other consulting its best lying au-pair plans thought that this uh...
fines
i'll consult since we've used the actuarial valuations again for
compliance rate applicable
expelling in financial reporting standards
as well as the actuarial standards of practice
inhibitions
uh... data get beat their reasonableness of the neck dates and there's something
he was in those valuation reports
last but not least
the that deletions of the investment footnotes uh...
in the fascist a men's
indies area errant lead we look at that underlying data
armed palestinians you come to my list is the footnotes
week was tense we select assembled and tested against eppadi um
soloist
it's where was reviewing for compliance with that counting standards
so back summarize our
al five fifty nine area is not in their presentation back to me and when you
look at those
for significant areas did you find anything
harshita
restructure
auditor
ginger play
no with the exception of mom my calculus almeda testing of scenic in
internal controls over that benefit payments
for the performed
in that area i m
based on our testing of internal controls we basically couldn t i am one
the significant and chose as their result we performed sucked into his
testing eighty n
thank you
mr chairman he has also add one thing you know the our processes of fluid
process
and were costly going through a updating our understanding of um... d operating
environment
as the audit
continues in new information comes along so justin's are made along the way
recognizing that began with chewed sometimes anticipate upfront doesn't
always come for which as you go through such as my calpers
situation
i know there was a little more detail than we normally get into anything so i
want to transition now into the results of our work
access should say that you know the significant areas of diverges spoke to
park or or not that doesn't kaka com that's not the complete audit me audit
all theories the finances tito mark huntley the more significant areas
so with that said i would like to now turn your attention to attachment one
the independent auditors report
based on the results
of the procedures performed we were able to obtain
sufficient inappropriate audit evidence to render an unqualified opinion
which effectively means as i stated earlier that um...
you know we were able to plan a performer work in a way to obtain report
shows that the financial statements
free material where
uh... i'd like to just quickly
a highlight the independent audit report currents
to see you understand what these paragraphs are intended to convey the
first paragraph
is usko paragraph it talks about what we're auditing in the period in which we
audit
the second paragraph talks about the standards
and what we've just in a group of would fall in and what we umbro
supposed to do under those standards
the third paragraph three
broker of that is the opinion paragraph so i just spoke to about the results of
our work
then the
all following one too
three-four curb ramps
uh... after the opinion paragraph or called emphasis of matter paragraphs
these your paragraphs and i won't go over each of them but these paragraph
sir
uh... items that we wanted to emphasize because of their own portents
to the financial statements
and then
finally you have the last two paragraphs
the second to last paragraph
discusses
the required supplementary information
uh...
uh... identifies with that information is starting with the and d_n_a_ and the
fact that we do not all pond on that that is an audited information
the last paragraph talks about
supplementary information eunice is not required
uh... actually go back to the our site what the o
when i say requires required by
the standard centers in this case the accounting standard setters
the carrying standard setters uh...
believe that
in order to understand and have for um...
uh... perspective on the finance tennis
certain information needs to accompany the basic financials and the called that
requires supplementary information
as opposed to supplemental information which is what we speak in the last
paragraph which is predominately
driven by management that management's uh...
very sr is is a klute
and uh...
we do brendor in in relation to opinion on that
itself should the question is will why would you not
issue an opinion on are side to get do it
on the other information
well the primary reason is that as a general rule
not an absolute robitussin general rule required supplemental information
is not
does not come as a direct by-product of the accounting system in which we
undeterred
okay
that's not the true in all cases
in these there are there some exceptions
but when the standard setters in this case the aicpa dwarfed
uh... what a lot of the are spotty information was coming from the
accounting standard setters
they're seeing that some of it was on audible because the information was not
byproduct of the financial accounting system in which the financial statements
were prepared and the auditor audited
so whenever you see in in relation to opinion on supplementary information it
be it's because he came directly from the accounting system that generates the
financial statements in which we opted
there's a lot of contention in the profession uh... as a result of how this
is laid out to this confusing but nonetheless that is the explanation as
to why our side
is on is unaudited and supplementary information
is suit
so that is
the result of our audit
um... we help have one other document attachment to throw the court
communications
i am not going to go into any level of detailed presentation on this because
the primary component of this
uh... communications is under the qualitative aspects of accounting
practices we covered it premier li and debbie's presentation
the only thing that you want to note is that we have a section here
disagreements with management
um... we did not have any disagreements with management
typically does disagreements with his would reside around
uh... the application gap
in the finance reporting process
we did not call have those types of problems
and then finally as i've mentioned earlier um... our management comments
and recommendations will be forthcoming
to u uh... in the next time that we meet with again which i believe is in march
so that's our pre sentation i apologize for the level of detail but i just felt
it was necessary to get through it uh...
mr chair too
isn't that correct in uncorrected
you'd you say that mansion made all the appropriate
corrections of the statements
tucson here i'll see what kind of misstatements
objects mince words weakness
so for example with billy says
there was several audited distance leading to again implementation of my
calculus for the benefit payments line items
to do it
you know we impact several financed several of the pension fund so there was
does have a campbell's advocates and on still on for the health care funds you
know
ambient used you lauren engraving
any questions
you have to turn my against them
cartoon
uh... aryn
and technician i move that an the committee except that it's report back
basic financial statements for the year ending
two-thirty capacity company company required indications group letter
sale of recovery
any discussion
staff have any comment
if not all those who favor
of the motion saline
opposed
motion carries
england ann-margret you it's something new
ul height could add that there is an attachment um...
attachment three
is it a process flow chart that's staff create internal staff created to help to
explain them
all the different pieces of the odette
said today were in december uh... this these approved financial statements of
and being created in calpers
comprehensive annual financial port
and they will also be incorporated into state of california's comprehensive
annual financial report
and then this um... process diagram also indicates what rick just mentioned at
that time management letter and
management's responses to that letter will be presented march
that's it
built from about six p orders
thank you
margaret sixty and sixty
this is an action item and and the request is other admonitions to approve
the revised high-resolution policy
um... this is an existing board approve policy and i'm just requesting some
minor pretty on minor revisions administrative in and clarifying in
nature nothing really substantive and there's no out change in the intent of
the policy or anything so that um... red uh... redline strikeout version is
attached as attachment b
first all references to finance committee have been replaced with risk
of heart committee
we've also um... clarified that there's the possibility of management electing
to accept a risk before one year has transpired rather than waiting for a
full year to get by
the approval process for any
management acceptance of this case still the same
it's still a go to the executive risk committee
and accepted their we come
would be a great today risk a night committee
and then uh...
or clarifying that the now we have hit the deputy uh... title to clarified that
the uh... any
acceptance of risk would have to be put at the level and finally in the power of
the agency reviews
for clarifying that the employer has one hundred and twenty calendar days to
resolve the finding rather than the previous ninety to align left
customer account services divisions
program guidelines
that is all the changes to the spot
requested
any discussion
if not all those of favor
the document changes saline
opposed
seductive
so it takes us to stop it
seventy
beginnings to carry members of the risk and onecommittee kathleen lapd chief
officer first complaints and affects
as you recall chaos of enterprise recession is hosting a series of board
development sessions in support of our effort to cultivate
a high performing risk intelligent and innovative culture
prefer session was conducted with the board of ministration happy october
meeting with a focus on concepts and principles
the focus today
is on the roles and responsibilities within emphasis onboard roles
responsibilities
well the anymore
let's elite there we go their weekend
it's working now
we love you both roles of ricky response police is currently defined at cal
personal so look at those with leading organizations
the session does upon the foundations that were set in the october session
where the focus was on cheers see concepts definitions and guiding
principles
now that we have levels set on key cheers see concepts the session will
examine how those concepts are applied and who has responsibly calpers for
cheers the activities
well risk there's been is everyone's responsibility is important as to how
the role of the board in its committees
differ from executive management and staff
calpers is facing many challenges today including but not limited to pension
reform
health care reform
increasing health care costs investing in a global economy while offering our
members
innovative
customer service
as such it is important for the board to have oversight in understanding
at how risk is addressed a calpers
the expectations of board members by stakeholders in is increasing as well as
the velocity
and which change in tax the top christian organization
initialing
boards are being asked to take on more responsibilities
and accountability in many areas of organizational oversight
the california coast tish provides that the calpers poor chaplain area forty
introduced responsibility
for the investment of monies in adminstration the system
is charged with the sole and exclusive fiduciary responsibility over the assets
of the system
is grad missile exclusive responsibly for administering the system in a manner
that will sure prompt delivery of benefits in a related services to system
numbers and beneficiaries
september twenty ten the board approved the cop versus can tell jim national
policy recognizing
importance of the role of the board in establishing any risk intelligent
culture
calpers is mission is to provide responsible efficient stewardship of the
system to deliver promised retirement
and health benefits while promoting wellness and retirement security
crew members and beneficial use
did successfully do sell it is critical of aveo risk management structure
and clarity around the roles and responsibilities that includes the
committees to support the board and the board itself
through board governance the board ministration has overarching authority
and delegate certain powers of a reserve for the risk another committee
diaz of enterprise risk management provides a risk in our committee with
regular agenda items covering many of these areas of responsibility
is reports a designed to ensure the committee has adequate oversight
for their risk management responsibilities
as the office of enterprise risk management continues to make sure
ditional reports will be provided the committee to approve risk appetites
oversee enterprise policy and program compliance and service provider
compliance
the three lines of defense is establishes in defiance the key risk
leadership colors an organization
pored over say for the structure support it with the presentation of reports to
the board of the ministration ended sub-committees
from all three lines of defense
management provides reports and pop risk mitigation strategies
and demonstrates compliance the policy and process needs
mention also reports and service levels can achieve in a strategic goals and
objectives
enterprise risk management compliance divisions assistant with the development
of risk management capabilities
through training tools in court issue risk management reporting
across the enterprise
these divisions also assist management by providing risk analysis in compliance
reporting and monitoring
internal audits provides the board with independent sherman's that management
and the risk and compliance programs are operating as intended
internal audits also relies on the work of the risk and compliance divisions
determine where to apply its resources
for auditing
this reflects a concept has been adopted is being socialized account hers
although these roles focus on the responsibilities of management it is
important for the board
torsten how management has assigned in organize risk leadership at calpers
that slide captures common tenants and practices of organizations with leading
risk management processes
the calpers risk intelligent national policy in paris reserved for the risk
not a committee are consistent with the leading practices for governance risk
and compliance programs
and risk management oversight
the national association of corporate directors has identified the above areas
of focus for ports
the board administration covers policy through the delegations of authority in
the paris reserve for the risk a not a committee
address these areas of focus emphasized by the any cd is consistent with leading
practices
the risk reports another tonight is presented to the risk not a committee
allows the committee to review and assess calpers top rents he's reports
present both strategic
and operational risk operas faces in his monitoring our medicating
each the top crisper signed to a board committee
and assigned
to executive staff ownership
for committee member should insurer
the topper surveying addressed in their respective committees understanding
oversee the treatment of the rents
we provided to all of you today and your folders
the a copy of the any cd which i'll hold up its balancing
cabinets
risk that's actually risk events pal singh risk and reward we find this to be
in excellent resource and i hope that you also take the time to review it
includes
samples of guiding principles an overview of roles and responsibilities
sample risk assessments and other reports
annex idols trace the different roles responsibilites within a recession in
the life cycle and risk management process different parts the organization
involved in different parts of that life cycle
providing for system of checks and balances
and the risk assessment process assigned roles would include the following
the chief risk officer has the role responsibility to guide the risk
assessment process
the board has a responsibly for viewing the risk assessments results which are
reflected
and three calibration of the dashboard m brisk reports
management has the role responsibly perform or delegate the risk assessment
process and their program areas
process leaders have responsibility to provide input into the risk assessment
process
as illustrated everybody has a role end risk management
as we build a risk intelligent culture
the last line
to some of summaries of what we've talked about
to be effective risk managers everyone needs to understand their roles
responsibilities
and while we might be in different lines of defense we are all on one defensive
team
this concludes our cheer see report for today our next session with the board
will be at the january twenty thirteen offsite
well we'll discuss setting risk appetites intolerance is that the board
prepares for the asset liability management discussion he considers
pension funding risk
the nec the report that we provided you include some examples of risk appetite
statements and tolerances for your review before next session in january
and that concludes my presentation have to take any questions
thank you an
iron
it want on
black during our briefing i'd ask that uh...
you and
maybe with some of the committee members are in a bit think about
had a better connect
the risk dash or in some of the top risks that are identified with the king
with the standing committees set
oversee that area that program area
and at site two states want share that with a booked me because i think
breaking out they haven't quite gotten it
and in terms of the committees taking responsibility for
management uh... instead of just risk reporting which is coming here
sweatshirt
any other questions
seventy
good afternoon mister chairman members of the committee larry johnson copper
staff
this item is a information item these these uh... risk exposure reports are
designed to uh... allow the committee to oversee calpers risk landscape
and management's response to the top risk of the organization
risk exposure reports a regularly updated in reviewed by the executive
staff and in the november reporting period the risk landscape remained
relatively stable
whoever management has identified tourist domains on the executive risk
management dash board which is provided as attachment one
of this agenda items
specifically the investment risk management domain
uh... the has changed from moderate to an elevated level do today could see in
the investment officer wrist vision for example leaky uh... senior risk
investment officer position
has been vacant since july of twenty thousand and twelve
these vacancies have led to delay in the usage of the borrower risks system in
the enhancements that'd office
also allowed as noted in the report the top risk domains or those items that are
our top wrist of the organization are now highlighted or illustrated in red
text and moving moving forward will be will be uh... identified this way for
for the committee to usually
uh... note those areas that are top concerns to the organization
atop risk report is provided as attachment to have this agenda item
this report shows ten top risks for the organization
reported enterprise the risk and provides a risk statement or definition
of the risk
correlates the risk domain to the enterprise wrist dashboard identifies
the board
committee and uh... executive owner of the rooms
and provides a summary of the current mitigation strategies to reduce the risk
executive staff is updated the mitigation strategies in the top
residual risk reports reflect current responses to the risk exposures
management continues to actively managed
uh... calpers top risks
on the top risk report the pension reform implementation risk
the executive owner has changed to doug partner deputy over operations and
technology
for operational oversight
during the next quarter the enterprise risk management division will be
conducting an enterprise-wide risk assessment
the results reflected in the risk exposure provoked reports provided to
the risk in our committee
at the march two thousand thirteen
meetings this concludes my report and happy answer any questions in my
rear uh...
i know there's a desire to define a few pages as possible
anything
possible to react hat
it's really apostrophe
and so i would just ask that maybe we tried we could see because this crap
really printing it anymore if we try to reform at the school at
hit to focus on formatting that and
it would be really come talk like actually we are checking
and would like to submit the longer run
you give us this in hard copy you can pass without
at me
thank you for your *** comments and will we will explore ways to do that so that
it's a easily uh... red available on uh... annika thank you like it
and here
singnet com if if i promoters you from
risk officer tourists god for calpers
rather than have a consensus management report would what would you change in
this report you personally
widget
interesting larry
in just you know i've also asked kathleen did recycler such misery in
both of these reports
you personally free
with the assessments would you change emphasis on some of them
wiper i'd personally do agree with the assessments yes that's part of i think
our responsibility
uh... as risk officer and and and kathy's responsibility as chief fresco
officer of
as we discussed these uh... risks with management
uh... you know are they properly identified in the sense than we used
standard criteria
in that assessment process
uh... and so i'd i'd believe that they are accurately reflected uh... by
i would not disagree with any of these mister
and i think we have a duty that if they're not accurately reflected to let
the committee know that as well
uh... i mean it's really bizarre businesses managements
few of the risk
and so i'm saying let's not talk at least for this question was some talk to
about management's p let's talk about larry's u
eat you're comfortable with scm uncomfortable at the rate loans that are
provided to the committee sm
risk risk obvious untitled at the group
management inc
probably a little about me
uh... well with
we're taking your promotional
any other
questions comments
okay if not then we will go back
to four f the ethics hotline report
prompted to you want to have them presented or give a specific question
thank you
thank you miss you chair
etc and
kevin can you explain to me why when we go through all of the to challenge when
we get to
senior for this time of substantiated wire weeding total brief in closed
session on what
substantiated and goes on and on of those at not be substantiate understand
when we actually realized it was an issue
in the bore still doesn't know about it i think we should be meeting in closed
session again
bhuli briefed on anything it's been found to be substantial
happened to her that her ascension
and the the one observation notices were still getting a lot of
anonymous complaints
i think that
raises the issue of how much confidence
to ours employees have that they can races and not have a flow back on them
fed id number
you know they just lack the cuff
uh... so as we
so cultural thing
okay any others
anything else and open session
if not
all public comment
a city public comment
the
open session is adjourned