Fire fighter & peace officer cancer insurance policy program / annual financial report

              FIRE FIGHTERS’ CANCER
INSURANCE POLICY
PROGRAM
OF THE
STATE OF ARIZONA
FIFTH ANNUAL FINANCIAL REPORT
—
FOR THE FISCAL YEAR ENDED
JUNE 30, 2002
FIRE FIGHTERS’ CANCER INSURANCE POLICY PROGRAM
STATE OF ARIZONA
FIFTH ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2002
This report was prepared by the staff of the FFCI
1020 East Missouri Avenue
Phoenix, Arizona 85014
(602) 255-5575
Fax (602) 255-5572
www.psprs.com
FINANCIAL SECTION
FIRE FIGHTERS’ CANCER INSURANCE POLICY PROGRAM
FIFTH ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED
JUNE 30, 2002
Independent Auditor's Report
Statements of Plan Net Assets
Statements of Changes in Plan Net Assets
Notes to Financial Statements
Page 13
Phoenix, Arizona
INDEPENDENT AUDITOR'S REPORT
FUND MANAGER
STATE OF ARIZONA PUBLIC SAFETY
PERSONNEL RETIREMENT SYSTEM
PHOENIX, ARIZONA
We have audited the accompanying Statements of Net Assets Available for Benefits of the STATE OF
ARIZONA FIRE FIGHTERS’ CANCER INSURANCE PROGRAM as of June 30, 2002 and 2001,
and the related Statements of Changes in Net Assets Available for Benefits for the years then ended.
These financial statements are the responsibility of the Program’s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial status of the STATE OF ARIZONA FIRE FIGHTERS’ CANCER INSURANCE
PROGRAM as of June 30, 2002 and 2001, and the changes in its financial position for the years then
ended in conformity with generally accepted accounting principles.
Barrows & Schatza/sig
November 15, 2002
2002 2001
ASSETS
Receivables
Retention Receivable $ - $ -
Insurance Reserves - -
Interest and Dividends - 3 ,221
Total Receivables - 3 ,221
(Book Cost - (Book Cost -
Investments at Fair value (Note 2): For Reference Only) For Reference Only)
U.S. Government Securities $ 4 50,000 4 60,728 $ 4 97,608 4 94,016
Corporate Bonds - - - -
Corporate Notes - - - -
Corporate Stocks 9 60,963 6 80,579 9 79,998 8 56,334
Other Investments - - - -
Money Market Account 1 ,427,526 1 ,427,526 5 93,774 5 93,774
Total Investments $ 2 ,838,488 2,568,832 $ 2,071,380 1,944,124
Total Plan Assets 2 ,568,832 1 ,947,345
Collateral Held in Trust for
Securities on Loan - -
Liability- Collateral Subject to
Return to Borrower - -
Liability - Accrued Expenses - (16,391)
Net Assets Held in Trust
for Benefits: $ 2,568,832 $ 1,930,954
The accompanying notes are an integral part of these financial statements.
STATE OF ARIZONA
FIRE FIGHTERS' CANCER INSURANCE POLICY PROGRAM
STATEMENTS OF PLAN NET ASSETS
AS OF JUNE 30, 2002 AND 2001
AVAILABLE FOR BENEFITS
2002 2001
ADDITIONS:
Contributions
Employers' Contributions $ 828,360 $ 7 71,840
Net Appreciation (Depreciation)
in Fair Value of Investments (Note 2) ( 202,044) (147,675)
Interest 53,976 7 9,707
Dividends 4,959 2 ,462
Security Lending Activities - -
Less Investment Expense ( 3,208) (3,959)
Net Investment Income 682,043 7 02,375
Total Additions 682,043 7 02,375
DEDUCTIONS:
Insurance Benefits (Note 1) 15,291 7 4,332
Administrative Expenses 28,874 3 6,834
Total Deductions 44,165 1 11,166
Net Increase (Decrease) 637,878 5 91,209
Net Assets Held in Trust
for Benefits
Beginning of Year - July 1 1,930,954 1 ,339,745
End of Year - June 30 2,568,832 1,930,954
STATE OF ARIZONA
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
FIRE FIGHTERS' CANCER INSURANCE POLICY PROGRAM
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STATE OF ARIZONA
FIRE FIGHTERS’ CANCER INSURANCE POLICY PROGRAM
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE 1 - PLAN DESCRIPTION
Organization
The State of Arizona Fire Fighters’ Cancer Insurance Policy Program (FFCI) is a multiple-employer cancer insurance program
established by Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes, to provide cancer insurance benefits for active
and retired fire fighters of certain state and local governments. The Fund Manager of the State of Arizona Public Safety
Personnel Retirement System administers the Program.
The Fund Manager is a five-member board. Beginning August 6, 1999, the Governor began appointing all members, who serve
a fixed three-year term. The Fund Manager is responsible for the investment of the Plan's assets, hiring personnel to
administer the Program, and the general protection and administration of the Plan.
The Program provides cancer insurance covering active fire fighters of participating employers who have been employed at
least five years and remain eligible for coverage. Retired members remain eligible for coverage for five months for every year of
credited service accumulated toward retirement under the PSPRS. When the retiree reaches age 85 or uses his allotted
coverage (whichever occurs first), coverage will terminate.
The insurance policy purchased by the program provides benefits for hospitalization, surgery, radiation and chemotherapy and
other cancer related illness benefits. Coverage is available to fire fighters’ families at additional costs that are not paid for by
the Program. Effective July 1, 2000, the policy became self-insured and an agreement for claims administration was entered
into with Monumental Life Insurance Company. Monumental Life agreed to adjudicate claims and perform administrative
functions. They would be compensated based on $5.00 per eligible fire fighter in the preceding six months. Payments were
due bi-annually on the last day of December and the last day of June. The Claims Administrative Service Agreement was
cancelled effective June 30, 2001.
The Fund Manager of the PSPRS is also responsible for the investment and general administration of three other statewide
retirement plans—the Public Safety Personnel Retirement System, the Elected Officials’ Retirement Plan and the Corrections
Officer Retirement Plan. The investments and expenses of these plans are held and accounted for separately from those of
the FFCI. Since none of the plans have the authority to impose their will on any of the other plans, each plan is reported as its
own stand-alone government.
Benefits
The insurance policy provides benefits to eligible active and retired fire fighters. The policy may be cancelled or terminated at
any time without notice.
Contributions
Participating local boards contribute $180 each fiscal year for each fire fighter employed at June 30 of the prior fiscal year.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS
Basis of Accounting
These financial statements are prepared using the accrual basis of accounting.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Investments
FFCI investments are reported at Fair Value and at Cost. Fair values are determined as follows. Short-term investments are
reported at Fair Value, which approximates Cost. Equity securities are valued at the last reported sales price. Fixed-income
securities are valued using the last reported sales price or the estimated fair market value as determined by one of the world's
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largest and most prominent fixed-income broker/dealers. Investments that do not have an established market are reported at
estimated fair value. Investment income is recognized as earned.
Statutes enacted by the Arizona Legislature authorize the Fund Manager to make investments in accordance with the
"Prudent Man" rule. The Fund Manager is not limited to so-called "Legal Investments for Trustees." In making every
investment, the Fund Manager shall exercise the judgement and care under the circumstances then prevailing which men of
ordinary prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but
in regard to the permanent disposition of their funds, considering the probable income from their funds as well as the probable
safety of their capital, provided:
1) That not more than seventy per cent of the pension fund shall be invested at any given time in corporate stocks, based on
cost value of such stocks irrespective of capital appreciation.
2) That not more than five per cent of the pension fund shall be invested in securities issued by any one institution, agency
or corporation, other than securities issued as direct obligations of and fully guaranteed by the United States Government.
3) That not more than five per cent of the voting stock of any one corporation shall be owned.
4) That corporate stocks eligible for purchase shall be restricted to stocks which, except for bank stocks and insurance
stocks, are either:
a) Listed or approved on issuance for listing on an exchange registered under the securities exchange act of 1934, as
amended (15 United States Code §§ 78a through 7811)
b) Designated or approved on notice of issuance for designation on the national market system of a national securities
association registered under the securities exchange act of 1934, as amended (15 United States Code §§ 78a
through 7811)
c) Listed or approved on issuance for listing on an exchange registered under the laws of this [Arizona] state or any
other state.
d) Listed or approved on issuance for listing on an exchange of a foreign country with which the United States is
maintaining diplomatic relations at the time of purchase, except that no more than ten per cent of the pension fund
shall be invested in foreign equity securities on these exchanges, based on the cost value of the stocks irrespective
of capital appreciation.
The Plan's investment portfolio is in compliance with state law.
Statement No. 3 of the GASB requires government entities to categorize investments for the purpose of giving an indication of
the level of risk assumed by the entity at year-end. Category 1 includes investments that are insured or registered or for which
the Plan or its agent in the name of the Plan holds securities. Category 2 includes uninsured and unregistered investments for
which the securities are held by the counterparty, or by its trust department or agent but not in the Plan's name.
All investments of the Plan (other than those held by broker-dealers under the security loan program and those investments
categorized as "Other Investments") meet the criteria of Category 1. "Other Investments", which primarily consists of loans
and real estate investments, are not considered securities for purposes of credit risk classification. Substantially, all
investments are held in the name of the Plan by its custodian bank.
Money Market Account
The money market account is a deposit with an Arizona bank. These deposits are insured by federal depository insurance.
The money market account is subject to the general depository laws of the State of Arizona, which require deposits to be
either insured by the Federal Deposit Insurance Corporation or collateralized by certain securities including U.S. Government
obligations and first mortgages.
Interest Revenue
The Program received interest on their money market account with the bank as well as interest on their bond portfolio.
Benefit Payments
During the year ended June 30, 2003, the Program paid two fire fighters for their first occurrence benefit of $6,000 each. The
Program paid six fire fighters’ cancer claims during the fiscal year ended June 30, 2003.
Administrative Expenses
The Public Safety Personnel Retirement System administers the Program and an allocation of expenses incurred by the
System is charged to the Program. The Program is administered in the same building as the System utilizing staff employed
by the System. The allocated expenses for the year ending June 30, 2003 totaled $26,726. The Program is authorized to use
up to 10% of total receipts to pay the costs of administering the Program.
2002 2001
RECEIPTS
Employers' Contributions $ 828,360 $ 771,840
Interest 55,211 76,083
Dividends 4,959 1,946
Retention and Reserves 305,889
Securities Lending Income - -
Amounts Transferred from Other
State-Sponsored Pension Plans - -
Maturities and Sales of
U.S. Government Securities 49,594 3,278
Corporate Bonds - -
Corporate Notes - -
Other Investments - -
Common Stock 144,988 177,145
Net Decrease in Money Market Funds - 410,389
Total Receipts 1,083,112 1,746,570
DISBURSEMENTS
Insurance Benefits 30,482 28,249
Refunds to Terminated Members -
Investment and Administrative Expenses 33,281 40,779
Amounts Transferred to Other
State-Sponsored Pension Plans -
Acquisitions of:
U.S. Government Securities - 499,980
Corporate Bonds -
Corporate Notes -
Other Investments -
Common Stock 185,597 1,177,562
Net Increase in Money Market Fund 833,752 -
Total Disbursements 1,083,112 1,746,570
INCREASE (DECREASE) IN CASH - -
BEGINNING CASH BALANCES--July 1 - -
ENDING CASH BALANCES--June 30 $ - $ -
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
STATE OF ARIZONA
FIRE FIGHTERS' CANCER INSURANCE POLICY PROGRAM
SUPPLEMENTAL SCHEDULES OF
CASH RECEIPTS AND CASH DISBURSEMENTS
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