2011 Annual TCRS Report - Tennessee Department of Treasury

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F I N A N C I A L S E C T I O N (CONTINUED) State Employees, For the Teachers, Higher For the Year Ended Education Employees Political Subdivisions Year Ended June 30, 2011 Pension Plan Pension Plan June 30, 2010 Total (SETHEEPP) (PSPP) Total $ 260,387 $ 190,635 $ 64,414 $ 255,049 995,540 578,403 258,324 836,727 1,255,927 769,038 322,738 1,091,776 4,597,653 1,494,405 307,909 1,802,314 561,568 482,315 99,369 581,684 337,178 226,610 46,687 273,297 64,567 52,952 10,910 63,862 5,560,966 2,256,282 464,875 2,721,157 (32,213) (23,877) (4,934) (28,811) 5,528,753 2,232,405 459,941 2,692,346 6,784,680 3,001,443 782,679 3,784,122 1,248,538 994,439 170,275 1,164,714 76,298 60,945 10,435 71,380 32,140 26,041 4,459 30,500 290,396 231,084 30,395 261,479 5,498 4,694 2,420 7,114 35,540 19,371 17,052 36,423 7,157 3,924 3,619 7,543 1,695,567 1,340,498 238,655 1,579,153 5,089,113 1,660,945 544,024 2,204,969 28,574,195 21,948,733 4,420,493 26,369,226 $ 33,663,308 $ 23,609,678 $ 4,964,517 $ 28,574,195 P A G E 2 5
T E N N E S S E E C O N S O L I D A T E D R E T I R E M E N T S Y S T E M TENNESSEE CONSOLIDATED RETIREMENT SYSTEM NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2011 AND JUNE 30, 2010 The Tennessee Consolidated Retirement System (TCRS) administers two defined benefit pension plans - State Employees, Teachers and Higher Education Employees Pension Plan (SETHEEPP) and Political Subdivisions Pension Plan (PSPP). Although the assets of the plans are commingled for investment purposes, each plan’s assets may be used only for the payment of benefits to members of that plan, in accordance with the terms of the plan. A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Reporting Entity – The TCRS is included in the State of Tennessee Financial Reporting Entity. Because of the state’s fiduciary responsibility, the TCRS has been included as pension trust funds in the Tennessee Comprehensive Annual Financial Report. 2. Measurement Focus and Basis of Accounting – The accompanying financial statements have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). The financial statements have been prepared using the flow of economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Plan member contributions are recognized in the period of time for which the contributions are assessed. Plan employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. 3. Cash and Cash Equivalents – Cash and cash equivalents by definition, includes cash and short-term investments with a maturity date within three months of the acquisition date. The state’s accounting policy regarding the definition of cash and cash equivalents includes cash management pools as cash. Cash received by the TCRS that cannot be invested immediately in securities, or that is needed for operations, is invested in the State Pooled Investment Fund sponsored by the State of Tennessee and administered by the State Treasurer. The classification of cash and cash equivalents also includes cash invested in a short-term, open-end mutual fund under the contractual arrangement for master custody services. 4. Method Used to Value Investments – Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. The fair value of real estate investments is determined at least every three years by qualified independent appraisers who are members of the Appraisal Institute and internally by real estate advisors for those years when independent appraisals are not performed. The fair value of private equity investments is determined by the fund managers using various methodologies as applicable under Generally Accepted Accounting Principles. In many cases, these valuations are additionally reviewed by advisory boards comprised of a subgroup of the fund’s investors. These valuations are audited on an annual basis by independent accounting firms engaged by the private equity fund managers. Investment income includes realized and unrealized appreciation (depreciation) in the fair value of investments. Interest income is recognized when earned. Securities and securities transactions are recorded in the financial statements on trade-date basis. Real estate transactions are recorded in the financial statements at the time of closing. 5. Capital Assets – Capital assets consist of internally generated computer software in development and are reported at historical cost. Capital assets are defined by the state as assets with an initial individual cost of $5,000 or more and an estimated useful life in excess of two years. Software in development was valued at June 30, 2009 and June 30, 2010 at zero and at June 30, 2011 was valued at $1,896,671. Software in development will be depreciated over the ten year estimated life of the system once the system is completely operational. (continued) P A G E 2 6
Page 2 and 3: T ENNESSEE CONSOLIDATED R ETIREMENT
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2011 Annual TCRS Report - Tennessee Department of Treasury

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