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• • • • • • To the Board of Trustees and Plan Administrator Village of Key Biscayne Police & Firefighters Retirement Plan • March 28. 2014 • Page 2 • • investment manager and/or investment advisor when determining the fair value of alternative • investments held by the Plan. Administration of the Plan is responsible for the valuation of ® alternative investments and for reporting the fair value at September 30 of each year. As part of fulfilling its responsibility, administration should have an established process for • determining fair value, select appropriate valuation methods, identify and adequately support • any significant assumptions used, prepare the valuation, and ensure that the valuation results • are presented in conformity with accounting principles generally accepted in the United States of America. While administration may look to the fund manager for the mechanics of • the valuation, administration must have sufficient information to evaluate and independently • challenee the fund's valuation. • Recommendation: We recommend that administration, if they intend to invest in alternative • investments, implement ongoing monitoring controls over the valuation of alternative • investments in order to ensure that the plan's alternative investments are reported in the financial statements at amounts in accordance with the Village's stated accounting policies. • The process and controls should include having sufficient understanding of the nature of the • underlying investments, the portfolio strategy of the alternative investments, and the method • and significant assumptions used by the fund manager to value the underlying investments. Some of this can be accomplished by obtaining, maintaining and reading the latest audited • financial statements on the investment and by obtaining, maintaining and reviewing the • investee quarterly reports, especially for the quarter ended September 30 to ensure • consistency of measurement methods for developing fair value. This can also be accomplished with conversations with the investment manager or advisor once the • documents are obtained and reviewed but the responsibility still rests with administration. • • MLC 2013—3: Recordkeeping of the Share and DROP Accounts • Observation: We were informed by the Plan that based on the Plan documents and fiduciary • responsibilities, the Share and DROP assets and liabilities and operations should be included • in the financial statements of the Village of Key Biscayne's Police & Firefighters' Retirement Plan. During our audit it was difficult to obtain underlying accounting records of • the Share and DROP plan's activity as this information is held by a different • recordkeeper/third party administrator. • Recommendation: We recommend that, at a minimum, that the annual accounting for the • Plan include the Share and DROP activity. This can be accomplished by establishing • policies and procedures for reconciling custodian records to include the Share and DROP plans in the Plans accounting records at fiscal year end in order for them to be included in the • audited financial statements. • • • • • •