ABOUT LACERA

AUDIT COMMITTEE MINUTES 12-9-09

PRESENT

• Simon S. Russin, Chair
• Ed C. Morris, Vice Chair
• William R. Pryor
• Michael Schneider

ABSENT

• Herman B. Santos, Secretary
• William de la Garza

ALSO ATTENDING:

BOARD MEMBERS AT LARGE

• None

AUDIT COMMITTEE CONSULTANT

• Timothy O‛Brien

STAFF, ADVISORS, PARTICIPANTS

• Gregg Rademacher
• Robert Hill
• Robb Van Der Volgen
• Beulah Canevari
• Nai-Len Ishikawa
• James Pu
• Richard Bendall
• Sarah Marks
• Bernie Buenaflor
• Andrew Paulden
• Ted Granger
• David Redman
• Ruwen Liu
• George Lunde
• Sylvia Botros
• Nathan Amick
• Rey Sare
• Eddie Paz
• Roxanna Castillo

1. APPROVAL OF THE MINUTES OF THE REGULAR AUDIT COMMITTEE MEETING OF JULY 29, 2009, AND THE SPECIAL MEETING OF THE AUDIT COMMITTEE OF SEPTEMBER 29, 2009.

   A motion was made by Vice Chairman Morris and seconded by Mr. Schneider, to approve the Audit Committee minutes prepared for the meetings held on July 29, 2009 and September 29, 2009, as presented. The motion passed with a unanimous vote.

2. PUBLIC COMMENT

   No items to report.

3. REPORTS
   1. Status of Contract re LACERA‛s external financial statement auditor for the five year period beginning January 1, 2010 and ending December 31, 2014, with a two year extension at the option of LACERA.

      Richard Bendall, Chief-Internal Audit (Oral presentation only)

      Richard Bendall, Chief-Internal Auditor, stated that Brown Armstrong had been awarded the contract for LACERA‛s external financial statement audit work for the five year period beginning with Fiscal Year 2009/2010, and with the option for a two year extension at the Board of Retirement‛s discretion. Richard went over some of the contract details and stated that the contract had been sent to Brown Armstrong‛s office for signature.

   2. Brown Armstrong Presentation of the Reports for Fiscal Year Ended June 30, 2009

      Reports and Agenda from Brown Armstrong et. al. (Memo dated October 27, 2009)

      Presentation by: Brown Armstrong, Certified Public Accountants
      Andrew Paulden, Managing Partner (Brown Armstrong Agenda Memo)

      A presentation was given by Andrew Paulden, CPA, Managing Partner for Brown Armstrong in relation to LACERA‛s FYE 6/30/09 audit of financial statements. Mr. Paulden‛s presentation covered the audit process, significant audit areas/scope of work, and the audit reports.

      Mr. Paulden stated that LACERA‛s Financial Statements were given a clean opinion otherwise known as an unqualified opinion; there were no material weaknesses or significant deficiencies reported.

      Mr. Schneider asked Mr. Paulden how they obtained their valuations of LACERA‛s private equity investments. At this time Mr. Paulden gave an overview of Brown Armstrong‛s private equity audit procedures.

   3. Internal Audit Staffing Report

      Richard Bendall, Chief Internal Audit (Oral presentation only)

      Richard Bendall, Chief-Internal Auditor, stated that staff is healthy, in good spirits and working diligently. Richard reminded the Committee that Ted Granger is working on a special project and has been reassigned to FASD for the year.

   4. Audit Plan Status Report — As of November 15, 2009

      Sarah Marks, Principal Internal Auditor (Memo dated November 23, 2009)

      Richard Bendall, Chief-Internal Auditor, stated that Internal Audit is approximately in the same position as last year with regards to the Audit Plan percentage completed. At this time Richard gave an overview of the inputs necessary to create the Audit Plan. Richard is striving for an 80% to 90% rate of completion at the end of the year. Lastly, Richard pointed out some adjustments made to the Audit Plan with regards to the estimation of project hours and unplanned projects.

      Chairman Russin stated that he was pleased to see the focus of hours in the processing of retiree‛s and their benefits.

      Vice Chairman Morris inquired as to the “Rehired Retirees” project. He wanted to know if this project was in regards to the “120 day people” and if so, how it differs from the “Returning Retirees” project. Richard stated that the “Returning Retirees” was a consulting project on the processing of the “120 day people”. The “Rehired Retirees” project was the annual testing of the processing of the “120 day people.”

   5. Summary of Significant Work Completed / In-Progress Since Last Audit Committee Meeting [As of November 30, 2009]

      Richard Bendall, Chief-Internal Audit
      Sylvia Botros, Internal Auditor
      Nathan Amick, Internal Auditor (Memo dated November 30, 2009)

      Richard Bendall, Chief-Internal Auditor, gave a run down of some of the more significant projects completed thus far.

      David Redman, Senior Internal Auditor gave a review of the “120 Days Rehired Retirees” project. David commended George Lunde, LACERA Senior Internal Auditor. Internal Audit was able to electronically access all Los Angeles County payroll records for every employee for the last 2 years and extract the data necessary. David ended his presentation by stating that this testing will be performed annually and the test results communicated to the County.

   6. LACERA — Network Access Vulnerability Assessment conducted by Foundstone — August 20, 2009

      George Lunde, Senior Internal Auditor
      James Pu, Assistant Division Manager, Systems (Memo dated November 16, 2009)

      George Lunde, Senior Internal Auditor, gave an overview of the tests performed by Foundstone and the results of those tests. George noted that Foundstone would not have been able to perform their desired tests without LACERA‛s Systems Division “lowering their defenses.” Overall staff was pleased with the result of the audit.

   7. Status of Other External Audits Not Conducted at the Discretion of Internal Audit

      No items to report.

4. ACTION ITEMS
   1. Recommendation as submitted by Richard Bendall, Chief-Internal Audit:

      Staff requests that your Committee approve the proposed, updated LACERA Audit Committee Charter. (Memo dated November 30, 2009)

      Richard Bendall, Chief Internal Auditor, presented to the Committee, for their approval, a revised Audit Committee Charter. Richard then discussed the difficulties that would result from increasing the committee membership with regards to ensuring that committee meetings did not comprise a forum of either the Board if Retirement or the Board of Investments. That being the said, Mr. Bendall requested the Audit Committee to approve the proposed changes to the LACERA Audit Committee Charter with the exclusion of the changes to committee composition.

      Mr. Schneider moved to approve the revised Audit Committee Charter with the exclusion of all recommended changes to section “III. Audit Committee Composition and Consultant” as described by Mr. Bendall. The motioned was seconded by Mr. Pryor. The motion passed with a unanimous vote.

5. FOR INFORMATION ONLY

   No items to report.

6. CONSULTANT COMMENTS

   Timothy O‛Brien — Audit Committee Consultant (Oral presentation only)

   Timothy O‛Brien, Audit Committee Consultant, wanted to applaud Andy Paulden, Brown Armstrong, on the quality of his presentation. Mr. O‛Brien was also pleased with the results of the worked performed in the Network Access Vulnerability Assessment.

7. Good of the Order

   The Audit Committee wished everyone a Happy Holiday.

8. ADJOURNMENT

The Board of Retirement has adopted a policy permitting any member of the Board to attend a standing committee meeting open to the public. In the event five or more members of the Board of Retirement (including members appointed to the Committee) are in attendance, the meeting shall constitute a joint meeting of the Committee and the Board of Retirement. Members of the Board of Retirement who are not members of the Committee may attend and participate in a meeting of a Board Committee but may not vote on any matter discussed at the meeting. The only action the Committee may take at the meeting is approval of a recommendation to take further action at a subsequent meeting of the Board.

Documents distributed to members of the Committee less than 72 hours prior to the meeting will be available for public inspection at LACERA at the time they are distributed to a majority of the Committee, provided the documents are subject to public disclosure and relate to an open session of the Committee. Such documents may be viewed Monday through Friday during normal 9:00 a.m. to 5:00 p.m. business hours. LACERA is located at 300 N. Lake Avenue, Suite 820, Pasadena, California.

Persons requiring an alternative format of this agenda pursuant to Section 202 of the Americans with Disabilities Act of 1990 may request one by calling Cynthia Guider at (626)-564-6000, from 8:30 a.m. to 5:00 p.m. Monday through Friday, but no later than 48 hours prior to the time the meeting is to commence. Assistive Listening Devices are available upon request. American Sign Language (ASL) Interpreters are available with at least three (3) business days notice before the meeting date.

7/19/10