ABOUT LACERA

AUDIT COMMITTEE MINUTES 7-29-09

PRESENT

• Simon S. Russin, Chair
• Ed C. Morris, Vice Chair
• Herman B. Santos, Secretary
• William R. Pryor

ABSENT

• William de la Garza
• Michael Schneider

ALSO ATTENDING:

BOARD MEMBERS AT LARGE

• None

AUDIT COMMITTEE CONSULTANT

• Timothy O‛Brien

STAFF, ADVISORS, PARTICIPANTS

• Gregg Rademacher
• Robert Hill
• Janice Golden
• Beulah Canevari
• Nai-Len Ishikawa
• Cindy Guider
• Mike Mikhail
• Richard Bendall
• Bernie Buenaflor
• Elvia Gonzalez
• Sarah Marks
• Ruwen Liu
• Sylvia Botros
• Nathan Amick

1. APPROVAL OF THE MINUTES OF THE SPECIAL AUDIT COMMITTEE MEETING OF MARCH 24, 2009

   A motion was made by Mr. Pryor and seconded by Vice Chairman Morris, to approve the Audit Committee minutes prepared for the meeting held on March 24, 2009, as presented. The motion passed with a unanimous vote.

2. PUBLIC COMMENT

   No items to report.

3. PRESENTATIONS
   1. Audit Committee Roles and Responsibilities Recap Audit Coverage for Fiscal Year 2008-2009

      Richard Bendall, Chief Internal Auditor (Oral presentation only)

      Richard Bendall, Chief Internal Auditor, gave an overview of the various roles and responsibilities of the Audit Committee. Mr. Bendall notified the Audit Committee, Internal Audit will be without Ted Granger for a year. He is on special assignment as the Acting Assistant Division Manager in FASD, to fill in for the Assistant Division Manager who is the Acting Division Manager, while the Division Manager is on special assignment in the Claims Processing Division.

4. ACTION ITEMS
   1. Recommendation as submitted by Richard Bendall, Chief Internal Auditor: Approve the Fiscal Year 2009-2010 Audit Plan as presented — TO BE TAKEN UP AFTER AGENDA ITEMS V.A. and V.B. (Memo dated July 17, 2009)

      Richard Bendall, Chief Internal Auditor, presented the Fiscal Year 2009-2010 Audit Plan and gave an allocation breakdown of projected hours, by division, for the proposed 2009-2010 Audit Plan.

      Mr. Pryor motioned to approve the Fiscal Year 2009-2010 Audit Plan as presented. The motion was seconded by Mr. Morris. The motion passed with a unanimous vote.

   2. Approve a Special Meeting of the Audit Committee for Wednesday, September 9, 2009, immediately following the Board of Investments meeting. (Oral presentation only)

      A motion was made by Vice Chairman Morris and seconded by Mr. Pryor, to approve a Special Meeting of the Audit Committee for Wednesday, September 9, 2009, immediately following the Board of Investments meeting. The motion passed with a unanimous vote. Mr. Santos stated that he will be unavailable to attend.

   3. Approve the rescheduling of the next Audit Committee meeting to Tuesday, December 8, 2009, at 9:00 a.m. (Oral presentation only)

      A motion was made by Mr. Santos to approve the rescheduling of the next Audit Committee to December 9, 2009, immediately following the Board of Investments meeting. The motion was seconded by Vice Chairman Morris and approved unanimously.

5. REPORTS
   1. Audit Plan Status Report — Fiscal Year End June 30, 2009

      Richard Bendall, Chief Internal Auditor Sarah Marks, Principal Internal Auditor (Memo dated July 17, 2009)

      Richard Bendall, Chief Internal Auditor, was pleased to state that Internal Audit had a 96% completion rate with regards to the FYE 6/30/09 Audit Plan. Mr. Bendall noted that 1,092 project hours had to be reallocated during the year for use on unplanned and special projects.

      Chairman Russin inquired as to the status of the 10 temporary employees to be hired for the 1996 project. Bernie Buenaflor, Principal Internal Auditor, stated all 10 employees had been hired, their initial training has been completed, and they are currently performing production work and handling the 1996 cases.

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

      Richard Bendall, Chief Internal Auditor
      Sylvia Botros, Internal Auditor (Memo dated June 30, 2009)

      Richard Bendall, Chief Internal Auditor, stated that the memo gives an overview, by division, of completed and in progress projects and that staff is available to take questions regarding these projects.

      At this time the Audit Committee had no questions for staff.

   3. FYE 2009 Annual Audit of the Financial Statements — Status Update

      Richard Bendall, Chief Internal Auditor
      Ted Granger, Senior Internal Auditor (Memo dated July 17, 2009)

      Richard Bendall, Chief Internal Auditor, stated that Brown Armstrong has completed their preliminary field work and will return in September to complete the audit field work. Audited Financial Reports will be presented at the December Audit Committee meeting, with Brown Armstrong in attendance to answer questions.

      Timothy O'Brien, Audit Committee Consultant, inquired as to the process used by Brown Armstrong to confirm private equity holdings. Sarah Marks, Principal Internal Auditor, stated that Brown Armstrong sent out confirmation letters to the various private equity funds.

   4. 2009 RFP for Annual Audits of the Financial Statements — Progress Update

      Richard Bendall, Chief Internal Auditor Ted Granger, Senior Internal Auditor (Memo dated July 17, 2009)

      Richard Bendall, Chief Internal Auditor, gave a progress update of the 2009 RFP for Annual Audits of the Financial Statements. Currently the REP has been sent out and Internal Audit has received notice from six firms of their intent to bid. Bid proposals are due 7/7/09. Bid finalists will be brought to the Audit Committee on 9/9/09 for approval and the Audit Committee's recommendation to the Board of Retirement for finalist interviews.

   5. Status Update on the Project

      Bernie Buenaflor, Principal Internal Auditor (Memo dated July 16, 2009)

      Bernie Buenaflor, Principal Internal Auditor, gave a status update on the “1996 Cases” project. Currently 10 new staff have been hired and trained, and are reviewing all cases in order to identify and remedy any discrepancies. It is anticipated that this will be a multi year project.

      A discussion ensued as to the initial source of the “1996” issue and the possible financial impact to the members.

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

      No items to report.

6. FOR INFORMATION ONLY

   No items included.

7. CONSULTANT COMMENTS

   Timothy O'Brien — Audit Committee Consultant

   Timothy O'Brien, Audit Committee Consultant, stated that the SEC is considering a regulation prohibiting third party marketers of dealing with public pension funds. Tim wanted to know that if this were to happen will this be a compliance issue that Internal Audit would be required to handle?

   According to Gregg Rademacher, LACERA CEO, as we do not do in-house investing, it is the responsibility of the Investments staff to review and monitor compliance issues pertaining to investment managers. Internal Audit would be responsible for ensuring that Investments staff is following their own policies and procedures.

8. GOOD OF THE ORDER

   No items to report.

9. CLOSED SESSION (Pursuant to Government Code Section 54957)
   1. PUBLIC EMPLOYEE PERFORMANCE EVALUATION

      Payroll Title: Chief-Internal Audit

10. ADJOURNMENT

7/19/10