REPORT DIGEST ILLINOIS STATE BOARD OF INVESTMENT COMPLIANCE EXAMINATION FOR THE YEAR ENDED JUNE 30, 2017 Release Date: April 5, 2018 FINDINGS THIS AUDIT: 2 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 1 -- 1 TOTAL: 1 -- 1 -- 2 FINDINGS LAST AUDIT: 1 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, AUDITOR GENERAL To obtain a copy of the Report contact: Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703 (217) 782-6046 or TTY (888) 261-2887 This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov INTRODUCTION This digest covers our Compliance Examination of the Illinois State Board of Investment (Board or ISBI) for the year ended June 30, 2017. A separate Financial Audit as of and for the year ending June 30, 2017 was previously released on January 31, 2018. That report contained one finding. SYNOPSIS • (17-02) The Board did not always obtain fully completed disclosures from investment managers as required in the Illinois Pension Code. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NONCOMPLIANCE WITH THE ILLINOIS PENSION CODE The Illinois State Board of Investment (ISBI) did not always obtain fully completed disclosures from investment managers as required in the Illinois Pension Code. During our testwork of twelve investment manager disclosures returned to ISBI, we noted the following: • The investment manager disclosures for four investment managers did not properly disclose the number of contracts with businesses owned by a minority, a woman, or a person with a disability. • The investment manager disclosures for the four investment managers identified above also did not properly disclose the number of contracts with other than those businesses owned by a minority, a woman, or a person with a disability if more than 50% of services performed pursuant to the contract are performed by a minority, a woman, or a person with a disability. (Finding 2, pages 12-13) We recommended ISBI comply with the Illinois Pension Code or seek legislative remedy. ISBI officials stated that subsequent to December 2016 they have implemented corrective action and were in full compliance with the statute for the period January 2017 to June 2017. AUDITOR’S OPINION The financial audit was previously released. The auditors stated the financial statements of the Board as of and for the year ended June 30, 2017 are fairly stated in all material respects. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Board for the year ended June 30, 2017, as required by the Illinois State Auditing Act. The accountants stated the Board complied, in all material respects, with the requirements described in the report. This compliance examination was conducted by KPMG LLP. Jane Clark Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:TLK