REPORT DIGEST JUDGES’ RETIREMENT SYSTEM OF ILLINOIS
COMPLIANCE
EXAMINATION For the Year Ended: June 30, 2005 Summary of Findings: Total findings this report 1 Total findings prior report 0 Repeated findings 0 Release Date:
May 2, 2006
State of Illinois Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
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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 the
Full Report are also available on the worldwide web at http://www.state.il.us/auditor
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SYNOPSIS u The management for the Judges’ Retirement System (JRS) and the General Assembly Retirement System (GARS) have not performed any documented review or evaluation of the allocation of joint administrative expenses of the two systems for several years.
{Financial Information and Activity Measures are summarized on the reverse page.} |
INFORMATION
FROM FINANCIAL AUDIT AND COMPLIANCE EXAMINATION
OPERATING STATEMENT ANALYSIS |
FY 2005 |
FY 2004 |
Contributions – Appropriations & other......................
Total Contributions.................................................
Net investment income......................................................
Net
appreciation in fair value of investments................
Interest
earned on cash balances....................................
Total Revenue..........................................................
EXPENSES: Benefits - Retirement annuities.............................................
Benefits - Survivors' annuities............................................
Total Benefits...............................................................
Refunds..................................................................................
Administration......................................................................
Total
Expenses............................................................
Revenues over expenses.....................................................
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$13,268,530
32,043,009
$45,311,539
12,111,036
38,466,043
271,889
$96,160,507
$50,718,643
13,820,917 $64,539,560
740,497 460,826
$65,740,883
$30,419,624 |
$ 13,720,911
178,593,095
$192,314,006
8,350,649
65,525,769 136,396 $266,326,820 $ 47,965,512
12,947,383
$ 60,912,895
439,575 448,087 $ 61,800,557
$204,526,263 |
FY 2005
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FY 2004
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$521,372,992
(21,600,000)
$499,772,992
13,341,258
(1,230,222)
$
12,111,036
25,316,348
13,149,695
$
38,466,043
$
50,577,079
$550,350,071 |
$317,541,091
129,955,483
$447,496,574
9,238,465
(887,816)
$
8,350,649
36,057,122
29,468,647
$
65,525,769
$
73,876,418
$521,372,992
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Contributions Available to Invest
(iNVESTMENTS USED FOR Benefits and Expenses) |
FY 2005 |
FY 2004 |
Appropriations & other ....................................
Total Contributions (5).................................
DEDUCTIONS:
Benefits.......................................................................
Refunds....................................................................
Administration........................................................
Total Deductions (6)......................................
Contributions Available
to Invest (Investments used to Pay
Benefits
and Expenses) (5)-(6)................................................................
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$ 13,268,530 32,043,009 $
45,311,539 $
64,539,560 740,497 460,826 $ 65,740,883
$(20,429,344) |
$13,720,911 178,593,095 $192,314,006 $ 60,912,895 439,575 448,087 $ 61,800,557
$130,513,449 |
SUPPLEMENTARY
INFORMATION |
FY 2005
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FY 2004
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Number of System
employees......................................................................
Retirees and beneficiaries receiving benefits
(unaudited).......................
Total members (unaudited).......................................................................... Total
active members (unaudited)...............................................................
Total
return on investments (unaudited)...................................................
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6 900 962 928 10.1% |
7 873 941 906 16.4% |
EXECUTIVE SECRETARY |
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During
Audit Period: Robert V. Knox
Currently: Robert V. Knox |
Joint administrative expenses were allocated 60% to JRS and 40% to GARS
Recalculation of administrative expense allocation using 5 year historical information would be 73% to JRS and 27% to GARS
Funding legislation
was changed to reduce the required employer (State) contributions for fiscal
years 2006 and 2007
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INTRODUCTION
This
digest covers our compliance examination of the Judges’ Retirement System
(System) for the year ended June 30, 2005.
A financial audit covering the year ending June 30, 2005 was issued
separately.
It
should be noted that, pursuant to the Illinois Pension Code, investments of
the System are managed by the Illinois State Board of Investment.
FINDING, CONCLUSION, AND RECOMMENDATION
Allocation of Joint
Administrative Expenses
During our testing of joint administrative
expenses, we noted the board of trustees for the Judges’ Retirement System
(JRS) and the General Assembly Retirement System (GARS) approved an
allocation of joint administrative expenses of 60% for JRS and 40% for
GARS. System management indicated the
joint administrative expense allocation methodology was based on the number
of members and annuitants of each system.
The allocation has not been reviewed by management for several years
to determine if it continues to be a valid allocation base.
We recomputed the joint administrative
cost allocation for the two systems using the actual number of members and
annuitants for each system over the five years ended June 30, 2005. Based on our recalculation the allocation
of joint administrative expenses would be 73% allocable to JRS and 27%
allocable to GARS. Using our
recalculation, GARS would have reduced their reimbursement of joint
administrative expenses by $87,589
for fiscal year 2005, and JRS would have increased their reimbursement by the
same amount.
System management stated the joint administrative expense
allocation had not been reevaluated in recent years because the board of
trustees for both GARS and JRS felt that the cost sharing was appropriate and
no major changes to the two systems have occurred.
We recommended GARS and JRS review and agree on an
administrative expense allocation methodology and then recompute the joint
administrative expense allocation on a periodic basis to ensure that each
system is paying their equitable share of the joint administrative
expenses. (Finding 1, page 8)
System management concurred with our recommendation and
indicated the issue will be reviewed with the JRS and GARS boards of
trustees.
Mr. Robert V. Knox, Executive Secretary provided the System’s
response to the finding.
CHANGE IN FUNDING LEGISLATION
In June 2005, Public Act 94-0004 became
law. This legislation further
modified the funding plan of the System by reducing the amount of required
employer contributions for fiscal year 2006 and 2007 that would have
otherwise been required under the previous funding legislation. The required State contributions for
fiscal years 2008 through 2010 will then be increased incrementally as a
percentage of the participant payroll so that by fiscal year 2011 the State
is contributing at the required level contribution rate to achieve the
financing objective of a 90% funded status by the end of fiscal year 2045.
AUDITORS’ OPINION
We conducted a compliance attestation
examination of the System for the year ended June 30, 2005 as required by the
Illinois State Auditing Act. A financial audit covering the year ending June
30, 2005 was issued separately.
_____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:RPU:pp
SPECIAL ASSISTANT AUDITORS
McGladrey & Pullen LLP were our special assistant auditors for this engagement.
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