REPORT DIGEST STATE EMPLOYEES’ RETIREMENT SYSTEM COMPLIANCE EXAMINATION For the Year Ended: June 30, 2011 Release Date: May 2, 2012 Summary of Findings this Audit Cycle: • Compliance Examination: 3 • Financial Audit (previously reported 2-21-12): 1 Total findings: 4 Summary of findings from previous audit cycle: 0 Repeated from last audit: 0 State of Illinois, Office of the Auditor General WILLIAM G. HOLLAND, 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 The Financial Audit for the year ended June 30, 2011 was previously released on February 21, 2012. That audit contained one finding. This report addresses State compliance findings to the State Compliance Examination report. In total this report contains four findings, one of which was also reported in the Financial Audit. SYNOPSIS • The State Employees’ Retirement System’s Internal Audit Department did not review critical new Human Resource and Attendance Systems prior to their implementation. • The State Employees’ Retirement System did not file a report required by Executive Order 10-10. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS LACK OF REVIEW OF COMPUTER SYSTEMS BEFORE IMPLEMENTATION The State Employees’ Retirement System’s (System) Internal Audit Department did not review its critical new Human Resource and Attendance Systems prior to their implementation. The Human Resource System, used for tracking personnel records and work schedules, was implemented in August 2010 and took approximately 1,870 person-hours to develop. The Attendance System, used for tracking employee attendance, time-off requests, overtime and compensatory time, and timesheets, was implemented in December 2010 and took approximately 1,890 person-hours to develop. The Fiscal Control and Internal Auditing Act (30 ILCS 10/2003(a) (3)) requires the System’s internal auditing program to conduct reviews of the design of major new electronic data processing systems and major modifications of those systems before their installation to ensure the systems provide for adequate audit trails and accountability. System management stated the Internal Auditor was informed of the development efforts and received regular updates from the IT Division Manager; however other audit activities took priority. (Finding #4, page 13) System officials concurred with our recommendation that the System’s Internal Audit Department perform a review of all new critical systems or major modifications to existing system prior to its implementation. LACK OF SUBMISSION OF REQUIRED REPORT The State Employees’ Retirement System (System) did not file a report required by Executive Order 10-10. Executive Order 10-10, dated July 1, 2010, required all state agencies to report within 30 days of the effective date of the Executive Order to the Governor’s Office of Management and Budget (GOMB), the amount of reductions they have implemented or realized or which they will be able to implement or realize as required in the Executive Order, as well as savings resulting from any other reductions. The System never filed the required report. System officials did not initially believe this requirement was applicable to them. (Finding #2, page 10) System officials concurred with our recommendation to review and comply with Executive Orders issued by the Governor. OTHER FINDINGS The remaining finding was accepted by the System. We will review the System’s progress towards implementation of our recommendation in our next State compliance examination. AUDITORS’ OPINION The auditors conducted a compliance examination of the System for the year ended June 30, 2011. A financial audit covering the year ended June 30, 2011 was issued previously. WILLIAM G. HOLLAND Auditor General WGH:JAF:rt SPECIAL ASSISTANT AUDITORS Our special assistant auditors for this compliance examination were BKD LLP.