REPORT DIGEST STATE UNIVERSITIES RETIREMENT SYSTEM COMPLIANCE EXAMINATION For the Year Ended: June 30, 2009 Summary of Findings: Total this audit 3 Total prior audit 1 Repeated from last audit 0 Release Date: March 3, 2010 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 http://www.auditor.illinois.gov

INTRODUCTION This digest covers our compliance examination of the System for the year ended June 30, 2009. A financial audit covering the year ended June 30, 2009 was issued separately. FUNDING LEGISLATION Public Act 94-0004 became law June 1, 2005 and affected the System by modifying several retirement benefit calculations for fiscal year 2006 and beyond. In addition, the Act also established specific dollar amounts to be contributed by the State for fiscal years 2006 and 2007, as opposed to the State contribution being calculated based on the existing funding formula. State required contributions will be higher in future years to make up for the two-year funding reduction. SYNOPSIS The System does not have adequate internal control over the determination of the eligibility of retired members in the State of Illinois’ College Insurance Plan that did not previously make contributions as active members prior to 1999.

STATE UNIVERSITIES RETIREMENT SYSTEM

COMPLIANCE EXAMINATION

Year Ended June 30, 2009

FINANCIAL OPERATIONS	FY 2009	FY 2008
Additions Contributions Participants.............................................. Employer................................................. Total Contributions............................. Investment Income......................................... Net depreciation in fair market value ........ Interest.................................................... Dividends................................................. Securities lending...................................... Less: Investment expense........................ Net Investment Loss.......................... Total Additions............................ Deductions Benefits.......................................................... Refunds of contributions................................. Administrative expense................................... Total Deductions.......................... Net Decrease.......................................................	$322,117,492 489,881,392 $811,998,884 ($3,290,131,425) 183,668,534 153,789,636 18,313,879 (32,760,517) ($2,967,119,893) ($2,155,121,009) $1,376,726,389 51,372,312 12,922,070 $1,441,020,771 ($3,596,141,780)	$310,101,265 383,899,304 $694,000,569 ($938,306,823) 60,706,695 187,602,637 14,161,232 (39,012,867) ($714,849,126) ($20,848,557) $1,279,172,742 54,939,592 12,079,244 $1,346,191,578 ($1,367,040,135)
INVESTMENTS USED FOR BENEFITS AND EXPENSES (Defined Benefit Plan)	FY 2009	FY 2008
Contributions Participants .................................................... State of Illinois................................................ Federal/Trust and other sources....................... Total Contributions.................................... Deductions Benefits......................................................... Refunds......................................................... Administrative Expenses................................. Total Deductions....................................... Investments Used to Pay Benefits and Expenses....	$273,292,053 417,257,229 34,359,837 $724,909,119 $1,371,990,391 42,651,635 12,922,070 $1,427,564,096 $(702,654,977)	$264,149,354 306,914,260 38,030,978 $609,094,592 $1,275,713,711 44,984,290 12,079,244 $1,332,777,245 $(723,682,653)
SUPPLEMENTARY INFORMATION	FY 2009	FY 2008
Total investment administrative expenses................ Investment return (unaudited)................................ Average number of employees (unaudited)............. Number of active members................................... Number of inactive members................................. Number of retirement benefit recipients.................. Number of survivors benefit recipients................... Number of disabilities benefit recipients..................	$29,439,957 (19.7%) 114.10 83,545 77,780 38,400 7,269 726	$37,659,805 (4.5%) 119.10 83,074 76,721 37,055 7,122 762
EXECUTIVE DIRECTOR
During Audit Period: Dan M. Slack (7-1-08 to 12-31-08), Currently: Ms. Judith Parker – Interim Executive Director (1-1-09 to present)

It is the responsibility of the System to determine eligibility of members participating in the College Insurance Plan

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS ELIGIBILITY IN COLLEGE INSURANCE PLAN The State Universities Retirement System (System) does not have adequate internal controls over the determination of the eligibility of retired members in the State of Illinois’ College Insurance Plan (CIP) who did not previously make contributions as active members prior to 1999. The College Insurance Plan (CIP) was created by the State of Illinois, in order to establish a uniform program of health benefits for community college recipients and their dependent beneficiaries. The CIP is administered by the State’s Department of Central Management Services. According to State statute, it is the responsibility of the System to determine eligibility of members participating in the CIP. During our mandate testing, it was noted that the System does not have a formalized process that independently verifies the eligibility of retired members participating in the CIP prior to 1999. Rather, the System relies on the respective college for this determination, by obtaining some communication (via email), regarding members’ eligibility status. In addition, the System does not require a certification from the college for eligibility, at the time of retirement, at which time an eligible member would be entitled to receive benefits. We recommended that the System implement sufficient internal controls over eligibility of retired members participating in the College Insurance Plan. A process should be put in place to adequately review the eligibility of retired members to ensure compliance with the applicable State law. (Finding 3, Pages 10-11) System management concurred with the finding and stated that they will develop a formal certification process to be used by employers in verifying this information. AUDITORS' OPINION Our auditors state the June 30, 2009 financial statements of the System are fairly presented in all material respects. _____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:TLK:pp SPECIAL ASSISTANT AUDITORS McGladrey & Pullen, LLP were our special assistant auditors for this audit.