This digest covers our financial audit of the System for the year ended June 30, 2002. A compliance audit covering the year ending June 30, 2002 is being issued separately.

The System shares administrative staff and common administrative expenses with the Judges’ Retirement System (JRS). The System reimburses the JRS for 40 percent of the administrative costs incurred.

It should be noted that, pursuant to the Illinois Pension Code, the Illinois State Board of Investment manages the investments of the System.

The actuarial accrued liability was valued at $185 million at June 30, 2002. The actuarial value of assets (at market) totaled approximately $54 million at June 30, 2002. The difference between the liability and the assets of $131 million reflects the unfunded liability of the System at June 30, 2002. The General Assembly Retirement System had a funded ratio of 29.3% at June 30, 2002.

The System had a decline in its investment portfolio subsequent to June 30, 2002. Pursuant to the Illinois Pension Code, the Illinois State Board of Investment (ISBI) manages the investments of the System. The ISBI Commingled Fund had a decline in its investment portfolio subsequent to year-end due to turbulent market conditions. At September 30, 2002, the ISBI Commingled Fund had incurred an approximate $880 million (11.1%) decrease in its investment portfolio due to declines in the domestic and international equity markets.

The System adopted Government Auditing Standard Board (GASB) Statements 34, 37 & 38. The adoption of these standards, effective July 1, 2001, had no impact on the System’s financial statements or its net assets. As a result of the adoption of these standards the System now presents a section on Management’s Discussion and Analysis which precedes the financial statements.

Our auditors state that the June 30, 2002 financial statements of the System are fairly presented.

WILLIAM G. HOLLAND, Auditor General

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