ILLINOIS STATE BOARD OF INVESTMENT
For the Year Ended June 30, 2010
Summary of Findings:
Total this audit: 1
Total last audit: 2
Repeated from last audit: 0
Release Date: March 24, 2011
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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• ISBI did not comply with certain statutory mandate requirements.
This digest covers our compliance attestation examination of the Illinois State Board of Investment for the year ended June 30, 2010. A financial audit covering the year ended June 30, 2010 was previously released on January 27, 2011.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
NONCOMPLIANCE WITH STATUTORY MANDATES
The Illinois State Board of Investment (ISBI) did not comply with mandate requirements related to the management of the Power Agency Trust Fund, quarterly and annual financial reporting, and publishing information on their website.
We noted that ISBI was not in compliance with the State Finance Act that requires ISBI to manage the investments in the Power Agency Trust Fund once the fund has reached a balance of $25 million. We noted that the Power Agency Trust Fund amounted to a balance of $25 million in FY08, but ISBI has not been managing the investments in the Power Agency Trust Fund in the current fiscal year or any prior years.
We also noted that ISBI was not in compliance with the Illinois Pension Code that requires a quarterly report to each pension fund under its jurisdiction and an annual report to each pension fund. The mandate requires that the quarterly reports include a full description of the investments acquired showing average costs and a full description of securities sold or exchanged; however, we noted this information was not provided.
During our testing of revenues and receipts, we noted that ISBI did not update its monthly financial information to their website by the 15th of the following month as required by the Accountability for the Investment of Public Funds Act. Furthermore, ISBI does not have a published list of approved depository institutions, commercial paper issuers, or broker dealers.
According to ISBI management, ISBI was unaware of the specific requirements of these mandates.
We recommended ISBI perform a periodic review of general mandates and those specific to ISBI to ensure compliance with State statutes and regulations. (Finding 1, pages 7-8)
Management agreed with the recommendation and indicated they will incorporate the Power Agency Trust Fund and the Accountability of the Investment of Public Funds Act into its function. The Power Agency Trust Fund is currently under $25 million but the Board will work with the Illinois State Treasurer so as to monitor when the fund has a balance of $25 million or more in order to manage the fund investment. Procedures are also being implemented to ensure that investment summary information is updated by the 15th of the month. Also the Board will incorporate sufficient information concerning the investment of public funds held by the Board into the Board website to comply with all of the requirements of the Accountability of the Investment of Public Funds Act.
We conducted a compliance attestation examination of the Board for the year ended June 30, 2010 as required by the Illinois State Auditing Act. The accountants’ report does not contain any scope limitations, disclosures or other significant non-standard language.
WILLIAM G. HOLLAND
SPECIAL ASSISTANT AUDITORS
McGladrey & Pullen LLP were our Special Assistant Auditors for this engagement.