REPORT DIGEST JUDGES’ RETIREMENT SYSTEM Financial Audit For the Year Ended June 30, 2015 Release Date: January 12, 2016 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 0 -- 1 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 0 -- 1 -- 1 FINDINGS LAST AUDIT: 2 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, 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 This digest covers the financial statement audit of the Judges’ Retirement System of the State of Illinois (System) as of and for the year ended June 30, 2015. The Judges’ Retirement System’s Compliance Examination covering the year ended June 30, 2015 will be issued in a separate report at a later date. Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans requires the System to disclose the total pension liability and net pension liability in the financial statement notes as well as other related information as required supplementary information. The System’s total pension liability is $2,352.9 million at June 30, 2015. The net pension liability at June 30, 2015 is $1,519.0 million, which is the difference between the System’s fiduciary net position of $833.9 million and the total pension liability. The System’s funded ratio is 35.44%. The criteria used for computing pension liability information in the financial report in accordance with GASB Statement No. 67 differs from the criteria used to compute the actuarial accrued liability and actuarial unfunded liability under the State’s funding plan, therefore this information under the State’s funding plan is no longer reported in the financial statements. FINDINGS SYNOPSIS • (15-1) The Judges’ Retirement System was not in compliance with the Fiscal Control and Internal Auditing Act. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NONCOMPLIANCE WITH FISCAL CONTROL AND INTERNAL AUDITING ACT The Judges’ Retirement System (System) was not in compliance with the Fiscal Control and Internal Auditing Act (the Act). During the prior year’s audit, we noted that the System was required by the Act (30 ILCS 10/2001) to have a full-time program of internal auditing. The System filled the Internal Auditor position in October 2014. Therefore this part of the prior year’s finding is not repeated in the current fiscal year’s audit. The Act (30 ILCS 10/2003) also requires the chief executive officer to ensure that internal audits of all major systems of internal control are conducted at least once every two years. As a result of the vacancy in the Internal Auditor position during part of the fiscal year, only one of the seven internal audits of major systems planned for fiscal year 2015 was completed. Therefore, the System was not in compliance with this provision of the Act. According to System officials the System was not able to fill the internal audit position sooner and therefore the current internal auditor did not have adequate time during the fiscal year to complete internal audits as planned. (Finding 1, page 33) The System accepted our recommendation to develop a plan to ensure that the internal audit function continues in the event the position is left vacant for a period of time. AUDITOR’S OPINION Our auditors stated the financial statements of the Judges’ Retirement System as of June 30, 2015, and for the year then ended, are fairly stated in all material respects. FRANK J. MAUTINO Auditor General FJM:JAF SPECIAL ASSISTANT AUDITORS Our Special Assistant Auditors for this audit were BKD LLP.