REPORT DIGEST

 

STATE EMPLOYEES’ RETIREMENT SYSTEM OF ILLINOIS

 

COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2007

 

Summary of Findings:

Total this year

  -Financial Audit                 1*

  -Compliance Examination  2

                                           3

Total last year

  -Financial Audit                 0*

  -Compliance Examination  1

                                           1

Repeated from last year

  -Financial Audit                 0*

  -Compliance Examination  1

                                           1

* Financial audit previously released

 

Release Date:

April 30, 2008

 

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 the Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

INTRODUCTION

 

      A financial audit covering the year ending June 30, 2007 was previously released on March 4, 2008.  The financial audit report contained one finding relating to a significant deficiency in the design of the State Employees’ Retirement System of Illinois’ (System) internal control.

 

     This digest covers our compliance attestation examination of the System for the year ended June 30, 2007.  The compliance attestation examination report includes two State compliance findings and supplementary information.

 

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

 

SYNOPSIS

(State Compliance Findings)

 

¨      Statements of Economic Interests have not been filed for all System employees having responsibility for formulation, negotiation, issuance or execution of contracts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Financial Data and Supplementary Information are summarized on the reverse page.}

 

 

 

STATE EMPLOYEES' RETIREMENT SYSTEM OF ILLINOIS

COMPLIANCE EXAMINATION

YEAR ENDED JUNE 30, 2007

 

OPERATING STATEMENT ANALYSIS

FY 2007

FY 2006

REVENUES:  Contributions - Participants...............................

Contributions - State agencies & appropriations

Total Contributions..................................

Net investment income...................................

Net appreciation in fair value of investments.....

            Interest earned on cash balances......................

                        Total Revenue ........................................

EXPENSES:  Benefits - Retirement annuities...........................

 Benefits - Survivors' annuities............................

                  Benefits - Disability benefits...............................

                    Benefits - Lump-sum benefits............................

Total Benefits............................................

Refunds...........................................................

           Administration...................................................

                        Total Expenses..........................................

Excess of revenue over expenses........................

$   224,722,599

   358,786,650 

$   583,509,249 

266,766,628

1,500,507,144

     12,633,405 

$2,363,416,426 

$1,030,284,942 

65,215,133

43,053,148

     22,737,815 

$1,161,291,038 

14,261,872

       8,807,627

$1,184,360,537 

$1,179,055,889 

$   214,108,896 

   210,499,791  

$   424,608,687 

264,013,416

840,493,512

       8,724,784 

$1,537,840,399 

$   985,503,023 

61,100,647

40,271,558

     23,710,733 

$1,110,585,961 

13,410,048

       8,139,278 

$1,132,135,287

$   405,705,112  

ANALYSIS OF PLAN INVESTMENTS

FY 2007

FY 2006

Balance at beginning of year, at fair value.................................

Net cash transferred to (from) investments..............................

Net investments (1).......................................................

Investment income – interest, dividends and other....................

Investment expenses.............................................................

Net Investment income (2).............................................

Net realized gain on sale of investments..................................

Net unrealized gain on investments.........................................

Net appreciation in fair value of investments (3)................

Total net investment income (4), (2) + (3).......................

Balance at end of year, at fair value (1) + (4)....................

$10,654,863,723 

  (612,000,000) 

$10,042,863,723 

304,940,692

     (38,174,064)

$     266,766,628 

798,735,493

     701,771,651 

$  1,500,507,144 

$  1,767,273,772 

$11,810,137,495

$10,271,356,795 

  (721,000,000)

$  9,550,356,795  

292,393,986

     (28,380,570)  

$     264,013,416 

734,112,782

     106,380,730

$     840,493,512 

$  1,104,506,928 

$10,654,863,723

iNVESTMENTS USED FOR Benefits and Expenses

FY 2007

FY 2006

CONTRIBUTIONS:  Participants.......................................... ...........................................................

            State agencies & appropriations..........

           Total Contributions (5)..................

DEDUCTIONS:       Benefits.................................................

Refunds.................................................

                     Administration........................................

Total Deductions (6).........................

Investments used to Pay Benefits and Expenses (5)-(6)............

$   224,722,599

   358,786,650 

$   583,509,249

$1,161,291,038

14,261,872

       8,807,627

$1,184,360,537

$(600,851,288)

$   214,108,896  

   210,499,791  

$   424,608,687 

$1,110,585,961

13,410,048 

       8,139,278 

$1,132,135,287

$(707,526,600)

SUPPLEMENTARY INFORMATION

FY 2007

FY 2006

Number of System employees...............................................

Retirees and beneficiaries currently receiving benefits (unaudited)           

Total members (unaudited).....................................................            

Total active members (unaudited)...........................................

Total return on investments (unaudited)..................................

80

55,265

89,321

67,699

17.1%

82

54,868

89,447

68,075

11.0%

EXECUTIVE SECRETARY

During Audit Period:  Timothy B. Blair, Acting

Currently:  Timothy B. Blair, Acting


 

 

 

 

 

 

 

 

 

 

 


Three employees failed to file Statements of Economic Interests

 

 

 

 

 

 

 

 

 

 


System management concurred with the recommendation

 

 

 

 

 

 

 

 

 

 

 

 

Funding legislation was changed to reduce the required State contributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND

RECOMMENDATIONS

 

Statements of economic interests not filed for required employees

 

     During our testing, we noted three employees had not filed Statements of Economic Interests as of either May 1, 2006 or May 1, 2007.  All of these individuals either have responsibilities that require them to, or have potential to be involved in having direct responsibility for the formulation, negotiation, issuance or execution of contracts.

 

     The Illinois Governmental Ethics Act requires State employees who have direct supervisory authority over, or direct responsibility for the formulation, negotiation, issuance or execution of contracts entered into by the State in the amount of $5,000 or more to file a verified written Statement of Economic Interests.   

 

     System management indicated the required Statements of Economic Interests were not filed because the employees were not aware they were required to file.

 

      We recommended System management review and update the list of those employees who are in positions required to file Statements of Economic Interests to ensure an accurate and complete listing is submitted to the Secretary of State.   (Finding 3, page 8)

 

     System management concurred agreed with our recommendation.

 

OTHER FINDING

 

     The remaining finding is reportedly being given attention by the System.  We will review the System’s progress toward the implementation of our recommendations in our next engagement.

 

 

FUNDING LEGISLATION

 

      In June 2005, Public Act 94-0004 became law.  This legislation further modified the funding plan of the System by reducing the amount of required employer (State) contributions for fiscal year 2006 and 2007 that would have otherwise been required under the previous funding legislation.  The State contributions will be higher in future years to make up for the two-year funding reduction.

            

ACCOUNTANTS’ REPORT

 

      We conducted a compliance attestation examination of the System for the year ended June 30, 2007 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, Auditor General

 

WGH:RPU:pp

 

SPECIAL ASSISTANT AUDITORS

 

      McGladrey & Pullen, LLP were our special assistant auditors for this engagement.