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REPORT DIGEST STATE EMPLOYEES’ RETIREMENT SYSTEM OF COMPLIANCE
EXAMINATION For the Year Ended: June 30, 2008 Summary of Findings: Total this report 2 Total last report 1 Repeated from last report 0
Rele May 21, 2009
State of
Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
To obtain a copy of the
Report contact: Office of the Auditor
General
(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
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INTRODUCTION This
digest covers our compliance attestation examination of the State Employees’
Retirement System of Illinois’ (System) for the year ending June 30,
2008. A financial audit covering the
year ending June 30, 2008 was previously released on January 15, 2009. It should be noted that, pursuant to the
Illinois Pension Code, investments of the System are managed by the Illinois
State Board of Investment. The auditors identified 2 findings
during their testing. Following is a
summary of the finding included in this digest.
¨
The System did not have a process to review
financial journal entries independent of the person who initiates and posts
them to the financial records.
SUBSEQUENT
EVENT Public Act 96-006 provides for the
termination of the terms of Board of Trustee members appointed by the
previous Governor as well as making changes in the composition of the Board
of Trustees.
{Financial Data and Supplementary Information are summarized on the reverse page.} |
COMPLIANCE
EXAMINATION
YEAR
ENDED JUNE 30, 2008
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OPERATING STATEMENT ANALYSIS |
FY 2008
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FY 2007
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Contributions - State agencies & appropriations........... Total Contributions........................................... Net investment income............................................. Net appreciation (depreciation) 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 (under)
Expenses..................... |
$ 249,955,208 587,732,407 $ 837,687,615 274,524,210 (968,688,184) 13,404,255 $ 156,927,896 $ 1,089,743,632 68,770,552 43,086,065 12,515,378 $ 1,214,115,627 16,817,433 9,537,305 $ 1,240,470,365
$(1,083,542,469) |
$ 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 |
FY 2008
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FY 2007
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$11,810,137,495
(462,000,000) $11,348,137,495 313,924,157 (39,399,947) $ 274,524,210 559,623,090 (1,528,311,274) $
(968,688,184) $ (694,163,974) $10,653,973,521 |
$ 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 |
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iNVESTMENTS USED FOR
Benefits and Expenses |
FY 2008
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FY 2007
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State agencies & appropriations....................
Total
Contributions (5)........................... DEDUCTIONS:
Benefits.......................................................... Refunds.......................................................... Administration................................................. Total Deductions (6).................................. Investments used to Pay Benefits and Expenses (5)-(6)..................... |
$ 249,955,208 587,732,407 $ 837,687,615 $1,214,115,627 16,817,433 9,537,305 $1,240,470,365 $(402,782,750) |
$ 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) |
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SUPPLEMENTARY
INFORMATION |
FY 2008
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FY 2007
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Number of System
employees........................................................ Retirees and beneficiaries currently receiving
benefits (unaudited)....... Total members (unaudited)............................................................ Total
active members (unaudited)................................................... Total
return on investments (unaudited)........................................... |
81 56,111 87,625 66,237 (6.2)% |
80 55,265 89,321 67,699 17.1% |
EXECUTIVE SECRETARY
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During Audit Period: Timothy B. Blair, Acting Currently: Timothy B. Blair, Acting |
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Same individual prepares and posts the financial
journal entries
Original accounts receivable information was
understated $26.8 million
Public Act 96-006
changes the membership of the Board of Trustees |
FINDINGS,
CONCLUSIONS, AND RECOMMENDATIONS JOURNAL
ENTRY REVIEW
During our testing, we noted the same
individual prepares and posts the financial journal entries. During our testing of the System’s accounts
receivable we identified a journal entry did not include all the accrued
payroll contributions that should have been recorded at June 30, 2008. As a result, the accounts receivable
balance information originally presented to the auditors was understated by
approximately $26.8 million as of June 30, 2008.
System personnel indicated the journal
entry omission was the result of a formula error in a spreadsheet used to
generate the amounts for the journal entry.
System personnel went on to note the information provided to the
auditors was not final and believed the omission of the payroll contributions
would have been discovered during their review process of the System’s
financial statements. Because of the significance of the omission and the
lack of an independent review of journal entries, we are considering this to
be a significant deficiency in the System’s internal control.
We recommended someone other than the
person preparing and posting the journal entries review the journal entries
and the related supporting documentation for accuracy and that the review be
documented. (Finding 08-1, pages 7-8) System management concurred with the
recommendation and indicated they will institute a system to have all
financial journal entries and supporting documentation reviewed by a person
independent of the person that initiates them. 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. SUBSEQUENT
EVENT On April
3, 2009 the Governor signed Senate Bill 364 into law as Public Act 96-006. This new law provided for the termination of
the terms of Board of Trustee members appointed by the previous Governor as
well as making changes in the composition of the Board of Trustees. The new law expanded the Board of Trustees
from seven members to thirteen and set forth criteria new members must meet
to be on the Board of Trustees.
ACCOUNTANTS’
REPORT We conducted a compliance attestation
examination of the System for the year ended June 30, 2008 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
The public accounting firm of BKD LLP was our special assistant auditor for this engagement. |