REPORT DIGEST

STATE EMPLOYEES’ RETIREMENT SYSTEM

Financial Audit
For the Year Ended June 30, 2015

Release Date:  January 12, 2016

FINDINGS THIS AUDIT:  2

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 0 -- 0
Category 2:  0 -- 2 -- 2
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 2 -- 2

FINDINGS LAST AUDIT: 3

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 State Employees’
Retirement System of the State of
Illinois (System) as of and for the year
ended June 30, 2015.  The State
Employees’ 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 $43.3 billion
at June 30, 2015.  The net pension
liability at June 30, 2015 is $28.0
billion, which is the difference between
the System’s fiduciary net position of
$15.3 billion and the total pension
liability.  The System’s funded ratio is
35.27%.  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

• (15-2) The State Employees’ Retirement
System has weaknesses in controls over
creditable earnings and member census
data reported by its participating State
agencies.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

CONTROLS OVER CENSUS DATA

The State Employees’ Retirement System of
the State of Illinois (System) has
weaknesses in controls over creditable
earnings and member census data reported
by its participating State agencies.

During our current fiscal year testing we
noted 2 errors in certain census data
reported to the System out of 240 active
members tested.  During a review of the
System’s internal controls over
creditable earnings and member census
data, it was noted that creditable
earnings and member census data for the
System is accumulated from multiple State
agencies which increases the likelihood
of errors within the data.  The System’s
current processes and controls for
verifying the data rely heavily on the
reporting of the information by the
participating State agencies and there
are limited controls in place by the
System to verify the creditable earnings
and member census information.

System officials indicated they have
added some additional controls to verify
census data on an ad hoc basis, however
the System is still working to determine
the best method for it to conduct State
agency audits to verify census data to
personnel files.  (Finding 2, pages
39-41)

The System accepted our recommendation to
update current processes and controls to
include the verification of significant
elements of census data.

OTHER FINDING

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

AUDITOR’S OPINION

Our auditors stated the financial
statements of the State Employees’
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.