REPORT DIGEST

REPORT DIGEST

STATE UNIVERSITIES RETIREMENT SYSTEM

COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2004

Summary of Findings:

Total this audit 1

Total prior audit 4

Repeated from last audit 1

Release Date:

April 28, 2005

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

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740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

¨ The bank reconciliations were not performed or reviewed by an official independent of the accounting function.

{Financial Information and Activity Measurers summarized on the reverse page.}

STATE UNIVERSITIES RETIREMENT SYSTEM

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

Year Ended June 30, 2004

FINANCIAL OPERATIONS	FY 2004	FY 2003
Revenues Contributions Participants.............................................. Employer.................................................. Total Contributions.............................. Investment Income Net appreciation in fair market value.......... Interest.................................................... Dividends................................................. Securities lending...................................... Less: Investment expense......................... Net Investment Income....................... Total Revenues............................. Expenses Total benefits.................................................. Other expenses............................................... Total Expenses............................. Excess (deficiency) of Revenues over (under) expenses..........................................................	$275,144,174 1,783,315,990 $2,058,460,164 $1,669,635,805 132,573,212 83,433,974 3,532,875 23,871,283 $1,865,304,583 $3,923,764,747 $915,947,276 51,472,597 $967,419,873 $2,956,344,874	$275,901,085 310,016,721 $585,917,806 $37,985,978 159,186,178 72,861,166 2,954,892 17,596,727 $255,391,487 $841,309,293 $837,332,238 48,372,692 $885,704,930 $(44,395,637)
INVESTMENT PORTFOLIO ANALYSIS (Fair Market Value)	JUNE 30, 2004	JUNE 30, 2003
Total equities........................................................ Total fixed income securities.................................. Cash and short-term investments........................... Real estate investments......................................... Mutual funds and variable annuities........................ Accrued investment income................................... Total Portfolio at Fair Market Value.................	$8,425,888,500 4,163,615,140 257,301,092 317,832 249,347,518 27,485,586 $13,123,955,668	$6,176,436,373 3,531,907,779 398,174,643 748,250 170,428,929 32,031,269 $10,309,727,243
ADMINISTRATIVE EXPENSES	FY 2004	FY 2003
Personal services and benefits............................... Other professional fees and services...................... Depreciation......................................................... Postage ............................................................ Printing and copying services................................. Building operations expenses................................. Self-managed plan................................................ Other expenses..................................................... Total Administrative Expenses.........................	$7,023,642 1,197,785 1,770,819 261,614 134,476 221,273 453,687 453,198 $11,516,494	$6,847,556 1,500,472 1,760,283 423,459 176,289 229,200 457,607 518,139 $11,913,005
SELECTED ACCOUNT BALANCES	JUNE 30, 2004	JUNE 30, 2003
Investments at Market Value................................. Securities lending collateral.................................... Cash & short term investments.............................. Pending investment sales....................................... Accrued investment income receivable................... Other assets......................................................... Total assets.................................................... Securities lending collateral.................................... Payable to brokers for unsettled trades................... Other payables..................................................... Total liabilities................................................. Net assets held in trust for pension benefits............	$12,839,168,990 1,945,631,693 257,301,092 261,070,448 27,485,586 31,694,876 $15,362,352,685 1,945,631,693 530,592,835 24,748,624 $2,500,973,152 $12,861,379,533	$9,879,521,331 1,210,412,320 398,174,643 420,616,551 32,031,269 85,847,907 $12,026,604,021 1,210,412,320 878,398,038 32,759,004 $2,121,569,362 $9,905,034,659
SUPPLEMENTARY INFORMATION	FY 2004	FY 2003
Total investment administrative expenses................ Investment return (unaudited)................................ Average number of employees.............................. Number of active members................................... Number of inactive members................................. Number of retirement benefit recipients.................. Number of survivors benefit recipients................... Number of disabilities benefit recipients..................	$23,067,221 17% 122 81,242 66,727 30,795 6,427 902	$16,815,880 2.9% 122 78,936 61,447 29,020 6,138 864
EXECUTIVE DIRECTOR
During Audit Period and Currently: Mr. James M. Hacking

Independent review of bank reconciliation not performed

INTRODUCTION

This digest covers our compliance examination of the System for the year ended June 30, 2004. A financial audit covering the year ended June 30, 2004 is being issued separately.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

LACK OF SEGREGATION OF DUTIES

The System did not have an adequate segregation of duties over the bank reconciliation process. Bank reconciliations were performed by the same individual that performed accounting functions and were not reviewed by a responsible official independent of the accounting function. System personnel stated this was caused by an employee's role changing and the duty of bank reconciliation review not being reassigned. (Finding 1, page 11) This finding was first reported in 2003.

The System agreed with our finding and responded they implemented a procedure at the end of fiscal year 2004 to have an independent staff member review the bank reconciliation. (For the previous System response, see Digest Footnote #1.)

We will review progress toward the implementation of our recommendation in our next examination. The System response was provided by Mr. Steve Hayward, Internal Auditor.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KMA:pp

SPECIAL ASSISTANT AUDITORS

BKD, LLP were our special assistant auditors.

DIGEST FOOTNOTES

#1 - LACK OF SEGREGATION OF DUTIES - Previous System Response

2003: SURS agrees with this finding and will have an independent staff member review the bank reconciliation.