REPORT DIGEST

TEACHERS’ RETIREMENT SYSTEM

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2020

Release Date:  April 22, 2021

FINDINGS THIS AUDIT:  1

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

FINDINGS LAST AUDIT: 1

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 our Compliance
Examination of the Teachers’ Retirement
System of the State of Illinois for the
year ended June 30, 2020.  A separate
Financial Audit as of and for the year
ending June 30, 2020, was previously
released on January 7, 2021.  This report
contains one finding.  The Financial
Audit report contained no findings.


SYNOPSIS

• (20-1) The Teachers’ Retirement System
did not always obtain full disclosures
from investment managers as required by
the Illinois Pension Code.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS


NONCOMPLIANCE WITH CERTAIN DISCLOSURES
REQUIRED BY THE ILLINOIS PENSION CODE

The Teachers’ Retirement System of the
State of Illinois (System) did not always
obtain fully completed disclosures from
investment managers as required by the
Illinois Pension Code.

Before the System hires a new investment
manager, they require the entity to
complete the Firm Employment and Use of
Professional Service Providers form.  The
form includes all of the disclosures
required by the Pension Code for its
investment and senior staff (Form A) and
its contractors (Form B).  In addition,
the form requests additional comments and
certifications from the prospective
investment manager related to their
diversity initiatives that the System
takes into consideration when hiring new
investment managers.

Illinois Pension Code 40 ILCS 5/1-113.21

During testing, the auditors noted 12 of
35 (34%) investment manager disclosures
returned to the System where the
investment manager did not properly
disclose the number of contracts with
minority, women or disabled person owned
businesses and the number of contracts
with other than those businesses owned by
minority, women or persons with a
disability.  The investment managers
informed the System that not all of this
information was tracked. For certain
investment managers, multiple exceptions
were noted.  Specifically, we noted the
following:

• 1 (8%) investment manager did not track
any of the required disclosure items
required by the Pension Code.
• 1 (8%) investment manager was an
international firm that does not have
defined diversity initiatives to track
under its laws.
• 9 (75%) investment managers did not
track the number of contracts for
investment services, consulting services
and professional services with minority-
owned businesses, women-owned businesses
or businesses owned by persons with a
disability.
• 1 (8%) investment manager did not track
the fund expenses to date for investment
services, consulting services and
professional services with minority-owned
businesses, women-owned businesses or
businesses owned by persons with a
disability.  (Finding 1, pages 10-12)

We recommended the System work with their
investment managers to comply with the
disclosure requirements of the Illinois
Pension Code or seek legislative remedy
from the statutory requirement.

System management stated that as with
prior years, they disagreed with this
finding and believe the System is
following statute compliance.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Teachers’ Retirement
System (System) for the year ended June
30, 2020, as required by the Illinois
State Auditing Act.  The accountants
stated the System complied, in all
material respects, with the requirements
described in the report.

This compliance examination was conducted
by BKD LLP.

JANE CLARK
Division Director

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

FRANK J. MAUTINO
Auditor General

FJM:JAF