REPORT DIGEST

REPORT DIGEST
TEACHERS’ RETIREMENT SYSTEM

COMPLIANCE AUDIT

For the Year Ended:
June 30, 1999

Summary of Findings:

Total this audit 1
Total last audit 5
Repeated from last audit 0

Release Date:

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

To obtain a copy of the Report contact:
Office of the Auditor General
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

The System’s internal audit program did not meet the requirements of the Fiscal Control and Internal Auditing Act. The internal audit function audited twelve of fourteen major systems of internal control identified in the System’s two-year audit plan.

{Financial Data and Activity Measures are summarized on the reverse page.}

TEACHERS' RETIREMENT SYSTEM OF ILLINOIS

INFORMATION FROM FINANCIAL AND COMPLIANCE AUDITS

YEAR ENDED JUNE 30, 1999

OPERATING STATEMENT ANALYSIS	FY 1999	FY 1998
Revenues: Contributions - Members Contributions - State of Illinois Contributions - School Districts Total Contributions Investment Income - Appreciation in Fair Value Investment Income - Income From Investments Total Investment Income Investment Expense Total Revenues Expenses: Total Benefits Other Expenses Total Expenses Revenues in Excess of Expenses	$ 866,375,866 572,950,673 63,645,260 $1,502,971,799 1,249,234,042 1,019,382,731 2,268,616,773 178,955,804 $3,592,632,768 $1,284,126,616 36,684,558 $1,320,811,174 $2,271,821,594	$ 441,016,391 466,948,418 35,985,379 $ 943,950,188 2,054,735,011 996,269,001 3,051,004,012 (177,902,545) $3,817,051,655 $1,209,957,247 34,314,918 $1,244,272,165 $2,572,779,490
INVESTMENT PORTFOLIO ANALYSIS - Fair Value	JUNE 30, 1999	JUNE 30, 1998
Total Government Obligations Total Corporate Obligations International Notes Preferred Stock (U.S. & International Combined) Common Stock - U.S. Common Stock - International Short Term Investments Real Estate Investments Alternative Investments Currency Investment Total Investment Portfolio	$3,721,789,582 3,811,831,816 1,518,930,968 106,705,409 7,484,313,905 2,664,930,858 831,540,481 2,500,511,322 596,456,656 39,166,266 $23,276,177,263	$3,763,739,965 3,009,332,951 1,412,854,121 106,840,757 6,336,877,264 2,104,340,857 1,315,152,039 2,465,432,457 458,118,826 9,969,850 $20,982,659,087
ADMINISTRATIVE EXPENSES	FY 1999	FY 1998
Personal Services Professional Services Postage Machine Repair and Rental Other Contractual Services Commodities Occupancy Expense Provision for Depreciation Gain on Disposal of Equipment Total Administrative Expenses	$ 7,534,038 849,600 296,888 409,878 673,592 271,846 194,542 448,680 1,030 $10,680,094	$ 6,754,240 807,808 374,988 306,077 569,345 233,925 235,241 481,297 (1,611) $9,761,310
SELECTED ACCOUNT BALANCES	JUNE 30, 1999	JUNE 30, 1998
Cash Receivables Accrued Investment Income Receivable Investments Collateral from Securities Lending Prepaid Expenses Property and Equipment Total Assets Total Liabilities Net Assets Held in Trust for Pension Benefits Actuarial Accrued Liability Unfunded Actuarial Accrued Liability	$ 2,756,183 313,908,201 222,342,888 23,053,834,375 1,418,345,349 449,650 3,339,675 $25,014,976,321 2,777,267,322 $22,237,708,999 33,205,513,000 $(10,967,804,001)	$ 1,129,919 129,755,536 234,214,755 20,748,444,332 1,841,099,038 637,835 3,184,221 $22,958,465,636 2,992,578,231 $19,965,887,405 29,908,241,000 $(9,942,353,595)
SUPPLEMENTARY INFORMATION	FY 1999	FY 1998
Total investment manager fees Total time weighted return on investments Average Number of System Employees Number of Retirement Annuitants Total Brokerage Commissions Paid	$75,463,334 10.8% 161 52,430 $14,031,243	$70,424,067 16.6% 155 51,472 $14,282,151
EXECUTIVE DIRECTOR
During Audit Period: Mr. Keith Bozarth Currently: Mr. Keith Bozarth

Two major internal control systems were not tested

INTRODUCTION

This digest covers our State compliance audit of the System for the year ended June 30, 1999. A financial audit covering the year ended June 30, 1999 is issued under a separate cover.

FINDING, CONCLUSION, AND RECOMMENDATION

INTERNAL AUDIT PROGRAM

The internal audit function audited twelve of fourteen major systems of internal control identified in the System’s two-year audit plan. Major systems of internal control that did not have audits completed included:

Budgeting, accounting and reporting
Member services

According to the Fiscal Control and Internal Auditing Act, major systems of internal control should be audited on a periodic basis such that all major systems are reviewed at least once every two years.

System management noted the transition from the predecessor Internal Audit Manager to the present manager is the cause for the incomplete schedule. In addition, management indicated adequate time was needed to hire and orient the new manager.

We recommended the internal audit function devote sufficient resources to completing audits of major internal control systems within the two-year period covered by its audit plan.

System management stated a two-year audit plan has been developed and an additional internal auditor has been hired to ensure all required audits will be completed during the next two-year cycle.

Mr. John Bauman, Chief Operating Officer, provided the response to our recommendation on November 30, 1999.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

Friedman Eisenstein Raemer and Schwartz, LLP were our special assistant auditors for this audit.