REPORT DIGEST

 

 

GENERAL ASSEMBLY RETIREMENT SYSTEM,

STATE OF ILLINOIS

 

FINANCIAL AUDIT

For the Year Ended:

June 30, 2008

 

Release Date:

January 15, 2009

 

 

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

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(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

 

 

 

 

 

 

 

 

 

 

SYNOPSIS

 

 

®       The unfunded liability of the General Assembly Retirement System, State of Illinois (System) was $160.4 million at June 30, 2008.The Systemís funded ratio at that date was 32.0%.

 

®       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 to the Systemís June 30, 2008 fiscal year end the overall investment portfolio managed by the Illinois State Board of Investment, which includes the Systemís investments, experienced a significant decline due to unprecedented unfavorable market conditions.

 

 

 

 

 

 

 

 

 

 

 

 

 

{Financial data is summarized on the reverse page}

 

 

 

 

GENERAL ASSEMBLY RETIREMENT SYSTEM, STATE OF ILLINOIS

FINANCIAL AUDIT

FOR THE YEAR ENDED JUNE 30, 2008
 

OPERATING STATEMENT ANALYSIS

FY 2008

FY 2007

REVENUES:Contributions - Participants.......................................

†††††††††††††††††† †† Contributions Ė Employer / Appropriations...................

††††††††††† †††††††††††† †††Total Contributions...............................................

†††††††††††††††††† †† Increase / (Decrease) in Fair Value of Investments......

†††††††††††††††††† †† Investment Income Ė Net of Management Expenses...... †††††††††††††† Interest Earned on Cash Balances...............................

††††††††††† †††††††††††† †††Total Revenues....................................................

EXPENSES:Benefits...................................................................

††††††† ††††††††††††† Refunds....................................................................

††† Administrative Expenses.............................................

†††††† ††††††††††††††††† †††Total Expenses....................................................

††† Revenue Over / (Under) Expenses.............................

$†††† 1,772,860 †††††††††      6,809,800

$†††† 8,582,660

(6,734,639)

1,893,640

††††††† 132,702

$†††† 3,874,363 

$†† 15,258,621

147,804

††††††† 244,170 

$†† 15,650,595

$(11,776,232)

$1,703,344

5,470,429 

$7,173,773

10,914,976

1,933,225

†††† 142,784 

$20,164,758 

$14,719,292

297,790

†††† 220,333 

$15,237,415

$†† 4,927,343

INVESTMENT SUMMARY Ė (All investments held in the Illinois State Board of Investment commingled fund at fair value)

JUNE 30, 2008

JUNE 30, 2007

Government and Agency Obligations.................................................

Foreign Obligations...........................................................................

Corporate Obligations.......................................................................

Common Stock & Equity Funds........................................................

Preferred Stock...............................................................................

Foreign Equity Securities..................................................................

Hedge Funds...................................................................................

Real Estate Investments...................................................................

Private Equity..................................................................................

Money Market Instruments..............................................................

Infrastructure Funds.........................................................................

Bank Loans.....................................................................................

Forward Foreign Currency Contracts................................................

†††† Total Investment Portfolio...........................................................

Other ISBI Assets Less Liabilities....................................................

††††† ISBI Net Assets........................................................................

Investments owned by other retirement systems, SERS & JRS...........

†††† General Assembly Retirement System Investments.......................

$††† 852,045,701 

113,005,430

1,058,164,332

4,241,685,933

5,094,532 

1,984,314,463

598,985,402

1,332,081,349

524,628,589

307,481,504

209,975,518

202,137,983

†††††††††† (72,622)

$11,429,528,114

(114,474,953)

$11,315,053,161 (11,243,129,218)

$†††††† 71,923,943

$ 1,184,275,884 

72,189,687

1,228,970,012

6,059,409,027

1,865,020 

1,365,647,941

496,404,578

1,189,614,911

563,366,021

535,699,912

108,436,449

0

††††††††† (108,696)

$12,805,770,746

†† (253,574,585)

$12,552,196,161

(12,468,331,219)

$†††††† 83,864,942 

ADMINISTRATIVE EXPENSES

FY 2008

FY 2007

Personal Services.............................................................................

Retirement, Insurance & Social Security............................................

Contractual Services........................................................................

Electronic Data Processing...............................................................

Printing............................................................................................

Telecommunication..........................................................................

Travel.............................................................................................

Commodities....................................................................................

Operation of Automotive Equipment..................................................

Provision for Depreciation................................................................

Change in Accrued Compensated Absences......................................

†††††† Total Administrative Expenses...................................................

$107,733

52,785

71,960

4,313

2,097

982

830

218

450

880

††† 1,922

$244,170

$96,923 

41,553

76,276

4,663

1,408

993

886

273

314

1,106 

(4,062)

$220,333

FUNDING PROGRESS

JUNE 30, 2008

JUNE 30, 2007

Actuarial Accrued Liability............................................

Actuarial Value of Assets.............................................

Unfunded Actuarial Accrued Liability...............................

Funded Ratio...................................................................

$235,780,071

75,405,943

$160,374,128

32.0%

$231,913,988

87,182,175

$144,731,813

37.6%

EXECUTIVE SECRETARY

 

 

During Engagement Period: Tim Blair, Acting

Currently:Tim Blair, Acting

 

 

 



 

 

 

 

 

 

 

 

 


Unfunded liability at June 30, 2008 totals $160.4 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Same individual prepares and posts the financial journal entries

 

 

 

 

 

 

 

 

 

 

 

 

 

 


ISBI investment portfolio decreased approximately $2.1billion subsequent to June 30, 2008

 

 

INTRODUCTION

 

††††† This digest covers our financial audit of the General Assembly Retirement System, State of Illinois (System) for the year ended June 30, 2008.A report on the results of our compliance attestation examination for the year ending June 30, 2008 is being issued separately.

 

UNDERFUNDING OF THE SYSTEM

 

††††† The actuarial accrued liability was valued at $235.8 million at June 30, 2008.The actuarial value of assets (at fair value) totaled approximately $75.4 million at June 30, 2008.The difference between the liability and the assets of $160.4 million reflects the unfunded liability of the System at June 30, 2008.The System had a funded ratio of 32.0% at June 30, 2008.

 

FINDING, RECOMMENDATION AND SYSTEM RESPONSE

 

††† During our testing, we noted the same individual prepares and posts the financial journal entries.†††

 

†††† System personnel indicated the lack of appropriate personnel to perform a meaningful review contribute to the current procedures.A lack of an independent review of journal entries leaves the System open to risks of error and material misstatement of financial information.Because of the lack of an independent review of journal entries, we are considering this to be a significant deficiency in the Systemís 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, page 24)

††††

††† 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.

SUBSEQUENT EVENT

 

†††† Subsequent to the Systemís June 30, 2008 fiscal year end the overall investment portfolio managed by the Illinois State Board of Investment (Board), which includes the Systemís investments, experienced a significant decline due to unprecedented unfavorable market conditions.Based on unaudited information the Boardís investment portfolio declined approximately $2.1 billion from the June 30, 2008 balances based on the readily determinable market values provided by the Board.

 

 

AUDITORS' OPINION

 

††††† Our auditors state the June 30, 2008 financial statements of the System are fairly presented.

 

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:RPU:pp

 

 

SPECIAL ASSISTANT AUDITORS

 

††††† BKD LLP were our special assistant auditors for this audit.