GENERAL ASSEMBLY RETIREMENT SYSTEM OF ILLINOIS
For the Year Ended: June 30, 2011
Release Date: February 21, 2012
Summary of Findings:
Total this audit: 1
Total last audit: 0
Repeated from last audit: 0
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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This digest covers our financial audit of the General Assembly Retirement System, State of Illinois (System) for the year ended June 30, 2011. A compliance examination report covering the year ending June 30, 2011 will be issued separately.
The actuarial accrued liability was valued at $298.4 million at June 30, 2011. The actuarial value of assets (at smoothed value) totaled approximately $63.2 million at June 30, 2011. The method for determining the actuarial value of the assets was changed beginning with the June 30, 2009 valuation. The method was changed from the market value to a smoothed value where the actuarial investment gains or losses for each year are recognized in equal amounts over the ensuing five-year period.
The difference between the actuarial accrued liability and the actuarial value of assets of $235.2 million reflects the unfunded liability of the System at June 30, 2011. The System had a funded ratio (at smoothed value) of 21.2% at June 30, 2011. When using the market value, the System would have had a funded ratio of 20.2% at June 30, 2011.
• The General Assembly Retirement System does not have a policy or procedure for the review of financial journal entries or journal entry reconciliations by a person independent of the person that initiates them.
LEGISLATIVE CHANGE TO PENSION CODE
Public Act 96-0889, which was signed into law April 2010, adds a new section to the Pension Code that applies different benefits to anyone first hired in a position covered by the System on or after January 1, 2011. Changes in the pension law include initiating a cap on the salaries used to calculate retirement benefits, raising the minimum eligibility to draw a retirement benefit to age 67 with at least 8 years of service or age 62 with at least 8 years of service credit with a reduced annuity, and limiting cost-of-living annuity adjustments to the lesser of 3% or the annual increase in the Consumer Price Index, whichever is less. The pension law changes do not apply to anyone who has System service prior to January 1, 2011.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
JOURNAL ENTRY REVIEW
The General Assembly Retirement System (System) does not have a policy or procedure for the review of financial journal entries or journal entry reconciliations by a person independent of the person that initiates them.
During our audit testing, we noted the same individual prepares and records the financial journal entries without an independent review by another individual. It was also noted the monthly journal entry reconciliations are prepared by the same individual who records the entries.
System officials indicated the management staff preparing the journal entries are not involved in the preparation and/or processing of the underlying transactions. Due to the relatively small size of the Accounting Division, however, there has been a lack of appropriate personnel to perform a meaningful review of financial journal entries and reconciliations. (Finding #1, page 28)
We recommended the System develop a policy and procedure for someone independent of the individual preparing and recording financial journal entries and reconciliations to document their review of the financial journal entries, reconciliations and related supporting documentation.
System officials indicated that the System would reallocate the review function of financial journal entries to other management staff which are independent of the person that initiates them.
The auditors stated the financial statements of the General Assembly Retirement System of Illinois as of June 30, 2011, and for the year then ended, are fairly stated in all material respects.
WILLIAM G. HOLLAND
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were BKD LLP.