REPORT DIGEST STATE EMPLOYEES’ RETIREMENT SYSTEM OF THE STATE OF ILLINOIS Financial Audit – Schedule of Employer Allocations by Fund For the Year(s) Ended June 30, 2014 and 2013 Release Date: August 13, 2015 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 Full Report are also available on the worldwide web at www.auditor.illinois.gov INTRODUCTION This digest covers the Financial Audit of the Schedule of Employer Allocations by Fund as of and for the years ended June 30, 2014 and 2013 and the related notes to the Schedules. In addition, the digest also covers the Financial Audit of the total for all funds of the columns titled beginning and ending net pension liability, total deferred outflows of resources, total deferred inflows of resources, and total pension expense (specified column totals) in the Schedule of Pension Amounts by Fund of the State Employees’ Retirement System of the State of Illinois (System) as of and for the year ended June 30, 2014. We previously released a separate Financial Audit of the System’s financial statements (released January 22, 2015) and Compliance Examination (released May 7, 2015) as of and for the year ending June 30, 2014. The System is the administrator of a single- employer defined benefit public employee retirement system established and administered by the State of Illinois to provide pension benefits for its employees. Generally, anyone entering State service, except those in positions subject to membership in certain other State sponsored retirement systems, persons employed after June 30, 1979 as public service employment program participants under the Federal CETA program, and other exceptions as indicated in State law, become members of the System immediately. Certain contributions are statutorily required to be made to the System by employees and the State of Illinois (State). For the year ending June 30, 2015, the State of Illinois will be required to adopt Governmental Accounting Standards Board (GASB) Statement 68, Accounting and Financial Reporting for Pensions. GASB Statement 68 requires the primary government and its participating component units that prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP) to recognize their proportionate share of certain collective pension amounts in their financial statements, which includes the net pension liability. In addition, certain departments of the State of Illinois that also prepare financial statements will report a proportionate share of certain collective pension amounts in their financial statements, which includes the net pension liability. Prior to the implementation of GASB Statement 68, the State, its participating component units, and certain departments did not report the cumulative pension amounts, including the net pension liability, in either their audited financial statements or notes, even though there is an obligation to provide pension benefits to the employees. GASB Statement 68 changed previously followed financial reporting requirements and now requires the State and its participating component units to calculate their proportion of the System’s collective pension amounts. As a result, the State, its participating component units, and certain departments will report a portion of the collective pension amounts in their financial statements. The System has prepared the Schedule of Employer Allocations by Fund as of and for the years ended June 30, 2014 and 2013 and the Schedule of Pension Amounts by Fund as of and for the year ended June 30, 2014 which provides the necessary financial information to assist the State, its participating component units, and certain departments in preparing financial statements. These Schedules have been audited and will provide relevant information for the fiscal year 2015 financial statements and audits thereof. The State’s beginning net pension liability associated with the State Employees’ Retirement System was $24.4 billion, the ending net pension liability was $27.1 billion, total deferred outflows of resources was $3.2 billion and total deferred inflow of resources was $1.6 billion as of June 30, 2014. The State’s pension expense was $2.8 billion for the year ended June 30, 2014. AUDITORS' OPINION Our auditors stated the Schedule of Employer Allocations by Fund as of and for the years ended June 30, 2014 and 2013, total for all funds of the columns titled beginning and ending net pension liability, total deferred outflows of resources, total deferred inflows of resources, and total pension expense (specified column totals) in the Schedule of Pension Amounts by Fund of the State Employees’ Retirement System of the State of Illinois as of and for the year ended June 30, 2014, and the related notes to the Schedules, are fairly stated in all material respects. WILLIAM G. HOLLAND Auditor General WGH:JAF SPECIAL ASSISTANT AUDITORS Our Special Assistant Auditors for this audit were BKD LLP.