REPORT DIGEST

 

STATE UNIVERSITIES RETIREMENT SYSTEM

 

COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2005

 

Summary of Findings:

Total this audit†††††††††             ††† 1

Total prior audit††††††††††††††††††††††† 1

Repeated from last audit†††††††††† 0

 

Release Date:

May 2, 2006

 

 

 

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 available on

the worldwide web at

http://www.state.il.us/auditor

 

 

 

 

 

 

 

 

 

 

SYNOPSIS

 

 

u      The System did not have collateralization or insurance for deposits totaling $2,596,590 at June 30, 2005.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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

 


STATE UNIVERSITIES RETIREMENT SYSTEM

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

Year Ended June 30, 2005

 

FINANCIAL OPERATIONS

FY 2005

FY 2004

Revenues

††††† Contributions

††††††††††† Participants..............................................

††††††††††† Employer..................................................

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

††††† Investment Income

††††††††††† Net appreciation in fair market value..........

††††††††††† Interest....................................................

††††††††††† Dividends.................................................

††††††††††† Securities lending......................................

††††††††††† Less:Investment expense.........................

††††††††††††††††† Net Investment Income.......................

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

Expenses

††††† Total benefits..................................................

††††† Other expenses...............................................

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

Excess (deficiency) of Revenues over (under) expenses..........................................................

 

 

†††††††††† $285,585,320

†††††††††††† 312,834,985

†††††††††† $598,420,305

 

††††††† $1,073,726,553

†††††††††††† 137,186,111

†††††††††††† 113,089,192

††††††††††††††† 4,493,205

†††††††††††† (26,530,253)

††††††† $1,301,964,808

††††††† $1,900,385,113

 

††††††† $1,005,369,722

††††††††††††† 55,936,646

††††††† $1,061,306,368

†††††††††††††††††††††††††††††

†††††††††† $839,078,745

 

 

†††† ††††† $275,144,174

††††††††† 1,783,315,990

††††††† $2,058,460,164

 

††††††† $1,669,635,805

†††††††††††† 132,573,212

††††††††††††† 83,433,974

††††††††††††††† 3,532,875

†††††††††††† (23,871,283)

††††††† $1,865,304,583

††††††† $3,923,764,747

 

†††††††††† $915,947,276

††††††††††††† 51,472,597

†††††††††† $967,419,873

 

††††††† $2,956,344,874

 

INVESTMENT PORTFOLIO ANALYSIS (Fair Market Value)

JUNE 30, 2005

JUNE 30, 2004

Equities  ...........................................................

Fixed income........................................................

Short term investments..........................................

Real estate...........................................................

Self-managed plan funds.......................................

Accrued investment income...................................

††††† Total Portfolio at Fair Market Value.................

††††††† $9,160,596,029

††††††††† 4,190,599,051

†††††††††††† 262,061,668

††††††††††††† 43,258,905

†††††††††††† 317,175,851

††††††††††††† 34,029,516

†††††† $14,007,721,020

††††††† $8,409,673,553

††††††††† 4,155,715,624

†††††††††††† 257,301,092

†††††††††††††††††† 313,773

†††††††††††† 273,466,040

††††††††††††† 27,485,586

†††††† $13,123,955,668

 

CONTRIBUTIONS AVAILABLE TO INVEST

(INVESTMENTS USED FOR BENEFITS AND EXPENSES)

 

FY 2005

 

FY 2004

Contributions

      Participants  ....................................................

††††† State of Illinois................................................

††††† Federal/Trust and other sources.......................

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

Deductions

††††† Benefits.........................................................

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

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

††††† Bond Interest Expense....................................

††††††††††† Total Deductions.......................................

Contributions Available to Invest (Investments Used to Pay Benefits and Expenses)..........................

 

†††††††††† $251,939,562

†††††††††††† 247,418,620

††††††††††††† 38,004,690

†††††††††† $537,362,872

 

††††††† $1,004,452,222

††††††††††††† 35,775,893

††††††††††††† 12,087,116

†††††††††††††††††† 692,750

††††††† $1,053,007,981

 

††††††††† $(515,645,109)

 

 

†††††††††† $243,823,966

††††††††† 1,722,363,055

††††††††††††† 35,183,869

††††††† $2,001,370,890

 

†††††††††† $915,222,494

††††††††††††† 34,453,381

††††††††††††† 11,516,494

†††††††††††††††††† 821,110

†††††††††† $962,013,479

 

††††††† $1,039,357,411

 

SUPPLEMENTARY INFORMATION

FY 2005

FY 2004

Total investment administrative expenses................

Investment return (unaudited)................................

Average number of employees..............................

Number of active members...................................

Number of inactive members.................................

Number of retirement benefit recipients..................

Number of survivors benefit recipients...................

Number of disabilities benefit recipients..................

†††††††††††† $25,473,352

†††††††††††††††††††††††† 10.4%

†††††††††††††††††††††††† 121.3

††††††††††††††††††† 80,102

††††††††††††††††††† 69,849

††††††††††††††††††† 32,002

††††††††††††††††††††† 6,550

†††††††††††††††††††††††† 864

†††††††††††† $23,067,221

††††††††††††††††††††††††† 17%

†††††††††††††††††††††††† 122

††††††††††††††††††† 81,242

††††††††††††††††††† 66,727

††††††††††††††††††† 30,795

††††††††††††††††††††† 6,427

†††††††††††††††††††††††† 902

EXECUTIVE DIRECTOR

 

 

During Audit Period:James M. Hacking

Currently:Dan M. Slack (effective December 2005)

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

All deposits not collateralized or insured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State contributions will be reduced for fiscal year 2006 and 2007

 

 

INTRODUCTION

 

††††† This digest covers our compliance examination of the System for the year ended June 30, 2005.A financial audit covering the year ended June 30, 2005 was issued separately.

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

DEPOSITS SUBJECT TO CUSTODIAL CREDIT RISK

 

††††† The System did not have collateralization or insurance for all deposits.At June 30, 2005, the System had $255.4 million in cash deposits of which $2,596,590 was exposed to custodial credit risk.Custodial credit risk is the risk that in the event of a financial institution failure, the Systemís deposits may not be returned.The State Officers and Employees Money Disposition Act (Act) provides that whenever funds deposited with a bank or savings and loan association exceed the amount of federal deposit insurance coverage, a bond, pledged securities, or other eligible collateral shall be obtained.Also, prudent business practices dictate that assets be protected from possible losses.System personnel indicated they have researched the statute and believe it does not apply to Illinois Pension Systems.(Finding 1, page 10)

 

††††† We recommended that the System obtain additional collateral for all deposits that exceed federally insured limits.

 

††††† System officials agreed to obtain additional collateral as a matter of prudent business practices.They continued to maintain the opinion that the Act does not apply to assets held by the System.

 

††††† In an auditorsí comment, we explained that the System is a part of the Executive branch of State government and is subject to the provisions of the Act.We further recommended that if the System continues to disagree with the applicability of the Act, it should seek a formal, written Attorney General opinion on this matter.

 

††††† We will review progress toward the implementation of our recommendation in our next examination.The System response was provided by Ms. Shelley Porter, Chief Financial Officer, on March 28, 2006.

 

NEW LEGISLATION AFFECTING THE SYSTEM

 

††††† Public Act 94-0004 became law June 1, 2005 and affected the System by modifying several retirement benefit calculations for fiscal year 2006 and beyond.In addition, the Act also established specific dollar amounts to be contributed by the State for fiscal years 2006 and 2007, as opposed to the State contribution being calculated based on the existing funding formula.State required contributions will be higher in future years to make up for the two-year funding reduction.

 

 

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

 

WGH:KMA:pp

 

SPECIAL ASSISTANT AUDITORS

 

††††† BKD, LLP were our special assistant auditors.