REPORT DIGEST

 

STATE UNIVERSITIES RETIREMENT SYSTEM

 

COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2006

 

Summary of Findings:

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

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

Repeated from last audit††††††††  †† 1

 

Release Date:

April 17, 2007

 

 

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.auditor.illinois.gov

 

 

 

 

 

 

 

 

 

 

SYNOPSIS

 

 

®      The System did not have collateralization or insurance for foreign currency deposits totaling $19,913,922 at June 30, 2006.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 


STATE UNIVERSITIES RETIREMENT SYSTEM

COMPLIANCE EXAMINATION

Year Ended June 30, 2006

 

FINANCIAL OPERATIONS (All Funds)

FY 2006

FY 2005

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..........................................................

 

 

†††††††††† $292,392,188

†††††††††††† 209,651,367

†††††††††† $502,043,555

 

††††††† $1,281,932,946

†††††††††††† 183,792,025

†††††††††††† 126,245,756

††††††††††††††† 4,525,486

†††††††††††† (29,685,842)

††††††† $1,566,810,371

††††††† $2,068,853,926

 

††††††† $1,086,565,418

††††††††††††† 63,584,559

††††††† $1,150,149,977

 

†††††††††† $918,703,949

 

 

†††††††††† $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

INVESTMENT PORTFOLIO ANALYSIS (Fair Market Value)

JUNE 30, 2006

JUNE 30, 2005

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

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

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

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

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

††††††† $9,692,422,530

††††††††† 3,816,079,807

†††††††††††† 131,569,925

†††††††††††† 405,332,778

†††††† $14,045,405,040

††††††† $9,160,596,032

††††††††† 3,759,068,138

††††††††††††† 43,258,905 

†††††††††††† 317,175,851

†††††† $13,280,098,926

INVESTMENTS USED FOR BENEFITS AND EXPENSES

(Defined Benefit Plan)

FY 2006

FY 2005

Contributions

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

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

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

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

Deductions

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

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

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

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

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

Investments Used to Pay Benefits and Expenses....

 

†††††††††† $252,921,802

†††††††††††† 142,196,464

††††††††††††† 37,821,618

†††††††††† $432,939,884

 

††††††† $1,085,383,795

††††††††††††† 42,620,200

††††††††††††† 11,982,284

†††††††††††††††††† 179,640

††††††† $1,140,165,919

††††††††† $(707,226,035)

 

†††††††††† $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)

 

SUPPLEMENTARY INFORMATION

FY 2006

FY 2005

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

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

Average number of employees (unaudited).............

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

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

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

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

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

†††††††††††† $28,813,142

†††††††††††††††††††††††† 11.7%

††††††††††††††††††††††† 121.30

††††††††††††††††††† 80,869

††††††††††††††††††† 72,606

††††††††††††††††††† 33,574

††††††††††††††††††††† 6,807

†††††††††††††††††††††††† 864

†††††††††††† $25,473,352

††††††††††††††††††††††††† 10.4%

†††††††††††††††††††††††† 122.25

††††††††††††††††††† 80,102

††††††††††††††††††† 69,849

††††††††††††††††††† 32,002

††††††††††††††††††††† 6,550

†††††††††††††††††††††††† 864

EXECUTIVE DIRECTOR

 

 

During Examination Period:James M. Hacking (through August 2005), Dan M. Slack, Interim (August Ė December 2005)

Currently:Dan M. Slack (effective December 2005)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All deposits not collateralized or insured

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State contributions reduced for fiscal year 2006 and 2007

 

 

INTRODUCTION

 

††††† This digest covers our compliance examination of the System for the year ended June 30, 2006.A financial audit covering the year ended June 30, 2006 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, 2006, the System had $376.5 million in cash deposits of which $19,913,922 was foreign currency deposits and 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.Prudent business practices dictate that assets be protected from possible losses.The Systemís policies did not address custodial credit risk for foreign deposits.(Finding 1, pages 10-11)

 

††††† We recommended that the System make the necessary policy changes to address the lack of collateralization or insurance on foreign currency deposits.

 

††††† System officials concurred and stated a revised investment policy was approved by their Investment Committee. They anticipated approval of the investment policy by the System Board at the December meeting.

 

††††† We will review progress toward the implementation of our recommendation in our next examination.The System response was provided by Mr. Steven Hayward, Internal Auditor, on December 4, 2006.

 

FUNDING LEGISLATION

 

††††† 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.

 

AUDITORSí OPINION

 

††††††† We conducted a compliance examination of the System for the year ended June 30, 2006 as required by the Illinois State Auditing Act.A financial audit covering the year ending June 30, 2006 was issued separately.

 

 

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

 

WGH:KMA:pp

 

SPECIAL ASSISTANT AUDITORS

 

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