REPORT DIGEST JUDGES’ RETIREMENT SYSTEM FINANCIAL AUDIT For the Year Ended June 30, 2014 Release Date: January 22, 2015 FINDINGS THIS AUDIT: 2 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 2 -- 0 -- 2 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 0 -- 2 FINDINGS LAST AUDIT: 0 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. 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 statement audit of the Judges’ Retirement System of the State of Illinois (System) as of and for the year ended June 30, 2014. The Judges’ Retirement System’s Compliance Examination covering the year ended June 30, 2014 will be issued in a separate report at a later date. During fiscal year 2014 the System implemented Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans. Implementation of the new statement requires the System to disclose the total pension liability and net pension liability in the financial statement notes as well as other related information as required supplementary information. The System’s total pension liability is $2.231 billion at June 30, 2014. The net pension liability at June 30, 2014 is $1.455 billion, which is the difference between the System’s fiduciary net position of $776 million and the total pension liability. The System’s funded ratio is 34.78%. The criteria used for computing pension liability information in the financial report in accordance with GASB Statement No. 67 differs from the criteria used to compute the actuarial accrued liability and actuarial unfunded liability under the State’s funding plan. The pension information under the State’s funding plan is no longer reported in the financial statements. FINDING SYNOPSIS • (14-2) The Judges’ Retirement System has weaknesses in controls over creditable earnings and member census data reported by the Administrative Office of the Courts. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS CONTROLS OVER CENSUS DATA The Judges’ Retirement System of the State of Illinois (System) has weaknesses in controls over creditable earnings and member census data reported by the Administrative Office of the Courts (Courts). During our current fiscal year testing we noted no errors in census data reported to the System out of 40 active members tested. During a review of the System’s internal controls over creditable earnings and member census data, it was noted the System’s current processes and controls for verifying the data rely heavily on the reporting of the information by the Courts and there are limited controls in place by the System to verify the creditable earnings and member census information. System officials indicated the System did not have procedures in place to conduct audits of the Courts to verify census data. (Finding 2, pages 34-35) The System accepted our recommendation to update current processes and controls to include the verification of significant elements of census data. OTHER FINDING The remaining finding is reportedly being given attention by the System. We will review the System’s progress towards the implementation of our recommendations in our next financial audit. AUDITOR’S OPINION Our auditors stated the financial statements of the Judges’ Retirement System as of June 30, 2014, and for the year then ended, 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.