FY11-GARS-Fin-Full

              General Assembly Retirement System
of the State of Illinois
Auditors' Report and Financial Audit For the Year Ended June 30, 2011 Performed as Special Assistant Auditors for the Auditor General, State of Illinois
CPAs &Advisors General Assembly Retirement System
of the State of Illinois
Financial Audit
For the Year Ended June 30, 2011
Table of Contents
System Officials
...................................................................................................................
1
Financial Statement Report
Summary
............................................................................................................................................
2
Independent Auditors' Report
............................................................................................................
3
Management's Discussion and Analysis
............................................................................................
5
Financial Statements
Statements ofPlan Net Assets
.......................................................................................................
7
Statements of Changes in Plan Net Assets
....................................................................................
8
Notes to Financial Statements
.......................................................................................................
9
Required Supplementary Information
Schedule ofFunding Progress
..........................................................................................................
23
Schedule ofEmployer Contributions
................................................................................................
23
Notes to Required Supplementary Information
................................................................................
23
Supplementary Financial Information
Summary of Revenues by Source
.....................................................................................................
24
Schedule of Payments to Consultants and Advisors
.........................................................................
24
Summary Schedule of Cash Receipts and Disbursements
................................................................
25
Independent Auditors' Report on Internal Control over Financial
Reporting and on Compliance and Other Matters Based on an Audit
of the Financial Statements Performed in Accordance with Government
Auditing Standards
.........................................................................................................
26
Schedule of Findings
.........................................................................................................
28
General Assembly Retirement System
of the State of Illinois
June 30, 2011
System Officials
Executive Secretary
Timothy B. Blair
Division Manager
Jayne Waldeck
Accounting Division Supervisor
David M. Richter, CPA
Office Locations
2101 South Veterans Parkway
P.O. Box 19255 Springfield, Illinois 62794-9255
State ofIllinois Building 160 North LaSalle Street, Suite N725 Chicago, Illinois 60601
Page 1
General Assembly Retirement System
of the State of Illinois
Financial Statement Report Summary
For the Year Ended June 30, 2011
Summary
The audit of the accompanying financial statements ofthe General Assembly Retirement System of the State of Illinois was performed by BKD, LLP.
Based on their audit, the auditors expressed an unqualified opinion on the General Assembly
Retirement System of the State of Illinois' financial statements.
Summary ofFindings
The auditors identified a matter involving the System's internal control over financial reporting that they considered to be a significant deficiency. The significant deficiency is described in the accompanying Schedule of Findings listed in the table of contents as finding 11-1 (Journal Entry Review).
Exit Conference
System management waived a formal exit conference in correspondence dated January 9,2012.
Page 2
CPAs
& Advisors
225 N, Water Street. Suite 400 p,O, Bo)( 1580 Decatur,IL62525-1580 217,429.2411 Fax 217,429,6109 www.bkd.com
Independent Auditors' Report
The Honorable William G. Holland Auditor General State ofIllinois and Board ofTrustees General Assembly Retirement System ofthe State ofIllinois
As Special Assistant Auditors for the Auditor General, we have audited the accompanying statement of plan net assets ofthe General Assembly Retirement System ofthe State ofIllinois (System), as of June 30, 2011 and 2010, and the related statement ofchanges in plan net assets for the years then ended. These financial statements are the responsibility ofthe System's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 2011 and 2010 financial statements ofthe Illinois State Board ofInvestment, an internal investment pool ofthe State of Illinois, which statements represent 93 percent, 95 percent, and 43 percent, respectively in 2011, and 92 percent, 94 percent, and 28 percent, respectively, in 2010 oftotal assets, net assets held in trust for pension benefits, and total additions ofthe System. Those financial statement were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Illinois State Board ofInvestment is based on the report of the other auditors.
We conducted our audits in accordance with aUditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report ofother auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report ofother auditors, the financial statements referred to
above present fairly, in all material respects, the plan net assets ofthe System as ofJune 30,2011 and
2010, and the changes in its plan net assets for the years then ended in conformity with accounting
principles generally accepted in the United States ofAmerica.
Page 3
Praxiix·;
MEMBER _. GLOBAL ALLIANCE OF experienceBKD INDEPENOENT FIRMS
In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2012 on our consideration ofthe System's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit
The accompanying management's discussion and analysis and schedules offunding progress and employer contributions and accompanying notes to required supplementary information as listed in the table of contents are not a required part of the basic financial statements but are supplementary
information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods of measurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it
Our audits were conducted for the purpose of forming an opinion on the System's basic financial
statements. The supplementary financial information as noted in the table ofcontents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The
supplementary financial information has been subjected to the auditing procedures applied by us and
other auditors in the audits ofthe basic financial statements and, in our opinion, based on our audits and
the report of other auditors, is fairly stated, in all material respects, in relation to the basic financial
statements as of and for the years ended June 30, 2011 and 2010, taken as a whole.
January 27, 2012
Page 4
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MANAGEMENT'S DISCUSSION AND ANALYSIS
This financial This section presents management's discussion and report is designed analysis of the financial position and performance of
to provide a
general overview of the General Assembly Retire­ment System's finances for al/
those with an
interest in the
F r
Srstem s I mances.
the General Assembly Retirement System (System) for the years ended June 30, 2011 and 2010. it is presented as a narrative overview and analysis.
The System is a defined benefit, single-employer public employee retirement system. it provides services to 180 active participants and 410 benefit recipients. Throughout this discussion and analysis units of measure (Le. billions, millions, thousands)
are approximate, being rounded up or down to the
f ..
nearest tenth 0 the respective Unit value.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the System's financial reporting which is comprised of the following components:
1.
Basic Financial Statements. For the fiscal years ended June 30, 2011 and 2010, basic financial state­ments are presented for the System. This information presents the net assets held in trust for pension ben­efits for the System as ofJune 30, 2011 and 2010. This financial information also summarizes the changes in net assets held in trust for pension benefits for the years then ended.
2.
Notes to the Financial Statements. The notes to the financial statements provide additional informa­tion that is essential to achieve a full understanding of the data provided in the basic financial statements.
3.
Required Supplementary Information. The required supplementary information consists of two schedules and related notes concerning actuarial in­formation, funded status and required contributions for the System.
4.
OtherSupplementary Schedules. Other supple­mentary schedules include more detailed informa­tion pertaining to the System, including schedules of revenues by source, cash receipts and disbursements, and payments to consultants.
FINANCIAL HIGHLIGHTS
•
The System's net assets increased by approxi­mately $5.7 million and decreased by approximately $401.0 thousand during fiscal years 2011 and 2010, respectively. These changes were primarily due to a $5.7 million increase in investments (excluding securities lending collateral) during fiscal year 2011 and a $4.3 million decrease in cash and receivables partially offset by a $3.9 million increase in invest­ments (excluding securities lending collateral) during fiscal year 2010.
•
The System was actuarially funded at 21.2% as of June 30, 2011 which is a decrease from 26.3% as of June 30, 2010. For fiscal years 2011 and 2010, the actuarial value of assets equals the fair value of assets adjusted for any actuarial gains or losses from invest­ment return incurred in the fiscal year recognized in equal amounts over the five year period following that fiscal year.
•
The overall rate of return for the Illinois State Board of Investment (lSBI) Commingled Fund
The condensed Statements of Plan Net Assets reflect the resources available to pay was 21.7% for fiscal year 2011 compared benefits to members, including retirees and beneficiaries, at the end of the years to 9.1% for fiscal year 2010. reported. A summary of the System's Plan Net Assets is presented below.
ADDITIONS TO PLAN NET
Condensed Statements of Plan Net Assets
Cash $
Receivables
Investments, at fair value *
Equipment, net
Total assets liabilities * Total plan net assets $
ASSETS
(in thousands)
Increasel(Decrease)
Additions to Plan Net Assets include
from
employer and participant contribu­As of June 30, 2010 to 2009 to tions and net income from investment
2011 2010 2009 Zen1 2010
activities. Participant contributions were approximately $2.0 million and $1.7
3,102.3 $ 3,099.4 $ 3.105.7 $ 2.9 $ (606.3)
million for the years ended June 30,
30.7 50.0 3,777.5 (19.3) (3.127.5)
2011 and 2010. Participant contribution
58,616.4 52,781.6 47,693.7 5,834.8 5,087.9
rates are set by statute as a percentage
1.7 1.9 1.7 (0.2) 0.2
of gross salary. Employer contributions
61.751.1 55,932.9 55,178.6 5,818.2 increased to $11.4 million in 2011 from
1 1,241.8 86.5 114.4 1,155.3 $10.4 million in 2010. This increase was primarily the result of the State's fund­60,394.9
$ 54,691.1 $ 55,092.1 $ 5,703.8 $ (401.0)
ing plan.
*Including securities lending collateral
General Assembly Retirement System, State ofIllinois ............................................................................................ 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
DEDUCTIONS FROM PLAN NET ASSETS
Deductions from Plan Net Assets are primarily benefit payments. During 2011 and 2010, the System paid out $17.7 million and $17.0 million, respectively, in benefits and refunds, an increase of 4.4% from 2010. These higher payments were mainly due to an increase in the number of annuitants as well as a 3% automatic annuity increase paid each year. The administrative costs of the System represented 1.7% and 1.6% of total deductions in 2011 and 2010, respectively.
FUNDED RATIO
The funded ratio ofthe plan measures the ratio of net assets against actuarially determined liabilities and is one indicator of the fiscal strength of a pension fund's ability to meet obligations to its members. An annual actuarial valuation is required by statute. The most recent available valuation showed the funded status of the System on June 30, 2011 decreased to 21.2% from' 26.3% at June 30, 2010. The major reason for the decline was the lingering effect of prior invest­ment performance on the smoothed market value of assets. The amount by which actuarially determined liabilities exceeded the actuarial value of assets was $235.2 million at June 30, 2011 compared to $185.6 million at June 30, 2010.
INVESTMENTS Investments of the System are combined in a com­mingled investment pool with the Judges' Retire­ment System and the State Employees' Retirement System. Each system owns an equity position in the pool and receives proportionate investment income from the pool in accordance with respective own­ership percentage. Investment gains or losses are reported in the Statement of Changes in Plan Net Assets of each retirement system.
The net investment income of the total 1581 Com­mingled Fund was approximately $2.0 billion during fiscal year 2011, versus $846.2 million during fiscal year 2010, resulting in returns of 21.7% and 9.1%, respectively. For the three, five, and ten year period ended June 30, 2011, the 1581 Commingled Fund earned a compounded rate of return of 2.0%,3.1%, and 4.5%, respectively.
The 1581 is exposed to general market risk. This general market risk is reflected in asset valuations fluctuating with market volatility. Any impact from market volatility on the 1581's investment portfolio depends in large measure on how deep the market downturn is, how long it lasts, and how it fits within fiscal year reporting periods. The resulting market risk and associated realized and unrealized gains and losses could significantly impact the 1581's financial condition.
Questions concerning any of the information provided in this report or requests for additional financial inform­ation should be
addressed to
the General Assembly Retirement System, Accounting
Division,
2101 S. Veterans
Parkway,
P. O. Box 19255, Springfield, Illinois
62794
The condensed Statements of Changes in Plan Net Assets reflect the changes in the resources available to pay benefits to members, including retirees and beneficiaries. Condensed Statements of Changes in Plan Net Assets
Additions Participant contributions Employer contributions Investment
income/(loss) Miscellaneous Total additions/(deductions)
Deductions Benefits Refunds Administrative expenses Total deductions
Net increase/(decrease) in plan net assets
(in thousands) For the Year Ended June 30, 2011 2010 2009
Increase/(Decrease) from 2010 to 2009 to 2011 2010
$ 2,006.2 11.433.6
$ 1,680.6 10.411.3
$ 1,697.6 8,856.4
$ 325.6 1,022.3
$
(17.0) 1,554.9
10,291.4 10.0 23,741.2
4,770.5 16,862.4
(14,662.3) (4,108.3)
5,520.9 10.0 6,878.8
19.432.8 20,970.7
17,676.8 61.5 299.1 18,037.4
16)69.0 222.1 17,263.4
15.857.2 71.6 276.7 16,205.5
907.8
911.8
$ 5,703.8
$ (401.0)
$(20,313.8)
$ 6,104.8
$ 19,912.8
(160.6)
General Assembly Retirement System, State of/llinois ................................................."................................. ...... 6
FINANCIAL STATEMENTS
GENERAL ASSEMBLY RETIREMENT SYSTEM,
STATE OF ILLINOIS
Statements of Plan Net Assets
June 30, 2011 and 2010
Assets
Cash
Receivables: Participants' contributions Refundable annuities Interest on cash balances
Total receivables
Investments· held in the Illinois State Board of Investment Commingled Fund at fair value Securities lending collateral with State Treasurer
Equipment, net of accumulated depreciation
Total Assets
Liabilities
Benefits payable Administrative expenses payable Due to Judges' Retirement System of Illinois Securities lending collateral
Total Liabilities
Net assets held in trust for pension benefits
See accompanying notes to financial statements.
2011
$ 3,102,265
29,207 1,445
30,652
57,346,442
1,270,000 1,757
61,751,116
369 30,316 55,523
1,270,000
1,356,208
$60,394,908
2010
$ 3,099,436
47,141 422 2,452
51,638,586 1,143,000
55,932,904
6,024 27,311 65,413 1,143,000
1,241,748
$ 54,691,156
General Assembly Retirement System, State of Illinois ............................................. "., ....................... , ...... ',........... 7
FINANCIAL STATEMENTS
GENERAL ASSEMBLY RETIREMENT SYSTEM, STATE OF ILLINOIS Statements of Changes in Plan Net Assets Years Ended June 30, 2011 and 2010
Additions: Contributions: Participants Employer Total contributions
2011 $ 2,006,200 11,433,614 13,439,814
$
2010 1,680,603 10,411,274 12,091,877
Investments: Net investment income Interest earned on cash balances Net appreciation in fair value of investments
1,171.910 20,869 9,098,602
1,157,595 21,974 3,590,964
Total investment income
10,291,381
4,770,533
Other: Miscellaneous
10,000
Total Additions
23,741,195
16,862,410
Deductions: Benefits: Retirement annuities Survivors' annuities Total benefits Refunds of contributions Administrative expenses
14,564,699 3,112,152 17,676,851 61,476 299,116
13,770,131 2,998,901 16,769,032 222,094 272,253
Total Deductions
18,037,443
17,263,379
Net Increase (Decrease)
5,703,752
(400,969)
Net assets held in trust for pension benefits:
Beginning of year
54,691,156
End of year
$ 60,394,908
$
See accompanying notes to financial statements.
54,691,156
General Assembly Retirement System, State of Illinois ............................................................................................ 8
FINANCIAL STATEMENTS
GEI\IERAL ASSEMBLY RETIREMENT SYSTEM, STATE OF ILLINOIS
Notes to Financial Statements June 30, 2011 and 2010
1. Reporting Entity
Generally accepted accounting principles require that the financial reporting entity include (1) the primary government (2) organizations for which the primary government is financially accountable and (3) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.
The General Assembly Retirement System (System) is administered by a Board of Trustees consisting of seven persons, which include the President of the Sen­ate, ex-officio, or his designee, two members of the Senate appointed by the President ofthe Senate, three members of the House of Representatives appointed by the Speaker of the House of Representatives, and one person elected from the member annuitants.
Based on the criteria of the Governmental Account­ing Standards Board Statement No. 14, there are no other state agencies, boards or commissions, or other organizations required to be combined with the Sys­tem, however, the System is considered to be part of the State of Illinois financial reporting entity, and is to be combined and included in the State of Illinois' comprehensive annual financial report.
Pursuant to federal tax law and regulations govern­ing the administration of public employee pension plans, the System has established a separate fund for
At June 30, 2011 and 2010, the System membership consisted of:
Retirees and beneficiaries
currently receiving benefits:
Retirement annuities
Survivors' annuities
Reversionary annuities
Inactive participants entitled to benefits but not yet receiving them Total
Current participants: Vested Nonvested Total
2011
291 118 _1 410
128
2f..
180
the sole purpose of paying benefits in accordance with Section 415 of the Internal Revenue Code. The receipts and disbursements from the fund for fiscal years 2011 and 2010 were each less than $39.000. Due to the immaterial nature of the separate fund, these receipts and disbursements have been included in the System's financial statements.
2. Plan Description
The System is the administrator of a single-employer defined benefit public employee retirement system (PERS) established and administered by the State of Illinois to provide pension benefits for its participants. The plan is comprised of two tiers of contribution re­quirements and benefit levels. Tier 1 pertains to par­ticipants who first became a participant of the System prior to January 1, 2011. Tier 2 pertains to participants who first became a participant of the System on or af­ter January 1, 2011.
a.
Eligibility and Membership
The General Assembly Retirement System covers mem­bers
of the General Assembly of the State and persons
elected to the offices of Governor, Lieutenant Gover­nor,
Secretary of State, Treasurer, Comptroller and At­torney
General for the period of service in such offices
and the Clerks and Assistant Clerks of the respective
Houses of the General Assembly. Participation by eli­gible
persons is optional.
b.
Contributions In accordance with Chapter 40, Section
5/2-126 of the Illinois Compiled Statutes, participants contribute specified percent­2010 ages of their salaries for retirement annui­ties,
survivors' annuities, and automatic an­nual
increases as shown on the next page.
278
Tier 1 participants contribute based on to­119
tal annual compensation. Beginning Janu­_
1
ary 1, 2011, Tier 2 participants contribute 398 based on an annual compensation not to exceed $106,800 with limitations for future years increased by the lesser of 3% or the annual percentage increase in the Consum­er Price Index. Contributions are excluded
139
from gross income for Federal and State in·
43
come tax purposes.
182
The statutes governing the General Assem­Operation of the System and the direction of its policies bly Retirement System provide for optional are the responsibility of the Board of Trustees. contributions by participants, with interest
General Assembly Retirement System, State ofIllinois ............................................................................................ 9
FINANCIAL STATEMENTS
The total contribution rate is 11.5% as shown below:
8.5%
Retirement annuity
2,0%
Survivors' annuity
1,0%
Automatic annual increases
11.5%
at prescribed rates, to retroactively establish service credits for periods of prior creditable service.
The Board of Trustees has adopted the policy that in­terest payments by a participant, included in optional contributions to retroactively establish service credits, shall be considered an integral part of the participant's investment in annuity expectancies and, as SUCh, shall be included as a part of any refund payable.
The payment of (1) the required State contributions,
(2) all benefits granted under the System and (3) all expenses in connection with the administration and operation thereof are the obligations of the State to the extent specified in Chapter 40, Article 5/2 of the Illinois Compiled Statutes.
c, Benefits Retirement Annuity: Tier 1 PartiCipants have vested rights to full retirement benefits beginning at age 55 with at least 8 years of credited service or at age 62 with at least 4 years of credited service.
The retirement annuity is determined according to the following formula based upon the applicable final salary:
3.0% for each of the first 4 years of service 3.5% for each of the next 2 years of service 4.0% for each of the next 2 years of service 4.5% for each of the next 4 years of service 5.0% for each year of service in excess of 12 years.
The maximum retirement annuity is 85% of the ap­plicable final salary, Annual automatic increases of 3% ofthe current amount of retirement annuity are provided,
Retirement Annuity: Tier 2 PartiCipants have vested rights to full retirement ben­efits at age 67 with at least 8 years of credited service or reduced retirement benefits at age 62 with at least 8 years of credited service.
The retirement annuity provided is 3% for each year of service based upon the applicable final average salary. The maximum retirement annuity is 60% of the applicable final average salary. Annual automatic in­creases equal to the lesser of 3% or the annual change in the Consumer Price Index are provided,
Other Benefits:
The General Assembly Retirement System also pro­vides
survivors' annuity benefits, reversionary annu­ity
benefits, and under certain specified conditions,
lump-sum death benefits.
Participants who terminate service may receive, upon
application, a refund of their total contributions. Par­ticipants
who are not married are entitled to refunds
of their contributions for survivors.
3. Summary of Significant Accounting Policies and Plan Asset Matters
a, Basis of Accounting The financial transactions of the System are main­tained and these financial statements have been prepared using the accrual basis of accounting in conformity with generally accepted accounting principles.
Participant and employer contributions are recog­nized as revenues when due pursuant to statutory requirements. Benefits and refunds are recognized as expenses when due and payable in accordance with the terms of the plan.
b. Cash The System retains all of its available cash in a com­mingled investment pool managed by the Treasurer of the State of Illinois (Treasurer). All deposits are fully collateralized by the Treasurer.
"Available cash" is determined to be that amount which is required for the current operating expendi­tures of the System. The excess of available cash is transferred to the Illinois State Board of Investment (ISBI) for purposes of long-term investment for the System.
c.
Implementation of New Accounting Standard GASB Statement No. 59, Financial Instruments Omnibus, was established to update and improve existing standards regarding financial reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been identified in practice. The ISBI implemented this Statement for the year ending June 30, 2011.
d.
General Litigation The System is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the dispOSition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the plan net assets or the changes in plan net assets of the System.
General Assembly Retirement System, State ofIllinois ............... ,............................................................................ 10
FINANCIAL STATEMENTS
e. Methods Used to Value Investments Investments are managed by the ISBI pursuant to Chapter 40, Article 5/22A of the Illinois Compiled Statutes (lLCS) and are maintained in the ISBI Com­mingled Fund.
Investments owned are reported at fair value as follows: (1) U.S. Government and Agency, Foreign Government and Corporate Obligations, Convertible Bonds -prices quoted by a major dealer in such securities; (2) Common Stock and Equity Funds, Preferred StOCk, Foreign Equity Securities, Forward Foreign Currency Contracts and Options: (a) Listed­closing prices as reported on the composite summary of national securities exchanges; (b) Over-the-counter -bid prices; (3) Money Market Instruments -average cost which approximates fair values; (4) Real Estate Investments fair values as determined by the ISBI and its investment managers; and (5) Alternative Investments (Private Equity, Hedge Funds, and Infrastructure Funds) fair values as determined by the ISBI and its investment managers; and (6) Commingled Funds -fair values as determined by the ISBI and its investment managers.
Units of the ISBI Commingled Fund are issued to the mem ber systems on the last day of the month based on the unit net asset value calculated as of that date. Net investment income of the ISBI Commingled Fund is allocated to each of the member systems on the last day of the month on the basis of percentage of accumulated units owned by the respective systems. Management expenses are deducted monthly from income before distribution.
The investment authority of the ISBI is provided in Chapter 40, Section 5/22A-112 of the ILCS. Such investment authority requires that all opportunities be undertaken with care, skill, prudence and dili­gence given prevailing circumstances that a prudent person acting in like capacity and experience would undertake.
f.
Actuarial Experience Review In accordance with Illinois Compiled Statutes, an actuarial experience review is to be performed at least once every five years to determine the adequacy of actuarial assumptions regarding the mortality, retirement, disability, employment, turnover, inter­est and earnable compensation of the members and beneficiaries of the System. An experience review was last performed as of June 30, 2010 resulting in the adoption of new assumptions as of June 30, 2011.
g.
Administrative Expenses Expenses related to the administration of the System are financed through investment earnings and em­ployer retirement contributions. These expenses are
budgeted and approved by the System's Board of Trustees.
Administrative expenses common to the General As­sembly Retirement System and the Judges' Retirement System are allocated 30% to the General Assembly Retirement System and 70% to the Judges' Retirement System.
Invoices/vouchers covering common expenses in­curred are paid by the Judges' Retirement System, and the appropriate amount is allocated to and reimbursed by the General Assembly Retirement System. Administrative expenses allocated to and reimbursed by the General Assembly Retirement System as of June 30, 2011 and 2010, were $226,995 and $208,978, respectively.
h.
Risk Management
The System, as part of the primary government of
the State, provides for risks of loss associated with
workers' compensation and general liability through
the State's self-insurance program. The System ob­tains
commercial insurance for fidelity, surety, and
property. There have been no commercial insurance
claims in the past three fiscal years.
i.
Use of Estimates
In preparing financial statements in conformity with
U.S.
generally accepted accounting principles, the
System makes estimates and assumptions that af­fect
the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at
the date of the financial statements, as well as the
reported amounts of revenue and expenses during
the reporting period. Actual results could differ from
those estimates and assumptions.
j.
Reclassifications
Certain fiscal year 2010 amounts have been reclassi­fied
to conform to the fiscal year 2011 presentation.
These reclassifications have not changed the fiscal
year 2010 results.
4. Investments
Custodial Credit Risk for Investments
The custodial credit risk for investments is the risk
that, in the event of the failure of the counterparty
to a transaction, the ISBI will not be able to recover
the value of investments or coltateralsecurities that
are in the possession of a counterparty. As of June 30.
2011 and 2010, there were no investments that were
uninsured and unregistered, securities held by the
counterparty or by its trust department or agent but
not in the ISBI's name.
General Assembly Retirement System, State ofIllinois .,."....................................................................................... 11
FINANCIAL STATEMENTS
transaction accounts (DDAs) for a
Summary ofthe 1581 Fund's investments at fair value by type
June 30, 2011
U.S. govt. and agency obligations
$ 1,367,098.151
Foreign government obligations
37,951.169
Corporate obligations
762,833,382
Domestic common stock & equity funds 3,380,198,858
Preferred stock
Foreign equity securities 2,195,201,185
Foreign preferred stock 40,032
Commingled funds 256,817,374
Hedge funds 1,075,584,754
Real estate funds 819,053,366
Private equity 629,256,286
Money market instruments 303,501 ,465
Infrastructure funds 417,267,415
Bank loans 253,447,070
Forward foreign currency contracts (353)
Total investments $11,498,251,354
Deposits Custodial credit risk for deposits is the risk that, in the event of a financial institution failure, the Sys­tem's and ISBI's deposits may not be returned. All non-investment related bank balances at year-end are insured or collateralized with securities held by the Illinois State Treasurer or agents in the name of the State Treasurer. As of June 30, 2011 and 2010, the ISBI had non-investment related bank balances of $119,804 and $34,557, respectively. During fiscal year 2007, a Credit Risk Policy was implemented by the ISBI staff and formally adopted by the ISBI Board in July of 2007. The policy outlines the control procedures used to monitor custodial credit risk. These assets are under the custody of State Street Bank and Trust Company. State Street Bank and Trust Company has an AA-Long-term Deposit/Debt rating by Standard & Poor's and an Aa2 rating by Moody. Certain invest­ments of the ISBI with maturities of 90 days or less would be considered cash equivalents; these consist of short-term investment funds and U.S. Treasury bills with maturities of 90 days or less, which are not subject to the custodial credit risk. For financial statement presentation and investment purposes, the 1581 reports these types of cash equivalents as Money Market Instruments within their investments. As of June 30, 2011 and 2010, the ISBI had investment related bank balances of $12,234,333 and $3,630,043, respectively, These balances include USD and foreign cash balances. The USD cash balances had no expo­sure to custodial credit risk as a result of the passage of the Dodd Frank Wall Street Reform and Consumer Protection Act ("Dodd Frank Act") in JUly, 2010. The FDIC must provide unlimited deposit insurance cover­age for balances held in US dollar non-interest bearing
june 30, 2010
period of two years, beginning on December 31, 2010 and ending on
$
810)39,312
December 31, 2012. At any given
44,409,906
point and time, the foreign cash
925,668,388
balances may be exposed to custo­2,857,144,559
dial credit risk,
517,676
1,733,177,670
Securities Lending
179,924
The ISBI participates in a securities
270,510,642
lending program with Credit Suisse
917,854,201
AG, New York Branch who acts as
750,210,957
securities lending agent. Securi­542,441,291
ties are loaned to brokers and,
270,231,935
in return, the ISBl receives cash
320,293,041
and non-cash collateral. All of the
222,623,999
securities are eligible for the securi·
(266,410)
ties lending program. Collateral
$ 9,665,737,091
consists solely of cash and U.S.
government securities having a fair
value equal to or exceeding 102% of the value of the loaned securities (105% for non-U.S. securities). In the event of borrower default, Credit Suisse AG, New York Branch provides the ISBI with counter party default indemnification. Investments in the cash collateral account represent securities that were distributed to the ISBI in connection with the in-kind redemption of the ISBI's ownership in the State Street Bank and Trust Company Quality Funds for Short-Term Investment ("Quality Dn). Credit Suisse is not responsible for any losses with regards to these legacy investments. This arrangement subjects the ISBI to credit risk as the credit quality of these investments may decline over time. The credit risk on the legacy investments is the risk of a possible loss arising from the inability of a counterparty to meet its obligations. These losses could include the loss of principal, interest and/or decreased expected cash flows in any of the invest­ments held in the ISBI's cash collateral account. In the event a counterparty defaults on its obligations, the ISBI would need to credit the cash collateral account with the amount of the default to make the account whole so that once loaned securities are returned, the cash pledged by borrowers is returned to them. As of June 30, 2011 and 2010, respectively, the collateral re­ceived exceeded the fair value of the securities loaned, As of June 30, 2011 and 2010, there were outstand­ing loaned investment securities having fair values of $221,448,333 and $1,055,476,733, respectively; against which collateral was received with a fair value of $230,083,146 and $1,091,589,381, respectively. Col­lateral received at June 30, 2011 and 2010 consisted of $216,717,213 and $1,010,115,059, respectively, in cash and $13,987,903 and $81,474,322, respectively, in securities for which the ISBI does not have the ability to pledge or sell.
General Assembly Retirement System, State of Illinois ........... , ........................... , .................................................... 12
FINANCIAL STATEMENTS
The cash col­lateral received is invested in a short term investment pool having a fair value of $211,162,204 and $997,638,887 as of June 30, 2011 and 2010, respectively. This investment pool had an av­erage duration of 31,18 days and 12.45 days as of June 30, 2011 and 2010, respectively. Any decrease in the fair value of invested cash collateral is recorded by the ISBI as unreal­ized losses and
reported as a component of the investment
Moody's
Quality Rating
2011
U.S. Government and
AAA
$ 1,355,098,991
Agency obligations
A
Not Rated
11,999,760
Total U.S. govt. & agency obligations
$ 1,367,098,751
Foreign government obligations
AA
$ 2,972,737
A
9,187,174
BAA
BA
7,107,320
B
17,263,610
Not rated
1,420,928
Total foreign government obligations
$ 37,951,769
Corporate obligations
Total corporate obligations
income/loss on the ISBI's Statement of Changes in Net Assets.
Cash and cash equivalents included in the System's Statement of Plan Net Assets consist of deposits held in the State Treasury. The Illinois Office of the Trea­surer invests the deposits held and allocates invest­ment income on a monthly basis.
Under the authority of the Treasurer's published investment policy that was developed in accordance with State statute, the State Treasurer lends securities to broker-dealers and other entities for collateral that will be returned for the same securities in the future. The State Treasurer has, through a Securities Lending Agreement, authorized Deutsche Bank Group to lend the State Treasurer's securities to broker-dealers and banks pursuant to a form of loan agreement.
During fiscal year 2011, Deutsche Bank Group lent
U.S. agency securities and received as collateral U.S. dollar denominated cash. Borrowers were required to deliver collateral for each loan equal to at least 100% of the aggregate market value of the loaned securities. Loans are marked to market daily, If the market value of collateral falls below 100%, the bor­rower must provide additional collateral to raise the market value to 100%,
AAA
$
17,786,171
AA
87,458,769
A
193,686,773
BAA
99,755,613
BA
84,923,049
B
243,240,592
CAA Not rated
$
2010
$ 785,753,044 11,999,760 12,986,508
$ 810,739,312
$ 1,601.595 13,951,076 10,708,205 11,475,920 5,659,170 1,013,940 $ 44,409,906
$ 43,798,021 78,359,254 272,476,793 201,122,004 85,333,142 188,825,884 38,250,212 17,503,078
$ 925,668,388
The State Treasurer did not impose any restrictions during the fiscal year on the amount of the loans of available, eligible securities. In the event of borrower default, Deutsche Bank Group provides the State Treasurer with counterparty default indemnification. In addition, Deutsche Bank Group is Obligated to indemnify the State Treasurer if Deutsche Bank Group loses any securities, collateral or investments of the State Treasurer in Deutsche Bank Group's custody. Moreover, there were no losses during the fiscal year resulting from a default of the borrowers or Deutsche
Bank Group.
During the fiscal year, the State Treasurer and bor­rowers maintained the right to terminate all securities lending transactions on demand. The cash collateral received on each loan was invested in repurchase agreements with approved counterparties collater­alized with securities approved by Deutsche Bank Group and marked to market daily at no less than 102%. Because the loans are terminable at will, their duration did not generally match the duration of the investment made with cash collateral. The State Trea­surer had no credit risk as a result of its securities lend­ing program as the collateral held exceeded the fair value of the securities lent. For the portion related to the System, securities lending collateral was invested
General Assembly Retirement System, State of Illinois .......................................................................................... " 13
FINANCIAL STATEMENTS
in repurchase agreements and the value of securities on loan for the State Treasurer as of June 30, 2011 and 2010 were $1,270,000 and $1,143,000, respectively. Securities on loan are reported at market value with the exception of U.S. Treasury Bills and U.S. Agency Discount notes which are reported at amortized cost.
Concentration of Credit Risk and Credit Risk for Investments The ISBl's portfolio of investments is managed by professional investment management firms. These in­vestment management firms are required to maintain diversified portfolios. Each investment manager must comply with risk management guidelines individually assigned to them as part of their investment manage­ment agreement. The ISBI did not have any single issuer investment that exceeded 5% of the total net assets of the fund as of June 30, 2011 and 2010. The table on page 13 presents the quality ratings of debt securities held by the ISBI as of June 30, 2011 and 2010.
Derivative Securities In fiscal year 2010, the ISBI implemented GASB State­ment No. 53 Accounting and Financial Reporting for Derivative Instruments with respect to investments held in derivative securities. A derivative security is an investment whose payoff depends upon the value of other assets such as commodity prices, bond and stock prices, or a market index. The ISBI invests in derivative instruments including forward foreign currency con­tracts, futures, rights and warrants. The ISBI's deriva­tives are considered investment derivatives.
Foreign currency forward contracts (FX forwards) are used to protect against the currency risk in the ISBl's foreign equity portfolio. A foreign currency forward contract is an agreement to buy or sell a specific amount of a foreign currency at a specified delivery or maturity date for an agreed-upon price. Fluctua­tions in the market value of foreign currency forward contracts are marked to market on a daily basis. These investments are reported at fair value in the invest­ment section of the ISBl's Statement of Net Assets. The gain or loss arising from the difference between the original contracts and the closing of such con­tracts is recognized in the net increase/decrease in the fair value of investments in the ISBI's Statement of Changes in Net Assets. In May 2011, the ISB) removed language from the investment management agree­ments allowing managers to hedge foreign currencies and/or to hedge equity pOSitions.
The ISBI's investment managers use financial futures to replicate an underlying security they wish to hold (sell) in the portfolio. In certain instances, it may be beneficial to own a futures contract rather than the
Futures positions held by the ISSI as of June 30, 2011 and 2010 2011
Number of
Contract
Contracts
Principal'
EqUity futures
purchased
1.305
$85,836.375
2010
Number of
Contract
Contracts
Principal'
Equ ity futures
purchased
1,026
$52,664,580
• Contract principal amounts shown represent the market value of the underlying assets the contracts control. These are shown to present the volume of the transactions but do not reflect the extent to which positions may offset one another. These amounts do not represent the much smaller amounts potentially subject to risk. Contract prinCipal values also do not represent actual recorded values reported in the ISBl's Statement of Net Assets.
underlying security (arbitrage). A financial futures contract is an agreement to buy or sell a specific amount at a specified delivery or maturity date for an agreed-upon price. As the fair values of the futures contract vary from the original contract price, a gain or loss is recognized and paid to or received from the clearinghouse. The gain or loss is recognized in the net increase/decrease in the fair value of investments in the ISBI's Statement of Changes in Net Assets. Fi­nancial futures represent an off-balance sheet obliga­tion, as there are no balance sheet assets or liabilities associated with those contracts other than the fair values. The cash or securities to meet these Obliga­tions are held in the ISBI's investment portfolio.
Rights and warrants allow the ISBI's investment man­agers to replicate an underlying security they wish to hold (sell) in the portfolio. Rights and warrants pro­vide the holder with the right, but not the obligation, to buy or sell a company's stock at a predetermined price. Rights usually expire after a few weeks and warrants can expire from one to several years. Under certain circumstances, a type of warrant called Par­ticipatory Notes (P-Notes) are used in the portfolio by the ISBI's investment managers that are not registered to trade in domestic Indian Capital Markets. P-Notes are issued by Indian-based brokerage firms against an underlying Indian security permitting holders to get a share in the income from the security. These invest­ments are reported at fair value in the investment sec­tion of the ISBI's Statement of Net Assets within the common stock and foreign equity classifications. The gain or loss associated with rights and warrants is rec­ognized in the net increase/decrease in the fair value of investments in the ISBl's Statement of Changes in Net Assets.
General Assembly Retirement System, State ofIllinois ............................................................................................ 14
FINANCIAL STATEMENTS
69,204
69,204 2.72% 100.00%
The fair values of the forward contracts are estimated Derivative transactions involve, to varying degrees, based on the present value of their estimated future credit risk and market risk. Credit risk is the possibility cash flows. Futures contracts are exchange traded that a loss may occur because a party to a transaction instruments where the fair value is determined by fails to perform according to terms. Derivatives which the equilibrium between the forces of supply and are exchange traded are not subject to credit risk. demand. The fair value of a right or warrant closely Market risk is the possibility that a change in interest tracks the intrinsic value of the underlying stock and (interest rate risk) or currency rates (foreign currency can be determined either by formulaic methodology risk) will cause the value of a financial instrument to
(most commonly Black-Scholes) or intrinsic value decrease or become more costly to settle. The market methodology. risk associated with derivatives, the prices of which are
The IS81's derivative investments in foreign currency forward contracts are held with counterparties. The credit ratings and net exposure as of June 30, 2011 and 2010 for the counterparties are as follows:
2011 2010
Moody's Net Percentage of Net Pecentage of
Rating Fair Value Exposure Net Exposure Fair Value Exposure Net Exposure
Aa3 $ 188 $ 188 0.01% $ $
A3 2,736,018 2,736,018 99.99%
A 2,478,451 2,478,451 97.28%
AA
$2,736,206 $ 2,736,206
The following table presents the fair value of derivative investments exposed to foreign currency risk as of
June 30, 2011 and 2010:
2011
2010
Currency
FX Forwards
Rights
Warrants
FX Forwards
Rights
Warrants
Australian Dollar Brazilian Real Canadian Dollar English Pound Sterling Euro Hong Kong Dollar Indian Ruppe Japanese Yen Norwegian Krone Singapore Dollar South Korean Won Swedish Krona Swiss Franc Investments denominated
$
(391) 38
$
153,078 9,055
$
$ 367,196 (510,309) (81,756) (603,992) 293,614 625,478 (2,226) (991) 841 (768) (353,497)
$
191,452 31,000 5,355
$
722 18,357
in U.S. dollars
$ 162,133
66,421,545 $ 66,421 ,545
$
(266,410)
$ 227,807
65,354,031 $ 65,373,110
Changes 2011
in Fair Value 2010
Fair Val2011
ue at Year End 2010
Notional Amount (number ofshares) 2011 2010
FX Forwards Futures Rights Warrants
$(15.460,385) nla 840,746 16,898.459 $ 2,278,820
$ 4,751,552 nla 1,184,339 12,100,555 ~ 18,036,446
$ ~
(353) nla 162,133 66,421,545 66,583,325
$ (266.410) nla 227,807 65,373,110 ~ 65,334,507
nla 65,250 901,548 5,272,322 6,239,120
nla 51,300 905,044 3,391,468 4,347,812
General Assembly Retirement System, State of Illinois ............................................................................................ 15
FINANCIAL STATEMENTS
constantly fluctuating, is regulated by imposing strict nerships. The ISBI had outstanding commitments to limits as to the types, amounts and degree of risk that these limited partnerships of approximately $344 mil­investment managers may undertake, These limits are lion and $463 million, as of June 30, 2011 and 2010, approved by the Board of Trustees and management respectively, Also, at the end of fiscal year 2011 and of the ISBI and the risk positions of the investment 2010, the ISBI had outstanding commitments of $321 managers are reviewed on a periodic basis to monitor million and $154 million, respectively, to separate real compliance with the limits, As of June 30, 2011 and estate accounts. Also at the end of fiscal year 2011 June 30, 2010, the ISBI held no derivatives subject to and 2010, the ISBI had outstanding amounts of $102 interest rate risk, The IS81 has not adopted a formal million and $147 million, respectively, committed to policy specific to master netting arrangements, infrastructure funds. The 1581 would fund outstand­ing
commitments by utilizing available cash and then The table at the bottom of page 15 presents the selling liquid securities in the portfolio as necessary.
investment derivative instruments aggregated by type that were held by the IS81 as of June 30, 2011 and Foreign Currency Risk
2010,
The ISBI's international portfolio is constructed on the principles of diversification, quality growth, and Investment Liquidity value. Risk of loss arises from changes in currency
The ISBI holds investments in hedge funds, real estate funds, private equity funds and infrastructure funds eXChange rates. International managers may also en­that are considered illiquid by the very nature of the gage in transactions to hedge currency at their discre­investment. Market risk exists with respect to these tion. Certain investments held in infrastructure funds investments as the IS81 may not be able to exit from trade in a reported currency of Euro-based dollars the investments during periods of significant market valued at $50,878,191 and $34,896,279 as of June 30, value declines. 2011 and 2010, respectively. The table below presents
the foreign currency risk by type of investment as of Investment Commitments June 30, 2011 and 2010.
The ISBI's real estate and private equity investment
portfolios consist of passive interests in limited part­2011
2010
Foreign Equity and
Foreign Govt.
Foreign Equity and
Foreign Govt.
Currency
Foreign Preferred Securities
Obligations
Foreign Preferred Securities
Obligations
Australian Dollar
$ 109,809,451
$
$ 80,124,165
$
Brazilian Real
62,981}03
52,217,836
Canadian Dollar
144,335,493
97,585,461
Danish Krone
25,279,264
29,167,544
Egyptian Pound
1,549,693
2,121.276
English Pound Sterling
388.163,730
333.465.799
Euro
550.189,912
401 ,821.017
Hong Kong Dollar
83,691,016
60,278.477
Hungarian Forint
1,711,349
266,743
Indonesian Rupian
1,735,957
992,274
Israeli Shekel
4,293,903
Japanese Yen
249.633,309
222,916,572
Mexican Peso
10,577.337
5,584,047
New Zealand Dollar
4,812,384
3,181,046
Norwegian Krone
25,479,679
15,111,055
Singapore Dollar
51,977,284
35.452,297
South African Rand
11,571,713
8,691,759
South Korean Won
62,696,222
39,303,338
Swedish Krona
35,264,901
21.927,042
Swiss Franc
154,181,296
121,970,148
Thailand Baht
1,081,519
Foreign investments
denominated in U.s, Dollars 215,305,621
37,951,769
199,498,179
44,409,906
Total
$ 2,195,241,217
$
37,951,769
$ 1,733,357,594
$
44,409,906
General Assembly Retirement System, State of Illinois .......................................... " ............................. " .... ".".", .. " 16
FINANCIAL STATEMENTS
Alternative Investments The IS81's investments in hedge funds are structured to achieve a diversified hedged equity fund-of-funds portfolio. Capital is allocated to a select group of hedge fund managers that invest predominately in equity securities. both long and short. The investments shall be managed with the intent of preserving capital in a declining market and in a rising market they will generate a smaller return than the overall equity market.
The ISBI's investments in Private Equity and Real Estate funds represent investment vehicles used for making investments in various equity and debt securities ac­cording to the investment strategies as determined by the fund managers at the commencement of the fund.
Investment strategies of Private Equity funds include,
but are not limited to. leveraged buyouts. venture capital, growth capital and mezzanine capital.
Investment strategies of Real Estate investments include, but are not limited to, the purchase, develop­ment. ownerShip. management. rental and/or sale of real estate for profit. In May. 2011, RU Lodging Fund
II. a limited partnership investment. was exchanged by the ISBI for 1,035,092 shares of restricted common stock as a result of an initial public offering (IPO) transaction conducted by RLJ Lodging Trust. Due to the fact that this holding is currently restricted for sale as a result of a lock-up agreement in place that specifies that during the period that commences 180 days from the date of the initial IPO the holders of the shares will not. without prior written consent of the underwriting group, directly or indirectly offer. pledge, sell, contract to sell. sell any option or contract to purchase, purchase any option or contract to sell.
2011
grant any option, right or warrant for sale of, or oth­erwise
dispose or transfer such shares. As of June 30,
2011, this holding is an illiquid asset as a result of this
restriction. The fair value of these shares at June 30,
2011 is $17,959.548. As a result of the current illiquid­ity
of this investment. the IS81 has determined that it
is appropriate to continue to classify the asset as a real
estate investment. When the restrictions imposed by
the lock-up agreement lapse the ISBI will reclassify the
investment as common stock.
The ISBI's investments in infrastructure funds repre­sent
pooled investment vehicles used to seek capital
appreciation and current income by acquiring, hold­ing,
financing, refinancing and disposing of infra­structure
investments and related assets. Infrastructure
assets include various public works (e.g. bridges,
tunnels, toll roads, airports, public transportation and
other public works) that are made typically as a part
of a privatization initiative on the part of a govern­ment
entity.
A Commingled fund is a kind of mutual fund or
common trust fund which consists of multiple kinds
of assets from several accounts combined together.
'Commingling' these separate assets mitigates risk for
the trader through investment diversification and re­duces
the cost of managing each account separately.
Commingled funds are also called "pooled funds"
and "master trusts".
Interest Rate Risk
The ISSI manages its exposure to fair value losses aris­ing
from interest rate risk by diversifying the debt se­curities
portfolio and maintaining the debt securities
portfolio to an effective weighted duration between
80% and 120% of the benchmark index.
2010
Effective
Effective
Weighted
Weighted
Duration
Duration
Investment
Fair Value
in Years
Fair Value
in Years
U.S. Govt. and Agency Obligations
U.S. Government $ 479,422,631 6.9 $ 155,303,411 4.8
Agency 887,676,120 3.6 655,435,901 2.3
Foreign Govt. Obligations 37,951,769 4.3 44,409.906 4.9
Corporate Obligations
Bank & Finance 204,608,577 4.2 246,087,134 4.8 Collateralized Mortgage
Obligations 13,492,526 2.1 39.240,826 3.0 Industrials 425,847,041 4.4 496,856.383 4.8 Other 4.2 143,484,045 5.0
Total $ $1.780,817,606
General Assembly Retirement System, State ofIllinois .........................,.................................................................. 17
FINANCIAL STATEMENTS
Duration is the measure of a debt investment's expo­sure to fair value changes arising from changing inter­est rates. It uses the present value of cash flows, weighted for those cash flows as a percentage of the investment's fair value. The effective duration mea­sures the sensitivity of market price to parallel shifts in the yield curve. As of June 30, 2011 and 2010, the ISBI benchmarked its debt security portfolio to Barclay's Capital Intermediate U.S. Government/Credit Bond
Index. At June 30, 2011 and 2010, the effective dura­tion of the Barclay's Capital Intermediate U.S. Govern­ment/
Credit Bond Index was 3.9 years. At the same
point in time, the effective duration of the ISBI debt security portfolio at June 30, 2011 and 2010 was 4.6 and 3.8 years, respectively. The table at the bottom of
page 17 shows the detail of the duration by invest­ment
type as of June 30, 2011 and 2010.
Other Information The System owns approximately 1%of the net invest­ment assets of the IS81 Commingled Fund as of June 30, 2011 and 2010. A schedule of investment expenses is included in the ISBI's annual report.
For additional information on IS81's investments, please refer to their Annual Report as of June 30, 2011. A copy of the report can be obtained from the ISBI at 180 North LaSalle Street, Suite 2015, Chicago, Illinois 60601.
5. Administrative Expenses
A summary of the administrative expenses for the General Assembly Retirement System for fiscal years 2011 and 2010 are listed below.
Administrative expenses for fiscal years 2011 and 2010
Personal services
Employee retirement contributions paid by employer
Employer retirement contributions
Social security contributions
Group insurance
Contractual services
Travel
Printing
Commodities
Telecommunications Electronic data processing
Automotive Depreciation
Change in accrued compensated absences
Total
6. Funding -Statutory Contributions Required & Contributions Made
On an annual basis, a valuation of the liabilities and reserves of the System is performed by the System's actuarial consultants in order to determine the amount of contributions statutorily required from the State of Illinois. For fiscal years 2011 and 2010, the actuary used the projected unit credit actuarial method for determining the proper employer con­tribution amount.
For fiscal years 2011 and 2010, the required employer contribution was computed in accordance with the State's funding plan. This funding legislation provides for a systematic 50 year funding plan with an ultimate goal to fund the cost of maintaining and administer­ing the System at an actuarial funded ratio of 90%.
In addition, the funding plan provides for a 15 year phase-in period to allow the state to adapt to the increased financial commitment. Since the 15 year phase-in period ended June 30 2010, the state's contribution will remain at a level percentage of payroll for the next 35 years until the 90% funded level is achieved.
The total amount of statutorily required employer contributions for fiscal years 2011 and 2010 was $11,039,000 and $10,454,000, respectively. The total amount of employer contributions received from the state during fiscal years 2011 and 2010 was $11,047,010 and $10,411,274, respectively.
The schedule of funding progress,
presented as required supplemen­tary information (RSI) following the
2011 2010
notes to the financial statements, $ 131,342 $119,330 presents multiyear trend informa­3,330 4,049 tion about whether the actuarial 36,776 33,883 values of plan assets are increasing 9,765 8,848 or decreasing over time relative to
24,664 21,158
the AALs for benefits.
84,630 76,439 565 1,255 1,660 1,670 322 192 1,155 1,169 1,087 2,390 848 521 444 386 2,528 963 $ 299,116 $272,253
General Assembly Retirement System, State of Illinois ........ " .... """ ..... ,,................................................................. 18
FINANCIAL STATEMENTS
The funded status of the System as of June 30, 2011, the most recent actuarial valuation date, is listed below:
Actuarial
Actuarial Accrued
Unfunded
Value of
Liability (AAL)
AAL
Funded
Assets
Projected Unit
(UAAL)
Ratio
(a)
Credit (b)
(b-a)
(a/b)
ment Benefits
UAAL as a
Covered
Percentage of
Payroll
Covered Payroll
(c)
([b-a]/c)
$63,161 ,047 $298,408,371 $235,247,324 21.2% $15,188.000 1,548.9%
Additional information as of the latest actuarial valuation is as follows.
Valuation date: June 30, 2011 Actuarial cost method: Projected Unit Credit Amortization method:
a.
For GASB Statement No. 25 reporting purposes:
Level percent of payroll
b.
Per state statute: 15-year phase-in to a level percent
of payroll until a 90% funding level is achieved
Remaining amortization period:
a.
For GASB Statement No. 25 reporting purposes: 30 years, open
b.
Per state statute: 34 years, closed
Asset valuation method: Fair value, adjusted for any actu­arial gains or losses from investment return incurred in the fiscal year recognized in equal amounts over the five year period following that fiscal year.
Actuarial assumptions: I nvestment rate of return: 7.0 percent per year, compounded annually Projected salary increases: 4.0 percent per year,
Assumed inflation rate:
Group size growth rate:
Post-retirement increase:
Mortality Rates: compounded annually
3.0 percent
0.0 percent Tier 1: 3.0 percent per year. compounded annually Tier 2: 3.0 percent per year or the annual change in the Consumer Price Index. whichever is less, compounded annually
Active and retired members: The UP-1994 Mortality
Table for Males. rated down 4 years.
Survivors: The UP-1994 Mortality Table for Females.
rated down 1 year.
7. Pension Plan & Other Post-Employ­Plan
Description. All of the System's full­time employees who are not eligible for participation in an­other state-sponsored retirement plan par­ticipate in the State
Employees' Retirement System (SERS), which is a pen­sion trust fund in the State of tilinois reporting entity.
The SERS is a single-employer defined benefit public employee retirement system (PERS) in which state employees participate, except those covered by the State Universities, Teachers'. General Assembly, and Judges' Retirement Systems.
The financial position and results of operations of the SERS for fiscal years 2011 and 2010 are included in the State of '"inois' Comprehensive Annual Financial Report (CAFR) for the years ended June 30, 2011 and 2010, respectively. The SERS also issues a separate CAFR that may be obtained by writing to the SERS. 2101 South Veterans Parkway, Springfield, Illinois, 62794-9255 or by calling 217-785-7202.
The State of Illinois' CAFR may be obtained by writing to the State Comptroller's Office. Financial Reporting Department, 325 West Adams St.• Springfield, Illinois. 62704-1858 or by calling 217·782-2053.
A summary of SERS' benefit provisions, changes in benefit provisions, employee eligibility requirements including eligibility for vesting, and the authority under which benefit provisions are established. are included as an integral part of the SERS' CAFR. Also included is a discussion of employer and employee obligations to contribute, and the authority under which those obligations are established.
Funding Policy. The System pays employer retirement contributions based upon an actuarially determined percentage of its payrolls. For fiscal years 2011. 2010, and 2009 the employer contribution rates were 27.988%, 28.377%. and 21.049%, respectively. The System's contributions to SERS for fiscal years 2011, 2010, and 2009 were $36,776, $33,883 and $24,818, respectively, and were equal to the required contribu­tions for each fiscal year.
Other Post-Employment Benefits. The State provides health, dental, vision, and life insurance benefits for retirees and their dependents in a program admin-
General Assembly Retirement System, State ofIllinois ..................................................... ...................................... 19
FINANCIAL STATEMENTS
istered by the Department of Healthcare and Family Services along with the Department of Central Man­agement Services. Substantially all State employees become eligible for post-employment benefits ifthey eventually become annuitants of one of the State sponsored pension plans. Health, dental, and vision benefits include basic benefits for annuitants and dependents under the State's self-insurance plan and insurance contracts currently in force. Annuitants may be required to contribute towards health, dental, and vision benefits with the amount based on factors such as date of retirement, years of credited service with the State, whether the annuitant is covered by Medicare, and whether the annuitant has chosen a managed health care plan. Annuitants who retired prior to January 1, 1998, and who are vested in the State Employee's Retirement System do not contrib­ute towards health, dental, and vision benefits. For annuitants who retired on or after January 1, 1998, the annuitant's contribution amount is reduced five percent for each year of credited service with the State allowing those annuitants with twenty or more years of credited service to not have to contribute towards health, dental, and vision benefits. Annuitants also receive life insurance coverage equal to the annual sa lary of the last day of employment until age 60, at which time the benefit becomes $5,000.
The State pays the System's por­tion of employer costs for the benefits provided. The total cost of the State's portion of health, dental, vision, and life insur­ance benefits of all members, including post-employment health, dental. vision, and life
A summary of post-employment benefit provisions, changes in benefit provisions, employee eligibility requirements including eligibility for vesting, and the authority under which benefit provisions are estab­lished are included as an integral part of the financial statements of the Department of Healthcare and Family Services. A copy of the financial statements ofthe Department of Healthcare and Family Services may be obtained by writing to the Department of Healthcare and Family Services, 201 South Grand Ave., Springfield, Illinois, 62763-3838.
8. Analysis of Changes in Reserve Balances
The funded statutory reserves of the Geneal Assembly Retirement System are composed of the following:
a. Reserve for Participants' Contributions This reserve consists of participants' accumulated contributions for retirement annuities, survivors' an­nuities and automatic annual increases.
b. Reserve for Future Operations This reserve is the balance remaining in the General Assembly Retirement System from State of Illinois contributions and revenue from investments after consideration of charges for payouts by the General Assembly Retirement System.
Statements of Changes in Reserve Balances Years Ended June 30, 2011 and 2010
Participants' Contributions
Future Operations
Total Reserve Balances
Balance at June 30, 2009 $
insurance benefits, is recognized
Add (deduct):
as an expenditure by the State Excess of revenues over (under) expensesin the Illinois Comprehensive Reserve transfers:Annual Financial Report. The Accumulated contributions of participants State finances the costs on a who retired or died with eligible pay-as-you-go basis. The total survivor during the year
costs incurred for health, dental, vision, and life insurance benefits
Balance at June 30, 2010 $
are not separated by depart­Add
(deduct):
ment or component unit for
Excess of revenues over expenses
annuitants and their dependents Reserve transfers:nor active employees and their Accumulated contributions of participants dependents.
who retired or died with eligible survivor during the year
Balance at June 30, 2011 $
16,875,510 1,458,509
$ 38,216,615 (1,859,478)
$
55,092,125 (400,969)
(587,265) 17,746,754 2,331,328
587,265 $ 36,944,402 3,372,424
$
54,691,156 5,703,752
(2,711,851 ) 17,366,231
2,711,851
$
60,394,908
General Assembly Retirement System, State ofillinOis ........... ,"', ........................ ,................................................... 20
FINANCIAL STATEMENTS
9. Accrued Compensation Absences
Employees of the General Assembly Retirement System are entitled to receive compensation for all accrued but unused vacation time and one-half of all unused sick leave earned after December 31. 1983 and prior to January 1, 1998 upon termination of employ­ment. These accrued compensated absences as of June 30, 2011 and 2010 total $23,379 and $20,851. respectively and are included in administrative ex­penses payable.
10. Equipment
Capital assets over $100 are capitalized at their cost at the time of acquisition. Depreciation is computed using the straight-line method over the estimated use­ful life of the asset. The estimated useful lives are as follows: (1) office furniture -10 years, (2) equipment -6 years, and (3) certain electronic data processing equipment -3 years.
11. New Accounting Pronouncements
GASB Statement No. 62, "Codification of Account­ing and Financial Reporting Guidance contained in pre-November 1989 FASB and AICPA Pronounce­ments", was established to incorporate into the GASB's authoritative literature certain accounting and financial reporting guidance that is included in certain FASB and AICPA pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements. The System is required to implement this Statement for the year ending June 30, 2013.
GASB Statement No. 63, "Financial Reporting of Deferred Outflows of Resources. Deferred Inflows of Resources and Net Position", was established to provide a framework that specifies where deferred outflows of resources and deferred inflows of re­sources, assets, liabilities and net position should be displayed on the financial statements. The System is
required to implement this Statement for
Summary of the changes in equipment for fiscal years 2011 and 2010 the year ending June 30, 2013.
Equipment Accumulated depreciation Equipment, net
Equipment Accumulated depreciation Equipment. net
Beginning Balance
2011 Additions Deletions
Ending Balance
GASB Statement No. 64, "Derivative Instruments: Application of Hedge Ac­counting Termination Provisions An Amendment to GASB Statement No. 53",
$ 20,843
$ 334
$(2.059)
$ 19,118
was established to enhance comparability
(18,976)
(444)
2,059
(17,361 )
and improve financial reporting by clarify­$
(110)
~
$ 1,757
ing the circumstances in which hedge
accounting should continue when a swap
2010
counterparty, or a swap counterparty's
Beginning
Ending
credit support provider, is replaced. The
Balance
Additions
Deletions
Balance
ISBI is required to implement this State­$
21,078
$ 558
$ (793)
$ 20,843
ment for the year ending June 30, 2012.
(19,383)
(386)
793
(18,976)
The System's and ISBI's management has
$ 1,867
not yet completed their assessment of
these Statements; however, they are not
expected to have a material effect on the
overall financial statement presentation.
General Assembly Retirement System, State of Illinois ............................................................................................ 21
FINANCIAL STATEMENTS
12. Subsequent Events (Unaudited)
Subsequent to the June 30 fiscal year end, the overall financial markets experienced a decline in value. The decline in the ISBI's investments as of October 31, 2011 is depicted in the strategic asset allocation chart below. The chart represents assets assigned to invest-
U. S. Equities Commingled Funds" Foreign EqUity Securities Foreign Preferred Stock Fixed Income Real Estate*" Private Equity* * Hedge Funds**" Infrastructure Funds** Money Market Instruments Bank Loans'" * Foreign Currency Forward Contracts Total Investments
June 30, 2011
$ 3,380,198,858 256,817,374 2,195,201,185 40,032 2,167,883,902 819,053,366 629,256,286 1,075,584,754 417,267,415 303,501,465 253,447,070
(353)
$11,498,251,354
ment managers within each asset allocation class, not by security type. Therefore, amounts noted below will differ from those as presented in the ISBI's Statement of Plan Net Assets. The chart below represents the most current information available for both pub'lic and private market investments as compared to June
30,2011.
October 31 , 2011 ,.
$3,241,223,055 208,080,726 2,002,588,947 206,197 1,887,365,453 809,618,861 633,685,952 997,862,476 479,237,585 216,097,627 307,092,370 (36,366) $10.783,022,883
Percentage Increase/ Increase/ (Decrease) (Decrease)
$(138,975,803) (4.11)% (48,736,648) (18,98) (192,612,238) (8.77)
166,165 415.08 (280,518,449) (12.94) (9,434,505) (1.15) 4,429,666 0.70
(77,722,278) (7.23) 61,970,170 14.85 (87,403,838) (28.80) 53,645,300 21.17
(36,013) (10,201 .98) $(715,228,471 )
* October 31,2011 information is based upon best available data on December 1, 2011 as recorded by the ISBI's custodian and is preliminary and unaudited.
*. Mark to market adjustments as of September 30, 2011 have been incorporated into the ISBl's custodian data and represents the most recent investment manager mark to market information to date.
General Assembly Retirement System, State ofIllinois .................................. ,...................... ,',................................ 22
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS
Actuarial
Actuarial Accrued
Unfunded
UAAL as a
Actuarial
Value of
Liability (AAL)
AAL
Funded
Covered
Percentage of
Valuation
Assets *
Projected Unit
(UAAL)
Ratio
Payroll
Covered Payroll
Date
(a)
Credit (b)
(b-a)
(alb)
(c)
([b-aj!c)
6/30/06
$ 82,254,832
$ 221,713,300
$ 139,458,468
37.1%
$ 12,739,000
1,094.7%
6/30/07
87,182,175
231,913,988
144,731,813
37.6
12,701 ,000
1,139.5
6/30/08
75,405,943
235,780,071
160,374,128
32.0
12,871,000
1,246.0
6/30/09
71,573,865
245,226,299
173,652,434
29.2
14,728,000
1,179.1
6/30/10
66,212,244
251,764,834
185,552,590
26.3
14,775,000
1,255.9
6/30/11
63,161,047
298,408,371
235,247,324
21.2
15,188,000
1,548.9
• For fiscal years prior to 2009, the actuarial value ofassets was equal to the fair value of assets. Beginning in fiscal year 2009, the
actuarial value ofassets was equal to the fair value ofassets adjusted for any actuarial gains or losses from investment return incurred in the fiscal year recognized in equal amounts over the five year period following that fiscal year.
SCHEDULE OF EMPLOYER CONTRIBUTIONS
Annual Annual Required Required Year Contribution Contribution Ended per GASB Percentage per State Percentage June 30 Statement No. 25 Contributed Statute Contributed
2006 $ 8,593,196 48.4% $ 4,157,000 100.0%
2007 10,125,503 51.6 5,220,300 100.0
2008 10,672,535 63.8 6,809,800 100.0
2009 11,129,440 79.5 8,847,000 100.0
2010 12,064,078 86.3 10,454,000 99.6
2011 13,086,199 84.4 11,039,000 100.1
Notes to Required Supplementary Information
Valuation date: June 30, 2011 Actuarial assumptions: Investment rate of return: 7.0 percent per year, com­Actuarial
cost method: Projected Unit Credit
pounded annually Amortization method:
Projected salary increases: 4.0 percent per year, com­a.
For GASB Statement No. 25 reporting purposes: pounded annually Level percent of payroll
b. Per state statute: 15-year phase-in to a level Assumed inflation rate: 3.0 percent percent of payroll until a 90% funding level is Group size growth rate: 0.0 percent achieved
Post-retirement increase: Tier 1 -3.0 percent per year, Remaining amortization period: compounded annually
a.
For GASB Statement No. 25 reporting pur­Tier 2 -3.0 percent per year poses: 30 years, open or the annual change in
b.
Per state statute: 34 years, closed the Consumer Price Index,
whichever is less, compound­Asset valuation method: Fair value, adjusted for any
ed annually actuarial gains or losses from investment return
Mortality Rates: incurred in the fiscal year recognized in equal
Active and retired members: TheUP-1994 Mortality amounts over the five year period following that Table for Males, rated down 4 years. fiscal year.
Survivors: The UP-1994 Mortality Table for Females, rated down 1 year.
General Assembly Retirement System, State ofIllinois ................................................... ........................................ 23
SUPPLEMENTARY FINANCIAL INFORMATION
SUMMARY OF REVENUES BY SOURCE YEARS ENDED JU~IE 30, 2011 AND 2010
Contributions:
Participants:
Participants
Interest paid by participants
Repayment of refunds
Total participant contributions
Employer:
Pension Contribution Fund
General Revenue Fund
Paid by -participants
Total employer contributions Total contributions revenue
Investments:
Net investment income
Interest earned on cash balances
Net appreciation in fair value of investments
Total investment revenue
Other:
Miscellaneous
Total revenues
SCHEDULE OF PAYMENTS TO CONSULTANTS YEARS ENDED JUNE 30,2011 AND 2010
Actuary
Audit fees
Total
2011
2010
$ 1,865,542 140,658
$ 1,606,878 44,607
2,006,200
1,680,603
9,037,344 2,009,666 386,604
10,411,274
12,091,877
1,171,910 20,869 9,098,602 10,291,381
1,157,595 21,974 4,770,533
10,000 $ 23,741,195
$ 16,862,410
2011 $29,000 26,205
2010 $20,000 28,044 $48,044
General Assembly Retirement System, State ofIllinois ............................................................................................ 24
SUPPLEMENTARY FINANCIAL INFORMATION
SUMMARY SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS YEARS ENDED JUNE 30, 2011 AND 2010
2011
Cash balance, beginning of year $ 3,099,436
2010
$
Receipts: Participant contributions Employer contributions:
Pension Contribution Fund
General Revenue Fund
Paid by participants
Interest income on cash balances After-tax installment payments Tax-deferred installment payments Cancellation of annuities Repayment of refunds Transfers from Illinois State Board of Investment Miscellaneous
Total cash receipts
Disbursements:
Benefit payments:
Retirement annuities
Survivors' annuities
Refunds Transfer to Illinois State Board of Investment Administrative expenses
Total cash disbursements Cash balance, end of year
1.792,003
9,037,344 2,009,666 139,115 21,876 228,632 223,051 18,716
27.938
13,600,000 10,000
27.108,341
14,570,770 3,119,214 72,293 9,037,344 305,891
27,105,512 $ 3,102,265
1,605,311
10,411,274 3,686,250
22,274
57,841
35,339
55,870 11,200,000
27,074,159
13,764,107 3,005,192 248,654 10,396,274
27,680,380 $ 3,099,436
General Assembly Retirement System, State of Illinois ............................................................................................ 25
CPAs
&Advisors
225 N. Water Street, Suite 400
p.o. Box 1580
Decatur,IL62525·1580 217.429.2411 Fax 217.429.6109 www.bkd.com
Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance With Government Auditing Standards
The Honorable William G. Holland Auditor General State of Illinois and The Board ofTrustees General Assembly Retirement System ofthe State of Illinois
As Special Assistant Auditors for the Auditor General, we have audited the financial statements of the General Assembly Retirement System ofthe State ofIIlinois (System), as of and for the year ended June 30, 2011 and have issued our report thereon dated January 27, 2012, which contained a reference to the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Other auditors audited the fmancial statements ofthe Illinois State Board of Investment, as described in our Independent Auditor's Report on the System's financial statements. This report does not include the results ofthe other auditors' testing of internal control over fmancial reporting or compliance and other matters that are reported on separately by those auditors.
Internal Control Over Financial Reporting
Management ofthe System is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the System's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness ofthe System's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness ofthe System's internal control over financial reporting.
A deficiency in control exists when the design or operation ofa control does not allow management or
employees, in the normal course ofperforming their assigned functions, to prevent, detect and correct
misstatement on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the System's
financial statements will not be prevented, or detected and corrected on a timely basis.
Page 26
Praxiix·:
MEMBER ~.
GLOBAL ALLIANCE OF
experience BKD HlDEPENOENT FIRMS
Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph ofthis section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting ofthe System that we consider to be material weaknesses, as defined above. However, we identified a certain deficiency in internal control over financial reporting, described in the accompanying schedule of findings and response as item 11-1, that we consider to be a significant deficiency in internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Compliance and Other Matters
As part ofobtaining reasonable assurance about whether the System's fmancial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective ofour audit and, accordingly, we do not express such an opinion. The results ofour tests disclosed no instances ofnoncompliance or other matters that are required to be reported under Government Auditing Standards.
The System's response to the finding identified in our audit is described in the accompanying schedule of findings. We did not audit the System's response and, accordingly, we express no opinion on it.
This report is intended solely for the information and use ofthe Auditor General, the General Assembly,
the Legislative Audit Commission, the Governor, the Board of Trustees ofthe System and System
management and is not intended to be and should not be used by anyone other than these specified
parties.
January 27,2012
Page 27
General Assembly Retirement System
of the State of Illinois
Current Finding -Government Auditing Standards
June 30, 2011
11-1. Finding -Journal Entry Review
The General Assembly Retirement System (System) does not have a policy and procedure for the review of financial journal entries or journal entry reconciliations by a person independent ofthe person that initiates them.
During our audit testing, we noted the same individual prepares and records 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.
The Fiscal Control and Internal Auditing Act (Act) (30 ILCS 10/3001) notes agencies shall establish and maintain a system of internal and fiscal and administrative controls, which shall provide assurance that revenues, expenditures, and transfers ofassets, resources, or funds applicable to operations are properly recorded and accounted for to permit the preparation ofaccounts and reliable financial and statistical reports and to maintain accountability over the State's resources.
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. However, there is a subsequent, independent review ofthe System's financial statements on a quarterly basis for potential irregularities.
The lack ofan independent review of financial journal entries and reconciliations leaves the System open to risks of error and material misstatement of financial information. (Finding Code No. II-I)
Recommendation:
We recommend 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 ofthe financial journal entries, reconciliations and related supporting documentation.
System Response:
The System will reallocate the review function of financial journal entries to other management staffwhich are independent ofthe person that initiates them. The System recently hired another management staff member who will provide assistance in the financial journal entry review process. The new process will be incorporated into the System's policy and procedures in fiscal year 2012.
Page 28