Fiscal Year Ended June 30, 2001
JANUARY 24, 2002 02-04
Financial Audit Division
The Office of the Legislative Auditor (OLA) is a professional, nonpartisan office in the legislative branch of Minnesota State government. Its principal responsibility is to audit and evaluate the agencies and programs of state government (the State Auditor audits local governments). OLA's Financial Audit Division annually audits the state's financial statements and, on a rotating schedule, audits agencies in the executive and judicial branches of state government, three metropolitan agencies, and several "semi-state" organizations. The division also investigates allegations that state resources have been used inappropriately. The division has a staff of approximately fifty auditors, most of whom are CPAs. The division conducts audits in accordance with standards established by the American Institute of Certified Public Accountants and the Comptroller General of the United States.
Consistent with OLA's mission, the Financial Audit Division works to:
· Promote Accountability, · Strengthen Legislative Oversight, and
· Support Good Financial Management.
Through its Program Evaluation Division, OLA conducts several evaluations each year and one best practices review.
OLA is under the direction of the Legislative Auditor, who is appointed for a six-year term by the Legislative Audit Commission (LAC). The LAC is a bipartisan commission of Representatives and Senators. It annually selects topics for the Program Evaluation Division, but is generally not involved in scheduling financial audits.
All findings, conclusions, and recommendations in reports issued by the Office of the Legislative Auditor are solely the responsibility of the office and may not reflect the views of the LAC, its individual members, or other members of the Minnesota Legislature.
This document can be made available in alternative formats, such as large print, Braille, or audio tape, by calling 651-296-1727 (voice), or the Minnesota Relay Service at 651-297-5353 or 1-800-627-3529. All OLA reports are available at our Web Site: http:// www. auditor. leg. state. mn. us
If you have comments about our work, or you want to suggest an audit, investigation, evaluation, or best practices review, please contact us at 651-296-4708 or by e-mail at auditor@ state. mn. us
Public Employees Retirement Association
Table of Contents
Report on Compliance and Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
The following members of the Office of the Legislative Auditor prepared this report:
Claudia Gudvangen, CPA Deputy Legislative Auditor Jim Riebe, CPA Audit Manager
Scott Tjomsland, CPA Auditor-In-Charge Susan Mady Auditor
Darcie Stadum Intern
We discussed this report and other issues involving the internal control structure with the following Public Employees Retirement Association staff at an exit conference on January 10, 2002:
Mary Most Vanek Executive Director Dave DeJonge Assistant Executive Director, Finance and Information Services Gary Hovland Finance Supervisor David Andrews Management Analyst
We issued an unqualified opinion on the financial statements of the Public Employees Retirement Association (PERA) as of and for the year ended June 30, 2001.
We issued a Report on Compliance and Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. We did not report any material weaknesses involving the internal control over financial reporting and its operation or noncompliance that would be required to be reported under Government Auditing Standards. We reviewed the administrative expenditures of the Public Employees Retirement Association for fiscal years 1998 through 2001. We found that for items tested, PERA paid employees and processed other administrative expenditures in compliance with significant finance-related legal provisions and accurately recorded those expenditures in the accounting records. In response to a request from the Executive Director of the Public Employees Retirement Association, we audited an internal review PERA conducted that identified past benefit overpayments and underpayments. We also conducted a risk assessment of PERA's new benefit payment system. We concurred with the results of the internal review and did not identify any errors or material weaknesses related to the review or the system.
The Public Employees Retirement Association (PERA) administers four separate funds: the Public Employees Retirement Fund (PERF), the Public Employees Police and Fire Fund (PEPFF), the Public Employees Correctional Fund (PECF), and the Public Employees Defined Contribution Plan (PEDCP). The PERF covers employees of counties, cities and townships, and employees of schools in non-certified positions. The PEPFF covers police officers and fire fighters. The PECF covers employees in county correctional institutions who have direct contact with inmates. The PEDCP covers elected local government officials except elected county sheriffs, emergency medical service personnel employed by or providing service to any of the participating ambulance services, and physicians employed at public facilities. PERA served approximately 2,000 units of government and had 317,776 members in its four funds as of June 30, 2001. At June 30, 2001, PERA administered about $14.2 billion in net assets. For the year ended June 30, 2001, PERA received contributions of about $461.1 million and paid benefits and refunds of about $807.8 million.
OFFICE OF THE LEGISLATIVE AUDITOR State of Minnesota ° James Nobles, Legislative Auditor Report on Compliance and Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
Senator Ann H. Rest, Chair Legislative Audit Commission
Members of the Legislative Audit Commission
Members of the Public Employees Retirement Association Board of Trustees
Ms. Mary Most Vanek, Executive Director Public Employees Retirement Association
We have audited the financial statements of the Public Employees Retirement Association as of and for the year ended June 30, 2001, and have issued our report thereon dated December 7, 2001. 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 of the United States.
As part of obtaining reasonable assurance about whether the Public Employees Retirement Association's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and contracts, 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 of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the Public Employees Retirement Association's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the Legislative Audit Commission and the Public Employees Retirement Association and is not intended to be and should not be used by anyone other than these specified parties.
/s/ James R. Nobles /s/ Claudia J. Gudvangen
James R. Nobles Claudia J. Gudvangen, CPA Legislative Auditor Deputy Legislative Auditor
End of Fieldwork: December 7, 2001
Report Signed On: January 17, 2002