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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Financial Audit Division

Report Summary
Minnesota State Board of Investment

Financial Audit Fiscal Year
Ended June 30, 1998


Public Release Date: January 29, 1999 No. 99-6

Background Information

The Minnesota State Board of Investment (SBI) administers the investment of state funds, including retirement funds. State funds consist of invested treasurers cash, which is the idle cash of various state funds and other state agency cash, including Housing Finance and the Minnesota State Colleges and Universities Revenue Bond Fund. SBI also invests funds for the three major retirement associations --Minnesota State Retirement System, Teachers Retirement Association, and the Public Employees Retirement Association. Minn. Stat. Chapter 11A governs the investment activities of the board. Howard J. Bicker is the executive director of the board.

The board uses both internal staff and external investment managers to fulfill its responsibilities. The external firms invest and manage the assets of the Post Retirement Fund and Supplemental Investment Fund, as well as the assets of the basic retirement funds and the assigned risk plan. SBI staff manage the other investments.

Audit Objectives and Scope

The primary objective of our audit was to render an opinion on the Supplemental Investment and Post Retirement Funds financial statements. These financial statements are included in SBI's Annual Report for fiscal year 1998. Our objective included determining whether SBI's financial statements presented fairly the financial position, results of operations, and changes in net assets in conformity with generally accepted accounting principles.

As part of our work, we gained an understanding of the internal control structure over investment purchases and sales, investment custody and valuation, investment income and allocation, security lending income, and management fee payments. We also ascertained whether SBI complied with laws and regulations that may have had a material effect on its financial statements.


SBI's investment activities were fairly presented in the general purpose financial statements of the State of Minnesota's Comprehensive Annual Financial Report and SBI's Annual Report. SBI's Annual Report for the year ended June 30, 1998, included our qualified audit opinion, dated December 1, 1998, on the Supplemental Investment and Post Retirement Funds financial statements. We qualified our report because sufficient evidence did not exist to support the SBI's disclosures with respect to the year 2000. Auditing SBI's year 2000 compliance efforts was not an objective of this audit. As a result, we do not provide assurance that SBI is or will be year 2000 ready, that its year 2000 remediation efforts will be successful in whole or in part, or that parties with which SBI does business will be year 2000 ready. We found that SBI designed internal controls to provide reasonable assurance that investments were adequately safeguarded, authorized, and properly recorded in accounting records and financial statements. For items tested, we also found SBI to be in compliance with material financial legal provisions.

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