[Audit Report on the Government Employees Retirement System, Government of the Virgin Islands]
[From the U.S. Government Printing Office, www.gpo.gov]
Report No. 99-i-261
Title: Audit Report on the Government Employees Retirement System,
Government of the Virgin Islands
Date: March 26, 1999
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U.S. Department of the Interior
Office of Inspector General
AUDIT REPORT
GOVERNMENT EMPLOYEES RETIREMENT SYSTEM,
GOVERNMENT OF THE VIRGIN ISLANDS
REPORT NO. 99-I-261
MARCH 1999
MEMORANDUM
TO: The Secretary
FROM: Eljay B. Bowron
Inspector General
SUBJECT SUMMARY: Final Audit Report - "Government Employees
Retirement System, Government of the
Virgin Islands" (No. 99-i-261)
Attached for your information is a copy of the subject final
audit report. The objective of our review was to determine
whether (1) the Government Employees Retirement System
satisfactorily implemented recommendations contained in our 1991
followup audit report on the Retirement System, (2) the
Government of the Virgin Islands made timely deposits of employer
and employee contributions into the Retirement System's bank
account in accordance with the consent judgment issued by the
U.S. District Court, and (3) the Retirement System properly
accounted for and collected interest receivable from the
Government.
We found that the Retirement System did not fully implement 15 of
the 16 unresolved recommendations contained in our 1991 report
and therefore did not adequately administer loans to members of
the Retirement System and did not properly account for employer
and employee contributions to the Retirement System. The
deficiencies existed because the Retirement System's computer
system was outdated (a new system was being installed as of July
1998) and a key position within the Retirement System's loan
administration section had been vacant since 1995. As a result,
as many as 1,054 loans, with outstanding balances of about $5.3
million, were delinquent as of February 1998; the computerized
loan files contained duplicate accounts, incorrect social
security numbers, and incorrect or outdated loan status
information; automobile loans were not approved and mortgage
loans were not closed timely; and 32 of 35 automobile and home
mortgage loans reviewed did not have required insurance policies.
In its response to the draft report, the Retirement System
addressed recommendations contained in the 1991 report but did
not address the current report's 11 recommendations. Based on
the response, we considered 10 recommendations unresolved and
requested additional information for 1 recommendation.
If you have any questions concerning this matter, please contact
me at (202) 208-5745 or Mr. Robert J. Williams, Assistant
Inspector General for Audits, at (202) 208-4252.
Attachment
V-IN-VIS-002-98
Ms. Corine King
Chairperson, Board of Trustees
Government Employees Retirement System
No. 48C-50C Kronprindsens Gade
Charlotte Amalie, Virgin Islands 00802
Subject:Audit Report on the Government Employees Retirement
System, Government of the Virgin Islands (No. 99-i-261)
Dear Ms. King:
This report presents the results of our audit of the Government
Employees Retirement System, Government of the Virgin Islands.
The objective of the review was to determine whether (1) the
Retirement System satisfactorily implemented recommendations
contained in our September 1991 report "Followup of
Recommendations Concerning the Employees Retirement System,
Government of the Virgin Islands" (No. 91-I-1431); (2) the
Government made timely deposits of employer and employee
contributions into the Retirement System's bank account in
accordance with the consent judgment issued by the U.S. District
Court; and (3) the Retirement System properly accounted for and
collected interest receivable from the Government.
We found that improvements were needed in the Retirement System's
(1) administration of loans to its members and (2) accounting for
employer and employee contributions to the Retirement System.
Specifically:
- For the 16 recommendations contained in the 1991 report,
we found that 4 recommendations had been partially
implemented and 10 recommendations had not been implemented.
We also considered 1 recommendation implemented and withdrew
1 recommendation. Because all of the recommendations had
not been implemented, the Retirement System did not have
adequate control over loans to members, and there were 1,054
delinquent loans, with outstanding balances totaling $5.3
million.
- Erroneous amounts were deducted from employees' salaries
as contributions to the Retirement System, which resulted in
the need to refund an average of about $104,000 annually,
and the Retirement System lost about $1 million in interest
income because of the Government's delays in submitting
biweekly retirement contributions to the Retirement System.
Additionally, the Retirement System's bank account had not
been reconciled since fiscal year 1995. As a result, a
difference of $15 million existed between the bank statement
balance and the cash balance shown in the Retirement
System's internal records.
Based on the January 28, 1999, response (Appendix 3) to the draft
report from your office, we consider 10 of the 11 new
recommendations (A.2, A.3, A.4, A.5, A.6, B.1, B.2, B.3, B.4, and
B.5) unresolved and request additional information for one
recommendation (No. A.1) (see Appendix 4). Although the response
provided detailed information on actions proposed to implement
the 16 unresolved recommendations from the 1991 report, the
response did not address the new recommendations made in our
current report as a result of our followup audit.
The Inspector General Act, Public Law 94-452, Section 5(a)(3), as
amended, requires semiannual reporting to the U.S. Congress on
all audit reports issued, the monetary impact of audit findings
(Appendix 1), actions taken to implement audit recommendations,
and identification of each significant recommendation on which
corrective action has not been taken.
In view of the above, please provide a response to this report,
as required by Public Law 97-357, by April 30, 1999, to our
Caribbean Office, Federal Building - Room 207, Charlotte Amalie,
Virgin Islands 00802. The response should provide the information
requested in Appendix 4.
We appreciate the assistance of the management and staff of the
Government Employees Retirement System in the conduct of our
audit.
Sincerely,
Eljay B. Bowron
Inspector General
cc:Governor of the Virgin Islands
CONTENTS
Page
INTRODUCTION........................................... 1
BACKGROUND ......................................... 1
OBJECTIVE AND SCOPE ................................ 2
PRIOR AUDIT COVERAGE ............................... 2
FINDINGS AND RECOMMENDATIONS .......................... 4
A. LOANS TO MEMBERS............................... 4
B. RETIREMENT CONTRIBUTIONS....................... 11
APPENDICES
1. CLASSIFICATION OF MONETARY AMOUNTS..............16
2. STATUS OF RECOMMENDATIONS AND CORRECTIVE
ACTIONS FOR AUDIT REPORT "FOLLOWUP OF
RECOMMENDATIONS CONCERNING THE GOVERNMENT
EMPLOYEES' RETIREMENT SYSTEM, GOVERNMENT OF
THE VIRGIN ISLANDS".............................17
3. GOVERNMENT EMPLOYEES' RETIREMENT SYSTEM
RESPONSE TO DRAFT REPORT........................23
4. STATUS OF AUDIT REPORT RECOMMENDATIONS..........36
INTRODUCTION
BACKGROUND
The Government Employees Retirement System was established in
October 1959 to administer the employee pension plan of the
Government of the Virgin Islands. The plan offers retirement
benefits in seven categories: regular service, hazardous duty,
senator/legislator, duty-connected disability, nonduty-connected
disability, duty-connected death, and survivor's annuities. The
Retirement System also provides its members with automobile,
land, home mortgage, and personal loans.
The Government and its independent instrumentalities are required
by law to contribute an amount equal to 14.5 percent of their
employees' salaries to the Retirement System. The members of the
Retirement System are required to contribute 8 percent of their
salaries for regular employees; 9 percent for
senators/legislators; and 10 percent for employees in certain
high risk jobs, such as police officers, as provided for in Act
No. 5226. Contributions are submitted to the Retirement System
on a biweekly or monthly basis through lump-sum checks that
include employers' and employees' contribution payments.
The Retirement System is governed by a Board of Trustees that
comprises seven members (three each from St. Thomas and St. Croix
and one from St. John), and the Retirement System's day-to-day
operations are managed by an Administrator and four Assistant
Administrators. As of September 30, 1997, the Retirement System
managed investments and real estate valued at more than $1
billion. The most recent actuarial study stated that as of
September 30, 1997, the Retirement System had an unfunded pension
liability of $296.6 million.
As a result of a lawsuit brought by the Retirement System against
the Commissioner of Finance and the Government of the Virgin
Islands, the U.S. District Court in December 1984 issued a
consent judgment that required the Department of Finance to pay
all employer and employee retirement contributions into the
Employees Retirement System Fund within 30 days of the end of
each biweekly pay period. The consent judgment was modified in
April 1994 to require (1) the establishment of an
interest-bearing bank account in the name of the Retirement
System's Board of Trustees and (2) the deposit into this account,
by the Department of Finance, of all employer and employee
retirement contributions and other payroll deductions made on
behalf of the Retirement System within 21 days of the end of each
biweekly pay period. An April 1994 addendum to the consent
judgment required the Department of Finance and the Retirement
System to determine, based on their respective records, the
amount of Retirement System cash being held by the Department of
Finance as of September 30, 1993, and to deposit 75 percent of
the lower of such amounts into the Retirement System's
interest-bearing bank account no later than August 15, 1994.
OBJECTIVE AND SCOPE
The objective of our audit was to determine whether (1) the
Retirement System satisfactorily implemented recommendations
contained in our prior audit reports on the Retirement System
(see Prior Audit Coverage), (2) the Government made timely
deposits of employer and employee contributions into the
Retirement System's bank account in accordance with the consent
judgment issued by the U. S. District Court, and (3) the
Retirement System properly accounted for and collected interest
receivable from the Government based on the consent judgment.
To accomplish the audit objective, we reviewed documents and
records pertaining to the Retirement System's operations during
fiscal years 1996, 1997, and 1998 (through June). In addition,
we interviewed Retirement System personnel regarding actions
taken to implement the prior audit recommendations and to collect
and record employee and employer contributions. The audit was
conducted at the Retirement System offices on St. Thomas and St.
Croix.
Our review was made, as applicable, in accordance with the
"Government Auditing Standards," issued by the Comptroller
General of the United States. Accordingly, we included such
tests of records and other auditing procedures that were
considered necessary under the circumstances to accomplish the
audit objective.
Based on the limited objective and scope of our audit, we
evaluated internal controls only to the extent that they related
to corrective actions taken on the prior audit recommendations
and the amended consent judgment issued by the District Court of
the Virgin Islands. The internal control weaknesses identified
in these areas are addressed in the Findings and Recommendations
section of this report. Our recommendations, if implemented,
should improve the internal controls in these areas.
PRIOR AUDIT COVERAGE
During the past 5 years, the Office of Inspector General has not
issued any audit reports on the Government Employees Retirement
System. However, in September 1985, the Office of Inspector
General issued the report "Employees Retirement System,
Government of the Virgin Islands" (No. V-TG-VIS-24-84), which
stated that improvements were needed in the controls over (1)
reserve funding, (2) loan policies and administration, (3)
interest income, (4) the performance of professional investment
managers, and (5) duty-connected disability annuities.
Specifically, the report stated that the Retirement System may
not have accumulated sufficient reserves to guarantee the payment
of all promised retirement benefits, loan procedures were not
sufficient to prevent lost revenues and to protect the Retirement
System's interests, annual revenues of more than $164,000 were
not realized because of the procedures used by the Retirement
System to compute interest on personal loans, actions taken by
the Retirement System were not sufficient to timely correct poor
performance demonstrated by investment managers, and internal
controls were not sufficient to detect and minimize errors in
computing duty-connected disability annuities.
Additionally, in September 1991 the Office of Inspector General
issued the report "Followup of Recommendations Concerning the
Employees Retirement System, Government of the Virgin Islands"
(No. 91-I-1431), which stated that 15 of the 24 recommendations
contained in the 1985 report had not been implemented. The
report further stated that although some improvements had been
made in reserve funding, personal loan interest computations,
investment management, and disability annuity calculations,
additional improvements were needed with regard to loan
administration. Specifically, the Retirement System did not have
current and accurate records on the status of loans, minimal
collection efforts were made on delinquent loans, and Retirement
System personnel did not take sufficient action to ensure that
automobiles and real property purchased by members through loans
from the Retirement System were adequately insured. As a result
of the followup audit, we made three new recommendations.
Additionally, based on the Governor's response to the draft of
the followup audit report, we considered 2 of the 15 outstanding
recommendations from the1985 report resolved and implemented and
the remaining 13 prior recommendations and the 3 new
recommendations unresolved. Our current audit disclosed that 4
of these 16 unresolved recommendations had been partially
implemented and that10 recommendations had not been implemented.
We also considered 1 recommendation implemented and withdrew 1
recommendation.
FINDINGS AND RECOMMENDATIONS
A. LOANS TO MEMBERS
We found that the Retirement System did not fully implement 15 of
the 16 unresolved recommendations contained in our 1991 followup
report (see Appendix 2) and therefore did not adequately
administer loans to members of the Retirement System.
Specifically, the Retirement System did not (1) initiate
collection actions on delinquent loans, (2) have accurate and
reliable loan information on its computer system, (3) implement
standardized written policies and procedures for loan processing,
and (4) ensure that all automobile and mortgage loans had current
insurance policies to protect the Retirement System's interests.
The laws related to the operations of the Retirement System are
contained in Title 3, Chapter 27, of the Virgin Islands Code.
The deficiencies existed because the Retirement System's computer
system was outdated (a new system was being installed as of July
1998) and a key position within the Retirement System's loan
administration section had been vacant since 1995. As a result,
as many as 1,054 loans, with outstanding balances of about $5.3
million, were delinquent as of February 1998; the computerized
loan files contained duplicate accounts, incorrect social
security numbers, and incorrect or outdated loan status
information; automobile loans were not approved and mortgage
loans were not closed timely; and 32 of 35 automobile and home
mortgage loans reviewed did not have required insurance policies.
Collection Enforcement
Of the 16 recommendations contained in the 1991 followup report
(13 recommendations carried forward from the 1985 report and 3
new recommendations), we found that 4 recommendations were
partially implemented and 10 recommendations were not
implemented. We also considered 1 recommendation implemented and
withdrew 1 recommendation. (A summary of the status of each
recommendation is in Appendix 2.) Specifically, the Retirement
System took actions to (1) establish escrow accounts for mortgage
holders; (2) establish a Mortgage Loan Fund, as required by
Title 33, Section 3026, of the Virgin Islands Code; (3) ensure
that annuity computations were verified for accuracy; and (4)
ensure that the Government's independent agencies submitted
retirement contribution information in a timely manner and in a
format usable by the Retirement System. However, the Retirement
System did not have adequate controls over loans to members of
the Retirement System.
The Retirement System provides, to eligible members, automobile,
land, home mortgage, and personal loans. According to Title 3,
Chapter 27, of the Virgin Islands Code, members contributing to
the Retirement System for at least 2 years can obtain personal
loans for $20,000 or 75 percent of their contributions paid into
the Retirement System, whichever is less. Members contributing
to the Retirement System for at least 5 years can also obtain
automobile loans of up to $18,000, land purchase loans of up to
$30,000, and home mortgage loans of up to $105,000. According to
Retirement System records, as of February 1998, the Retirement
System had 13,445 outstanding loans, totaling $61.9 million. Of
that amount, 1,054 loans, totaling $5.3 million, were recorded as
delinquent, as shown in Table 1:
Table 1. Retirement System Loans Recorded as Delinquent
Type of Loan No. of Loans Outstanding Balance
Home Mortgage 184 $2,964,088
Personal 816 2,127,609
Automobile 47 157,592
Land Purchase 7 67,643
Total 1,054 $5,316,932
We reviewed a sample of 80 loans, totaling $907,729, that were
identified in the Retirement System's records as delinquent. We
found that only 44 of the 80 loans were delinquent. The
remaining 36 loans consisted of 15 loans to retired members who
continued to make loan payments after retirement, 8 loans to
active members who either were current in their loan payments or
had paid off their loans, 5 loans that were paid off from the
members' retirement contributions, 3 loans that were paid off
upon the death of the members, 1 loan that was not recorded in
the name of the correct member, 1 loan for which Retirement
System officials could not determine the borrower, and 3 loans
for which the loan files could not be located. Based on our
review, we determined that the Retirement System had initiated
collection actions on only 10 of the 44 loans which were verified
as delinquent and that the period of delinquency of the 44 loans
ranged from 128 to 5,146 days (4 months to 14 years). For
example:
- A mortgage loan with an outstanding balance of $32,955
had been delinquent since September 24, 1987, or a total of
3,843 days (10.5 years).
- An automobile loan with an outstanding balance of $4,240
had been delinquent since April 5, 1990, or a total of 3,039
days (8.3 years).
- A personal loan with an outstanding balance of $2,035 had
been delinquent since March 1, 1984, or a total of 5,146
days (14.1 years).
We also found that the Retirement System had not deducted loan
payments from the annuities of at least two members who had
retired or from the refund of retirement contributions of one
member who had resigned from government service.
We believe that the Retirement System should establish a
collection enforcement program that includes procedures which
ensure that (1) automatic deductions for required loan payments
are made from all active and retired members who have outstanding
loans; (2) delinquent loan amounts are deducted from the
retirement contribution refunds due members who leave government
service; (3) foreclosure is initiated on the automobiles, land,
or homes of members who have defaulted on their loans and who
have not made reasonable efforts to pay the delinquent amounts;
and (4) all delinquent loans are reported to the major credit
bureaus. The Retirement System should also obtain periodic
updates from the Motor Vehicle Bureau of the Virgin Islands
Police Department on the ownership status of automobiles
purchased with loans that are delinquent to improve the chances
of repossessing the vehicles of individuals.
Computer Files
As stated in the section "Collection Enforcement," we found that
the computerized loan files maintained by the Retirement System
were not reliable. In 1987, the Retirement System began using a
new computer for its loan operations. During the conversion to
the new computer, loan account information was not verified, and
incorrect data, such as loan balances and interest rates, were
transferred to the new computer. As a result, Retirement System
personnel had to manually recalculate interest and loan amounts
to provide accurate loan balances in response to inquiries or for
collection enforcement action. We also found that the computer
system contained (1) duplicate names (accounts); (2) incorrect
social security numbers; (3) loan balances that reverted to the
old, incorrect balance after having been recalculated and
corrected; (4) loans that had been paid off; (5) loans that were
recorded in the incorrect members' names; and (6) retirement
contribution payments that were recorded to the incorrect
accounts.
In July 1998, the Retirement System began to convert its loan
account files to off-the-shelf, personal computer-based software.
Retirement System officials said that when this conversion is
fully implemented, the software is expected to handle all of the
Retirement System's loan operations, including loan processing
and reporting. The officials further stated that the software
will be able to produce specialized reports, immediately provide
loan payoff amounts, and identify delinquent and uninsured
accounts. However, these officials were uncertain as to whether
the new software would be able to interface and share information
with the Retirement System's main financial accounting software.
As such, some manual intervention may be necessary to transfer
consolidated loan balance information from the new loan
management software to the financial accounting software.
To ensure the accuracy of loan account information on the new
loan management system, we believe that the Retirement System
should ensure that all loan account data, including identifying
information, payment methods, interest rates, and outstanding
loan balances, are verified prior to entry into the new system.
At the November 24, 1998, exit conference on the preliminary
draft of this report, Retirement System officials stated that
they were carefully reviewing the accuracy of loan information as
part of the conversion process and that they had drafted several
proposed changes to strengthen the Retirement System's internal
operating procedures with regard to loan administration.
Loan Processing Procedures
The Retirement System did not establish formal standardized
procedures for processing loans. Although the maximum loan
amounts, interest rates, and service eligibility requirements are
prescribed in Title 3, Chapter 27, of the Virgin Islands Code,
the Retirement System did not have detailed guidelines for issues
such as income requirements, outstanding debt limitations, loan
processing time frames, and collection procedures. For example,
although Retirement System officials said that they had a verbal
policy of approving automobile loans if the applicant had
residual monthly income of at least $250 per month, this policy
was not documented.
We also found that although the Retirement System's office on St.
Croix maintained detailed logbooks of the automobile and mortgage
loan applications, including the date received and the date
approved or closed, such logbooks or other similar processing
records were not maintained at the St. Thomas office. Based on
our review of the St. Croix logbooks, we found that the
automobile loan approval process took from 6 to 24 days (average
of 13 days) and that the mortgage loan approval process took from
5 to 14 months (average of 8 months) through the closing date.
At the November 24, 1998, exit conference, Retirement System
officials stated that sometimes title problems outside the
control of the Retirement System delayed the closing of mortgage
loans.
In addition, we determined that an individual who was not a
member of the Retirement System had an outstanding mortgage loan.
The applicant, who was a member of the Retirement System at the
time of the application, and his spouse were co-borrowers on the
loan. The couple were later divorced, and the loan was
transferred to the spouse, who was not a Retirement System
member. Retirement System officials told us that they had
questioned the propriety of this loan but that the loan had been
approved by the Board of Trustees. The loan has been delinquent
for more than 2 years. We believe that formal guidelines for
loan administration would have precluded approval of a loan for
an individual who was not a member of the Retirement System.
Insurance Coverage
The Retirement System did not ensure that recipients of
automobile and mortgage loans financed by the Retirement System
maintained automobile and property damage insurance coverage, as
required by Title 3, Section 717, of the Virgin Islands Code, to
protect the Retirement System's interests. Of 35 loans included
in our review that required automobile or property damage
insurance, only 3 loans had insurance coverage. We found that
this deficiency existed in part because the Retirement System did
not have an employee who monitored the status of insurance
coverage. Retirement System officials told us that a vacancy
announcement to fill the position of Insurance Monitor was not
successful because the position's salary was too low to attract
qualified candidates, but they stated that filling this position
was critical to improving the Retirement System's administration
of loans.
At the November 24, 1998, exit conference, Retirement System
officials stated that they were planning to implement a "force
placed" insurance program (that is, the Retirement System would
obtain insurance for the borrower) for mortgage and automobile
loans and that the proposed insurance carrier would have the
ability, through its computerized insurance database, to identify
borrowers whose insurance policies had lapsed. Retirement System
officials also stated that they were reviewing proposals for
providing disability and income protection insurance coverage for
borrowers.
Recommendations
We recommend that the Board of Trustees of the Government
Employees Retirement System direct the Administrator to:
1. Reconsider the recommendations in the September 1991
report which have not been fully implemented (see Appendix
2) and develop a plan of action which identifies the
corrective actions to be taken and includes target dates and
titles of officials responsible for implementation of these
recommendations.
2. Establish a collection enforcement program which includes
procedures to ensure that automatic deductions for required
loan payments are made from the salaries of all active and
retired members who have outstanding loans; delinquent loan
amounts are deducted from the refunded retirement
contributions due members who leave government service;
foreclosure is initiated on the automobiles, land, or homes
of members who have defaulted on their loans and who have
not made reasonable efforts to repay the delinquent amounts;
and all delinquent loans are reported to the major credit
bureaus.
3. Obtain periodic updates from the Motor Vehicle Bureau,
Virgin Islands Police Department, on the ownership status of
automobiles purchased with loans that are delinquent to
determine whether the vehicles are registered in the names
of the individuals who have the delinquent loans.
4. Establish and implement a plan of action to ensure that
all loan data are verified, corrected, and updated as part
of the conversion to the new personal computer-based loan
management system.
5. Develop and implement formal written guidelines for all
loan application, processing, administration, and collection
functions of the Retirement System's Loan Section.
6. Expedite the hiring of an Insurance Monitor so that
mandatory insurance coverage for automobile and mortgage
loans financed by the Retirement System is enforced.
Government Employees Retirement System Board of Trustees Response
and Office of Inspector General Reply
In the January 28, 1999, response (Appendix 3) to the draft
report from the Chairperson of the Government Employees
Retirement System's Board of Trustees, the Board addressed the
recommendations from our September 1991 followup report on the
Retirement System (the status of which is summarized in Appendix
2 of this report). However, theBoard did not address the new
recommendations made as a result of our current audit.
Therefore, we consider Recommendations A.2 to A.6 unresolved and
request additional information for Recommendation A.1 (see
Appendix 4).
General Comments on Prior Audit Recommendations
The Retirement System's January 28, 1999, response provided
information on concurrence or nonconcurrence with the prior audit
recommendations (see Appendix 2) and proposed actions to
implement those recommendations with which the Retirement System
concurred. In summary, the response indicated concurrence with
the September 1991 report's Recommendations 1.3, 1.5, 2.1, 2.3,
2.4, 2. 7, 2.8, 5.3, B.1, B.2, and B.3 and provided information
on proposed corrective actions. However, the response did not
provide target dates or titles of the officials responsible for
implementing the proposed actions. In addition, the Board
nonconcurred with Recommendations 2.2, 2.9, 2.11, and 4.3, as
discussed in the paragraphs that follow.
Prior Recommendation 2.2. Nonconcurrence.
Board of Trustees Response. The Board stated that the
Retirement System did not agree that a "credit history is
necessary" for personal loans to Retirement System members,
"since the loans are fully collateralized by the
contributions."
Office of Inspector General Reply. While we agree that
personal loans to Retirement System members are
collateralized by the members' retirement contributions, we
believe that because of the large number of delinquent
personal loans (816 delinquent loans, with outstanding
balances totaling $2.1 million, according to Retirement
System records as of February 1998), the Retirement System
should take additional precautions to ensure that there will
be a high probability that members will pay off new personal
loans. In our opinion, a review of the credit histories of
loan applicants is an additional step the Retirement System
can take as part of its loan approval process to ensure that
loans are not given to individuals who have a history of
delinquent loans and other debts.
Prior Recommendations 2.9 and 2.11. Nonconcurrence.
Board of Trustees Response. Regarding Recommendation 2.9,
the Board stated that the Retirement System "lacks any
authority or jurisdiction to compel the Office of Management
and Budget or the Commissioner of Finance to source the
[Mortgage Loan Fund] in accordance with the statutory
mandate." Regarding Recommendation 2.11, the Board stated
that "it is our position that this recommendation be
withdrawn because it [the recommendation] falls beyond any
reasonable scope of authority wherein [the Retirement
System] can be expected to exercise corrective action."
Office of Inspector General Reply. We agree that the
Retirement System does not have the authority to compel the
Executive or Legislative Branches of the Government of the
Virgin Islands to provide funding for activation of the
Mortgage Loan Fund. To that extent, we will refer these
recommendations to the Governor and the Legislature of the
Virgin Islands. However, because it would be in the best
interest of the Retirement System to have the Mortgage Loan
Fund activated as a resource to compensate the System for
defaulted loans to members, we also believe that the
Retirement System could submit to the newly elected Governor
and Legislature documentation presenting its support for
activation of the Mortgage Loan Fund.
Prior Recommendation 4.3. Nonconcurrence.
Retirement System Response. The Board stated that
"corrective action on this recommendation was implemented as
far back as July 1, 1994, when the [Retirement System]
contracted with [a bank] to perform Global Custodial
Services. That contract bound [the bank] as custodian, to
perform a number of custodial services which required [the
bank] to reconcile transactions, examine transactions for
unauthorized trades, notify the investment managers of all
unauthorized trades and initiate appropriate actions to
cancel unauthorized trades as soon as they are discovered."
The Board also stated that the Retirement System "is in the
transition of changing its Global Custodian . . . [to] an
institution whose primary services are custodial trust
services for private and public trust institutions" and that
the proposed custodian "has the ability to deliver a vast
range of reports within 24 hours of month end closings, and
they have the ability to have audited reports available
which can be accessed on-line, within three days of the
monthly closing."
Office of Inspector General Reply. At the time of the
audit, detailed information was not provided to our auditors
on the level of custodial services provided by the
Retirement System's current custodian. Further, as we
stated in Appendix 2, Retirement System officials told us at
the exit conference on the draft of this report that they
were evaluating proposals for new investment brokers and
that the candidate firm would have the capability to
implement the prior audit recommendations. Based on the
response, we consider prior Recommendation 4.3 resolved and
implemented and have revised Appendix 2 accordingly.
B. RETIREMENT CONTRIBUTIONS
We found that the Retirement System did not effectively manage
and monitor employer and employee contributions, which are the
primary investment capital used to fund the Retirement System's
activities and benefits. Specifically, (1) incorrect retirement
contribution amounts were deducted from members' salaries, (2)
employer and employee contributions were not submitted to the
Retirement System within the court-ordered time frames, and (3)
bank reconciliations were not performed for the Retirement
System's bank account. The laws related to the Retirement
System's operations are contained in the Title 3, Chapter 27, of
the Virgin Islands Code. In addition, a consent judgment issued
by the U.S. District Court requires that employer and employee
contributions be received by the Retirement System within 21 days
of the end of each applicable pay period. The deficiencies
occurred because the Retirement System, the Department of
Finance, and the Division of Personnel did not adequately
coordinate with each other (as appropriate) to develop and
implement procedures to ensure that changes to employees'
retirement deduction rates were processed correctly, retirement
contribution payments and applicable interest were submitted to
the Retirement System within required time frames, and bank
reconciliations were performed on a monthly basis. In addition,
the Retirement System did not establish procedures to ensure that
members' retirement deductions were accurately computed and that
members were provided with annual statements of their retirement
accounts. As a result, the Retirement System (1) had to issue
retirement contribution refunds of $104,000 to members during
fiscal years 1996 to 1998; (2) lost investment income of at least
$1 million during fiscal years 1996, 1997, and 1998; and (3) had
a $15 million difference between its internal records and the
bank statement balance.
Retirement Deductions
According to the Government Employee Retirement System Handbook,
a new Government employee becomes a member of the Retirement
System after 1 month of employment and immediately starts
contributing to the Retirement System. The retirement
contribution is computed as a percentage of the employee's salary
based on job classification and is deducted in biweekly
increments. Regular employees contribute at a rate of 8 percent,
legislators contribute at a rate of 9 percent, and employees in
hazardous duty jobs contribute at a rate of 10 percent.
Based on our review of a sample of 41 retirement contribution
refunds, totaling $218,138, issued to 30 employees, we found that
12 refunds, totaling $2,969, were inappropriate because incorrect
percentage rates were used to compute employees' retirement
deductions. For example:
- A police detective had 16 percent of his salary
deducted (twice the 8 percent regular employee rate) for the
period of September 1994 through November 1995, although the
deductions should have been at the 10 percent hazardous duty
rate. In September 1996, the employee was refunded $1,226,
which was the total amount erroneously deducted.
- A corrections officer had deductions at both the 8
percent regular employee rate and the 10 percent hazardous
duty rate for four pay periods in April and May 1997, even
though the deductions should have been at the 10 percent
rate. In September 1997, the employee was refunded $259,
which was the amount erroneously deducted. We found that
duplicate deductions had also been reported by the employee
in June and July 1996.
- A police radio dispatcher, who was not considered
by job position to be a law enforcement officer, had
deductions at both the 8 percent regular employee rate and
the 10 percent hazardous duty rate for three pay periods in
March 1996, although the deductions should have been made at
the 8 percent regular employee rate. Although the
employee's retirement files did not contain documentation
that a refund was issued, we estimated that the employee was
due a refund of $194. The files showed that duplicate
deductions had also been reported by the employee in
February and July 1996 and in April 1997.
Because of incorrect deduction rates, the Retirement System had
to pay refunds to members of the Retirement System totaling
$104,000 in fiscal years 1996, 1997, and 1998. Also, in those
cases where deductions were made at both the 8 percent and the 10
percent rates, only one deduction amount (usually the 8 percent
regular employee deduction) was posted to the employees'
Retirement System accounts. Therefore, the potential existed for
an employee who applied for retirement from a hazardous duty
position to be denied retirement benefits at the hazardous duty
level unless the employee either had documents to substantiate
that excess retirement contributions had been deducted or had
paid to the Retirement System an additional retirement
contribution amount representing the 2 percent difference between
the 8 percent regular duty contribution shown in the Retirement
System records and the 10 percent hazardous duty contribution
amount that should have been recorded.
We found that incorrect deduction amounts usually resulted when
an employee transferred between different job categories (such
as from regular duty to hazardous duty) and the prior deduction
was not stopped before the new deduction was started. Further,
although the Department of Finance provided the Retirement System
with biweekly summaries of retirement deductions, these summaries
were not reviewed by Retirement System personnel to identify any
errors. Consequently, the errors may not have been corrected if
the employees had not informed Retirement System officials of the
incorrect deductions.
Retirement System officials told us that the incorrect deductions
were caused by a programming or procedural problem at the
Department of Finance which resulted in Notices of Personnel
Action for changes in the employees' retirement deduction rates
not being captured in the Department of Finance's computer.
However, Department of Finance officials said that the problem
was procedural because Retirement System and/or Division of
Personnel employees did not deactivate the previous deduction
rate. We believe that representatives of the Retirement System,
the Department of Finance, and the Division of Personnel should
jointly develop procedures to eliminate the incorrect retirement
deductions.
Retirement Contribution Payments
Retirement contributions for Government employees are submitted
to the Retirement System by the Department of Finance through
lump-sum checks for each biweekly pay period. Each check
includes deductions made from employees' salaries and the
Government's 14.5 percent contribution. The 1994 consent
judgment issued by the U.S. District Court requires such
contributions to be received by the Retirement System within 21
days of the end of the pay period for which the contributions are
applicable. However, we found that the Government did not always
comply with this requirement. Specifically, for fiscal year
1996, none of the 25 biweekly checks (excluding 1 check that was
lost in transit and had to be reissued) were issued to the
Retirement System within the 21-day time frame specified by the
Court. The processing times ranged from 4 to 155 days late, with
an average of 70 days late. Similarly, during fiscal year 1997,
none of the 26 biweekly checks were issued within the 21-day time
frame. The processing times ranged from 5 to 51 days late, with
an average of 25 days late. However, we noted a significant
improvement for fiscal year 1998, in which only 4 of the 26
checks were issued late, with a range of 5 to 11 days, or an
average of 7 days late. Department of Finance officials
attributed the late contribution payments to cash flow problems
that prevented timely payment to the Retirement System.
We estimated, based on a conservative 6.9 percent rate of return
(as proposed by Retirement System officials), that the late
contribution payments resulted in lost interest income to the
Retirement System of at least $722,529 in fiscal year 1996,
$272,214 in fiscal year 1997, and $5,347 in fiscal year 1998, for
a total of $1 million over the 3 years. Although Retirement
System officials provided us with copies of numerous letters sent
to the Department of Finance during the period of September 1995
to July 1997 urging the Department to submit retirement
contribution payments in a timely manner, the Retirement System
and the Department of Finance had not jointly adopted
comprehensive procedures to ensure that contribution payments
were submitted within the 21-day time frame established by the
District Court. We believe that Retirement System and Department
of Finance officials should consult with the District Court to
establish formal policies and procedures, including applicable
interest rates for late payments, to ensure compliance with the
21-day payment time frame.
Bank Reconciliations
Title 3, Section 716, of the Virgin Islands Code designates the
Commissioner of Finance as the treasurer of the Retirement
System. However, despite documented attempts by Retirement
System officials and their independent auditors, the Retirement
System had not been able to obtain from the Department of Finance
an up-to-date, reconciled cash balance for the Retirement
System's bank account. Also, Retirement System personnel had not
been able to perform their own reconciliations between the
Retirement System's internal records and the bank statements.
The most recent bank reconciliations were performed by the
Department of Finance for fiscal years 1994 and 1995. For fiscal
year 1994, the Department had to adjust its book balance upward
by $25.4 million to match the $32.6 million bank balance, and for
fiscal year 1995, the Department had to adjust its book balance
downward by $44.7 million to match the negative $28.5 million
bank balance. The adjustments to the book balances resulted from
debit and credit memoranda issued by the bank, interest income
that had not been recorded in the financial records, and data
entry errors by the Department of Finance that resulted in
underposted and unrecorded deposits and overposted checks.
For fiscal year 1996, the Retirement System began to maintain an
internal cash flow statement (called an "inflow/outflow
statement" by the Retirement System). However, the Retirement
System had not reconciled these cash flow statements to the
monthly bank statements. Specifically, we found that for fiscal
year 1996, there was an unreconciled difference of $14.5 million,
for fiscal year 1997 there was an unreconciled difference of
$14.9 million, and for fiscal year 1998 (as of March 1998) there
was an unreconciled difference of $15 million. Retirement System
officials said that the bank account could not be reconciled
because the Department of Finance could not confirm a cash
balance for the account and canceled checks were not available to
the Retirement System because they were sent to the Department of
Finance by the bank. Department of Finance officials
acknowledged that differences existed between the book and the
bank balances for the Retirement System's account and that
Department and Retirement System personnel had tried
unsuccessfully to reconcile the account.
At the November 24, 1998, exit conference, Retirement System
officials suggested that the System's bank account be transferred
from the Department of Finance to the Retirement System. We
concur with this suggestion because it would give the Retirement
System direct control of its bank account and allow Retirement
System personnel to concentrate their efforts on reconciling
their own bank account. At the time of our audit, the Department
of Finance was responsible for managing and reconciling all of
the main bank accounts of the Government of the Virgin Islands.
Therefore, Finance personnel could not concentrate their efforts
on reconciling the Retirement System account. The suggested
change of custodianship would also allow the Retirement System to
make transfers between the bank account and various investment
accounts without the delays inherent in having to request that
such transfers be processed by the Department of Finance.
Prior Service Payments
During the audit, we noted that nine members of the Retirement
System who had applied for retirement benefits were required to
make lump-sum payments of retirement contributions totaling
$23,698 for prior service before becoming eligible to receive
retirement annuities. In one instance, the member had to pay
$15,514 in prior service contributions. Title 3, Section 704(i),
of the Virgin Islands Code allows members of the Retirement
System to make payment of retirement contributions for prior
creditable service, with the provision that such payments should
be made over a period not to exceed 5 years prior to retirement.
In the nine cases identified during our review, it appeared that
the members were not aware that they had not made full retirement
contributions. We found that the Retirement System did not send
periodic (at least annual) retirement account statements to
members so that they could review the status of their retirement
accounts and contact the Retirement System to make any
adjustments, corrections, or additional contribution payments
which were necessary.
Recommendations
We recommend that the Board of Trustees of the Government
Employees Retirement System direct the Administrator to:
1. Coordinate with officials of the Department of Finance
and the Division of Personnel to develop and implement
procedures to ensure that changes and updates to employees'
retirement deduction rates are properly made in the
Government's payroll system.
2. Review the files pertaining to all active members of the
Retirement System to identify any employees who have
incorrect retirement deductions and take actions to correct
the deduction rates.
3. Coordinate with officials of the Department of Finance
and the U.S. District Court to develop procedures to ensure
that retirement contribution payments are submitted to the
Retirement System within the time frames required by the
U.S. District Court consent judgment. The procedures should
include a provision for the Government to compensate the
Retirement System for interest income lost by late
submission of contribution payments at an interest rate
approved by the District Court.
4. Propose legislation to transfer custodianship of the
Retirement System's bank account to the Retirement System
and coordinate with officials of the Department of Finance
and the bank to reconcile the bank account and to develop
and implement procedures to ensure that future
reconciliations are performed on a monthly basis.
5. Implement procedures to provide members of the Retirement
System with periodic (at least annual) statements of their
retirement accounts.
Government Employees Retirement System Board of Trustees Response
and Office of Inspector General Reply
In the January 28, 1999, response to the draft report from the
Chairperson of the Government Employees Retirement System's Board
of Trustees, the Board addressed the recommendations contained in
our September 1991 audit report, the status of which is
summarized in Appendix 2 of this report. However, the Board did
not address the recommendations made as a result of our current
audit. Therefore, we consider Recommendations B.1, B.2, B.3,
B.4, and B.5 unresolved (see Appendix 4).
APPENDIX 1
CLASSIFICATION OF MONETARY AMOUNTS
Unrealized
Finding Area
Revenues*
A. Loans to Members
Collection Enforcement $5.3 million
B. Retirement Contributions
Contribution Payments $1.0 million
Total $6.3 million
__________
*Amounts represent local funds.
APPENDIX 2
Page 1 of 6
STATUS OF RECOMMENDATIONS
AND CORRECTIVE ACTIONS
FOR AUDIT REPORT
"FOLLOWUP OF RECOMMENDATIONS CONCERNING
THE GOVERNMENT EMPLOYEES' RETIREMENT SYSTEM,
GOVERNMENT OF THE VIRGIN ISLANDS"
(No. 91-I-1431)
Recommendations
Prior Audit Recommendations
1.3. Submit a bill to the Legislature which makes it unlawful to
(1) increase benefits without making compensations to cover the
present and future costs of such benefits and (2) reduce
contributions without eliminating benefits which would no longer
be financed.
1.5. Consider the establishment of a temporary moratorium on the
issuance of new personal loans until (1) a complete evaluation is
made of the status of existing personal loans, (2) loan records
are brought up to date, (3) collection actions are begun for
delinquent loans, and (4) loan administration procedures are
implemented to ensure proper management of the personal loan
program.
Recommendations
2.1. Immediately initiate collection efforts on all automobile
and mortgage loans currently delinquent over 6 months.
Specifically, (1) determine whether a delinquent borrower is
receiving retirement annuities and, in such instances, initiate
collection efforts through semimonthly annuity deduction and
notify the borrower of the action and (2) for all other
borrowers, issue a new letter informing each borrower that
repossession or foreclosure actions will be taken if settlement
is not immediately made. For nonresponsive borrowers, forward
the account to the System's attorney and follow up on each
account to ensure that timely legal actions were taken by the
attorney.
2.2. In conjunction with Recommendation 1.5, reduce the risk
associated with personal loans by (1) basing each approval on the
applicant's prior credit history, continuity of employment,
intent, and ability to meet financial obligations and (2)
requiring a valid need to be stated and evidence submitted to
verify that funds were used for their approved purpose. If funds
are not used for their stated purpose, disapprove all future
loans to the member.
Recommendations
2.3. Minimize delinquent accounts by implementing procedures to
immediately initiate collection efforts when automobile and
mortgage loans become delinquent. When borrowers are
nonresponsive to inquiries, ensure that accounts are forwarded to
the System's attorney and repossession and foreclosure efforts
are timely performed.
2.4. Monitor the accumulation of interest and penalties on
personal loans, and immediately initiate collection efforts when
accumulated amounts exceed a member's contribution.
2.7. Establish an escrow account for each mortgage holder so
that funds are accumulated toward the payment of insurance
premiums and property taxes.
2.8. Satisfy the legal requirement for insurance against a
mortgage holder's death or disability by (1) amending the current
life insurance policy to include insurance against the total
disability of a mortgage holder, (2) ensuring insurance premiums
for the policy are paid within the established grace period, and
(3) passing the cost of insurance to mortgage
Recommendations
holders by adding a charge to biweekly payroll deductions.
2.9. Seek reimbursement from the Mortgage Loan Fund for all
losses resulting from mortgage loans.
2.11. Submit a bill to the Legislature which appropriates
sufficient funds to finance and establish the Mortgage Loan Fund
as outlined in Title 33 of the Virgin Islands Code. Replenish
the fund through annual appropriations.
4.3. For each quarterly statement received from the custodian,
reconcile trade transactions to broker confirmation receipts.
Investigate and correct all variances prior to 180 days elapsing
after receipt of each statement. During the reconciliation,
examine transactions for trades not authorized by the Virgin
Islands Code. Notify appropriate investment managers of all
unauthorized trades, and initiate administrative actions if
unauthorized trades continue.
4.4. Pursue a conservative investment strategy so that risk is
minimized in conjunction with maximum returns. Specifically,
reevaluate investment guidelines given to managers for possible
reduction of the 40 percent limitation established for stock
investments. Any reduction should be moved into fixed income
investments.
Recommendations
5.3. Perform a 100 percent review of all annuities when computed
at time of retirement. Systematically spot-check the computation
for annual increments and cost-of-living allowances to minimize
computation errors.
New Recommendations
B.1. Require that the independent agencies submit payroll
deduction information on a biweekly basis and in a format
specified by the Retirement System to meet its processing needs.
If any of the independent agencies do not voluntarily meet the
Retirement System's requirements, consideration should be given
to refusing to process loans for employees of that agency until
the requirements are met.
B.2. Institute procedures to ensure that loan transactions,
including those related to loans to retirees, are processed in a
timely manner.
Recommendations
B.3. Expedite the hiring of additional staff needed to undertake
a special project to bring all loan records up to date.
Status of Corrective Actions
Not implemented. Retirement System officials stated that the
recommended legislation had not been submitted to the
Legislature. The Retirement System's unfunded pension liability
was $388 million as of fiscal year 1996 (the latest actuarial
report available). At the exit conference, Retirement System
officials stated that they will propose legislation to require
that a financial assessment be performed before future changes
are made to the benefit and contribution levels of the Retirement
System.
Not implemented. The Retirement System has not brought loan
records up to date. We found that the loan records contained
duplicate names (accounts), inaccurate account balances, and
other errors. In addition, there were no formal procedures for
enforcing the collection of delinquent loans. According to
Retirement System records, there were 1,054 delinquent loans,
with outstanding balances totaling about $5.3 million. At the
exit conference, Retirement System officials stated that they
believed loan administration could be improved without
implementing a moratorium on new loans. They also noted that
prior attempts to place a moratorium on new loans were
disapproved by the Legislature. In our opinion, regardless
APPENDIX 2
Page 2 of 6
Status of Corrective Actions
of whether a moratorium on new loans is implemented, the
recommended actions to improve controls over existing outstanding
loans should be implemented.
Not implemented. We found three mortgage loans that had been
delinquent since 1987 and one auto loan that had been delinquent
since 1988 but for which no collection action had been taken by
the Retirement System. In addition, we identified a retired
member who had a mortgage loan that was 6 1/2 years delinquent
but did not have loan payment amounts deducted from his
retirement annuity.
Not implemented. Retirement System officials stated that
personal loans are approved provided the member has at least 2
years of credited service. The officials also said that they
believed that a member's signature on the loan application was
sufficient to support that the funds will be used for the stated
purpose. Retirement System officials also stated that the
Retirement System's interests were protected because personal
loans were secured by the member's retirement contributions and
that prior attempts to require applicants to state the purpose of
personal loans were disapproved by the Legislature. However, we
believe that, at a minimum, the Retirement System should consider
an applicant's prior credit history and
APPENDIX 2
Page 3 of 6
Status of Corrective Actions
ability to repay the loan as part of the personal loan approval
process.
Not implemented. The Retirement System did not have formal
procedures for handling delinquent loans, including the referral
of delinquent mortgage and automobile loans to the Retirement
System's attorney. Further, no one was specifically assigned to
enforce the collection of delinquent automobile loans, and the
employee assigned to enforce the collection of mortgage loans was
also responsible for processing loan applications.
Not implemented. The Retirement System did not monitor the
accumulation of interest on the personal loans. As a result, we
found four personal loans for which the interest, totaling
$6,515, exceeded the members' contributions. In addition, the
Retirement System did not charge penalties to members who had
delinquent loans.
Partially implemented. The Retirement System established escrow
accounts for mortgage holders whose loans were approved since
1990. However, there are no escrow accounts for mortgage loans
issued prior to 1990. As a result, only 2 of 19 mortgage loans
reviewed had insurance policies.
Not implemented. Retirement System officials stated that the
life insurance policies have not been amended to include
insurance against the total disability of mortgage holders.
Additionally, the Retirement System still pays for the cost of
life insurance. The officials stated that because the 10 percent
interest rate charged by the
APPENDIX 2
Page 4 of 6
Status of Corrective Actions
Retirement System is higher than the rates for commercial
mortgages, the higher interest rate is justified by paying the
cost of life insurance. Based on this explanation, we withdrew
the portion of the prior recommendation relating to adding a
charge to biweekly payroll deductions.
Not implemented. Retirement System officials stated that since
the Mortgage Loan Fund has never been funded, they have not been
able to seek reimbursement from the Fund.
Partially implemented. The Legislature established the Mortgage
Loan Fund in Title 33, Section 3026, of the Virgin Islands Code.
However, the Fund is inactive because it has not received any
appropriations.
Implemented. The Retirement System's response to the draft
report stated that, since July 1994, the System's custodian has
reconciled trade transactions, examined transactions for
unauthorized trades, and taken action to cancel unauthorized
trades as soon as they are discovered. The response also stated
that the Retirement System was in the process of changing to a
new custodian firm, which has the ability to provide enhanced
services to the Retirement System.
Withdrawn. Retirement System officials stated that the
Legislature raised the limitation on stock investments from 40
percent to 50 percent rather than reduce the limitation, as had
been recommended.
Additionally, at the exit conference, Retirement System officials
stated that the Retirement System's investment
APPENDIX 2
Page 5 of 6
Status of Corrective Actions
portfolio was consistent with that of other retirement systems of
similar size and was diverse enough to protect the Retirement
System's interests. Based on information provided to us on the
breakdown of the Retirement System's investment portfolio, we
have withdrawn the recommendation.
Partially implemented. All annuity calculations are subjected
to a supervisory review. We selected a sample of 52 annuities
and found that 6 were initially incorrect. However, five of the
six errors were later detected and corrected by Retirement System
officials. Retirement System officials stated that the remaining
error, which resulted in overpayments totaling $9,602, will be
corrected. However, the Retirement System does not spot-check
annual increments and cost-of-living allowances for accuracy.
Partially implemented. Retirement System officials stated that
agencies are required to submit deduction information within 21
days of each pay period, which is in accordance with the District
Court's consent judgment. In addition, the officials stated that
the format used by the agencies was suitable for use by the
Retirement System. However, the Retirement System did not
receive salary information for the members to verify the accuracy
of deductions.
Not implemented. The Retirement System did not institute
procedures to ensure that loan transactions are processed in a
timely manner. Based on our review, we determined that it took
an average of 29 days between the date a loan payment was
received and the date
APPENDIX 2
Page 6 of 6
Status of Corrective Actions
the payment information was entered into the Retirement System's
computer files. Additionally, it took an average of 13 days for
automobile loans to be approved and an average of 8 months for
mortgage loans to be closed.
Not implemented. Retirement System officials stated that rather
than using temporary employees to bring loan records up to date,
they were attempting to use existing staff to update the loan
records as part of the conversion to the new computer system.
However, because we found that the Retirement System's loan
records were not accurate and up to date at the time of our
review, we believe that additional actions are needed to ensure
that all loan records are updated prior to the new computerized
loan administration system being fully implemented.
APPENDIX 3
Page 1 of 13
EMPLOYEES RETIREMENT SYSTEM RESPONSE
APPENDIX 4
STATUS OF AUDIT REPORT RECOMMENDATIONS
-----------------------------------------------------
Finding/Recommendation
Action
Reference Status Required
A.1 Management Provide target dates and the
concurs; titles of the officials
additional responsible for
informationimplementation of the
needed. corrective actions on the
outstanding prior audit
recommendations, as
described in the Retirement
A.2, A.3, A.4, Unresolved.System's January 28, 1999,
A.5, response to the draft
and A.6 report.
Reconsider the
recommendations, and provide
Unresolved.action plans that include
B.1, B.2, B.3, target dates and titles of
B.4, officials responsible for
and B.5 implementation.
Reconsider the
recommendations, and provide
action plans that include
target dates and titles of
officials responsible for
implementation.
----------------------------------------------------------
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TO THE OFFICE OF INSPECTOR GENERAL BY:
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Office of Inspector General
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Mail Stop 5341
Washington, D.C. 20240
Calling:
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Caribbean Region
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Calling:
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Office of Inspector General
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Suite 807, PDN Building
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Calling:
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