Section 4401.10  Purpose

 

The purpose of this Part is to establish uniform procedures for examination, compliance with examination, hearings and other matters related to examinations and audits.

 

Section 4401.20  Applicability

 

This Part shall apply to all pension funds established under the Illinois Pension Code and maintained for the benefit of employees and officers of governmental units in the State of Illinois [40 ILCS 5/1A-104].

 

(Source:  Amended at 22 Ill. Reg. 15312, effective August 7, 1998)

 

Section 4401.25  Definitions

 

            Accountant means an independent certified public accountant or independent accounting firm in good standing with the American Institute of CPA's and all states in which the accountant is licensed to practice.

 

            Department means the Department of Insurance of the State of Illinois [40 ILCS 5/1A-102] (see P.A. 90-507, effective August 22, 1997).

 

            Division means the Public Pension Division of the Department of Insurance [40 ILCS 5/1A-102] (see P.A. 90-507, effective August 22, 1997).

 

(Source:  Added at 22 Ill. Reg. 15312, effective August 7, 1998)

 

Section 4401.30  Pre-Audit and Examination Procedures

 

a)         Pursuant to Section 1A-104 of the Illinois Pension Code [40 ILCS 5/1A-104], each pension fund or retirement system under the Illinois Pension Code shall be subject to periodic examinations or audits on behalf of the Illinois Department of Insurance.

 

b)         Notification of an impending examination or audit will be given through the issuance of a "Warrant of Examiners."  This Warrant of Examiners shall state the name of the pension fund or retirement system which will be examined, and will identify the examiner appointed to perform the examination or audit.

 

c)         The Warrant of Examiners may also be accompanied by a letter, which shall set a tentative date for a review of the books and other documentation, as well as a request for materials which are to be sent by the pension fund or retirement system to the attention of the examiner within 14 days after receipt of said letter.  In preparing for the examination or audit, the Division's examiner shall have access to all books, records, files, documents and other relevant materials deemed necessary by the Division to assist in the completion of such examination or audit.

 

d)         All requests for an extension of time in providing the requested documents shall be sent to the examiner listed in the warrant at least 7 business days before the scheduled deadline.  One extension of time shall be granted automatically for a period of up to 30 days.  Thereafter, requests for extension shall only be granted for good cause.

 

e)         Pursuant to Section 1A-104 of the Illinois Pension Code [40 ILCS 5/1A-104], the Division may accept and rely upon a report of audit or examination for any pension fund or retirement system made by a certified public accountant in lieu of making an examination and investigation.  Upon receipt of the Warrant of Examiners, a pension fund may file with the Division a certified public accountant examination for its consideration in lieu of conducting the examination.  The Division shall notify the pension fund in writing of its intention to conduct or cancel the impending examination.  The acceptance of the report of audit or examination does not bar the Division from making a further audit, examination, and investigation if deemed necessary by the Division [40 ILCS 5/1A-104].

 

(Source:  Amended at 22 Ill. Reg. 15312, effective August 7, 1998)

 

Section 4401.40  Audit and Examination

 

a)         All audits and examinations, except under special circumstances (such as the need to expeditiously focus on a single issue, that has been brought to the attention of the Division, or an examination of a small fund, where the cost and time used to travel to the site is excessive in comparison to the time spent and information actually obtained), shall be made on site, to insure that all books, documents and other relevant procedures can be made readily available to the examiner.  During the audit or examination, the examiner may look at all aspects of the pension fund's or retirement system's business.  This includes verification of the existence of administrative rules, policies and procedures, verification of the participants in the fund and all information related to the participants, business affairs and expenditures of the pension board, including pension payments and investment holdings and procedures, the appointment and election of trustees, as well as any other relevant issues or procedures.

 

b)         Desk audits will be performed for each fund, following  the timely submission of the annual statement filing.  In addition, desk audits may be performed at any time on a pension fund.

 

c)         Situations may arise which require the Division to perform special examinations.  These examinations are limited by the Division to specific areas of concern.  The authority of the examiner when conducting a special examination shall be the same authority which is granted to the examiner in the performance of a general or full examination or audit.

 

d)         The majority of the audits and examinations will be performed directly by members of the Division.  However, in the event that an outside auditor or examiner is hired, such person shall be given all the rights and powers held by an employee of the Division.

 

(Source:  Amended at 22 Ill. Reg. 15312, effective August 7, 1998)

 

Section 4401.50  Post-Audit and Examination Procedures

 

a)         Following an examination or audit, the examiner may request further information be provided by the pension fund or retirement system.  Such information shall be provided within 2 weeks or within the time frame agreed to by the pension fund or retirement system and the Division.  At any time, the Division may refer investigatory information to the Illinois Attorney General's Office.

 

b)         Once all relevant information has been received and reviewed, the examiner will prepare a written report detailing the status of the pension fund's or retirement system's compliance with the policies, procedures and laws applicable to it.  This report shall be known as the report of examination.  A copy of the report of examination will be sent to the secretary of the pension fund or retirement system.  The fund will then have 30 days after the date of receipt of the report to review it and make any request for a hearing based on the facts contained in the examination report.

 

c)         After 30 days, if no hearing is requested, the examination report shall be officially filed with the Department and the contents shall thereafter be considered public information.  At this time an order shall be entered by the Director of Insurance which requires compliance where it is determined that the pension fund or retirement system has violated the policies, procedures and laws of the State of Illinois.  In response, action must be taken to comply with the findings of the examination report as detailed in the order or within 15 business days, whichever period is shorter.

 

(Source:  Amended at 22 Ill. Reg. 15312, effective August 7, 1998)

 

Section 4401.60  Audit and Examination Hearings

 

a)         Hearings requested pursuant to this Part are limited to the accuracy of the facts contained in the report of examination.

 

b)         All requests for a hearing shall be made in writing and delivered to the Pension Division of the Illinois Department of Insurance.  Such request shall be received within 30 days after the day that the pension fund or retirement system received the report of examination.  Such requests shall identify the specific findings that are in dispute.

 

c)         Once a timely request is received by the Division, the Division will issue a notice of hearing.  All hearings will be scheduled to be held no sooner than 20 days, but no later than 30 days, after receipt of the request, and will be held in the offices of the Department.

 

d)         All hearings will be conducted in accordance with Illinois Administrative Hearing Procedures as outlined in 50 Ill. Adm. Code 2402.

 

e)         The Director will issue a written order following the hearing.  If the Director's decision finds noncompliance, the procedures of 50 Ill. Adm. Code 4435, Noncompliance Notification and Penalties, will be followed.  If the Director's decision finds compliance, the audit and examination report will be rewritten in accordance with the Director's order.

 

(Source:  Amended at 22 Ill. Reg. 15312, effective August 7, 1998)

 

Section 4401.70  Compliance (Repealed)

 

(Source:  Repealed at 22 Ill. Reg. 15312, effective August 7, 1998)