A Report on the Audit of the Employees Retirement System's Fiscal Year 2011 Financial Statements
December 2011
Report Number 12-008
Overall Conclusion
In our audit report dated November 16, 2011, we concluded that the Employees Retirement System's (System) basic financial statements for fiscal year 2011 were materially correct and presented in accordance with accounting principles generally accepted in the United States of America. The System published our audit report as part of its basic financial statements, which it intends to post on its Web site at http://www.ers.state.tx.us/About_ERS/Reports/.
We also issued a report on internal control over financial reporting and on compliance and other matters as required by auditing standards (that report, including responses from System management, is presented in the attachment to this letter). In that report, auditors identified the following deficiencies in the System's internal control structure over accounting for and financial reporting of alternative investments:
- The System does not have documented accounting policies or procedures to ensure that (1) it directs its custodian bank to record transactions associated with the System's alternative investments in accordance with generally accepted accounting principles (GAAP) and (2) the System reports those investments in accordance with GAAP on its financial statements.
- The System does not independently evaluate the reasonableness of alternative investment valuations that it reports on its annual financial statements.
- The System does not review the transactions related to alternative investments that its custodian bank records in the System's general ledger.
Our procedures were not intended to provide an opinion on internal control over financial reporting or to provide an opinion on compliance with laws and regulations. Accordingly, we do not express an opinion on the effectiveness of the System's internal control over financial reporting or on compliance with laws and regulations.
Auditors communicated certain issues that were not material or significant to the audit objectives in writing to the System's management.
As required by auditing standards, we will also communicate to the System's Board of Trustees certain matters related to the conduct of a financial statement audit.