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A Report on the Audit of the Employees Retirement System's Fiscal Year 2012 Financial Statements

December 2012

Report Number 13-012

Overall Conclusion

In our audit report dated November 16, 2012, we concluded that the Employees Retirement System's (System) basic financial statements for fiscal year 2012 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 has posted on its Web site at

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 management, is presented in the attachment). In that report, auditors identified that while the System implemented new processes for financial reporting of alternative investments in fiscal year 2012, those processes were not operating effectively. Specifically, the System did not:

- Complete and review its alternative investment reconciliations within the required time frames.

- Adequately evaluate the alternative investment valuations that it reported on its annual financial statements.

- Accurately report capitalized management fees within its annual financial statements.

- Include all alternative investments in its accounting and financial reporting processes associated with alternative investments.

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 issue(s) 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.

Contact the SAO about this report.

Download the Acrobat version of this report. (.pdf)