Summary of Report 96-061

Report Number 96-061

Date Released: 4-24-96

Overall Conclusion

Based on our audit, the Teacher Retirement System's (System) general purpose financial statements for fiscal year 1995 are accurately presented in all material respects, in accordance with generally accepted accounting principles. We noted no material internal control weaknesses or noncompliance with laws and regulations. However, other matters involving weaknesses in the internal control structure and its operation are summarized below.

Key Facts And Findings

The System has implemented or made progress toward implementing most previous audit recommendations. However, three previous recommendations, discussed below, are repeated.

As commented on in the System's prior year management letter, anticipated dividend income controls are generally effective; however, we again noted cases where controls did not function or were not applied as intended, particularly with international dividend income. In fiscal year 1995, dividend income covered by such controls totaled $561 million, of which international equaled $65 million.

Although the System maintains considerable computer resources, the Security Administrator does not report directly to the Director of the Management Information Systems Department. Organizational placement of the Security Administrator can be critical to accomplishing its responsibilities and operating as an effective control. To accomplish its responsibilities and be an effective control, the Security Administrator should report to a position with sufficient independence and authority to take necessary corrective actions.

Improvement of control procedures over the System's $10 million in furniture and equipment and enhancement of controls to prevent accounting entries to closed periods are repeated from similar prior year comments.

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