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Audit: Department of Insurance not examining troubled local pension funds

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* The Illinois Municipal League continues its push for public safety pension fund consolidation

Illinois has more than 650 separate downstate municipal public safety pension funds. According to the IML, the math adds up to more than 10 million residents paying the bill for 40,000 pension participants. […]

“We are trying to resolve the issue of poor returns, not-great management, and create a system that can sustain these funds.” [said Brad Cole, IML executive director.]

There are 1,298 municipalities in Illinois, Cole said. Those with populations of 5,000 and larger are required to have pension funds if they have police and fire departments. […]

Unfunded pension liabilities are an ongoing concern for many cities, including Moline. Cole said Moline’s fire pension fund is only 33% funded, and the police pension fund is 44% funded.

* Coincidentally, the Illinois Auditor General just released its audit of the Department of Insurance. Part of the probe looked at whether Insurance is complying with a state law to examine each of those same public safety pension funds every three years. The Auditor General went back to 2004, meaning that in the audit period, Insurance should have examined each of those funds four different times.

Here’s what the Auditor General Found

* 2 public safety pension funds were examined three times in 14 years (one examination missed)

* 230 funds were examined two times (two missed)

* 383 funds were examined once (three missed)

* 1 fund was never examined (four missed)

* 36 funds were currently under examination (17 missed one to two examinations, 18 missed two, 1 missed three)

In response, the Department of Insurance said it was seeking legislation to shift to an audit of the funds every five years, instead of three.

Brilliant.

posted by Rich Miller
Friday, Apr 19, 19 @ 11:39 am

Comments

  1. –In response, the Department of Insurance said it was seeking legislation to shift to an audit of the funds every five years, instead of three.–]

    Brilliant, indeed.

    “That thing we’re required to do, but didn’t? Here’s our solution: stop requiring us to do it.”

    Don’t try that at work.

    Comment by wordslinger Friday, Apr 19, 19 @ 11:45 am

  2. I suspect the reason for that attempted change goes with the theme of the hollowing out of state government. They simply don’t have the staff to do it.

    Comment by Ron Burgundy Friday, Apr 19, 19 @ 11:50 am

  3. It’s easy to mock without any consideration for the reasons behind the response. I suspect they don’t have anywhere close to the number of staff they need to meet their mandate. If you poured over agency audits you would likely see that sort of response from agencies when it comes to mandates.

    Comment by Demoralized Friday, Apr 19, 19 @ 11:50 am

  4. ===It’s easy to mock===

    It’s even easier to defend the indefensible, apparently.

    Comment by Rich Miller Friday, Apr 19, 19 @ 11:53 am

  5. Many of the fire and police pension funds are in bad shape. This is NOT from lack of being examined. It is from lack of proper funding by the local governments.

    Comment by DuPage Friday, Apr 19, 19 @ 11:58 am

  6. Been like this since the GA passed a bill requiring it. Here’s a novel idea, consolidate the funds and then the state won’t have to examine 600+ funds every couple of years. That’s brilliant.

    Comment by Phenomynous Friday, Apr 19, 19 @ 11:59 am

  7. Also, what they really should do is shift that function to a more appropriate agency such as IDFPR. Idea has been floated before. Makes no sense to have it in Insurance. Still would probably be understaffed somewhere else though.

    Comment by Ron Burgundy Friday, Apr 19, 19 @ 12:03 pm

  8. The audit covered 14 years. I’d say both the executive and legislative branches have dropped the ball on this ongoing issue.

    That said, the IML has seven different public safety pension fund proposals.

    Doesn’t that just mean you don’t know what the heck you want to do?

    Comment by wordslinger Friday, Apr 19, 19 @ 12:03 pm

  9. But seriously, does Insurance have enough auditors to do the work? How many hours do the audits take, and what other funds are they auditing?

    Other departments are clearly short staffed; why would it surprise anyone that Insurance is, too? Lives aren’t at stake, exactly, but the work still takes time.

    Comment by Anonymous Friday, Apr 19, 19 @ 12:05 pm

  10. Auditing is becoming a bigger problem. Eight agencies were named in their audit finding in the same report. 2018-004.

    Comment by Annabelle Friday, Apr 19, 19 @ 12:05 pm

  11. Anecdotally I’m told Insurance used to have north of 400 employees. Now I’d be surprised if they were hitting 250.

    Comment by Ron Burgundy Friday, Apr 19, 19 @ 12:10 pm

  12. Any governing body with overlapping fire and police districts should consolidate those two pension funds.

    Comment by City Zen Friday, Apr 19, 19 @ 12:17 pm

  13. Ron Burgundy - Friday, Apr 19, 19 @ 12:10 pm:
    Anecdotally I’m told Insurance used to have north of 400 employees. Now I’d be surprised if they were hitting 250.
    ///

    More with less, they say. But they never say how.

    Comment by Annabelle Friday, Apr 19, 19 @ 12:22 pm

  14. Right Annabelle. It’s a never ending cycle. Legislature imposes an unfunded or underfunded mandate, agency can’t meet it, gets an audit finding, legislators question why it wasn’t done, agency responds you didn’t give us the resources, repeat.

    Comment by Ron Burgundy Friday, Apr 19, 19 @ 12:45 pm

  15. I think the point here is that the auditors over the past 14 years needed to say publicly “we are not able to comply with the number and frequency of legislatively mandated audits and that is a big concern regarding assuring the integrity of these funds which must be addressed immediately.” Instead, the approach seemed to be “gee, hope nobody notices we are not fulfilling our audit mandate.”

    Comment by Responsa Friday, Apr 19, 19 @ 12:50 pm

  16. I was a principal for a small broker dealer from 1999-2015. We had one exam by the Illinois Department of Financial and Professional Regulation (formerly the Department of Securities). We had a FINRA audit every three years.

    Comment by don the legend Friday, Apr 19, 19 @ 12:52 pm

  17. The Public Pension division of the Department of Insurance was decimated under Gov. Rauner. The numbers of staffers was nearly slashed in half and yet was charged with more responsibility. They did automate the department more and that effort continues.
    Is there any surprise that this is the result?

    Comment by Jake From Elwood Friday, Apr 19, 19 @ 12:54 pm

  18. If you make them all one fund, you need far fewer auditors for this function. I am sure AFSCME would be just fine with that. It would be for the good of the state after all.

    Comment by Captain Obvious Friday, Apr 19, 19 @ 1:13 pm

  19. Broken record again … pre-ERI & current headcounts?

    Comment by Smitty Irving Friday, Apr 19, 19 @ 1:34 pm

  20. It’s not as if getting an audit finding from the Dept. of Insurance is going to magically make these small-town pension funds solvent, or even create the political will to move them toward solvency. Everyone knows they’re insolvent, nobody is doing anything about it, wasting everyone’s time with more audit findings won’t help.

    Comment by lincoln's beard Friday, Apr 19, 19 @ 1:46 pm

  21. “Anecdotally I’m told Insurance used to have north of 400 employees.” The 1999 Annual Report (the oldest available on the website) says 358.

    Comment by Skeptic Friday, Apr 19, 19 @ 1:49 pm

  22. ==It’s even easier to defend the indefensible, apparently.==

    I wasn’t so bite me. Having fun up there on your high horse?

    I was simply stating what the likely reason for the response was.

    Comment by Demoralized Friday, Apr 19, 19 @ 1:59 pm

  23. If the person in charge of this pension fund was stealing money from such fund, would you want to wait 5 years to find out?

    Comment by Mama Friday, Apr 19, 19 @ 2:59 pm

  24. =It’s easy to mock===

    Try looking at who was running the Agency under Rauner and then look at the number of examiners for the unit not the Agency as a whole. Then look to see if this article was placed to get a third party contract, that seems to aways happen. It’s impossible to do a job without staff. Hire some where they are needed throughout the state and not just when an article appears. How about when the management team is begging. But let’s all pretend things can get done without resources. No different then no staff at DHS.

    Comment by Anon Y Friday, Apr 19, 19 @ 3:15 pm

  25. “Try looking at who was running the Agency under Rauner” As much as I like blaming Rauner for everything, keep in mind that 2004 is when Blago merged Insurance with FPR to create the fiasco known as DFPR. Insurance then broke back out again in 2009 (under Quinn.)

    Comment by Skeptic Friday, Apr 19, 19 @ 3:47 pm

  26. What with payments into Social security and the impact of not decreasing pension cost versus the same deferring action from the state constitution and change in pension law and taking the same time with transferring and funding A known item as social security and get us out of state and local and school promising and not depleting current law for IL pension? Never seen an alternative projected.

    Comment by bear3 Friday, Apr 19, 19 @ 3:52 pm

  27. bear3, take a breath. I know it’s close to happy hour but maybe slow down and let the pipe rest a bit.

    Comment by don the legend Friday, Apr 19, 19 @ 4:04 pm

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