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A Report on the Audit of the Employees Retirement System’s Fiscal Year 2017 Employer Pension and Other Post Employment Benefits Liability Allocation Schedules

June 2018

Summary Analysis

We have issued two audit reports dated June 27, 2018, related to the Employees Retirement System’s (System) pension and other post-employment benefits (OPEB) liability schedules for fiscal year 2017.

Pension Liability Schedules

We concluded that the System’s Schedules of Employer Allocations and the columns titled net pension liability, total deferred outflows of resources excluding employer specific amounts, total deferred inflows of resources excluding employer specific amounts, and pension expense (specified column totals) included in the Schedules of Collective Pension Amounts and the related notes as of August 31, 2017, were materially correct and presented in accordance with accounting principles generally accepted in the United States of America. The Schedules of Employer Allocations and Schedules of Collective Pension Amounts are for the following defined benefit pension plans: Employees Retirement System Plan, Law Enforcement and Custodial Officer Supplemental Retirement Plan, and Judicial Retirement System of Texas Plan II.

OPEB Liability Schedules

We concluded that the System’s Schedule of Employer Allocations for Other Post-Employment Benefits (OPEB) and the columns titled net OPEB liability beginning September 1, 2016, net OPEB liability ending August 31, 2017, total deferred outflows of resources excluding employer specific amounts, total deferred inflows of resources excluding employer specific amounts, and OPEB expense included in the Schedule of Collective OPEB Amounts for the Other Post-Employment Benefits (OPEB) Fund and the related notes as of August 31, 2017, were materially correct and presented in accordance with accounting principles generally accepted in the United States of America.

The system intends to post the pension liability Schedules, the OPEB liability Schedules and our audit reports on its Web site at https://ers.texas.gov/ .

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We also issued a report on internal control over financial reporting and on compliance and other matters of the pension liability schedules as required by auditing standards. Our procedures did not identify any material weaknesses in internal control over financial reporting or any noncompliance with laws or regulations that materially affected the pension liability schedules. In addition, the major internal controls that we tested for the purpose of forming our opinions on the pension liability schedules were operating effectively.

We also issued a report on internal control over financial reporting and on compliance and other matters of the OPEB liability schedules as required by auditing standards. In that report, auditors determined that the System did not accurately implement the requirements of Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. As a result, auditors identified material weaknesses in the System’s preparation and review of the Schedule of Collective OPEB Amounts for Other Post-Employment Benefits (OPEB) Fund for fiscal year 2017.

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The Employees Retirement System’s (System) did not accurately implement the requirements of Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. As a result, auditors identified material weaknesses in the System’s preparation and review of the Schedule of Collective OPEB Amounts for Other Post-Employment Benefits (OPEB) Fund (OPEB Liability Schedule) for fiscal year 2017. Specifically, those errors were related to the System:

  • Not correctly calculating the beginning balance of the total OPEB liability for fiscal year 2017.
  • Not accurately calculating the changes in OPEB liability resulting from (1) the difference between expected and actual experience and (2) changes in assumptions.

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