Financial Audit:

Pension Benefit Guaranty Corporation's 1993 and 1992 Financial Statements

AIMD-94-109: Published: May 4, 1994. Publicly Released: May 4, 1994.

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Robert W. Gramling
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GAO examined the financial statements of the Pension Benefit Guaranty Corporation's (PBGC) Single-Employer and Multiemployer Funds for the years ended September 30, 1993 and 1992, focusing on PBGC: (1) financial condition; (2) internal controls; and (3) compliance with applicable laws and regulations.

GAO found that: (1) PBGC financial statements for the years ended September 30, 1993 and 1992 were reliable in all material respects and presented fairly the funds' financial position in accordance with generally accepted accounting principles; (2) PBGC internal controls were not adequate to ensure that transactions were properly recorded, processed, and summarized in accordance with generally accepted principles, and to maintain accountability for assets among funds; (3) there was no evidence of material noncompliance with applicable laws and regulations; (4) the Single-Employer Fund's long-term viability was jeopardized by underfunding and a not-fully-risk-related premium structure; (5) weaknesses existed in the scope and quality of employee benefit plan audits and reporting; and (6) it could not audit the Multiemployer Fund's future financial assistance liability because it had incomplete information on certain financially troubled pension plans.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To strengthen internal controls over the Corporation's assessment of the Multiemployer Fund's liability for future financial assistance, the Executive Director, PBGC, should direct the Chief Financial Officer to monitor and test the Corporation's liability assessment process to ensure that it fully complies with its recently established policies and procedures for supporting and documenting all key decisions and for reviewing and supervising the process and its results.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: PBGC complied effectively with its policies and procedures in assessing its fiscal year 1995 multiemployer liability. For fiscal year 1994, PBGC prepared a manual that documented those procedures. Previously, PBGC established a Multiemployer Contingency Group to review the identification, documentation, classification, and valuation of multiemployer plans and a Multiemployer Working Group to coordinate the analysis and measurement of plan risk to the multiemployer insurance program.

    Recommendation: To strengthen internal controls over the Corporation's assessment of the Multiemployer Fund's liability for future financial assistance, the Executive Director, PBGC, should direct the Chief Financial Officer to enhance the liability assessment policies and procedures by requiring that: (1) computer controls be established to appropriately control the use of automated information and data; (2) automated data used in the process be tested for accuracy and completeness; and (3) the assessment process fully and consistently consider reportable events, plan financial trends, the extent of asset concentrations, and the age of the plan data used in the assessment.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: For FY 1994 PBGC implemented a Multiemployer Evaluation System (MES) to develop plan financial trend analyses and cash flow projections. PBGC also began redesigning the system used to track reportable events. In its audit of PBGC's FY 1994 financial statements, GAO found that the FY 1994 assessment process properly considered reportable events, financial trends, asset concentrations, and the age of the plan data, and that PBGC had made other improvements. However, in that audit, GAO also found significant deficiencies in the MES security controls and in certain supervision and review functions. Subsequently, PBGC has completed MES enhancements to address the security control deficiencies and assigned additional responsibilities to address the supervision and review deficiencies. Furthermore, PBGC began obtaining the most current available financial data on at-risk plans and evaluating alternatives to testing data of plans not currently at risk of becoming insolvent.

    Recommendation: To strengthen internal controls over the Corporation's liability for future benefits on terminated plans, the Executive Director, PBGC, should direct the Chief Operating Officer to implement the Inspector General's recommendations on strengthening internal controls over participant data as reported in Pension Benefit Guaranty Corporation Inspector General Report No. 94-6/23079-1.

    Agency Affected: Pension Benefit Guaranty Corporation

    Status: Closed - Implemented

    Comments: PBGC implemented computer edits of participant data to prevent the input of illogical data elements that support the calculation of participant benefits and the valuation of PBGC's liability for future benefits. PBGC also required that input forms for such data be supported by source documents or information received by the preparer of the forms. Furthermore, in an effort to facilitate the timeliness of data gathering and verification, PBGC reorganized its responsible department into multidisciplinary teams composed of auditors, actuaries, and pension law specialists. In addition, PBGC established procedures which require that certain types of supporting documents be maintained in participant files and provided related training to employees responsible for the files.

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