Commonwealth of Massachusetts | Public Employee Retirement Administration Commission
Five Middlesex Avenue, Suite 304, Somerville, MA 02145
Ph 617 666 4446 | Fax 617 628 4002 | TTY 617 591 8917 | www.mass.gov/perac
Domenic J. F. Russo, Chairman | A. Joseph DeNucci, Vice Chairman
Paul V. Doane | James M. Machado | Donald R. Marquis | Robert B. McCarthy | Gregory R. Mennis
Joseph E. Connarton, Executive Director
August 23, 2010
Treasurer Joseph Connolly, Chairman
Norfolk County Retirement System
480 Neponset Street, Building 15
Canton , MA 02021
REFERENCE: Report of the Examination of the Norfolk County Retirement System for the three-year period from January 1, 2006 through December 31, 2008
Dear Treasurer Connolly:
The Public Employee Retirement Administration Commission has completed a follow-up review of the findings and recommendations contained in its audit report of the Norfolk County Retirement System for the most recent period referenced above. We conduct these visits as a regular part of the oversight process. They are designed to ensure the timely implementation of corrective action for the recommendations cited in that report. The results are as follows:
1. The Audit Report cited a finding that payroll codes among the units were inconsistent and often unclear as to whether they should be considered regular compensation for retirement purposes. Errors were observed both in the omission of deductions which should have been taken and in deductions taken from non-qualifying income.
Follow-up Result: The Retirement Board met with all units to inform them that all payroll codes must be clear and consistent to ensure that deductions are taken from compensation as required. The Retirement Board recognizes that the review of the payroll codes is a continuing process and will ensure that the codes will be reviewed periodically for accuracy and consistency. This finding is considered resolved.
2. The Audit Report cited a finding that the additional 2% deduction for regular compensation over $30,000 annually, determined on a per-payroll basis, is incorrectly applied when more than one check is issued to members during a single payroll period or when members receive a salary increase raising their compensation over $30,000.
Follow-up Result: Payrolls for the various units examined now comply with this finding. This finding is considered resolved.
3. The Audit Report cited a finding that interest on buy-back and make-up payments is incorrectly charged.
Also, that buy-back interest is charged in cases of erroneous exclusion but should not be.
Follow-up Result: The staff is now using an automated system which conforms to PERAC guidelines on how to calculate buy-back and make-up interest. In addition, a manual double-check is performed. This portion of the finding is considered resolved.
Buy-back interest is still charged in cases of erroneous exclusion. The Board’s response to this finding was that it had referred the matter to Board counsel. Unless the Board’s counsel can present evidence supporting an alternative opinion on this matter, the Board must uphold PERAC’s interpretation of G. L. c. 32, § 20 (5) (c) (1) and allow buybacks for erroneous exclusion at no interest. This portion of the finding is not yet resolved.
4. The Audit Report cited a finding that members aged 70 and older had not made the required election as to whether to continue having deductions taken from their compensation.
Follow-up Result: The auditor reviewed the files of the members aged 70 and older examined during the audit to ensure that the required election forms were contained in the individual files. All files had the required election forms. This finding is considered resolved.
5. The Audit Report cited a finding that five checks remained outstanding from the System’s two bank accounts for longer than the recommended six months, the oldest remaining uncashed for more than one year.
Follow-up Result: The five checks outstanding at the time of the audit report issuance have all been voided and reissued. However, eleven additional checks are now outstanding for longer than the recommended six months. The Norfolk County Retirement System issues approximately 700 hundred checks per month. A more frequent analysis of outstanding checks is recommended. This is an ongoing problem and this finding is not considered resolved.
6. The Audit Report cited a finding that accounting for the System’s pooled funds is not accurately reflecting fees and investment income information available from the pooled fund manager’s statements, but is instead incorporating those items into gain/loss figures.
Follow-up Result: An allowance was posted to the general ledger in December 2009 to bring the fees-paid account up to the amount of pooled fund fees paid directly from pooled fund assets but not yet posted to the ledger. We encourage the staff to continue to reference managers’ statements to determine the exact amount of these fees and make appropriate adjustments by year end. This finding will require ongoing attention.
7. The Audit Report cited a finding that the term of the Board Member appointed by County Advisory Council members had expired and an election for the next term had not been held.
Follow-up Result: The Council has convened to reelect the Board Member to the unexpired remainder of his term. This finding is considered resolved.
The Commission wishes to acknowledge the significant effort demonstrated by the staff of the Norfolk County Retirement System to correct the deficiencies cited in the most recent examination of the system.
Thank you for your continued cooperation in this important matter.
Joseph E. Connarton
cc: Norfolk County Retirement Board Members
John Keenan, Executive Director
Return to PERAC Home Page