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Changes in DOI Audit Procedure

January 14th, 2016

Many changes in leadership at the Department of Insurance have brought about changes in the manner by which the Department interacts with Article 3 and 4 Pension Funds during an audit.  In the past, the Department approached the audit procedure in a cooperative manner and worked with Pension Funds to address any issues found during the audit process.  This approach now appears to be a thing of the past.

The procedure now followed by the Department allows Pension Boards 14 days to respond to a “Draft Report of Examination” by agreeing or disagreeing with the auditors findings.  The Department will consider extensions of time to respond.  As you can imagine, extensions are frequently needed given the truncated timetable provided by the Department and the need to call a public meeting to discussing the findings.

Following the draft report of examination, the Department will issue a final report of examination.  The Pension Board will have 30 from receipt of the final report to request a hearing before the Department to contest any of the findings.  No extensions will be granted nor will other written responses be considered.

If no hearing is requested, the Report is considered final and will be filed with the Department after 30 days have passed.  A “Director’s Order” will then be issued by the Department directing the fund to take action within 14 business days to correct any items identified as non-complaint during the audit.

Inasmuch as these new procedures were adopted only recently and without any notice to the Funds, it remains to be seen whether the Department will employ new or more frequent enforcement mechanisms in post-audit proceedings.  However, we will continue to keep a close eye on these substantive changes to the DOI audit procedure.