Pension Benefit Guaranty Corporation
Office of Inspector General
To the Board of Directors
Pension Benefit Guaranty Corporation
We contracted with the independent certified public accounting firm of PricewaterhouseCoopers LLP to audit the financial statements of Single-Employer and Multiemployer Program Funds administered by the Pension Benefit Guaranty Corporation (PBGC) as of the Fiscal Year (FYs) 2003 and 2002. This audit is performed in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States and the GAO/PCIE Financial Audit Manual.
In its audit of the financial statements of Single-Employer and Multiemployer Program Funds administered by PBGC, PricewaterhouseCoopers found:
The financial statements were fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles,
PBGC maintained effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations, except for a material weakness related to the methodology used in estimating multiemployer plan liabilities.
No reportable noncompliance with laws and regulations it tested.
In addition, PricewaterhouseCoopers described significant matters in the following areas where PBGC needs to:
integrate its financial management systems;
complete its efforts to fully implement and enforce an effective information security program;
improve controls related to single-employer premiums;
continue to improve its controls over the identification and measurement of Single-Employer Program Fund contingent liabilities;
improve controls over the estimation of reserves for Single-Employer Program Fund losses incurred but not reported or not specifically identified; and
strengthen controls over the identification and classification of Multiemployer plans probable of receiving financial assistance.
PricewaterhouseCoopers is responsible for the accompanying auditor’s report dated December 22, 2003 and the conclusions expressed in the report. We do not express opinions on PBGC’s financial statements or internal control or conclusions on compliance with laws and regulations.
A set of PricewaterhouseCoopers’ reports (2004-2/23176-2) is available upon request from the PBGC’s Office of Inspector General.
Sincerely,
Robert L. Emmons
Inspector General
December 22, 2003
PriceWaterhouseCoopers
Report of Independent Accountants
To the Inspector General
Pension Benefit Guaranty Corporation
We have audited the accompanying statements of financial condition of the Single-Employer and Multiemployer Program Funds administered by the Pension Benefit Guaranty Corporation (PBGC) as of September 30, 2003 and 2002, and the related statements of operations and changes in net position and of cash flows for the years then ended. These financial statements are the responsibility of PBGC’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Single-Employer and Multiemployer Program Funds administered by PBGC at September 30, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
By law, PBGC’s Single-Employer and Multiemployer Program Funds (the Funds) must be self-sustaining, and therefore their premiums must be sufficient to cover both their short and long-term obligations. The Funds have been able to meet their short-term benefit obligations, and PBGC internal analyses project that they will be able to do so for a number of years. However, as discussed in Note 1, management believes that neither program at present has the resources to fully satisfy PBGC’s long-term obligations to plan participants. The Funds’ statements of financial condition report a net deficit position (liabilities in excess of assets) of the Single-Employer and Multiemployer Program Funds of $11.2 billion and $261 million, respectively, at September 30, 2003. Losses that are “reasonably possible” as a result of unfunded vested benefits are estimated to be $85.5 billion and $63 million for Single-Employer and Multiemployer Program Funds, respectively, at September 30, 2003, as discussed in Note 7. The Funds’ net position, and long-term viability, could be further impacted by losses from plans classified as reasonably possible (or from other plans not yet identified as potential losses) as a result of deteriorating economic conditions, the insolvency of a large plan sponsor or other factors.
Management’s discussion and analysis, the Actuarial Valuation, and other supplemental information contain a wide range of data, some of which are not directly related to the financial statements. We do not express an opinion on this information. However, we compared this information for consistency with the financial statements and discussed the methods of measurement and presentation with PBGC officials. Based on this limited work, we found no material inconsistencies with the financial statements.
In accordance with Government Auditing Standards, we have also issued our reports dated December 22, 2003 on the effectiveness of PBGC’s internal control and on our tests of its compliance with certain provisions of laws and regulations. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.
December 22, 2003
2004-1/23176-1
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