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 Years 2004 and 2003. This audit is performed in accordance with auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of America;
PBGC’s assertion about internal controls over financial reporting and compliance with laws and regulations is fairly stated, however;
Five reportable conditions relating to financial management systems integration, information security, single-employer premiums, contingent liabilities for the Single-Employer Program Fund, and identifying and classifying probable Multiemployer plans; and
PricewaterhouseCoopers is responsible for the accompanying auditor’s report dated November 12, 2004 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. PricewaterhouseCoopers’ reports (2005-2/23182-2) are available on our website at http://oig.pbgc.gov.
Sincerely,
Robert L. Emmons
Inspector General
November 12, 2004
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, 2004 and 2003, 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, 2004 and 2003, 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. 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 $23.3 billion and $236 million, respectively, at September 30, 2004. The Single-Employer Program reported net losses of $12 billion and $7.6 billion and the Multiemployer Program reported net income of $25 million and a net loss of $419 million for 2004 and 2003, respectively. Losses for the Single-Employer Program that are reasonably possible as a result of unfunded vested benefits are estimated to be $96 billion as of September30, 2004. Losses for the Multiemployer Program that are reasonably possible are estimated to be $108 million as of September 30, 2004. The Funds’ net deficits, 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 November 12, 2004 on our consideration of PBGC’s internal control and a report dated November 12, 2004, on compliance and other matters. 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.
PricewaterhouseCoopers LLP
November 12, 2004
Report Number 2005-1/23182-1
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