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Audit finds military‑leave reconciliation gaps with $1.5M valuation impact; board accepts management letter
Summary
The audit management letter identified reconciliation exceptions for members returning from military leave that left payroll/system mismatches and an estimated $1.5 million impact on valuation; staff are working with San Jose HR and system vendors to remediate and the board accepted the letter.
The retirement board accepted a management letter from auditor MGO that identified an internal-control finding related to exception processing for members on military leave.
Audit staff said the issue arises when members on military leave are kept in exception status and subsequent payroll and pension-system records are not reconciled promptly after their return; auditors identified ten members in exception status, which the actuary said accumulated to about a $1,500,000 effect on the valuation. Staff told trustees they have begun reconciling known exceptions with San Jose HR and are implementing system enhancements to reduce the time members remain in exception processing.
Trustees moved to accept the MGO findings and the motion passed by roll call. Staff acknowledged they will prioritize reconciliation for members nearing retirement and will work with the pension system vendor on process improvements and further reconciliations.
No public comment was made on the item.
