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CalPERS audit teams outline FY26–27 internal and independent audit plans; auditors flag investment valuation as top risk
Summary
CalPERS staff and its independent auditors presented coordinated FY26–27 audit plans. Plante Moran highlighted significant audit risks — management override, valuation of Level 3 and net-asset-value investments, revenue recognition and actuarial estimates — and described testing approaches and timing.
CalPERS’ Office of Audit Services presented its risk‑based internal audit plan for fiscal year 2026–27, describing coordination with enterprise compliance and a multi‑cycle employer compliance review program that will use data analytics to select employers for review.
Plante Moran, the board’s independent auditor, then presented its audit plan to the Risk & Audit Committee and explained scope and timing for the fiscal‑year financial‑statement audit and related GASB schedules. Lead partner Jean Young and colleagues said the firm began interim planning in March, was on‑site for walkthroughs in May and expects year‑end fieldwork starting in August with issuance targeted for mid‑November.
Auditors identified significant risk areas likely to require focused testing: management override of internal controls; valuation of investments, especially level‑3 and NAV‑valued assets; improper revenue recognition (including health‑plan premiums and federal subsidies); pension and OPEB liabilities and the long‑term‑care fund estimate. Plante Moran described test procedures such as journal‑entry analytics, control testing, use of valuation specialists for hard‑to‑value investments, roll‑forward checks for March‑31 to June‑30 NAVs, and actuarial specialist involvement for pension and long‑term‑care liabilities.
Committee members pressed the auditors on specifics: how NAV roll‑forwards are tested, coverage for private equity and real‑asset appraisals, the firm’s use of data analytics and limited adoption of AI (auditors said protected client data is not sent through public AI tools). Auditors estimated the engagement will mobilize roughly 10,000 hours in its first year, with 25–30 staff full‑time on site and additional subject‑matter experts on a part‑time basis.
The committee approved both the Office of Audit Services plan and the independent auditor’s engagement plan. Directors agreed investment valuation remains the highest audit risk and asked for continued updates if new issues emerge.
