Audit of the Public Employee Retirement Administration Commission

This is a state audit of PERAC, the agency that oversees Massachusetts public retirement systems, focused on disability retirement processes from July 2015 through June 2017.

“This audit was undertaken to determine whether PERAC effectively administered various aspects of the disability retirement process for public employees and conducted its oversight activities in compliance with applicable laws and regulations.”

Auditors wanted to check whether PERAC was properly overseeing disability retirement applications, medical reviews, benefit approvals, and required legal compliance.

“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted an audit of certain activities of the Public Employee Retirement Administration Commission (PERAC) for the period July 1, 2015 through June 30, 2017.”

If PERAC does not review benefit calculations, people could receive disability retirement payments in the wrong amount.

“As a result, there is a higher-than-acceptable risk that inaccurate benefit payments could be paid to recipients of disability retirement benefits.”

For residents, this matters because public retirement benefits are part of government spending, and the audit checks whether those payments are properly reviewed.

“PERAC provides a variety of daily oversight functions to retirement boards.”

The main problem was not that auditors found wrong payments, but that PERAC lacked controls to make sure every disability benefit calculation was reviewed and approved.

“For the calculations we were able to review, we did not identify any errors.”

The auditor recommended that PERAC find any unapproved calculations and create monitoring controls so retirement boards submit calculations before first payments are made.

“PERAC should develop and implement monitoring controls to ensure that retirement boards follow its existing regulations.”

The finding affected 30 of 191 reviewed cases, which is a meaningful share and showed a weakness in PERAC’s tracking process.

“Specifically, during our audit period, PERAC did not approve the benefit calculations for 30 (16%) of the 191 approved disability retirement benefit cases we examined.”

A retirement board first decides and calculates a disability benefit; PERAC is supposed to review and approve that amount before the applicant is paid.

“After PERAC approves a retirement board’s decision to grant disability retirement benefits, the board performs the initial benefit calculation and sends it to PERAC for approval along with required information used to determine the amount (such as the applicant’s annuity savings account information and payroll records) before the board makes the first payment to the applicant.”