Supén warns CCSS pensions are ‘highly exposed’ to fraud

“As evidenced by the audited financial statements, IVM is at high risk of fraud and the presentation of accounting information may not accurately reflect the financial condition of the fund,” the document SP-725-2024 states. You have a copy of the document dated July 2 last year. nation.

The regulatory entity requires the CCSS Board to indicate within 20 working days the corrective measures, compliance deadlines, and officials responsible for mitigating the deficiencies exposed in the Disability, Aging and Death (IVM).

This request comes after Supén became aware of the external audit documentation for the 2021-2022 period and the special inspections reflected in the audit report. The auditor’s supplementary report, Compiled by Deloitte, the accounting firm, the documents reveal a series of flaws in the management of the Integrated Pension System (SIP) platform, which manages contributions and pension payments to regime members; Gecredit, which is responsible for mortgage business, and the IVM investment system for the stock market.

External audits also revealed that the regime lacked automated systems for financial and budgetary accounting.

To this end, Supén asked the fund’s executive president, Marta Eugenia Esquivel Rodríguez, to clarify whether the board would assume the operational, legal and reputational risks arising from the weaknesses pointed out by Deloitte.

been: Supén recommends major changes to the IVM to make it sustainable

The head of the regulator, Rocío Aguilar, said the findings of the external audit gave the CCSS an opportunity to act. “If there were no doubts, the (Deloitte) opinion would not be negative,” he said.

nation On July 24, the Fund’s Board of Directors was consulted in writing about the actions taken to mitigate the vulnerabilities pointed out by Supén and the external audit, as well as the certainty of the institution’s financial information. However, at the time of writing, no response had been received.

“IVM’s administration is highly opaque. It is inconvenient that insurance on this scale has these shortcomings. In short, the data we have (from the regime) is not reliable.”

— Edgar Robles, former leader of Supén

The CCSS Pensions Administration reported in writing that it could not refer to the issue as the committee was yet to be informed of the response to the regulator’s letter.

As of June last year, the IVM had registered 372,671 pension beneficiaries. In addition, 1,740,935 workers and 77,752 employers contribute to the system, according to CCSS data.

According to the audited financial statements, the IVM had reserves of 3,136,460 million euros as of December 31, 2022. This amount is equivalent to 6.9% of the gross domestic product (GDP) for that year. During this period, the management balance of the compulsory pension system (ROP) was 9,305,970 million euros, which is three times the basic fund.

The financial statements of the regime prepared by the IMF show reserves of 3301.185 billion pounds, equivalent to 7% of GDP, at the end of 2023. At the same time, according to Supén, the assets registered by pension operators in the ROP amount to 10895.87 billion pounds.

test result

On May 30, the CCSS Board of Directors voted 4-3 to accept and approve the audited financial statements for the 2021-2022 period, as recorded in Minutes No. 9,453.

Deloitte as external auditor issued a qualified opinion. This occurs when the auditor confirms that the client does not use accounting standards consistently and because he cannot obtain sufficient evidence to issue an unqualified or unqualified opinion (i.e. without any deficiencies).

The company described inconsistencies in accounting records for receivables from donors and states, amortization of premiums and investment discounts, bank balances, and overstated or understated figures, the document said. Auditor’s Supplementary Report17 pages, of which you have a copy nation.

The document points out significant weaknesses in internal controls that could adversely affect financial reporting. For example, Deloitte criticized the Fund for being in talks with the Treasury, but as of the end of 2022, the Fund was owed £350.161 billion by countries.

“Different bad debt estimation models have significant deficiencies that could affect the institution’s financial statement results due to overestimation or underestimation of accounts receivable balances,” said the letter signed by Jose Antonio Amador Zamora, an auditor at Deloitte.

Édgar Robles, former head of Supén, stressed that the fund lacked oversight of IVM management and had no clear operational and risk defense lines.

“The fundamental problem is transparency because it doesn’t exist. The IVM is very opaque in its administration. It’s inconvenient that insurance of this scale has these shortcomings. In short, the data we have (from the IVM) is not reliable. There has to be a cleansing process to know what is real and what is fake,” said Robles.

For Alvaro Ramos, a former IMF chief and pensions chief who sees the state’s debt to the regime as a major destabilizing factor, the regime’s accounting should reflect financial realities.

“If we never know whether the state will contribute its quota, we have to consider the difficulty of managing the liquidity of the fund,” Ramos said.

been: Government owes IVM £255bn in minimum pension contributions

Low security

Deloitte also pointed out that the fund had no access review controls over the regime’s database and the operating system responsible for managing the regime’s mortgages (with a portfolio of 81.401 billion pounds in June last year) and investment platforms (with a balance of 2,495.516 billion yen in the middle of this year).

Another issue that has lacked attention in terms of security is the System of Integrated Pensions (SIP), which is responsible for processing new pensions, monthly benefit amounts, and contributions of workers associated with IVM.

“It is not possible to confirm whether privileged accounts are properly assigned and protected. The above, as no formal evidence was found to indicate accounts with such access rights, and therefore the personnel responsible for the management and custody of each account,” the supplemental audit stated.

Robles believes there are very serious flaws in the platform associated with pension funds. “It is possible that fees are being charged to people who have never paid; this is very worrying. More so because the recent process allows Advance pensionthere may be no certainty that the amount collected is correct,” he stressed.

Regarding IT weaknesses, the regulator asked the bank’s risk and internal control area to identify risks related to accounting processes and report on the “extent of risk posed by IVM.” He also asked for an assessment of mitigation measures.

Gustavo Picado, the fund’s financial manager, confirmed that the preparation of the system’s financial statements was a joint effort between the pension administration and the financial administration.

“As far as the external audit’s opinion and the points raised by Supén are concerned, the pension management deals with these issues directly (…) We do technical work, but the implementation and focus of the recommendations are on the pensions side. This may mean that you work with us,” Picardo admitted.

Budget constraints

Regarding the budgetary closing, Deloitte verified that the IVM system lacks an automated system to integrate budget execution with accounting records, which means that the Comptroller General of the Republic (CGR) technical standards for public budgeting are not followed.

Furthermore, it was not possible to verify compliance with the pension fund budget spending targets detailed in the Deloitte audit.

The Audit Office’s Social Welfare Development Supervision Department informed that in October last year, the department issued an inspection report ordering the Social Security Center to comply with international public sector accounting standards. To this end, he instructed the formulation of an action plan to narrow the gap, which is still being implemented.

The CGR added that given the size of the fund’s budget, it is obligated to conduct an external quality review of budget settlements in addition to the reviews conducted by the Office of the Comptroller General and the agency’s internal audit body.