PBGC's Plan Asset Audit of National Steel Pension Plans Was Seriously Flawed (EVAL-2011-10 /PA-09-66-1), issued March 30, 2011

In response to a Congressional request to review the Pension Benefit Guaranty Corporation (PBGC) actions regarding Minnesota steelworker pension plans, we found serious errors and omissions in PBGC's plan asset audit to determine the fair market value of the assets of the National Steel Corporation family of pension plans. We found that neither PBGC nor its contractor exercised due professional care in conducting the plan asset audit, nor did the audit comply with Government Auditing Standards as required by the contract. Errors included some that were obvious and would have been identified if the audit report had been subjected to review or compared to supporting documentation.

While we have determined that the plan asset audit was so flawed that it cannot be relied and should be withdrawn, the OIG cautions against assuming that this report will result in benefit increases. PBGC has agreed to withdraw the report and is in the process of having a certified public accounting (CPA) firm re-perform the valuation of plan assets. However, due to the passage of time the CPA firm will not be able to provide the level of assurance that could have been provided at time of the initial review. We made 12 recommendations, all of which PBGC agreed with, including ones focused on the plan asset audit reassessment to ensure PBGC required the CPA firm to address all previously-omitted audit procedures, develop and perform alternative procedures if required audit procedures cannot be performed and validate the asset allocation process. Other recommendations focused on PBGC's internal needs for training, ensuring contract monitors understand their oversight responsibilities, a robust quality assurance program, and enhanced audit procedures and guidance to assure risk areas are identified and analyzed.