The Honorable Mayor and City Council
City of Scranton
Lackawanna County
Scranton, PA, 18503
We have conducted a compliance audit of the City of Scranton Aggregate Pension Fund for the Period January 1, 2022 to December 31, 2023. We also evaluated compliance with some requirements subsequent to that period when possible. The audit was conducted pursuant to authority derived from the Municipal Pension Plan Funding Standard and Recovery Act (Act 205 of 1984, as amended, 53 P.S. § 895.402(j)), which requires the Auditor General, as deemed necessary, to audit every municipality which receives general municipal pension system state aid and every municipal pension plan and fund in which general municipal pension system state aid is deposited. The audit was not conducted, nor was it required to be, in accordance with Government Auditing Standards issued by the Comptroller General of the United States. We planned and performed the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our conclusions based on our audit objective.
The objective of the audit was to determine if the pension fund was administer with applicable state laws, regulations, contracts, administrative procedures, and local ordinances and policies.
Our audit was limited to the areas related to the objective identified above. To determine whether the pension fund was administrated in compliance with applicable state laws, regulations, contracts, administrative procedures, and local ordinances and policies, our methodology included the following:
- We determined whether state aid was properly determined and deposited in accordance with Act 205 requirements by verifying the annual deposit date of state aid and determining whether deposits were made within 30 days of receipt for all years within the period under audit.
- We determined whether annual employer contributions were calculated and deposited in accordance with the plans’ governing document and applicable laws and regulations by examining the municipality’s calculation of the plans’ annual financial requirements and minimum municipal obligation (MMO) and comparing these calculated amounts to amounts actually budgeted and deposited into the pension plans as evidenced by supporting documentation
- We determined whether annual employee contributions were calculated, deducted, and deposited into the pension plans in accordance with the plans’ governing document and applicable laws and regulations by testing total members’ contributions on an annual basis using the rates obtained from the plans’ governing documents in effect for all years within the period under the audit and examining documents evidencing the deposit of these employee contributions into the pension plans.
- We determined whether retirement benefits calculated for the fund members who retired and the fund members who elected to vest during the current audit period, and through the completion of our fieldwork procedures, represent payments to all (and only) those entitled to receive them and were properly determined and disbarred in accordance with the plans’ governing documents, applicable laws, and regulations by recalculating the amount of the pension benefits due to the retired individuals and comparing these amounts to supporting documentation evidencing amounts of determined and actually paid or payable to recipients.
- We determined whether January 1, 2024 actuarial valuation reports were prepared and submitted by March 31, 2024, in accordance with Act 205 and whether selected information provided on these reports is accurate, complete, and in accordance with provisions to ensure compliance for participation in the state aid program by comparing selected information to supporting source documentation.
The City of Scranton contracted with an independent certified public accounting firm for annual audits of its basic financial statements which are available at the city’s offices. Those financial statements were not audited by us and, accordingly, we express no opinion or other form of assurance on them.
City officials are responsible for establishing and maintaining effective internal controls to provide reasonable assurance that the City of Scranton Aggregate Pension Fund is administered in compliance with applicable state laws, regulations, contracts, administrative procedures, and local ordinances and policies. As previously described, we tested transactions, interviewed selected officials, and performed procedures to the extent necessary to provide reasonable assurance of detecting instances of noncompliance with legal and regulatory requirements or noncompliance with provisions of contracts, administrative procedures, and local ordinances and policies that are significant within the context of the audit objective.
The results of our procedures indicated that, in all significant respects, the City of Scranton Aggregate Pension Fund was administrated in compliance with applicable state laws, regulations, contracts, administrative procedures and local ordinances and policies.
As previously noted, the objected of our audit of the City of Scranton Aggregate Pension Fund was to determine compliance with applicable state laws, regulations, contracts, administrative procedures, and local ordinances and policies. Act 205, which was amended on September 18, 2009 through the adoption of Act 44 of 2009, provides for the implementation of a distress recovery program. Three levels of distress have been established:
Level:
I
II
III
Indication:
Minimal Distress
Moderate Distress
Severe Distress
Funding Criteria:
70-89%
50-69%
Less then 50%
The accompanying supplementary information is presented for the purpose of additional analysis. We did not audit the information or conclude on it and, accordingly, express no form of assurance on it. Data from the January 1, 2019, January 1, 2021, and January 1, 2023 actuarial valuation reports filed with the Municipal Pension Reporting Program (MPRP) for the city’s police, firemen’s, and non-uniformed pension plans contained the following aggregated funding data:
Valuation Date:
01-01-19
01-01-21
01-01-23
Actuarial Valuation
of Assets:
$99,661,353
$122,947,933
$117,928,328
Actuarial Accrued
Liability:
$170,509,066
$185,228,396
$189,865,106
Funding Ratio:
58.4%
66.4%
62.1%
Based on the annual benefit payments owed to beneficiaries as reported on the respective plans’ January 1, 2023 actuarial valuation reports, at current funding levels, based on the plans’ current benefit obligations and actuarial assumptions, the schedule below illustrates the years of benefit payments available for the respective plans, as follows:
Plan:
Police
Firemen’s
Non-Uniformed
Actuarial Valuation of Assets: 01-01-23
$60,995,507
$49,529,601
$7,413,220
Annual Benefit Payments Owed to Beneficiaries: 01-01-23
$5,587,107
$6,679,890
$922,248
Years of Benefit Payments That Can Be Funded by Assets Available: 01-01-23
10.92
7.41
8.04
The department acknowledges the city’s continued efforts to address the city’s distressed status, and we encourage city officials to continue their efforts in the development and implementation of a long-term strategic plan to ensure the long-term financial stability of its pension fund.
The contents of this report were discussed with officials of the City of Scranton and, where appropriate, their responses have been included in the report. We would like to thank city officials for the cooperation extended to us during the conduct of the audit.
Timothy L. DeFoor
Auditor General
April 3, 2025