Trustees of public pensions programs have long had the need to perform due diligence to ensure they are using taxpayer money prudently, as well as funding plans appropriately to provide for retirees years of public service. To confirm that a pension system's plans are properly funded, annual actuarial valuations are crucial, which leads many public retirement systems to seek a second actuarial opinion. Best practice dictates a regular audit to: a) ensure that valuation calculations were done accurately, and b) offer a professional second opinion in assessing the appropriateness of the demographic and economic assumptions used.

Some public plans are legislatively required to have regular actuarial audits performed. For those without these legislative requirements, there are many reasons why actuarial audits of pension systems are necessary:

Conducting an actuarial valuation audit is good governance for public funds and helps increase public trust in the management of funds. An audit ensures trustees that valuations are being performed on an ongoing basis to serve the financial objectives of the system, while preserving the ongoing relationship with the consulting actuary, who knows the particular pension plan best.
The auditing actuary may have a different perspective that leads to better understanding of the valuation overall. A second opinion can provide recommendations for improvements in the valuation process, perhaps through how the information is presented in reporting and communications.
If the auditing actuary feels changes in calculations or assumptions are needed, suggestions for specific steps can be provided for the retirement system or consulting actuary to pursue. That means trustees won t be faced with questions like, How can we fix that?

Actuarial audits vary by situation, with some calling for full replications of the most recent actuarial valuation whereas others are more limited in scope. Often the auditing actuary must execute much of the same work for either option. A full-scope audit is generally the best way to ensure confidence in the valuation results.