Auditor Edelen still interested in Chamber’s audit request, says systems need transparency

State Auditor Adam Edelen still feels a performance audit of the Kentucky Retirement System (KRS) is needed and says he will continue to work “hand in glove” with the business community to make sure his office has the resources they need to bring transparency to the state’s pension systems.

As problems persist in the state’s public retirement systems, the Kentucky Chamber called on Edelen to perform a comprehensive performance audit of KRS to dig deeper into the reasons for the system’s funding problems.

In an interview with the Kentucky Chamber, Edelen noted that after asking legislative leaders for the money to bring in outside experts to conduct the audit, the legislature did not agree to that request. At its most recent meeting, the Public Pension Oversight Board announced that KRS would under an actuarial audit this summer, but that does not go as far as the Chamber’s request for a full comprehensive performance audit.

Edelen said he will continue to work with the Chamber and legislators to try and find and address the problems within the system.

“We are not going to vacate the space, we are going to closely monitor and work with that legislative committee to try to get some answers to make sure that the retirement system is operating in a way that is transparent and accountable because at the end of the day while it’s clear that system needs more money I think we want to guarantee that the taxpayers have safeguards in place that demonstrates its an effective investment,” Edelen said.

As the Chamber has previously reported, Edelen estimated the audit would cost around $150,000 to conduct. When asked if it is possible to revisit the funding for this evaluation of the system, Edelen said he would like to have that discussion during the 2016 session—which falls in a budget cycle.

“I’m a taxpayer watchdog, I employ really terrific public auditors, but evaluating the performance of an investment system is not part of our expertise. So it would require us going out and finding the best and brightest minds and having them come in and work with us in making that assessment because it really is going to require an outside set of brains and intellect to really help us understand the performance of that system,” Edelen told the Chamber.

Other associated costs of the audit mentioned by Edelen in the interview includes legal fees to make sure all the proper information needed for the audit is acquired.

Watch the interview with Edelen below:

The Kentucky Chamber believes a comprehensive performance audit of KRS is needed to examine a number of important factors, including:

• How the system’s investment performance compares to other state pension funds and the reasons for any underperformance.
• How the investment fees paid by KRS compare to those in other states and whether those fees are reasonable.
• The accuracy of the assumptions made by the system’s actuary about current liabilities and the amount of the actuarially required contribution compare to actual experience (including the accuracy of assumptions about: the rate of return on investments; salary increases for public employees; the cost of health insurance; the rate at which employees are retiring; and other factors).