At the monthly meeting of the Public Pension Oversight Board, the legislature’s oversight group for pensions, Sen. Jimmy Higdon said the group should recommend a full performance audit of the Kentucky Retirement System (KRS). He described the call for an audit as a way to “trust, but verify” the information provided to the group by KRS.
Higdon’s call followed testimony by KRS chief Bill Thielen, explaining why a recent report indicated a steep increase in investment fees by KRS. Though Thielen pointed to a number of audits and reports commissioned by KRS, he indicated KRS would fully comply with a performance audit. The Chamber called for a full performance audit last year, noting that the financial audits have not fully examined investment practices, fees and performance of the system.
Responding to Thielen’s suggestion there has been enough oversight, Sen. Joe Bowen expressed frustration with the level of transparency with the system. Bowen has previously supported the idea of a performance audit.
Segal Consulting also presented a “limited scope” audit to the oversight board. This audit and report was commissioned by KRS. The audit found some inconsistencies and miscalculations, but found no serious problems with the assumptions currently made by the system. However, this “limited scope” audit did not review overall performance of the system, investment performance or fees, but instead focused on financial accounting and certain assumptions made by the system. After probing questions about the scope of the audit by Sen. Bowen, Thielen said the limited scope was adequate and the decision was made to try to save money.
Because the information provided to the oversight committee seems to always come from the system itself, the Chamber has called for an independent performance audit to ensure transparency and accountability. John Gohmann, chairman of the Chamber’s internal working group, recently spelled out in detail the reasons in an opinion piece published by the Courier Journal and Lexington Herald Leader.
The key is how to get an independent review. Most prior reports KRS has had control and of course found nothing amiss. The two exceptions were the Independent Counsel Report http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2112594 and the Church Land Deal Audit did by the Finance Cabinet. While there was one HL story on the Finance Cabinet audit it was quickly buried, and KRS was able to keep the independent counsel report out of the media altogether.
Bottomline, we paid in what we were supposed to pay in to system as employees. THE STATE did not pay in their part. They failed to do what is required by law. The contract between the two is enviable. DON’T SPEND MONEY ON UNNECESSARY AUDITS—-PAY WHAT YOU OWE.