ICYMI: Toledo Blade Editorial Calls on Keith Faber to Actually Do His Job
July 8, 2022
For Immediate Release:
Friday, July 8, 2022
“The independence of the auditor’s office to dig into the numbers is the only way taxpayers and contributors to the pension fund can know they’re not being shafted.”
Columbus, OH — In case you missed it, the Toledo Blade Editorial Board earlier this week called on Auditor Keith Faber to finally do his job and oversee a state investigation of Ohio’s state pension funds, including an investment that’s lost more than $500 million for Ohio teachers and other retirees.
“Ohio law gives the state auditor the power to compel documents and witnesses tied to any public funds…So far, the auditor doesn’t want any part of it,” writes the Toledo Blade Editorial Board.
At a time when far too many teachers in Ohio are working longer, paying more while getting less to make ends meet, the failure to accordingly oversee their investment portfolio in the state’s pension funds is wrong.
Read more from Toledo Blade HERE and below:
- It’s time for an independent examination of the State Teachers Retirement System of Ohio and the state’s other public-employee pension funds.
- The fees and expenses charged by professionals paid by the funds require vetting. That examination must include a determination of the values of investment funds and the direct investments made on behalf of the pension funds.
- Why? The answer is Panda Power. That investment lost $525 million. A big zero remained from the initial investment. The right person to oversee that investigation is the state auditor. The independence of the auditor’s office to dig into the numbers is the only way taxpayers and contributors to the pension fund can know they’re not being shafted.
- For their part, STRS is moving fast to implement the key recommendation in a recent fiduciary audit. The near $100 billion retirement fund is seeking outside professional aid to validate fees, expenses, and profit shares on 430 investment funds and 50 direct investments. That’s a start. More, though, remains to be done.
- Together, the five Ohio pensions have about 20 percent of their $266 billion portfolio in alternative investments where returns on those investments are in the hands of outside fund managers. The pension fund-investment staffs picking the outside funds have a financial interest in the highest possible valuations.
- They receive performance bonuses based on the results. Those bonuses typically outpace their salaries.
- It’s a conflict of interest when consultants paid by the funds provide performance reports on investments. Those reports often paint a rosy picture of the reality. The S&P 500 just turned in the worst first half performance since 1970. With market indexes down nearly 12 percent for the June 30 fiscal year, the value of much less liquid alternative investments are subject to big losses. That’s why it’s essential to get the true value of the investments right.
- Ohio law gives the state auditor the power to compel documents and witnesses tied to any public funds. An outside vendor working with the auditor has more authority to acquire investment data and far more credibility than individuals paid by the funds. So far, the auditor doesn’t want any part of it.
- Ohio law gives the auditor sole authority to set up the “standards, guidelines, and procedures,” used for the financial examination. The expense is paid by the audited agency. STRS is planning to pay for private investment-expense verification. The rest of the pension plans must do the same. The best possible way to oversee those checks is for the auditor to hire and oversee independent vendors to examine the fees and investment returns charged to Ohio’s pension plans.