Dan MacDonald, Dean Dennis and Bob Buerkle's comments on the 09/17/20 STRS Board meeting, which make clearer than ever exactly why a forensic audit is absolutely necessary

Dan MacDonald's Report on the September 2020 STRS Board Meeting

Here is an excerpt from Dan MacDonald's report of the September 17, 2020  STRS Board meeting. Dan's full summary of the meeting can be found in the archives of the STRS Member Only Forum on Facebook. Added to Dan's excerpt are comments in boldface and  parentheses, by Dean Dennis and Bob Buerkle, who also tuned in to the meeting.

From Dan MacDonald

September 23, 2020

During the meeting CFA Institute was mentioned. The CFA Institute, a global, not-for-profit organization, is the world’s largest association of investment professionals with more than 178,000 members and 157 local member societies worldwide. Their mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. They administer 3 exams, one of which is compliance with GIPS (Global Investment Performance Standards). The GIPS standards are globally accepted and considered best practices for investment performance reporting and presentation. Adopted by organizations around the world, the GIPS standards have been implemented by most of the top asset management firms, including STRS.

So, STRS is a CFA member. Additionally, STRS uses the ACA Compliance Group, which is a leading provider of governance, risk, and compliance advisory services and technology solutions. They help their clients manage regulatory compliance, cybersecurity and risk, and performance verification through their consulting, outsourcing, and technology solutions. Basically, the ACA verifies STRS’s compliance with GIPS. This was [the] interesting part of the Board meeting since ACA uses the words "audit" and "verify" as interchangeable words. Appointed Board members Mayerfeld, Gruber and Steen picked up on ACA’s language. Executive Director Neville also entered to clarify the ACA “verifies the audit, digging into the details reported, replicating the numbers.” Only Steen stepped back to the plate. He asked ACA if they are liable and can be sued if the numbers are off. ACA quickly responded they are not liable for anything; they are just duplicating what was given (This is why a forensic audit is warranted). So CFA and ACA are prestigious and verify that the staff works well.

My point? The Guiding principles focus on staff and staff decision making and only indirectly on members, active or retired. We appear in "the greatest sustainable benefits for our members." Active benefits reduced. All retirees, no COLA since 7/1/2017 and some retirees not receiving a COLA since 7/1/2013. The STRS Board and staff use ACA and CFA to divert attention from not putting members first. Steen said, "We need ideas from our consultants" and enlightened the Board that the ACA's verification is not liable for its findings (We are paying our consultants to underperform what the market offers by not properly weighting our investments. This is yet another reason why a forensic audit is warranted). STRS is like the management team that can point to hitting all these bench markers, but still don't produce for its members. They do not win the World Series or the Super Bowl or the World Cup. The marriage of STRS and members is intact because of the emphasis by STRS to always speak in one voice, bullying, not seeking help from the legislature and doing everything in its power to ignore the hurting spouse while enhancing itself with money and awards, and prestigious consultants