Damschroder: If STRS management manipulated data to put millions in their pockets, they belong in prison not in charge of 500,000 citizens' retirement.
Fremont News Messenger
Damschroder: Where's the auditor?
John Damschroder,
Columnist
August 18, 2021
The wisdom of Lincoln was on display when the Ohio Retirement Study Council-ORSC met at the Statehouse on Aug. 12. “In this country, public sentiment is everything. With it, nothing can fail; without it nothing can succeed. Whoever molds public sentiment goes deeper than he who enacts statutes, or pronounces judicial decisions,” is a Lincoln philosophy still true today.
The large and fast growing social media presence of tens of thousands of beneficiaries of the Ohio public pension system was clearly on the mind of ORSC members who noted the barrage of emails as they finally voted to have fiduciary and actuarial audits due by law in 2016, performed for delivery in 2022.
Funston Advisory Services was selected as the fiduciary auditor for both the State Teachers Retirement System-STRS and the Ohio Police and Fire Pension Fund-OPFPF, at a cost of $1,422,000, fees a half-million dollars more than another bidder for both contracts. ORSC Chairman, state Rep. Rick Carfagna, a Republican from suburban Columbus, indicated the Funston writing style was the significant difference.
The writing style in the two month old, teacher funded, forensic audit of STRS didn’t have the same impact on Chairman Carfagna. When the 128-page document authored by securities attorney and public pension expert, Edward Siedle was suggested as an agenda item for the next ORSC meeting, Carfagna said he didn’t find much data in the document.
Uncomfortable, granular detail in Siedle report
In reality there is uncomfortable, granular detail in the Siedle report, including harsh criticism of the ORSC breakdown in oversight that originates in clear violations of Ohio law. The latest example of Ohio’s systemic breakdown in public pension oversight comes in response to Siedle’s conclusion that STRS routinely under reports fees to investment managers to overstate performance results.
Fremont native, Certified Public Accountant-CPA Wade Steen, twice appointed to the STRS Board as the governor’s representative, has written to fellow board members with a 10-point graphic showing STRS documents that reveal $163 million in investment costs was shaved from results to qualify staff for $7.8 million in bonuses. Steen also has written STRS leadership saying the information behind staff bonuses, due to be voted on tomorrow, is insufficient as evidence of performance to earn the bonuses.
This column was first to note the allegations of manipulated data in the STRS financial reports, but big city Ohio newspapers have also covered both the Siedle report and the Steen question on whether performance or fraud is behind the bonus pool. This an issue that goes way beyond $7.8 million, in that potential fraud anywhere raises questions everywhere with a $94 billion pension.
Normally those questions would be answered by the Auditor of State. Currently that’s Keith Faber. “The Auditor of State did not audit the accompanying financial statements and, accordingly, we are unable to express, and do not express an opinion on them,” said Faber who farmed the project out to CliftonLarsonAllen LLP of Toledo.
The contract auditor’s statement said; “This report consists of management’s representations regarding STRS Ohio’s finances. Management assumes full responsibility for the completeness and reliability of all information presented in this report.”
It's time for unit to follow the evidence
Since the only source of information on STRS stewardship of $94 billion is of questionable reliability, it’s time for the Auditor’s Special Investigations Unit to follow the evidence in Steen’s 10-point map to data manipulation he says was behind the $7.8 million pot of gold for STRS staff.
To force the issue I sent the graphic to Auditor Faber’s SIU team and his public affairs unit, while enlisting the social media army of Ohio pension beneficiaries to do the same. Within minutes the pension groups were flooding the Auditor’s Office with demands for an investigation.
Frankly, it’s the sort of thing the Auditor should have been all over the minute it hit the newspapers. It should have been the first item of new business on the Ohio Retirement Study Council agenda, and Wade Steen’s first email should have been to the auditor.
If STRS management manipulated data to put millions in their pockets, they belong in prison not in charge of 500,000 citizens' retirement. If the Steen document is wrong, it needs to be debunked ASAP by someone with credibility, like the Auditor’s SIU team. If they fail to perform as ORSC has over the years, the FBI will be the next alternative, although pension expert Siedle advises not to expect much help.
John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.
posted by Kathie Bracy at 9:24 AM
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