John Damschroder: Ohio teachers use Facebook to force pension audit

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https://www.thenews-messenger.com/story/news/2021/10/27/damschroder-ohio-teachers-use-facebook-force-pension-audit/8548824002/

October 27, 2021

John Damschroder

Columnist

Ohio teachers use Facebook to force pension audit

The controversy at Ohio’s State Teachers Retirement System (STRS) looks like a day at the beach compared to the problems at Facebook.

The global social media giant has been accused of assisting the the insurrectionists who attacked the U.S. Capitol, assisting foreign governments attempting to influence U.S. elections through misinformation, causing an increase in teenage suicide and eating disorders, all through the use of algorithms designed to trigger anger, because hot emotion causes users to stay longer, creating more advertising profit for Facebook.

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It’s hard to find a positive story about social media, but the thousands of retired Ohio teachers who’ve created two large and fast growing groups to monitor their retirement system — STRS Ohio Watchdogs and STRS Members Only  — have produced an outcome that is hard to imagine without Facebook.

Forensic audit underway; accounting for investment costs

Because hundreds of these STRS monitors reacted within minutes to my suggestion they contact the Special Investigations Unit of the state auditor’s office, STRS confirmed a forensic audit was underway, during their board meeting last week.

Tiffany Ridenbaugh, the Chief Forensic Auditor in the Special Investigations Unit, wrote to STRS Executive Director William Neville saying the probe is based on numerous complaints evolving from the $75,000 investigation of STRS done by former Securities and Exchange Commission attorney Edward Siedle for the Ohio Retired Teachers Association (ORTA). The Siedle report concluded STRS routinely underreports the true costs of externally managed alternative investments and thus overstates the returns it achieves. 

At issue in the forensic audit is accounting for investment costs in 2018. Siedle and STRS Trustee Board member, Fremont native Wade Steen, a certified public accountant with 30 years’ experience in government finance, indicate STRS reported costs of $279.1 million, a small gain on investments for the year and paid staff bonuses totaling $7.8 million.

The Siedle Report says the investment expense for the year was $463.6 million and Steen produced a graphic with screen shots of the records showing those costs, unreported by STRS, producing a loss for 2018 and making the bonuses improper.

'I don't lose sleep over the management of our assets, but I do worry about misinformation'

In August STRS Executive Director William Neville told board members all of the investment expenses are fully recorded and validated; “I don’t lose sleep over the management of our assets but I do worry about misinformation.” But like Facebook, STRS no data to refute assertions based upon data.

Director Neville doesn’t have the credibility to reassure Ohio’s retired teachers all is well with their pension, as he has passively allowed staff to collect salaries and bonuses research shows to be at the top of the scale nationally.

Moreover, STRS is one of the few funds in America paying bonuses, perhaps because the conflict of interest between valuations of private market investments, that enrich both fund managers and pension staff, without external validation, is obvious outside the capital of corruption Columbus has become.

As Facebook fights for redemption in the national media and during Congressional hearings, it would do well to tell the story of how it empowered Ohio teachers to literally force state government to do its job on oversight of their pension. 

As STRS faces investigative scrutiny on the truth in its financial records it would be well advised to cease claims of top tier performance as all the benefits flow to staff anyway. STRS must show us that what it tells us is true. The Special Investigations Unit audit, which by law becomes public when the case is closed, has the credibility to provide that much-needed outcome.

John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.