Audit clears teachers pension system of illegal acts

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A special audit of the State Teachers Retirement System of Ohio has found no evidence of fraud or illegalities related to the $90 billion held in trust by the STRS for its members.
The audit was conducted by the Ohio Auditor of State’s office, which also said the STRS, Ohio Retirement Study Council, and the state legislature should review pension system policies and related laws and consider changes to improve the overall management of pension funds.
Ohio Auditor Keith Faber described the special audit as a “limited review” of the teacher pension system but it determined the STRS organizational structure, control environment and operations are “suitably designed and well monitored, both internally and by independent experts.”
Faber said improvements could include implementing more effective safeguards to ensure required actuarial reviews and fiduciary audits are conducted in a timely manner, rethinking how or whether bonus payments are offered to investment staff, and removing trade secret provisions that shield investment decisions from further scrutiny.
“STRS should be striving to be as transparent as possible on the funds held in their trust,” Faber said. “That means fully disclosing how these funds are being invested and the returns or losses on those investments.”
The recommendations are included in the audit conducted by the auditor’s office Special Investigations Unit and a senior administrator in response to a June 2021 report titled, “The High Cost of Secrecy: Preliminary Findings of Forensic Investigation of State Teachers Retirement System of Ohio,’’ commissioned by the Ohio Retired Teachers Association.
The audit reviewed more than 24 allegations in the report and other complaints submitted to the auditor’s office.
State auditors noted, “Despite the trade secrets law relied on to classify these items as trade secrets, STRS could elect to negotiate with their investment firms to allow more transparency.” The California Public Employees Retirement System, for example, posts many documents online, including details of their bonus incentives and prospectuses, the auditors said.
Another recommendation is to revise the Investment Committee Charter of the STRS board to require regular meetings and detailed responsibilities to increase members’ understanding of the board’s investment strategy and results.
State law requires an independent actuarial and a separate fiduciary audit at least once every 10 years. The audit says the Ohio Retirement Study Council didn’t meet those requirements. The general purpose of the ORSC is to provide legislative oversight as well as advise and inform the state legislature on matters relating to the benefits, funding, investment, and administration of the five state retirement systems in Ohio.
Bill Neville, executive director of STRS Ohio, said the auditor’s findings refute much of the “inaccurate information” that has circulated about the STRS over the past two years.
“I want our members to know that STRS Ohio remains steadfast in our dedication to ensuring the sustainability of the pension fund and providing financial security to current and future generations of Ohio educators,” he said.
In August, the Ohio Retired Teachers Association issued a statement criticizing a vote by the STRS to approve $9.6 million in employee bonuses.
Robin Rayfield, executive director of the ORTA, said at the time the bonuses were coming when retired teachers were dealing with record inflation and struggling to make ends meet.