State audit of teacher retirement system finds no fraud, does suggest changes

Auditor’s office proposes ways to improve STRS, but finds no illegal acts after accusations from teacher group

State auditors reviewing the State Teachers Retirement System of Ohio found no evidence of fraud, illegal acts or data manipulation, according to the audit released Thursday. The organization’s structure, control environment and operations are also suitably designed and well monitored, the auditor’s office found.

But Auditor of State Keith Faber also said STRS, the Ohio Retirement Study Council and state lawmakers should review pension system policies and consider changes to improve the overall management of pension funds.

That includes more effective safeguards to ensure reviews and 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 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 Ohio Auditor’s findings were in response to a 2021 report commissioned by the Ohio Retired Teachers Association, titled, “The High Cost of Secrecy: Preliminary Findings of Forensic Investigation of State Teachers Retirement System of Ohio.”

The auditor’s office said STRS could be more transparent about its investments and noted in their report that the ORSC failed to meet the minimum standards of an independent actuarial review and a separate audit at least once every 10 years. The actuarial review was conducted in 2009 and not again until May 2022, and the audit was conducted in December 2006 and not again until May 2022.

“If the STRS Board and Retirement Study Council had managed this and not let other people get out in front of them, they would not have some of these incorrect public perceptions,” Faber said. “Certainly, all members of the STRS board should have access to full, accurate information about the true fees and expenses in management of the plans on a regular basis.”

Both the STRS board and the Ohio Retired Teachers Association applauded the findings, in very different ways.

STRS Ohio Executive Director Bill Neville said he appreciated the thoroughness of the special audit, and he called it noteworthy “that the special audit’s findings refute much of the inaccurate information circulated about STRS Ohio 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’s educators,” Neville said.

Robin Rayfield, executive director of ORTA, pointed to an upcoming STRS election as a key.

“For years, the board’s bad policies have yielded bad results for teachers, who are working longer and paying more for less, while enriching STRS staff,” Rayfield said. “The only way to change bad policies is to change the STRS board, which teachers will do in this spring’s election.”

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