benchmark: a standard or point of reference against which things may be compared or assessed.
audit: an official inspection of an individual’s or organization’s accounts, typically by an independent body.
New Jersey’s pension-fund investments posted an annual return of 4.16 percent in the fiscal year that ended June 30, following years of mostly sustained double-digit returns, state officials said Wednesday.
Nevertheless, according to Treasury Department data, the unaudited investment returns beat the state’s benchmark, a composite of various indexes, which yielded 2.93 percent.
Which brings up the obvious (at least to me) questions:
- If the state can spend resources on developing a benchmark return how about putting some effort into auditing these numbers?
- If 2.93% is the benchmark then why not use that as the expected investment return instead of 7.9%?
Number 2 is easy. The valuation investment return has nothing to do with funded ratios or what the trust earnings will be and everything to do with plugging in the highest number you can get away with to keep the contribution as low as possible. It’s that first question that yields a tougher and even more troubling answer.
In the private sector if you have over 100 participants you must get an independent audit even you have a plain vanilla 401(k) plan with maybe a couple hundred thousand dollars in it. Yet a government plan which reports $79 billion in assets on its website can prevaricate:
(Market value, unaudited, as of 6/30/2015. May not reflect the current market values of some alternative investments through the period noted, due to lags in reporting under industry standards.)
Plan trustees begging for an audit are being told by the Christie administration that they have no authority to request an audit of their fund’s investments which brings up two more questions:
- What does the Audit Committee of the State Investment Council do if audits are off the table?
- What do they have to hide?