State Auditor General Eugene DePasquale is planning an audit of how money’s being managed in Pennsylvania’s two biggest employee retirement systems.
The move comes amid a federal investigation that led to the indictment of former state Treasurer Barbara Hafer, who was charged with profiting off state payments to a private investment firm.
The two agencies under the microscope are the Public School Employees’ Retirement System and the Pennsylvania State Employees’ Retirement System.
DePasquale said the agencies are spending significant taxpayer money on fees to private asset management firms, which handle their investments.
But he’s concerned the practice isn’t paying off.
“We are paying millions of dollars to outside fund managers that aren’t even coming close to equalizing the stock market,” he said. “Why are we paying these people? And what are we getting for our money?”
Both systems, which manage more than $78 billion for more than 854,00 state employees and retirees, came up short in their rates of return in investments last fiscal year.
DePasquale likened the strategy to gambling.
The audits will begin next month, and are expected to finish by early 2017.
DePasquale’s audit is the first in over a decade to simultaneously investigate both of the state’s major retirement systems. The last one was in 2002 under now-U.S. Sen. Bob Casey, and received major opposition.