Pennsylvania’s teachers retirement fund is rethinking how it reports travel expenses after an internal review found that fund business trips had cost pensioners more than $160,000.
The review was initiated by Pennsylvania Public School Employees Retirement System’s board last March following the Capital-Star’s reporting on hidden pension employee travel costs to a five-star hotel in Beverly Hills.
The report, disclosed during a board committee meeting Friday, is still likely missing thousands of dollars, as it did not include travel costs booked by PSERS’ investment partners, such as a private equity firm and a hedge fund.
“We really don’t have a sense of what some of our funds or managers or others have actually spent” on PSERS staff travel, Nathan Mains, executive director of the Pennsylvania School Board Association and pension board member, asked during Friday’s meeting.
“That is correct,” Jim Grossman, the fund’s chief investment officer, responded.
The costs of that travel are sometimes baked into the contracts that PSERS signs with investment groups.
Such expenses were at the heart of the Capital-Stars reporting last December, when the outlet discovered that just $1,392 of expenses were publicly reported over the course of seven cross-country trips to Los Angeles, including a stay at the famous Beverly Hills Hotel.
The reported costs for all seven trips are less than PSERS’ own estimate for two trips alone.
The fund holds that none of the travel violates Gov. Tom Wolf’s gift ban. The pension fund’s spokesperson, Steve Esack, pointed out that cost estimates, as well as who pays for each PSERS trip, was available via public record request.
But the opaque expenses still raised enough concerns among PSERS board members that they ordered the internal audit in March.
The pension fund blamed the COVID-19 pandemic for the incomplete review. While PSERS’ investment partners kept records of the travel payments, they could not be acquired due to pandemic office closures.
In the future, PSERS deputy chief counsel Steve Skoff said that the fund would institute a new policy to disclose this outside travel purchases, from hotel stays to meals.
Investment contracts will require investors to provide the pension with a quarterly report on reimbursements and direct payments of travel expenses, once the policy is implemented.
Esack said a draft of the policy will mandate that the board publish the information on its website, but the timeframe for publishing the data is still up in the air.
Both the internal review as well as the newly proposed travel policy did not ease the concerns of the audit committee, according to one source who requested anonymity to discuss the panel’s work candidly, who felt they still needed more information.
Instead, audit committee members will likely back a second policy, offered by state Treasurer Joe Torsella, to create a pension wide policy beyond new contracts.
Torsella said it would include a tiered travel approval, would apply not just to investment staff but also board members and all other pension employees, and ask for a review of the last two years of travel costs.
The policy would also call for board reports on potential investments to reveal who paid for that travel.
“I think it’s awkward to say the least if we’re voting on investments by managers who pay for travel that we don’t have to disclose,” Torsella said.
Esack told the Capital-Star that fund employees already could not be reimbursed for due diligence travel to scout out a potential investment.
How pitches to pension personnel traveling for an existing investment would be handled is unclear.
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