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California

Pension fund trustees who spent more than $1.3 million on trips to face audit

LACERA organizational governance committee
Los Angeles County Employees Retirement Assn. board members oversee the pension system for county workers. On Wednesday the county Board of Supervisors voted to have the county auditor-controller examine operation spending at LACERA, which has come under scrutiny after its trustees have run up uncommonly high bills for travel to educational conferences and seminars.
(Matt Stiles / Los Angeles Times)

The Board of Supervisors ordered an audit Tuesday of L.A. County’s pension fund following a Times investigation of trustees’ spending on travel.

The Board of Supervisors on Tuesday ordered an audit of L.A. County’s massive employee pension fund, increasing scrutiny of its trustees’ spending on travel.

In a split vote, the supervisors adopted a motion calling on the county’s auditor-controller to examine operational spending at the Los Angeles County Employees Retirement Assn. and report back within 60 days.

The review is intended to look specifically at the budget and administrative expenses of LACERA, as the association is commonly known. The audit is likely to include costly trips taken by trustees to educational conferences and seminars.

Supervisor Hilda Solis said she sought the audit so the county “can reassure LACERA’s members that their retirement plans and health benefits are secure.”

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The Times reported this week that trustees have taken hundreds of trips, many of them overseas, and they have cost the fund more than $1.3 million since 2015 — expenses that outpace those of peer pension funds.

An internal audit released this month called LACERA a “significant outlier” among peer pension funds for travel costs. In fiscal 2018, for example, LACERA spent $400,000 on education travel for its trustees — three times as much as the California Public Employees’ Retirement System, or CalPERS, the audit found.

Many of the trips were approved in advance by the trustees themselves and largely adhered to their internal policies. But the amounts have prompted concern inside and outside of LACERA’s Pasadena headquarters.

Although LACERA is a public entity funded by contributions from the county and employees, as well as returns on investments, it operates independently with its own boards, budget and internal and external auditors. But California law also allows the supervisors to order their own auditor to review a fund’s spending — so long as it doesn’t pass on the cost of the review to the pension fund.

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The newly ordered audit would focus more broadly on LACERA’s “processes and controls over their administrative operations,” according to Solis’s motion, which was co-led by Supervisor Mark Ridley-Thomas. It seeks to “determine whether LACERA provides adequate stewardship” over costs.

The motion includes an analysis of LACERA’s budget increases, travel and training operations and administrative expenses — and how those compare with other funds and industry norms. The motion also includes a desire for the state’s Joint Legislative Audit Committee to review the association.

Supervisor Sheila Kuehl — whose appointee, Alan Bernstein, chairs LACERA’s Board of Retirement — voted against the latter measure while supporting the county audit. Supervisor Kathryn Barger didn’t attend Tuesday’s meeting because she was traveling.

In a written statement, LACERA said it maintains the “highest regard for transparency,” while pointing out that it regularly conducts internal audits.

“LACERA understands and respects the county Board of Supervisors’ statutory right to perform an audit, and we will cooperate to the fullest extent,” Steven Rice, the association’s acting chief executive, said in a statement.

Bernstein, a real estate investor from Hancock Park, took about $97,000 in trips during the three-year period examined by The Times — costs that can be inflated by pricey admissions fees charged by groups that organize the meetings. LACERA pays those fees and other travel expenses for such events in part to avoid the appearance that its potential customers are influencing trustees.

Other board members who topped the travel spending list were Lt. Shawn Kehoe, a Sheriff’s Department investigator; Vivian Gray, an attorney in the county’s Alternate Public Defender’s Office; and David Green, a social worker in the Department of Children and Family Services. Their trips totaled about $135,000, $115,000 and $120,000, respectively, during the time period.

The supervisors haven’t raised concerns about the association’s investments, which have produced healthy investment returns in recent years.


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