The Real Story (Part 4) — Special Audit of STRS Ohio

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There's been a lot shared about STRS Ohio lately on social media, the Internet and email. Sadly, much of this information has been incomplete at best and incorrect at worst.

In this edition of "The Real Story" we'll share more undeniable facts about the Ohio Auditor of State's special audit of STRS Ohio.

Here’s what the Auditor of State determined about STRS Ohio:

  • Of 29 allegations reviewed by the Auditor of State, most are false, inaccurate or misleading. Only two were true — both involved the timing of audits.

  • The Auditor of State found no fraud, illegal acts or data manipulation by STRS Ohio.

  • The Auditor of State says STRS Ohio’s organizational structure, control environment and operations are suitably designed and well-monitored internally and by independent experts.

  • The Auditor of State says STRS Ohio has lower overall investment costs than similar pension systems and STRS Ohio saves a significant amount of money by internally managing investments.

  • The Auditor of State confirms that in recent years, STRS Ohio’s total fund has outperformed 75% of similar pension systems.

  • The Auditor of State says performance-based incentives (bonuses) for investment staff are paid according to State Teachers Retirement Board-approved policy using board-approved benchmarks. The auditor reviewed bonuses in 2021 and found no issues. The auditor adds, “When considering average salary and bonus rates, STRS does not appear to be an outlier” compared to other public pension systems.

  • The Auditor of State says STRS Ohio staffers do not make up their own benchmarks. STRS Ohio benchmarks are approved by the board after review by the board’s independent investment consultant. STRS Ohio’s private equity benchmarks are like those at other public pension systems.

  • The Auditor of State says STRS Ohio follows board-approved policy for setting the total fund benchmark.

  • The Auditor of State says STRS Ohio has not backdated and manipulated its private equity benchmarks.

  • The Auditor of State says STRS Ohio has not manipulated its private equity valuations to boost performance. The auditor also says there have been no delays in recording private equity losses.

  • The Auditor of State says STRS Ohio follows generally accepted accounting principles (GAAP) in reporting private equity financial information and Global Investment Performance Standards (GIPS) in calculating private equity investment performance. There are no “accounting gimmicks.”

  • The Auditor of State says STRS Ohio receives conflicts disclosures from its investment consultants and has controls in place to monitor and review potential conflicts of interest.

  • The Auditor of State says STRS Ohio has sufficient controls to reduce, if not eliminate, the risk that private equity funds are overcharging fees.

  • The Auditor of State says STRS Ohio reports its total fund performance in compliance with Global Investment Performance Standards (GIPS) and Ohio law.