An internal audit found nothing untoward in the Kentucky Retirement Systems' interaction with the placement agents who bring investment deals to the pension program — unless you consider it untoward for the agents to collect nearly $15 million in fees since 2004.
Some people might feel that way, particularly the thousands of public employees and retired public employees who realize the $15 million could have been earning the financially strapped system some extra cash if it had been invested instead of being paid out in fees.
Those people no doubt welcome an audit of KRS operations by Auditor Crit Luallen's office — first suggested by Gov. Steve Beshear and subsequently requested by a KRS audit committee — because some of the questions such an investigation ought to answer include: Does KRS really need placement agents' help in finding investments; and if so, what is the proper level of reimbursement for those services?
Placement agents have been at the center of pension scandals in California and New York, and California's pension program has begun renegotiating deals to eliminate these go-betweens.
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Maybe Kentucky can get by without them as well.
If the auditor's office finds placement agents to be an integral part of KRS investment operations, the level of the fees they have been collecting came as a surprise even to some members of the KRS Board of Trustees.
Which raises another question the audit should answer: Why weren't those trustees kept abreast of the magnitude of these payments on an ongoing basis?
KRS faces an unfunded liability of more than $16 billion, largely due to the General Assembly's failure to fund the state pension plan at actuarially recommended levels for most of the last two decades.
But the system also has made some bad investments, and it has been the subject of rumors about mismanagement for years.
So, there is ample need for an outside assessment of KRS operations.
Reports about the placement agents and their eyebrow-raising fees provide a convenient justification for the auditor's office to step in and perform that assessment now.