Audit Finds 23 'Significant' Problems at PERF

The State Board of Accounts audit of the $11 billion public pension fund found 23 significant problems with the fund, which serves more than 500,000 public employees, retirees and their families, the Indianapolis Star is reporting.   Among the auditor’s findings:

• some accounts have not been balanced in years, leading to huge discrepancies
• there was an absence of reviews and approvals for transactions, accounting entries and benefits issued to retirees
• there was little segregation of duties, meaning the same person could issue, record and mail a check.

However, the auditors said some of the most alarming are problems found with the amount of money retirees are or should be getting. The auditors found 19% of those retiree accounts that were tested were not getting the correct monthly benefit.  

There were many issues found to be the cause of these discrepancies.   Auditors found 20% of retirements and refunds that they checked did not receive credit for their final contribution.   Also, payouts for retirees who were once receiving disability pensions were not correct, while others did not get the right death benefit.

Craig Hartzer, the executive director of PERF, told the Indianapolis Star his staff is aware of the issues and is taking steps to make corrections.   “If I were a retiree I would be confident of two things,” Hartzer said. “That PERF is doing everything it can to get pension checks out on time and in the correct amount and that they can count on us fixing any problem and making sure it doesn’t happen again.”

Significant Contribution

Auditors said the significant problems with the fund contributed to the “willful” wrongdoing of two employees in separate incidents.   One such instance involved former PERF chief benefits officer (CBO) and convicted identity thief Walter Kevin Scott.   Scott pleaded guilty to one count of misusing a Social Security number, two counts of bank fraud and 20 counts of illegal monetary transactions andwas sentenced to 10 years in prison in December 2003(See  Former PERF CBO Scott Gets 10 Years Behind Bars ).   Another instance involved one of Scott’s former employees, Shaunna Stone, who pleaded guilty to a single count of bank fraud and 13 counts of misusing the Social Security numbers of other people (See Former Indiana Pension Worker Pleads Guilty to Fraud Charges ).  Stone had previously worked in the same benefits department headed by Scott.

PERF has since modified its background check policy so that it covers every current and new worker, which will be put into place soon.   Hartzer said PERF has plans to hire an additional 20 employees, to bring the total pension staff to 127. Additionally, the fund will be spending an additional $3 million in administrative costs in the coming budget year.