Because of the uncertainty over the responsibilities of board members, their agencies and its director, the Pension Benefit Guaranty Corporation (PBGC) needs to put in place corporate governance practices and develop formal guidelines for its leaders’ precise roles, the Government Accountability Office (GAO) recommended in its report released Tuesday.
According to the report, the PBGC board has not addressed uncertainty over the extent to which it is a separate executive agency, a fact that has resulted in confusion over when the Department of Labor (DoL) has the authority to manage PBGC’s operations. Instead, PBGC officials typically react to DoL’s periodic written and oral communications, which PBGC officials said sometimes become a part of PBGC’s operational framework.
For example, GAO said the PBGC is required to incorporate its budget request with DoL’s budget request and over the years, DoL has taken a more active role in reviewing PBGC’s budget. However, PBGC officials believe that DOL has in some cases overstepped its role. For instance, DoL and PBGC officials disagreed over the inclusion of a funding request in PBGC’s fiscal year 2007 budget, the GAO report said.
The GAO document also asserted that the PBGC board has not established formal procedures to ensure that its management provides it information on all policy matters nor has it developed standing committees to oversee operations. Instead, the board relies on PBGC’s Inspector General and management’s oversight committees to ensure that PBGC is operating effectively.
Even though PBGC uses informal channels of communication to inform its board members, the board’s oversight may be limited, because it cannot be certain that it is receiving high quality and timely information about all significant matter, the GAO said.
“ As PBGC continues to navigate the challenges presented by the changing defined benefit pension environment, ensuring that the corporation is soundly governed and efficiently managed is essential to the thousands of Americans who rely on PBGC for their retirement income,” GAO auditors wrote in the report . ” Since 1974, the private sector pension industry has evolved and corporate governance models have changed. Yet, PBGC is still directed and overseen by one of the smallest and least diverse boards of directors, even though it is financially one of the largest corporations within the federal government. “
Despite board confusion over the DoL’s precise management role at the pension agency, the GAO asserted that “it remains essential that the board exercise its authority to oversee PBGC and coordinate with DoL and each other not only on major policy issues, but also on the oversight of PBGC’s activities. PBGC’s management staff should also work with the board to ensure that all significant matters are formally elevated to the board’s attention.”
The GAO auditors also recommend that Congressional lawmakers consider expanding the PBGC board. “â€¦it would be helpful to appoint additional members of diverse backgrounds who possess knowledge and expertise useful to PBGC’s responsibilities and can provide the attention that would be needed,” the report said.
The report is here .