State Controller John Chiang’s review found CalSTRS does not adequately audit more than 1,900 reporting entities (including school districts), has missed opportunities to reduce instances of suspicious or unjustified salary increases, and failed to adequately use existing electronic systems designed to identify cases of pension spiking. Pension spiking occurs when benefit payments are based on unusually large or excessive final compensation amounts.
The Comptroller’s office identified three major concerns:
did not provide adequate oversight of the reporting entities it should
be monitoring. For example, at the rate at which audits currently are
being performed, each district would be audited only once every 48
years. In addition, CalSTRS’ audit process should have been more
effective in detecting pension spiking at its reporting entities (i.e.,
missed opportunities to increase reporting entity accountability. The
independent review of the San Francisco Unified School District and the
San Diego Unified School District concluded that these districts lacked
the level of transparency and the necessary controls over management pay
increases that a public entity should exercise on behalf of its
constituents. As a result, pension spiking may be occurring at these
- CalSTRS did not review or verify the results of electronic “edits” it put in place to specifically identify potential pension spiking, except when there was an occasional inquiry from other CalSTRS divisions.
The review specifically examined the electronic methods that CalSTRS uses to detect and prevent pension payments based on unusually large or excessive final compensation amounts, the auditing processes the system uses to oversee the state’s school districts and the efforts conducted by its newly formed Comprehensive Review Unit during the review period of July 1, 2009 through June 30, 2011. The scope of the review was expanded to include records from three school districts, one community college district and one county office of education.The report is here.