Pension system probes questionable spending
Posted on Wednesday, October 3, 2007
As much as $ 60, 000 could be missing from Woodland Heights Retirement Center in Little Rock, the executive director of the Arkansas Teacher Retirement System said Tuesday.
The system owns the center. Funds may have been misappropriated through “petty cash, and some credit cards and so forth,” Paul Doane told the system’s trustees.
He said it may have involved a former employee of the center’s former manager, Affiliated Management LLC, which managed the center from August 2003 through July.
“We have spent a lot of time in the last three of four months trying to get to the bottom of the situation,” Doane said.
The system had an outside auditor attempt to determine the loss, Doane said. The system also got the state Legislative Audit Division involved and alerted legal authorities, including Pulaski County prosecuting attorney’s office, he said.
Doane said the system has taken steps to seek reimbursement through Affiliated Management.
Tom Ferstl of Little Rock, coowner of Affiliated Management, said later that under the firm’s contract with the system the system was supposed to have insurance to cover a loss of funds.
But Doane said the insurance doesn’t cover employees of management firms hired by the system.
Ferstl said that it’s his understanding that the $ 60, 000 the system seeks includes a bill for about $ 30, 000 from accounting firm Thomas & Thomas in Little Rock.
“I know [that person ] didn’t steal $ 60, 000,” Ferstl said.
System legal counsel Christa Clark and Ferstl declined to give the name of the former Affiliated Management employee.
Doane said in a memo to the board that the system’s internal audit staff, assisted by outside counsel and the Legislative Audit Division staff, determined that about $ 60, 000 was “allegedly misappropriated” from accounts of Woodland Heights.
“Admittedly proving the full extent of the dollar cost is problematic, but from the evidence we have assembled, my understanding is that the loss is in the $ 60, 000 range, and that has nothing to do with the cost of the external audit,” Doane said late Tuesday.
“We are not seeking recovery of audit fees at the time,” he said.
Larry Jegley, Pulaski County’s prosecuting attorney, said that after he gets a copy of the final draft he’ll “get the state police to do an investigation assuming there is a reason to believe a crime has been committed.” Deputy Legislative Auditor Ron Burch said an audit for the teacher retirement system is scheduled to be released to lawmakers in December.
In other business Tuesday, the trustees approved increasing the $ 18. 2 million budget for the expansion of the Woodland Heights center to about $ 18. 9 million. The expansion involves the addition of 83 apartments to the 62-apartment center and is aimed at making the center profitable.
About $ 400, 000 of the increase will go to refurbish the existing facility and another $ 300, 000 to $ 400, 000 for other costs, Doane said.
The trustees also OK’d a plan aimed at making the system’s $ 11 billion-plus portfolio less dependent on the domestic stock market investments and more dependent on private equity and real estate investments.
Under the plan, the system aims to have 25 percent of the value of the system’s investments in the domestic stock market, down from the current policy target of 40 percent.
Rather than a goal of having 17. 5 percent of the value of the investments in foreign stock markets, the system now has a target of putting 30 percent of the value in “global equity” in domestic and foreign stock markets.
The system also aims to have 20 percent of its investment value in bonds, down from 25 percent.
The system’s goal is to increase the 6 percent of the value of the system’s investments in private equity to 10 percent and the 5 percent in real estate to 10 percent under this plan.
The goal is to have the other 5 percent of the investments’ value invested in things such as in timber, infrastructure and commodities.
FEEDBACK:
Something to say about this topic? Submit a Letter to the Editor online
