Treasurer Loftis Releases Statement on Fiduciary Audit
April 22, 2014
State Treasurer Curtis Loftis issued the following statement today after the release of the State’s fiduciary audit by the Funston Group.
“My responsibilities are to the people of South Carolina, not a privileged few who seek total control of the now $28.8 billion pension investment fund. The tough stands I took over the past three years were needed to protect the people’s money. Because I made difficult decisions, the people’s money is safer today,” said Treasurer Loftis.
“I am hopeful the new policies, procedures, and other means of oversight outlined in the Funston Report will allow some members of the Commission to move away from political attacks against me and towards a more productive stance for our retirees,” continued Treasurer Loftis.
“It is important that all parties move forward so that we might further the goals of the State’s retirees. We owe them a transparent and accountable Investment Commission that can safely and efficiently fund their retirements. I have pledged to do that and am making every effort to encourage others to join me in that work as well.”
The fiduciary audit documents important changes that have taken place at the South Carolina Retirement Investment Commission since Treasurer Loftis began pressing for change in 2011. When elected to office, Treasurer Loftis found the six year old organization responsible for $26 billion of pension funds lacked basic controls required of any successful financial organization.
When Treasurer Loftis discovered this mismanagement of funds he pursued change through normal channels, but his efforts were ignored. Mr. Loftis, using the principles of transparency and accountability, took the issues facing the commission to the public. Thanks to pressure from the people of South Carolina and the General Assembly, the Investment Commission has made important and necessary changes.
The table below represents some the overdue changes made to the plan that were accomplished during the Treasurer’s tenure:
Appendix B RSIC Improvements Timeline
• Recruited additional employees in positions that previously did not exist such as; Director of Reporting, Senior Legal Officer, Senior Risk Management Officer, Operational Due Diligence
• An Audit Committee of the RSIC Commission was established in June of 2011
• Formal Memorandum of Understanding (MOU) was established between PEBA and RSIC (October 2011) and updated (January 2014)
• Adopted new Performance Incentive Compensation (PIC) Plan (May 2012)
• Created and implemented placement agent policy (September 2012)
• An Internal Audit and Compliance Department was established (September 2012)
• Completed year long search for new Investment Consultant (September 2012)
• Formal initial due diligence guidelines were adopted and implemented (November 2012)
• Formal management representation letter provided to PEBA and external auditor annually (November 2012)
• Formal on-going due diligence guidelines were adopted and implemented, including semi-annual and audited financial statement review (January 2013)
• A research management/contact management database program was purchased and implemented (February 2013)
• Formal Joint Valuation policies were adopted between PEBA and RSIC (March 2013)
• An operational due diligence program was established and implemented, which requires review of operations of all new investments (April 2013)
• Revised Governance Policies were adopted by the Commission ( May 2013)
• Implemented formal legal sufficiency letter to accompany every new investment funding (June 2013)
• Implemented annual compliance questionnaire and certification from external managers (July 2013)
• Implemented a Non-Disclosure Agreement (NDA) with the STO (September 2013)
• Implemented a technology solution to provide for document sharing with the Treasurer’s staff and Commissioners (September 2013)
• Improved fee validation procedures and collection process by moving to quarterly process - (October 2013)
o Disclosed investment fees by manager in the 2012 CAFR
o All fees were published in the 2013 audited financial statement
• Employee Compliance Policies have been established, including Code of Ethics Acknowledgement, Personal Trading Policy, Gifts and Conflict of Interest Policy and Whistleblower Policy (December 2013)
In process improvements:
• Risk RFP in final stages.
• Administrator selected after RFP process. Implementation to commence immediately with target completion of July 1, 2014.
• Development of Enterprise Risk Management Function, with direct reporting to Audit Committee, approved by Commission at March 2014 Commission meeting.