CalSTRS CEO Jack Ehnes responded that the organization is committed to cracking down on pension spiking.
"CalSTRS agrees with the Controller's recommendations and will take additional actions to further strengthen its controls," Ehnes said in a press statement release shortly after the audit was made public today. "In fact, many of the recommendations in the report have been initiated within the last year."
The review by State Controller John Chiang's office found CalSTRS, with more than 1,900 employer-members, averages just 40 audits per year.
Chiang's office also concluded that the fund needs more auditors and hasn't maximized technology to catch pension spiking.
The controller's auditors examined pay records for employees who received raises immediately prior to retirement from Pajaro Valley Unified School District in Santa Cruz County, the San Francisco and San Diego unified school districts, Santa Clara County's Foothill-De Anza Community College District and the Los Angeles County Office of Education.
Two of the five didn't have written performance evaluations, executive approvals or other written documentation to justify the pay increases.
Auditors found, for example, one San Francisco executive received a 26 percent pay hike six months before retiring. Another executive received a 20 percent raise one year before retiring. The district couldn't come up with any written justification for the increases.
State officials ran into the same thing with raises given soon-to-retire employees in the San Diego Unified School District.
In a letter to Chiang's office, Ehnes said that the fund has taken the audit to heart. Still, the vast majority of CalSTRS members work under salaries set by contract that don't leave room for spiking, he noted, and its hybrid pension structure doesn't use additional pay such as overtime to pad defined benefit pension formulae. CalSTRS also excludes accumulated leave or other one-time payments from calculations.
PHOTO CREDIT: Jack Ehnes/courtesy CalSTRS