Concerns were raised on Tuesday about how the Kentucky Public Pensions Authority (KPPA) manages several Chase accounts. Kristen Coffey, the KPPA director of Internal Audit Administration, outlined the findings of an internal review for members of the County Employees Retirement System (CERS) and Kentucky Retirement Systems (KRS) audit committees. She detailed 12 key findings.
- KPPA’s 12 Chase accounts consist of one clearing account used to receive employee and employer contributions, one excess benefit account used to pay retirees who earn more than what is allowed by federal law, and five pension and five insurance accounts (one for each hazardous and nonhazardous system and the State Police Retirement System (SPRS)). The audit noted that these are non-custodial accounts, and assets held in the accounts may be outside the statutory oversight of the Board of Trustees.
- Concerns raised included excessive transfers between accounts, including a Humana Insurance reimbursement deposited into the KERS Insurance account, despite portions being owed to other insurance funds.
- KPPA has no internal controls to ensure access levels to the non-custodial accounts are accurate.
- Kentucky Employees Retirement System (KERS) funds were spent to cover the expenses of other plans.
- Excess funds were kept in the non-custodial accounts instead of being invested.
- KPPA lacked control over reconciliations.
- A lack of review of journal entry transactions created a potential for errors in transferring funds.
- Payments made by check are sent in an envelope addressed as KPPA, and those made by direct deposits do not identify if the funds are from KPPA, CERS, or KRS, as required by statute.
- Activity in the Unfunded Liability Trust Fund is not monitored.
- Member banking information is not kept in a secure location.
- Coffey noted that files with member names and banking information were printed and kept on open bookshelves. She stated that KPPA indicates those files are now secured.
- KRS 61.706 is outdated, referencing the Kentucky Retirement Systems.
- House Bill 484, a KLC initiative legislators passed in 2020, changed the name to KPPA.
- KPPA reported inaccurate amounts on administrative expense spreadsheets.
- The audit found the amount was off by $2,940.
- KPPA did not post meeting minutes to its website in a timely fashion.
KPPA’s new chief financial officer, Mike Lamb, vowed to fix any internal issues. KPPA hired Lamb last month for the new position in charge of financial reporting and compliance, cash management, and external coordination.
KRS Board Member William Summers voiced frustration with the findings. “The sloppiness doesn’t need to occur,” he remarked. He and other members of the committee urged Lamb to address the issues in a timely fashion.
Representative Russell Webber (R-Shepherdsville) filed House Bill 587 to help address KPPA audits. The KLC initiative clarifies that the KPPA Internal Audit Administration works for KPPA trustees and performs audits at the direction of the six-member group, which is comprised equally of CERS and KRS representatives.