Wednesday, October 17, 2012

Administrative Expenses at NYCERS

I just read a October 12, 2012 NY Post article concerning administrative expenses at NYCERS. The Board refused the mayor's offer of $350,000 to pay for a consultant to come up with ways to cut the $120M/yr. administrative costs for the city's five pension funds.

This is a wild story. By statute NYCERS has to report all expenditures to OMB. (see S.13-103.g below) OMB is in the business of doing management audits of all city agencies. They don’t need to hire an outside consultant. The mayor just has to ask OMB to do the analysis.

The mayor can also instruct his representative on the Board to vote against the budget each year, if he is not happy with the way the executive director is running the agency (i.e. the LIC site ).

FYI: The Board had an extensive management audit done in 1996-1998. The trustees might try reading it.

In addition, by statute (S.13-103.g) the Comptroller is supposed to audit all NYCERS expenditures and is allowed to make recommendations, if he wishes to. Unfortunately, progress on the Comptroller’s heralded budget disclosure site has stalled.

NYCERS’s administrative budget (excluding loan operations:paid by members) has grown steadily in recent years.

  1. FY-2013=$43.838M (plus $7.532M fringe) (staff:380 full time & 25 par time)
  2. FY-2012=$44.538M (plus $6.603M fringe)
  3. FY-2011=$44.539M (plus $6.006M fringe)
  4. FY-2010=$43.825M (plus $5.362M fringe)
  5. FY-2009=$43,398M (plus $4.879M fringe)
  6. FY-2008=$41.908M (plus $4.799M fringe)
  7. FY-2007=$37.033M (plus $4.375M fringe)
  8. FY-2006=$34.939M (plus $4.076M fringe)
  9. FY-2005=$34.589M (plus $3.887M fringe) (staff:342 full time & 13 part time)

I was quite amused by the closing text from the article:

“The vote goes against all logic and is a lost opportunity to improve operations,” said Finance Commissioner David Frankel.
Why is Frankel commenting on a NYCERS Board of Trustees vote. He has nothing to do with NYCERS. Considering the ongoing mess at Finance he should focus on his own responsibilities.
Section 13-103.g of the NYC Admin Code dealing with the NYCERS adminitrative budget. g. All expenditures of the retirement system shall be subject to audit by the comptroller, who may make recommendations, including but not limited to, procedures designed to improve accounting and expenditure control. All expenditures of the retirement system shall be reported to the mayor's office of management and budget and the budgetary office of all participating employers.

Monday, October 15, 2012

Hedge Funds and NYCERS -- 2010-2012

As of June 30, 2010, NYCERS had no money invested in hedge funds.

As per a August 2, 2010 Wall Street article , Bloomberg appoints Nagaswami as "chair" of the NYCERS board. She was not employed at the time. Concurrently, Bloomberg appoints her to a paid position at the Department of Finance with a salary of $175,000/yr.

I use quotes around the word chair because for some strange reason since 2010 NYCERS has avoided stating for the record who the chair actually is. That in of itself is a warning sign. When a large financial organization can not identify who the Chair of the Board of Trustees is, you know there is trouble.

For the record, the mayor is not a trustee. The person he appoints is the trustee, not the mayor. This is completely different from the other ten trustees who are ex-officio members of the board.

As of June 30, 2011 NYCERS reported having $77.50M invested in hedge funds.

As of June 30, 2012 NYCERS reported having $960.48M invested in hedge funds. In the Comptroller's quarterly report these investments were reported to have a 2.14% loss for the fiscal year ending on June 30, 2012.

In August, 2012 Nagaswami resigned her position as "chair" of the NYCERS Board of Trustees. She announced that she was taking a job with the hedge fund Bridgewater Associates LP, the world’s biggest hedge fund.

In September, 2012 the trustees adopted a resolution thanking Nagaswami for her service to NYCERS.

This sequence is obviously outrageous.

While 85% of the money going into NYCERS comes from employer contributions, in FY-2011 the employees paid $410M in pension payroll deductions. That is an an average of $2,300 from each employee. When the trustees screw up, it is both the employees and the taxpayers who get pounded. The trustees get to go home to Greenwich and work for a hedge fund.