I was emailed the following post, link and comment from CFA Chris Tobe (i think CFA stands for Chartered Financial Analyst). He also sent it to the LawReader, and I assume it was tendered to me for publication here. Lawreader got it first, and I am sharing it with you now.
Government is looking for funds. I was told by my father that the penny you save is more valuable than the penny you earn. See, Op-Ed: What is being done to recover some of the money leaks at the Metropolitan Sewer District? from January 20, 2012 of the Kentucky Law Review and CJ News: "Bud Schardein departs from MSD" and what about that sweetheart of a trust?.
And most will remember my posts years ago warning of the financial toll to be paid for funding the Senior Status Judges' Program and the Court House Building Bonanza.
Well, to rephrase Sen. Everett Dirksen's remarks about spending - a few thousand here and a few hundred thousand or even a million dollars there, and before you know it you are talking some serious money. Per Mr. Tobe, that could be as high as $85 million per year!
No RFP’s for Kentucky Pensions- all back room deals.
by Chris Tobe, CFA
While the 2012 placement agent bill was an extremely watered down version from that of 2011, it is currently unenforceable because there is no documentation from an RFP to check.
Because of total lack of oversight the $13 billion Kentucky Retirement System (KRS) have been able to bypass many of the competitive bidding practices typically used by other parts of state government. The Government Finance Officers Association http://www.gfoa.org/index.php?option=com_content&task=view&id=1666 officially recommends a RFP process for public pension managers to hire investment managers. While KRS does issue RFP’s for relatively minor expenditures like the investment consultant and headhunters, well over 95% of expenditures bypass the RFP process.
According to the Report of Independent Counsel to SEC: Placement Agent Abuses at Kentucky Retirement System http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2112594 “… contrary to prudent investment practices for public pensions, KRS does not utilize RFPs seeking competitive bids from prospective money managers. Failure to solicit bids undermines the integrity of public pension contracting. RFPs ensure that contracts for investment management services are competitively bid and that requirements related to such contracts are clearly and publicly stated.” KRS pays 66 Money Managers over $56 million a year in fees and not one has ever filled out an RFP. https://kyret.ky.gov/investments/cafr/2011-cafr.pdf pg.98-100.
Kentucky Judicial and Legislative Retirement System to my knowledge has never issued an RFP and uses just one Kentucky money manager and one Kentucky broker to manage that plan. While I am not as familiar, I believe the Kentucky Teachers Retirement Systems uses RFP’s very sparingly for Investment consultants etc.
Legislation should require all the Retirement systems to use RFP’s for all major purchases or services over $25,000 a year .