Oregon State Treasury Needs More Staff, Audit Says

Auditors recommend structural and staffing changes at Oregon's Treasury investment division.

(January 25, 2013) — An audit of the Oregon State Treasury— which together with the Oregon Investment Council (OIC) oversees roughly $73 billion in public money–recommends additional staff.

In the same vein, it asserted that the Oregon Treasury investment division compares favorably to peers in terms of prudent management and adherence to fiduciary standards.

The audit said the Treasury has roughly a quarter of the staff of similar-sized public pensions. “Overall, we commend the Oregon Investment Council and Oregon State Treasury staff for seeking to be a leader in public pension fund management,” the audit said. The review showed that the treasury fully conforms to standards that protect public funds, including sufficient legal review of contracts and establishment of a custodian bank to hold funds in trust.

The review also discovered that the due diligence process to select external managers conforms to “applicable standards.” It found the investment fees paid are consistent with agreements and applicable laws, and chosen investments are appropriate for Oregon’s portfolio size.

Auditors made a series of recommendations: additional training for members of the OIC, which oversees state investment policy; more autonomy for the OIC to perform its fiduciary functions; establishment of an internal risk management function at treasury; better data management; better documentation of cash flows; periodic evaluation of the reasonability of fees paid to investment managers and service providers; improved conflict-of-interest policies; and a formal periodic review for work performed by hired managers, custodians and consultants.

“The audit is straightforward, and the recommendations are thoughtful and constructive to guide our effort of continuous improvement,” said Keith Larson, chairman of the OIC.

Deputy Treasurer Darren Bond said the office agrees with the findings and will work with the OIC to implement the recommendations, taking into account staff capacity.

Related article:Read aiCIO’s Power 100 profile of Mike Mueller, deputy CIO of the Oregon State Treasury.