A $12,500 first-class airline ticket. A personal item lost during official travel. An upgraded hotel room.
The Los Angeles County Employees Retirement Association (LACERA) has covered or all of those things for board members or staff, according to an internal audit issued June 20.
Board members’ travel expenses for conferences and the like have ballooned, the audit found, from $269,861 in fiscal 2016 to $403,267 in 2018. LACERA has budgeted a further $569,000 for fiscal 2020. Yet staff members substantially dropped their education-related spending during the same period, from $497,918 in 2016 to $381,671 last year.
LACERA’s board spends far more than its peers on attending events, meetings, and conferences, which the auditor flagged.
Business-class travel was a significant contributor, and LACERA’s policy allowing them for six-hour-plus flights sets it apart from many pension funds.
In one instance, a board member charged a $12,500 international first-class flight to the pension fund — on the member’s preferred airline — because business-class wasn’t available, the report said.
Other examples of pricey plane tickets that the auditor found include:
- “A Board member’s airfare for a domestic flight in December 2017 was approximately $5,400. When Internal Audit priced this for a trip 14 days in advance, the most expensive direct, nonrefundable, economy ticket on a major carrier was almost $600 (Google Flights), which is 800% less than what LACERA paid.”
- A board member’s domestic business-class flight in March 2018 was almost $3,000. When the internal audit priced this itinerary, the most expensive direct economy ticket was $240 — 1150 percent less than what LACERA paid.
- A June 2018 domestic flight cost about $2,400, versus $550 for economy, according to the report.
One individual board member charged the fund less than $1,000 for travel in a single year, the report said, whereas another member charged more than $55,000. Likewise, individual members attended between one and 16 events in a given year.
Travel has been a flash point at the $56 billion organization recently. Former chief executive officer Lou Razatin approved thousands of dollars in board expenses that she was not authorized to sign off on, according to a June 3 memo by chief counsel Steven Rice.
Shortly before the memo came out, LACERA’s boards placed Lazatin on leave. They fired her June 7, and have not explained why, citing policy.
[II Deep Dive: She Approved a $2,259 Travel Expense. Then She Was Fired.]
LACERA’s leadership is overhauling its travel and education policy in line with many of the auditor’s recommendations, according to a statement and documentation of its July 26 board meeting.
“Education is a necessary component for the ability of LACERA’s Boards to fulfill their fiduciary duty to effectively administer and invest the over $56 billion global fund for the benefit of our more than 165,000 members,” the statement said, noting that education and legislative matters can require trustees to travel as permitted by its policy.
“This year, the policy is being updated and, as part of a normal review which began in October 2018, the costs and operations of the program have been audited,” the statement went on. LACERA’s governance committee “voted unanimously to recommend policy revisions to the full Boards for approval at their August meetings,” and the “recommended targeted changes intended to enhance the program’s administrative efficiency and cost-effectiveness, without compromising the trustees’ ability to receive their needed education.”
One part of the new draft policy has not meaningfully changed in line with the auditor’s advice: Business-class travel.
