Missouri State Auditor Nicole Galloway today released a follow-up review of a retirement plan for employees of the City of Bridgeton, which is located in St. Louis County. The report is a review of progress made since an October 2016 audit gave the plan a performance rating of poor.
"Our initial review last year identified concerns both with the weak financial condition of the retirement plan and with the lack of oversight and accountability by the city," Auditor Galloway said. "While the city has taken some actions towards implementing our recommendations, there are changes still needed to help protect the financial well-being of the retirees counting on this plan. Clearly, the City of Bridgeton must do more."
The retirement plan reviewed by the State Auditor covers city employees hired prior to Jan. 1, 2012. The October 2016 audit report showed the plan was only 67 percent funded, largely due to inadequate contributions from the city and to returns on investments that were lower than assumed by the city council, which acted as the plan's trustee.
Following the October 2016 audit, the city increased its budget for plan contributions in 2017 and city officials indicated they plan to make full contributions to the plan in the 2018 budget and subsequent years. The city council has not, however, developed a formal funding policy or formal investment policy for the plan.
The October 2016 audit also recommended the city council maintain effective oversight of the plan by delegating fiduciary responsibilities to an independent pension board. The city has established a Pension Commission to monitor the plan, however, the commission serves only in advisory capacity and the city council continues to serve as the plan's trustee. This governance structure provides for an inherent conflict of interest.
The audit raised the concern that city officials were not preparing or distributing reports to employees, retirees and citizens showing the impact of insufficient contributions to the financial condition of the plan, and that the information provided could be misleading and provide a false sense of security. The follow-up review determined that more recent communications from the city to these key stakeholders contained only limited plan financial information.
Auditors evaluated the six areas of concern identified in the prior report during the follow-up review. The recommendations in one area have been fully implemented, and have been partially implemented in three other areas. In two areas of concern, the recommendations have not been implemented.
A copy of the progress report is available online here.