PERAC Memo #60 - 1998: Contract Audits

Contract Audits

Summary

PERAC Memo #60/1998 announces that beginning in December 1998, PERAC audit staff will conduct targeted Contract Audits of all retirement systems, examining contracts and the underlying selection process for money managers, consultants, custodians, actuaries, attorneys, and other vendors, as well as following up on prior audit findings. Boards should proactively review and organize their contract files—including executed contracts, competitive bidding documentation, selection scoring sheets, board minutes reflecting vendor selection discussions, and (for investment managers) required contract provisions such as fiduciary status, fee terms, and termination clauses—to ensure they are readily available for the auditors, who will contact each board to schedule a roughly half-day visit.

Full Text

PERAC MEMO #60/1998 M E M O R A N D U M TO: All Retirement Boards FROM: Robert F. Stalnaker, Executive Director RE: Contract Audits DATE: December 8, 1998 As part of our goal to perform targeted audits, PERAC will be performing Contract Audits of all retirement systems beginning in December, as well as following up on any audit findings presented in the previous audit of your retirement system. The audit staff will be reviewing all contracts that your system currently has in force. The contracts will include money managers, consultants, custodians, actuaries, accountants, attorneys, as well as any other vendors that you have or should have a contract to perform services for the retirement system. Contract for hardware and software vendors will be reviewed as part of the information technology audit. The auditors will be looking at not only the executed contract, but also the entire selection process. You should review your files to insure that these records are available for review. It is our hope that PERAC’s visit will provide you and your staff with the guidance necessary to bring your system, if it is not already, into compliance with contracting procedures. This audit process should take approximately one half day to complete. Frank Zecha and Harry Chadwick of our audit staff will be performing these audits and they will be contacting each board in the near future to determine a mutually convenient time to perform the audit. If you have any questions, please contact Jim Waldman at (617) 666-4446 ext. 924. CONTRACT PROFILE Name of Vendor ______________________________________________________________ Type of Services Provided ______________________________________________________ Dates of Service________________________________________________________________ Annual Fees___________________________________________________________________ Is there a copy of executed contract? YES_____ NO_____ How were potential vendors notified? _____________________________________________ Brief Description of Competitive Process___________________________________________

Is there a copy of other bids submitted? YES_____ NO_____ Was a scoring sheet or other type of selection process used? YES____ _ NO_____ Please describe_________________________________________________________________

Do the board minutes reflect a discussion of the selection of the contractor? YES_____ NO_____ THE FOLLOWING INFORMATION IS REQUIRED FOR INVESTMENT MANAGERS: Was the contract executed prior to the delegation of the investment authority?___________ Do the terms and conditions state the following : Investment Objectives YES_____ NO_____ Brokerage Practices YES_____ NO_____ Proxy Voting and Tender Offer Exercise Procedures YES_____ NO_____ Terms of Employment YES_____ NO_____ Fees YES_____ NO____ _ Termination Provisions YES_____ NO_____ Does the contract provide that the qualified investment manager is a fiduciary with respect to the funds the board invests pursuant to the qualified investment manager’s advice regarding the purchase and sale of investments or the funds which the qualified investment manages, as the case may be? YES_____ NO_____ Does the contract require indemnification of the manager by the retirement board (the answer should be no)? YES_____ NO_____ Is there a copy of a current ADV part II on file? YES_____ NO_____