CalPERS misused credit cards on hotels and events outside Sacramento, audit says

CalPERS meeting planners misspent public money on board meetings and conferences held outside Sacramento in 2016 and 2017, according to an internal audit report.

The report, which provides few top-line totals for the expenditures, says the retirement system’s Office of Stakeholder Relations improperly paid for cocktail tables, wine glasses, tubs of ice and corkage fees to outfit a “hospitality suite” at an offsite board meeting in July 2016.

The office spent $136 per day on attendees’ meals on the first day of the multi-day meeting, exceeding the state’s daily limit of $41, according to the audit.

And it booked hotel rooms in advance on Meeting Planner Account cards issued by the Department of General Services that aren’t supposed to be used for lodging, auditors found.

State employees typically are supposed to pay for their own rooms and then submit travel expense claims to cover the costs. When some of the rooms booked in advance by CalPERS went unused, the system had to pay about $5,500 in attrition fees, according to the audit.

The audit, completed in June 2019, was recently obtained through a Public Records Act request by J.J. Jelincic, a former board member of the $459 billion fund.

Auditors reviewed 20 transactions, half of the 40 transactions made on the Department of General Services-issued cards from July 2016 through June 2018, according to the report. Auditors identified unallowable expenses on nine of the transactions, the report says.

CalPERS stopped hosting hospitality suites for board members and employees in February 2018, according to the audit. The retirement system stopped paying for meals above the state’s per-diem limits at the offsite events in 2019, said spokesman Wayne Davis.

The Meeting Planner Account cards are now used only to pre-book event spaces, according to the report.

“It’s all been stopped and we responded to it,” Davis said of the audit.

Public audits?

Jelincic, who provided a copy of the audit report to The Bee, said he requested internal audit reports as part of his efforts to try to force the retirement system to be more transparent.

He recently sued the CalPERS board to try to obtain records related to the exit of former Chief Investment Officer Ben Meng, alleging the board violated the Public Records Act and California’s open meetings laws by withholding records.

CalPERS posts audits on its website of public agencies whose pension systems it administers, but it doesn’t post internal audits, nor has it been placing the audits on agendas for open or closed-session meetings.

“They ought to be posted,” Jelincic said of the internal audit reports.

Jelincic said he requested all internal audits for 2019 and 2020, and that CalPERS provided 39 reports and told him it was withholding 17.

Board member Margaret Brown has pressed for the internal audits to be more readily accessible since raising the issue in a June 2019 board committee meeting. She is an elected member of the board who is up for reelection this year.

“What we’re doing right matters, but what we’re doing wrong matters as well, and we’re not getting there,” Brown said.

Based on a motion from her, the board voted in June 2020 to place all internal audits on closed session meeting agendas, but Brown said the audits haven’t been placed on the agendas.

CalPERS board can review audits

CalPERS General Counsel Matt Jacobs said in a November 2019 memo to the board that CalPERS attorneys initially mark all the audits as confidential to ensure attorneys review them before they’re made public, since some of the reports contain sensitive information, such as IT vulnerabilities.

When the system receives public records requests, it reviews the audits and decides whether to withhold them, release them with redactions or release them in full, Jacobs said in the memo.

Board President Henry Jones said each board member may view the internal audits.

“From time to time there are issues, and that’s why we review them,” he said of the audit reports. “And we make policy changes going forward to make sure we’re consistent with the law and best practices.”

This story was originally published April 19, 2021 at 5:00 AM with the headline "CalPERS misused credit cards on hotels and events outside Sacramento, audit says."