Federal Agency Guaranteeing Americans' Pensions Flunks Internal Audit

The federal corporation responsible for rescuing Americans'
pensions from troubled companies has received an "F" for the internal
controls it exercises over its own finances, according to a Center for
Public Integrity investigation. The Center's investigative story, "No
Guarantees at the Pension Benefit Guaranty Corporation," found the
corporation suffers from other failings that alarm its internal watchdog
and key members of Congress.

Over the last two years, the Pension
Benefit Guaranty Corporation (PBGC) has lost Social Security numbers
stored on an unsecured thumb drive, misled members of Congress, and
flunked its own audit for a "material weakness" in its internal
financial controls. The low-profile federal entity, funded by insurance
premiums paid by pension fund operators, protects the pensions of about
44 million workers and retirees in traditional defined benefit pension
plans that promised a fixed monthly or bi-weekly payment to retirees for
life. When a covered company's pension plan defaults, PBGC swoops in
and protects workers' retirements.

"PBGC did not have effective internal
control over financial reporting (including safeguarding assets) and
compliance with laws and regulations and its operations," said Inspector
General Rebecca Anne Batts, the corporation's internal watchdog.

A Center review of hundreds of pages
of memos, audits, and internal reports shows the corporation has been
unable to make several guarantees about its own work.

Despite being the custodian of some of
Americans' most private data, PBGC suffers from such lax security that a
contractor was able in 2008 to download the pension and Social Security
numbers of 1,300 Americans to an unsecured electronic thumb drive that
was then lost at an Ohio train station, according to documents and
interviews. The corporation also has been criticized for letting its
contractors hire employees with inadequate experience or education, and
has been cited repeatedly since 1997 for failing to create a unified
financial management system to better safeguard its funds. It lacks the
ability, for instance, to independently confirm the investment revenue
figures reported by a contractor hired to engage in securities lending
on its behalf, according to audit reports and interviews.

And the PBGC's former chief executive
was the subject of a year-long criminal investigation that ended in
March with no criminal charges but a conclusion that his conduct raised
"serious ethical concerns," documents show.

Such systematic PBGC problems concern
lawmakers like Sen. Charles Grassley, the top Republican on the Senate
Finance Committee, and Sen. Herb Kohl of Wisconsin, the Democratic
chairman of the Senate Special Committee on Aging, particularly because
the corporation's own long-term financial outlook has worsened over the
last few years. Kohl, who backs legislation to strengthen the PBGC's
oversight and governance, told the Center that the corporation's
"long-running problems .... should serve as a wake-up call to Congress."
Nearly one in six Americans relies on the PBGC to guarantee their
pensions and "the agency is far too important to let it operate without
adequate oversight," added Kohl.