CONCORD, N.H. - Officials of the $2 billion New Hampshire Retirement System violated the fund's own code of ethics by accepting free travel, entertainment and gifts from outside service providers, according to a fund audit report.
The audit found one trustee accepted four tickets to a professional football game and that several trustees received food and holiday ornaments.
It also found the Bank of Ireland, an investment manager for the fund, paid $4,019 worth of hotels, meals and entertainment for four trustees and five spouses or guests who went to a five-day forum in Ireland. In addition, the Institute of Fiduciary Education partially underwrote an 11-day, $6,500 trip a board member took to China.
Each year, in addition to its financial audit, the legislative auditor for the state issues a management letter that addresses the fund's internal controls in financial and administrative areas.
Michael Buckley, director of audits, said the New Hampshire Retirement System board violated its own code of ethics during the fiscal year ended June 30, 1994.
This is not the first time the audit report has pointed a finger at trustees for what the auditor considers questionable perks. "It has been commented on in past years in one way or another," said Mr. Buckley.
A number of state lawmakers, including Senate President Joe Delahunty; state Sen. David Currier; and state Rep. Channing Brown, the legislative fiscal committee chairman, reportedly have called for greater scrutiny of the situation.
"The point we make is that it's improper for the board of trustees to accept free travel, entertainment and gifts from the service providers they are charged with monitoring," Mr. Buckley said.
Responding to the criticism of trips, the board of trustees, chaired by Charles Baldwin, wrote in their response to the audit report:
"It is customary that on occasion travel and accommodation expenses are provided by service providers. It is conventional that these expenses are considered by these providers to be a cost of doing business."
"In our judgment, not taking advantage of this type of opportunity will not result in reduced service provider fees but will most definitely result in lost opportunity to gain much needed education, exposure and training," the trustees said.
Nevertheless, trustees said they would address the travel and gift policy issue as well as the issue of spousal attendance at educational forums.
As for gifts, the trustees said they already had formally instructed their service providers on two occasions not to send gifts of any monetary value. "The instances cited in the audit observation are the minor exceptions rather than the rule."
The fund will forward a third notice to all service providers instructing them to comply with the policy.
The code of ethics states that "no trustee or staff employee shall accept gifts, entertainment, gratuities or non-system-related travel from system consultants, advisers, service providers, vendors or other persons connected with investments held by the system which give the appearance of a conflict of interest."
Service providers are prohibited from providing the board of trustees or management staff with gifts of any monetary value.
The code of ethics is silent as to what funding sources are allowed for system-related travel. The audit report called for any portion of travel funded by a service provider to be deemed a gift, and therefore prohibited. "Because benefits furnished by service providers in any form ultimately result in increased charges to clients, such benefits increase the system's investment manager expenses," the report said.
Instead, Mr. Buckley said such trips should be charged to the fund's administrative account.