In regards to the audit findings for the police and fire pension funds in St. Charles ("Audit knocks St. Charles police, fire pension boards," Nov. 19), an independent custodian is certainly worth considering. Our Skokie police fund switched to a separate custodian a few years ago. This arrangement helps ensure compliance with the investment policy. It is also particularly helpful in the event that the pension fund wants to switch investment advisers or brokers.
The added cost is about $15,000 in our case for a $70 million fund. However, there is nothing intrinsically wrong with having the investments in custody at the broker. Under such an arrangement, just as with a separate custodian, assets are given over by the investor to an entity that has a contractual obligation to return them. Neither St. Charles' fire or police boards engaged in any inappropriate action, as your headline and the auditor's comments about foxes and hens might suggest.
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An independent custodian is a good idea, adds minimal cost for the benefits, and is an appropriate suggestion by an auditor in what is called the "management letter." It is not, however, a finding of fault or wrong on the part of the pension trustees.
Daniel W. Ryan
Skokie Police Pension Fund