Retirement Security: Oversight of the National Railroad Retirement Investment Trust
Published: 2014-05-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Trust was established by federal statute effective in 2002 to manage a portion of the assets the Board uses to pay benefits to retired railroad workers, and managed about $25 billion in assets as of 2013. The Trust invests assets in stocks, bonds, and other investment vehicles in a manner similar to that of defined benefit plans. To insulate the Trust from political influence over its investment decisions, the Trust was established independent of the federal government. It is exempted from the federal law that governs the financial operations of the U.S. government and which establishes the duties and powers of the GAO. GAO assessed (1) the performance audit policies and practices that exist for oversight of the Trust; (2) the performance audit policies that apply to comparable organizations, such as large state public pension plans; and (3) what options, if any, could be pursued to improve Trust performance audit policies and what tradeoffs stakeholders believe such options entail.
GAO reviewed applicable federal laws, Trust policies and procedures, and relevant reports such as state, federal, and Trust-commissioned performance audit reports. GAO also interviewed officials of the Board, state and federal pension plans, the state Auditors General, and private plan fiduciary experts.
section_title: What GAO Found
paragraphs: Oversight of the National Railroad Retirement Investment Trust (Trust) includes both regular reporting and communications with the Railroad Retirement Board (Board), and periodic performance audits that the Trust has opted to commission; however, no written requirement for such audits exists. The Trust's mandatory annual management report includes financial and descriptive information, including a discussion of the evolution, current status and performance of the Trust's investment portfolio and administrative costs, including investment manager fees. The Trust has also commissioned four external performance audits since its creation—the first in 2004 and the most recent in 2012. These reviews have encompassed a wide range of issues, including the accuracy of monthly reports, compliance with Trust investment manager hiring policies, processes to ensure accuracy of financial recordkeeping and internal controls, adequacy of due diligence procedures, and the role of non-traditional investments.
Performance audit practices of comparable entities can differ from the Trust in scope and frequency. The large majority of state pension plans and two federal programs GAO reviewed that manage investment assets are subject to performance audits that can be initiated and conducted by an external entity, and some of these audits have addressed issues Trust-commissioned audits have not included. Forty-two of the 50 state plans GAO contacted are subject to performance audits that can be initiated and conducted by an external auditor, such as state Auditors General or equivalent, or by offices of internal audit. In some cases, the external auditor reviews the plan annually, while in others, plans are audited less frequently. Both federal programs—the Pension Benefit Guaranty Corporation's single-employer insurance program and the Thrift Savings Plan—are also subject to externally initiated and conducted performance audits. State and federal audits varied in subject and scope, and in some cases, examined issues that Trust-commissioned reviews have not yet included, such as ethics and conflict of interest policies. Experts told GAO that Trust performance audit practices are comparable to those of large private sector plans governed by the Employee Retirement Income Security Act of 1974.
Based on our review of oversight models that apply to state plans and other information, GAO developed several options to enhance the Trust's performance audit practices, and stakeholders identified potential advantages and limitations pertaining to them. For example, the Board's Office of Inspector General (OIG) could be granted authority to conduct performance audits, which would help ensure these reviews are initiated and performed independent of the Trust. However, both Board and Trust officials had reservations about this option, stating that the OIG lacks sufficient expertise in aspects of the Trust investment program, and expressing concerns about what they perceive as an unconstructive working relationship. The Trust's practice of commissioning periodic performance audits could be established as a formal requirement, either through a memorandum of agreement between the key parties, or through a statutory amendment, with external input on subject and scope of the audits. Trust and Board officials stated that this would be a reasonable option, and in early 2014 developed an initial proposal to implement such an agreement.
section_title: What GAO Recommends
paragraphs: This report makes no recommendations.

section_title: Letter
paragraphs: The National Railroad Retirement Investment Trust (Trust) is responsible  for investing and overseeing about $25 billion in federal assets used to  pay benefits to retired railroad workers through the railroad retirement  program managed by the Railroad Retirement Board (Board). The Trust  was established by statute effective in 2002 to manage and invest these  funds and was granted broad authority to invest in equities, bonds, and   The  other assets in the same manner as private sector pension plans.statute establishing the Trust provides that it is not a department, agency,  or instrumentality of the federal government and that it is not subject to  statutory provisions governing the financial operations of the federal  government. As a result, oversight requirements that typically apply with  respect to federal programs and activities do not apply to the Trust and its  activities, although the Trust is subject to limited oversight by the Board  and is also required to have its financial statements audited annually.  Recent financial markets crises and instances of malfeasance in the  management of some large public pension plans have raised concerns  about the financial risks that pension plans face generally, and the  adequacy of existing Trust oversight.
In light of the importance of these assets to the future financial security of  railroad retirees, and the limited oversight of the Trust, we reviewed  existing Trust oversight mechanisms. Because the Trust’s financial  statements are audited annually, we focused our review on performance  audits, broadly defined; issues pertaining to financial statement audits   Specifically, we sought to answer the  were excluded from our scope.following questions.  1.  What performance audit policies and practices exist for the oversight  of the National Railroad Retirement Investment Trust (Trust)?  2.  What performance audit policies apply to comparable organizations,  such as large state public pension plans?  3.  What options, if any, could be pursued to improve Trust performance  audit policies and what tradeoffs do stakeholders believe such options  entail?
To answer the first question, we interviewed representatives of the Board,  the Railroad Retirement Board Office of Inspector General (OIG), and the  Trust, including officials who were intimately involved in creation of the  Trust. We also reviewed relevant federal law, regulations, and legislative  histories, the Trust’s written policies and publications—including annual  reports and audit reports—and related publications of other federal  agencies such as the Social Security Administration. To answer the  second question, we interviewed officials of large public retirement plans  in each of the 50 states, and conducted in-depth case studies of seven  large state plans.officials, such as the Executive Director of the largest plan or investment  entity, and representatives of state auditors general or comparable entity  with authority to audit or otherwise review state plans. We also reviewed  relevant audit reports pertaining to each plan we contacted. Additionally,  we interviewed representatives of the Pension Benefit Guaranty  Corporation (PBGC) and the Federal Retirement Thrift Investment  Board—two federal agencies which oversee large pools of invested  assets—and reviewed relevant performance audits of these two  agencies. We also interviewed private plan fiduciary experts and  representatives of the Department of Labor’s Employee Benefit Security  Administration (EBSA), and PBGC’s Office of Inspector General. To  answer the third question, we interviewed relevant stakeholders— including representatives of the Board, Trust, and the Board’s OIG—to  discuss the benefits and drawbacks of policy options that could potentially  enhance Trust audit and oversight.
For each case study, we interviewed state pension  We conducted this audit from April 2013 to May 2014 in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient and  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: The Trust was established by statute as a tax-exempt entity to manage  and invest the assets used to pay a portion of Railroad Retirement  Program benefits. Congress anticipated that the Trust would be managed  much like a private sector pension plan trust.seven trustees that, like trustees of multiemployer plans established   The Trust is governed by  through collective bargaining, include representatives of both  management and labor. Three of the trustees are selected by railroad  management, three by railroad labor, and one independent trustee is  selected by the other six. The Trust may invest Trust assets in stocks,  bonds and other investment vehicles in a manner similar to other defined  benefit (DB) plans. While the Trust is not subject to the Employee  Retirement Income Security Act of 1974 (ERISA), which governs private  sector pension plans, its trustees are subject to fiduciary standards  comparable to the fiduciary duties under ERISA. For example, each  member of the Board of Trustees must act solely in the interests of the  Board and, thereby, plan participants and beneficiaries; for the exclusive  purpose of providing plan benefits and defraying administrative costs;  with the care, skill, prudence, and diligence that a prudent person familiar  with such matters would use; and diversify investments to minimize the  risk of large losses and avoid disproportionate influence over any industry  or firm. As of September 2013, the Trust held about $25 billion in  assets, placing it among the 50 largest DB plan trusts in the nation as of  2013. Trust assets consist mostly of equity and fixed income  investments, but also include substantial assets allocated to alternative  investments such as private equity, absolute return strategies, and  commodities. From 2003 through 2013, according to a Trust  representative, the Trust has had an average annual return on investment  of about 6.4 percent. However, along with other plans, the Trust also  suffered substantial investment losses during the financial crisis of 2008  and 2009. The Trust lost 19 percent in 2008 alone and suffered much  lower losses in 2009 and 2011.
The Trust operates in coordination with the Board, a federal agency  established in 1937 to provide old-age pensions to retired employees of  the nation’s railroads. In 2013, the Board oversaw the payment of about  $11.6 billion in retirement and survivor benefits to about 568,000  beneficiaries. The Board pays two types of benefits to retired workers and  their spouses, which are funded through federal payroll taxes assessed  on private railroads and their employees. Tier I benefits are calculated to  be comparable to Social Security benefits, for which railroad retirees  generally are not eligible. The Board also pays Tier II benefits, which  are intended to provide a benefit similar to that of a DB plan. Benefits  under Tier II are based on a worker’s 5 years of highest earnings and the  number of years spent in railroad employment. Assets not needed for  immediate payment of Tier II benefits are invested by the Trust in  accordance with its investment policy.
The legislation creating the Trust includes language making it clear that  the Trust is not part of the federal government. Specifically, the Trust is  not a department, agency, or instrumentality of the federal government,  and it is exempted from title 31 of the U.S. Code which governs the  financial operations of the federal government and establishes the powers   In addition, the  and duties of the U.S. Government Accountability Office. Board is not represented on the Board of Trustees because the Board is  a federal agency. However, as required by law, an independent qualified  public accountant audits the Trust’s financial statements each year. It  has been reported that these aspects of the Trust stemmed from  concerns about government involvement in investment decisions that  were repeatedly raised in Congress and elsewhere. It was reportedly  feared, for example, that politically motivated investment decisions would  lead to suboptimal investment returns and would provide political  advantages to those influencing the decisions. Concerns about this  “political risk” were of particular concern because the partial privatization  of the much larger Social Security Trust Fund was a prominent public  policy issue at the time. These concerns led to a desire to eliminate  even the appearance of possible political influence and significantly  influenced the Trust’s current structure.
While the Trust manages the pool of assets in a manner similar to that of  a private or public sector traditional DB plan, it also differs significantly  from such plans in certain ways. As figure 1 illustrates, the Trust’s role is  important but relatively narrow—its sole purpose is to manage and  oversee the assets used to ensure payment of Tier II railroad retirement  benefits. The Board assumes various other responsibilities of a DB  pension plan, such as keeping track of benefit accruals and ensuring  benefit payments. As a result, the Trust is a relatively small organization  compared to the Board and pension plans of comparable size. While the  Trust employs about 18 staff, the Board, which has many other duties— including unemployment and sickness benefit programs—and regional  offices around the United States, employs about 865. A public pension  plan like the Pennsylvania State Employees’ Retirement System, whose  assets under management are comparable to that of the Trust, employs  about 200 staff.
Other essential aspects of a typical DB plan, such as maintaining records  of accrued benefits, providing technical assistance to participants, and  authorizing and making benefit payments, are carried out by the Board or  the Department of the Treasury (Treasury). In addition, the Board  assumes responsibility for interacting with workers or beneficiaries as  needed. The Trust is thus free of these responsibilities, and is able to  focus on overseeing its invested assets. Table 1 compares the Trust and  the Tier II program to typical public and private DB plans.
Although the Trust does not have its own OIG, since the Trust’s inception,  the Board’s OIG has repeatedly expressed concerns about the adequacy  of Trust oversight. In November 2002, the OIG contacted the Trust’s  Chief Investment Officer to inquire about investment practices and the  transfer of assets from Board accounts at Treasury to the Trust. The OIG  requested written confirmation that transferred funds had been received,  which investments had been purchased, and current investment yields.  The Trust Chair responded by noting that the Trust transmits investment  information in a statutorily-required annual report, as well as monthly  reports pursuant to a memorandum of understanding with the Board,  Treasury, and the Office of Management and Budget (OMB). In a  subsequent correspondence, the Chairman noted that Congress had  specified that the Trust was to be audited by an independent auditor, and  delegated to the Board the responsibility to bring civil action if it believes  the Trust is not complying with the statute. Since that time, the Trust has  declined to provide any information directly to the OIG, although the  Board has opted to share information pertaining to the Trust in some  cases. In 2008, the OIG issued a report expressing concern that the  Trust’s authorizing legislation provided the Board with a passive oversight  role, and did not provide the Board with the ability to uncover  circumstances requiring enforcement action. The report further noted  limitations of annual financial statement audits, stating that such audits  provide a “snapshot” of an organization’s financial health at a point in  time, are not equivalent to a performance audit, and cannot assess  program performance compared to applicable criteria. The report  concluded that the annual financial statement audit should be  supplemented by performance audits, which can offer information about  the effectiveness of internal controls, assess compliance with law, and  assess the efficiency of recruitment and retention strategies.
The overall importance of adequate oversight of pension assets has been  highlighted in recent years by a number of incidents involving officials  responsible for managing large pools of retirement assets. For example,  in 2011, high ranking officials of a large state pension plan were  implicated in practices that violated fiduciary and ethical duties.  Specifically, they were found to have guided investments to certain  middlemen known as “placement agents” in exchange for trips and other  benefits, possibly to the detriment of beneficiaries. Similarly, in 2009, the PBGC Office of Inspector General (PBGC OIG) issued a report  regarding a former PBGC Director’s inappropriate involvement in  contracting for investment services. Among other things, the PBGC OIG  found that the former Director was communicating directly with some  bidders at the same time he was actively considering their proposals, and  so had clearly violated prohibitions against contact with potential service  providers.
section_title: Trust Oversight Includes Mandatory Reporting and Voluntary Periodic Performance Audits
subsections: section_title: The Trust Regularly Communicates with the Board and Other Federal Agencies
paragraphs: Under the law, the Trust must submit an annual management report to  the Congress, President, Board, and Director of OMB. This report is  required to address various matters pertaining to the Trust’s  administration and financial position. As table 2 outlines, the most  recent annual report contains information about the investment results,  financial activity, operations and management. For example, the report  includes a discussion of the evolution, current status and performance of  the Trust’s investment portfolio. It also includes a history of asset  transfers and current book and market values. The report also includes  a section on internal accounting and administrative controls including a  description of the custodial arrangements under which Trust assets are  primarily in the custody of a custodial bank, as well as the custodian’s  responsibility to provide the Trust with a full record of all transactions  involving Trust assets. The Annual Management Report also includes  relevant Trust policies such as Trust by-laws, investment guidelines, and  a conflicts of interest policy statement. In addition to Annual Management  Reports, the Trust also submits monthly and quarterly reports to the  Board. The monthly reports include financial information such as  information on the purchase and sale of federal and non-federal  securities, the monthly cash balance, and aggregate administrative  expenses. Quarterly reports include a summary of investment objectives,  quarterly investment returns, and aggregate asset values.
Under the terms of a memorandum of understanding with three federal  agencies, the Trust also submits a monthly report to the Board.memorandum states that because the Board is responsible for the overall  management of the Railroad Retirement System, it is responsible for all  budgetary and proprietary reporting of Trust transactions. Consequently,  as table 2 describes, the Trust must submit information on investment  and other transactions to the Board, and may do so on a 1-month delayed  basis. The Board then uses this information to prepare monthly financial  reports submitted to Treasury.
In addition to reviewing these reports, Board and Trust officials stated that  the organizations conduct regular formal meetings. In addition, the Board,  in cooperation with the Trust, receives and reviews communications and  information throughout the year. Board officials explained that Board  members and trustees meet face-to-face twice annually, during which the  Board receives a presentation on economic, legal, and other issues that  could affect the Trust and its investments. The presentation may also  include a detailed discussion of investment performance and outlook by  asset class. A Board official said that such meetings typically include a  question and answer session. These meetings are supplemented by  quarterly conference calls between Trust and Board financial and legal  staff in which investment performance, ongoing audits, or other issues are  discussed.
Board officials indicated that, after more than 10 years of experience  working with and overseeing the Trust, they saw no need for enhanced  oversight, noting that these reports and communications effectively  provide continuous oversight, and in the event of a participant complaint,  the Board would stand in for a claimant’s interest and take action in the  event of malfeasance or mismanagement. Further, Board and Trust  representatives told us that the Trust has never declined to share  information that the Board has requested. Based on this working  relationship, Board officials stated they believe they would be aware of  any cause to file a lawsuit under the statute.
section_title: The Trust Has Commissioned Periodic Performance Audits Since 2002, but Has Not Established a Formal Policy for Such Audits
paragraphs: While not required by law to do so, the Trust has commissioned four  performance audits since the Trust was organized in 2002. As table 3  illustrates, these audits have occurred roughly every 2 to 3 years, and  have covered a wide range of issues from technical compliance with the  terms of the MOU between the Board, OMB, and Treasury, to the Trust’s  approach to non-traditional investments such as hedge funds and private  equity.
These performance audits varied considerably in subject matter and  breadth. For example, the 2004 audit, conducted by the internal audit  departments of two railroad firms, sought to ensure that various core  functions, including financial reporting functions, were in place and  operating as intended. In contrast, the 2009 review sought to examine  various aspects of investment related practices, for which a railroad  internal audit department would not likely have sufficient expertise.  Instead, according to a Trustee, the Trust hired a consulting firm that it  believed to have considerable expertise in investment strategy and  management. This report went into some detail about the nature and  management of the Trust’s alternative investments such as hedge funds  and private equity, and examined the Trust’s “due diligence” procedures  regarding the search for investment managers and ongoing manager  oversight.
Each report contained recommendations and, according to Trust  documents, the Trust either implemented, committed to implement, or  explained why it would not implement each recommendation. In at least  one instance, the Trust has not pursued the auditor’s recommendations.  Specifically, while the 2006 internal risk assessment generally found few  gaps in Trust processes and controls of risk, the auditor also proposed a  second audit phase to explore a number of issues more deeply.  According to a Trust representative, the Trust audit committee opted not  to commit to the significant cost of this second phase, since the risk  analysis found only a few “gaps” out of the 19 areas evaluated, and  because the Trust either took corrective action or determined that the  Trust’s existing policies sufficiently addressed the concern. Since that  time, some of the specified issues have been addressed in subsequent  reviews, but others have not. For example, the audit proposed a more in- depth review of recruiting, staff compensation, and organizational culture,  but the Trust has not followed up with an audit of these issues.
Although Trust representatives indicated that they intended to continue  the practice of periodic performance audits, the Trust does not have a  written policy regarding performance audits, their frequency, or their  subject matter. For example, the Trust’s Audit Committee Charter  specifically assigns the Committee responsibility for, among other items,  1) retaining and working with the independent financial auditor, 2)  overseeing the Trust’s conflict of interest and confidentiality policies, and  3) overseeing Trust staff compliance with the MOU. However, the charter  is silent on performance audits.
Recently, a second MOU—developed between the Trust and the Board— has been drafted that would formalize the practice of commissioning  periodic performance audits. Under a draft MOU, starting in 2015,  performance audits would be performed at least every 3 years, in  consultation between the Trust and the Board. The document also lists 12  areas that would be appropriate subjects of the audits, and provides that  the Trust and the Board would meet to review the audit results and  assess what changes to Trust practices or procedures would be  warranted. However, the document does not include some audit subjects,  such as fiduciary responsibility and conflict of interest policies, and does  not specify timeframes for addressing particular areas subject to audit.
section_title: Performance Audit Practices of Comparable Entities Can Differ from the Trust in Scope and Frequency
subsections: section_title: Most Comparable Entities Are Subject to Multiple Levels of Performance Audits, but the Nature and Frequency of Reviews May Vary
subsections: section_title: Subject to Independent External Auditors
paragraphs: Unlike the Trust, most state plans and both federal programs we  contacted are subject to performance audits that can be initiated and  conducted by an independent entity. As figure 2 shows, 42 of the 50 state  plans we contacted are subject to external audits conducted by the states’  Auditor General or a comparable entity with authority to audit or otherwise  review them. External audits of these plans can be initiated and  conducted independent of the plans’ governing board and management.  The remaining 8 of these 50 state plans are not subject to external audit.  Plan officials in these 8 states stated that oversight can be achieved in  other ways, such as through the preparation of publically available reports  as well as through board of trustee and legislative oversight.
Two federal programs that oversee large asset pools for the benefit of  retirees and their beneficiaries are also subject to independently initiated  performance audits. For example, PBGC’s single employer insurance  program is subject to OIG audits and TSP is subject to Employee Benefit  Security Administration (EBSA) audits.
While the large majority of state and federal officials noted the importance  of performance audits conducted by an independent external entity,  officials of some state plans subject to audit noted potential drawbacks as  well. A plan official in one state said auditors should be independent  because they need to be unbiased, and conduct their work without  influence. An EBSA official stated that given the value of TSP’s asset  holdings, they would be concerned if EBSA was not able to initiate an  audit to examine program areas they felt warranted closer review.  Nonetheless, a plan official in one state said the plan resisted such audits  in part out of a concern for politically motivated reviews and a perceived  lack or expertise in investment matters. The official explained that the  Auditor General’s office was seen as a stepping stone to the  governorship, and that plan officials were concerned that audits could be  used for political purposes. According to the official, when a state court  ruled that the Auditor General had the power to initiate an audit, plan  officials commissioned an external firm in 2006 to conduct a separate review so state legislators could consider the findings of both audits.
section_title: Number of Independent External Auditors
paragraphs: In contrast to the Trust, several state and both federal programs we  contacted are subject to multiple audits initiated by independent agencies.  As indicated in figure 2, 13 of 50 state plans can be reviewed by two or  more entities. In one state for example, the plan is subject to review by  three state agencies: the Auditor General, a legislative oversight agency,  and the state’s Inspector General. In some cases, state oversight  agencies do not conduct audits but monitor investment strategy and  activities in other ways. For example, one state’s legislative oversight  committee informs and advises the legislature about different investment  options for pension assets. Both federal programs we contacted are also  subject to audit by multiple agencies. As noted above, PBGC is subject to  audit by its OIG, and TSP is subject to audit by EBSA. In addition, unlike  the Trust, both are subject to GAO’s audit jurisdiction.
section_title: Frequency of External Performance Audits
paragraphs: As illustrated in figure 3, the frequency with which the Trust has  commissioned performance audits is comparable to or exceeds most  state efforts. Unlike the Trust, 29 of the 50 state plans we contacted are  subject to external audits on a specific calendar cycle. While 14 of the 42  state plans are subject to quarterly or annual external audits, most state  plans are audited about as frequently as or less so than the Trust. For  instance, similar to the Trust, nine state plans are audited at least once  every 2 or 3 years. The remaining 19 state plans were subject to audits at  longer set intervals that varied from state to state or were not reviewed  according to any established time frame.
While the Trust had not established time frames for periodic reviews of  any topic, in some states, external auditors are required to review certain  topics within specified intervals. In one state, the Auditor General  conducts a performance audit every 2 years focusing on plan operations  while a second state agency audits the plan’s investment strategy,  performance, and practices every other year. In another state, a state  agency is required to conduct an audit every 3 years related to  investment strategy, performance, and practices as well as ethics and  conflicts of interest. The most recent of these audits assessed whether  fiduciaries act for the sole benefit of participants, and whether the highest  ethical practices were being upheld. Plan officials in this state stated that  the requirement is relatively new, resulting from allegations that  investment firms made improper payments to politically connected  intermediaries in exchange for managing the investment of state pension  assets.
section_title: Internal Audit Offices
paragraphs: Thirty-seven of the 50 plans we examined report being subject to  performance audits by an office of internal audit located within the plan  itself. In 32 of these plans, internal audits supplement external audits, but  in 5 others, the office of internal audit is the only entity that conducts  performance audits. According to plan officials, internal audits are  typically conducted on an ongoing basis in accordance with an annual  audit plan, and are conducted with a significant degree of independence.  For example, plan officials in two states stated that, although the board of  trustees must formally review and approve their annual audit plan,  trustees do not influence what internal auditors should or should not  review. One plan official said that such independence is important  because—if problems or malfeasance were occurring—the board of  trustees might try to divert the focus of these reviews. Nonetheless, an  official of one state plan that, like the Trust, solely manages and invests  pooled pension assets, told us that given their relatively small size, an  office of internal audit would not be appropriate. Instead, the official said  they plan to retain a third party firm to conduct a broad-based risk  assessment related to the plan’s investment allocations.
section_title: State and Federal Audits Cover Certain Areas Not Included in Trust Reviews
paragraphs: Trust performance audits are comparable to state and federal audits in  terms of the breadth of topics reviewed. We examined relevant  performance audit reports of plans in seven selected states and two  federal entities and compared these to the four audits the Trust has  commissioned. Our examination indicated that the range of topics the  Trust has reviewed included some topics that state or federal audits have  not included, and in some cases Trust audits addressed topics in more  detail. For instance, as shown in table 4, unlike TSP and four states, a  Trust audit included a review related to the qualifications and  compensation of its Board of Trustees and Trust staff. Further, Trust  audits of some topics have been more detailed than those of some state  audits. For instance, the Trust’s 2009 audit included an assessment of its  practices for selecting and monitoring external investment managers, as  did several state audits. However, the Trust audit also assessed the  Trust’s practices for terminating contracts based on the performance of  external investment managers which one state audit did not include.  Table 4 lists broad audit topics and indicates whether the Trust, state  plans, and federal agencies have conducted related reviews.
Conversely, some state and federal performance audits have included  findings on topics that Trust audits have not included, or addressed topics  in more detail. As table 4 indicates, two federal and six state entities have  audited plan ethics and conflicts of interest policies and practices  whereas the Trust audits have not. In some cases, such reviews have  resulted in findings and recommendations in areas that could be relevant  to the Trust. For instance, one state audit found that the plan did not have  a process to independently identify potential conflicts of interest. Several  states have also conducted audits that solely assessed whether the plan  was in compliance with law and plan policies whereas the Trust has not.  Although limited in scope, officials in one state said these types of  reviews have identified issues such as conflicts of interest and the misuse  of state funds. Finally, while a 2006 Trust audit considered qualifications  and compensation of the Board of Trustees and Trust staff as part of a  broad risk assessment, some state audits examined this issue in more  detail. For example, a Trust audit considered the risk that improper  compensation of staff would drive inappropriate behavior or limit ability to  attract and retain staff. The review found that the Trust has processes  and controls in place to address this concern, including a staff handbook  and an annual review for each employee. In contrast, an audit of a state  plan appeared to encompass more, finding that while the plan has a  consistently high quality investment staff, it has relatively low staffing  levels in several asset classes, a tendency to leave vacancies unfilled for  many months, and underdeveloped and underutilized human resources.  As a result, the fund has had to make more extensive use of external  consultants, which, according to the audit report, resulted in higher costs  to the plan.
section_title: According to Experts, the Trust’s Performance Audit Practices Are Similar to Those of Large Private Sector Plans
paragraphs: According to experts on private sector pensions, the Trust’s practice of  commissioning external firms to conduct performance audits every 2 to 3  years is comparable to the practices of large private sector plans. While  such plans are generally not subject to independently-initiated audits,  fiduciary experts stated that large private sector DB plans commission  periodic audits that are typically conducted by external consulting firms. In  discussing the Trust’s current practice of commissioning audits every 2 to  3 years, one investment fiduciary expert said that this is similar to many  large private sector plans. Experts indicated that such audits are fairly  common among large pension plans, but that smaller plans—those  managing assets of fewer than $100 million—do not typically commission  these reviews. One expert stated that smaller plans may have a more  difficult time justifying the use of the resources necessary to commission  performance audits. Nonetheless, where resources are available, experts  said that audits can be beneficial to a plan’s trustees and management.  For instance, one expert said these reviews help ensure the plan is  complying with all reporting and disclosure requirements.
In addition to periodic audits, private plans are also subject to potential  external review by ERISA enforcement agencies. To enforce the fiduciary  standards established in ERISA, for example, EBSA may review private  sector plans to ensure officials are in compliance with ERISA standards  and, like plan participants and others, take civil action to enforce  compliance. While not subject to ERISA, the Trust’s authorizing  legislation includes similar fiduciary standards and the Trust is subject to  potential civil action by the Board for violations of law. While such action  is possible, Board officials stated that the Board has never had cause to  take such action.
section_title: Key Parties Noted Tradeoffs with Expanded Trust Oversight
subsections: section_title: Key Parties Disagreed about Need and Extent of Additional Oversight
paragraphs: The Board’s OIG officials emphasized their long-held belief that the  current level of oversight is inadequate, and that the Trust should be   In a 2011 report, the OIG  subject to more rigorous performance audits.stated that without stricter accountability, transparency, and oversight on  issues such as administrative expenses and overall financial health, the  Trust runs the risk of fraud, waste and abuse. Further, according to the  OIG, there is no comparable example where federal program assets are  completely outside the jurisdiction of a federal agency’s appointed  Inspector General. OIG officials told us that that the Board can take  enforcement action if it believes the Trust is not in compliance with its  founding legislation, but that without more transparency, fraud or  mismanagement would be difficult to detect. The OIG maintained that an  external organization should have oversight authority so that it can  independently verify Trust reports. The OIG added that—despite explicit  statutory language making it clear that the Trust is not an agency of the  federal government—the Trust’s control of about $25 billion in federal  government assets makes its status as a non-governmental organization  somewhat illogical, and that it should be subject to greater oversight. The  official added that if the railroad industry fell on hard times and the Trust  was unable able to make benefit payments, industry officials would likely  need to seek federal financial assistance.
Both Trust and Board representatives stated that, in their view, the  current oversight is adequate, citing annual mandatory financial audits,  regular reporting and communications between the Board and Trust, and  voluntary periodic Trust-commissioned performance audits. Also, officials  cited the statutory “tax ratchet”, which raises or lowers the Tier II  employer and employee tax rate to ensure that the Trust assets equal  between 4 and 6 years of expected benefit payments. Officials noted that  this mechanism both ensures that the Trust’s financial position will not  unduly deteriorate so long as there is a viable railroad industry in the  United States to pay required taxes, and ensures that railroad labor and  management have a self interest in overseeing a financially healthy Trust.
Selected representatives of railroad management and labor generally  concurred with Board and Trust officials. For example, representatives of  the Association of American Railroads—an organization representing  U.S. railroads—stated that they did not have concerns about the Trust’s  current oversight structure. Similarly, an official of the Brotherhood of  Maintenance of Way Employes indicated that the Trust is doing well  financially, and did not have concerns with regard to Trust oversight  because the Trust is quite transparent, and labor organizations are able  to obtain periodic reports.
section_title: Stakeholders Identified Important Tradeoffs with Enhanced Trust Oversight Policy Options
paragraphs: Based on discussions with experts and key stakeholders, as well as our  review of oversight models that apply to large state plans, private sector  plans subject to ERISA, and comparable federal entities, we identified  four possible policy options for expanding Trust oversight. We spoke with  key stakeholders about these policy options and solicited their views on  the potential benefits and drawbacks of each. Table 5 summarizes  stakeholder views on these policy options.
An OIG official told us that, in their opinion, this would be the most logical  option because the Trust controls Board assets and the OIG is  responsible for overseeing the Board. However, the official noted that the  OIG has limited staff, and that such authority would require additional  staff resources. To make this option more agreeable to the Trust, an OIG  official said that any necessary statutory language could clearly delineate  what the OIG’s role would and would not be. The official said the OIG  would seek to verify that there are proper checks and balances in place  and to assess internal controls. The official stated the OIG would not seek  to advise the Trust on investment policy, which is beyond the OIG’s area  of expertise.
However, representatives of the Trust and the Board that we contacted  were unanimously opposed to such a proposal. Board officials stated that  such a development would be counter to the Trust’s originating  legislation, and one official stated that externally-initiated audits could  open the door to political influence, stating that audit objectives could be  framed in a way that would pressure the Trust’s investment policies in a  particular direction. For example, an audit could be designed to review  “politically incorrect” investments, or investments that might be portrayed  as not environmentally conscious. Similarly, a Trustee expressed concern  about “headline risk”, where an outside auditor might make an issue  about the Trust’s investments in alternative investments such as private  equity. Trust representatives also expressed concerns about what they  perceived as an unconstructive, confrontational relationship with the OIG.  One official said this has been manifest in a number of ways since the  Trust was established, including on matters relating to investment  management and returns. A Trust official noted that the OIG has  commented on Trust investments and related issues, and said that should  the OIG be granted authority to audit the Trust, such concerns could  result in an audit that would influence Trust investments. The official  added that the Trust has a professionally developed investment strategy,  and does not wish to take advice about investments or about its selection  of investment advisors from the OIG or any other government agency.
Also, as summarized below, Trust officials noted that the OIG’s stance  with regard to the Statement of Social Insurance (SOSI) has led them to  undertake a costly and, in their view, unnecessary second audit of their  financial statements each year. An OIG official told us that because the  SOSI is included in Board financial statements, in their view the audit of  the December 31 asset values is necessary based on OMB guidance.  The official further noted that while the difference in the value of Trust  assets between September 30 and December 31 is generally not large, in  2008 there was an 18 percent difference.
Background   U.S. generally accepted accounting principles require federal agencies charged with  responsibility for selected federal social insurance programs such as the Railroad  Retirement, Social Security and Medicare programs—to present the Statement of  Social Insurance (SOSI) as a basic financial statement in their respective annually  audited financial statements. The SOSI presents the projected actuarial present value  of the estimated future revenue and estimated future expenditures of these social  insurance programs over 75 years. In preparing its annual SOSI for the Railroad  Retirement program, the Board considers projections of employment levels,  economic factors, and demographic factors such as mortality rates, widow remarriage  rates, retirement rates, as well as current asset values provided by the Trust. The  Department of the Treasury has cautioned that the assumptions used to prepare  SOSI’s are inherently subject to substantial uncertainty, and that depending on future  events, there will be differences between the SOSI estimates and actual results.
OIG Action  In 2006, the OIG informed the Board that it would not provide an unqualified opinion  on its financial statements if the Board continued to accept unaudited December 31  asset values from the Trust. The Board then requested that the Trust pay for an audit  of the December 31 asset values.
Trust Position  A Trust official stated that this is unnecessary because Trust assets are audited at the  end of the Trust’s fiscal year—September 30. Further, the Trust noted that the  variance between audited December 31 and unaudited December 31 values are  invariably quite small—averaging about .12 percent and never exceeding ½ of 1  percent. According to a Trust official, the various assumptions made by the Board  actuary in preparing the SOSI have much more impact on the projections than the  difference between the audited and unaudited asset values.
Impact  According to the Trust, the additional audit is also wasteful—costing $152,000 in  2013 and a total of about $1.6 million since 2005.
Finally, Board and Trust officials indicated that the OIG would not have  sufficient expertise to conduct performance audits of the Trust. One  official noted that the internal audit departments of two railroad firms were  hired for the first audit that covered various administrative issues.  However, Trust officials decided that these auditors would not have the  expertise to conduct subsequent reviews, the scope of which required  greater knowledge of investment management. Instead, the Trust opted  to hire private consulting firms with recognized expertise in the relevant  subject matter. For the same reason, a Trust official contended that OIG  lacks the expertise to conduct these audits.
subsections: section_title: Require Periodic Audits with External Input on Scope
paragraphs: Key stakeholders—including Board and Trust officials—generally  supported this option. The Trust does not have a formal policy regarding  the frequency or subject matter of its performance audits, or a policy  regarding obtaining external advice on the subject and scope of such  audits. However, one trustee stated that, while the Trust has every  intention of continuing the practice of conducting periodic audits, they  would be amenable to formalizing this process. An OIG official also  generally supported this idea, but had previously stated that reviews  every 3 years would not be sufficient, and that more ongoing oversight is  needed. Board and Trust officials were also supportive of the Board  serving in an advisory role with regard to such audits.
Recently, the Trust and the Board have been developing a memorandum  of understanding (MOU). According to a draft version of this MOU,  starting in 2015, performance audits would be performed at least every 3  years based on mutual agreement between the Trust and the Board. The  draft MOU also lists 12 areas that would be appropriate subjects of such  audits, and provides that the Trust and the Board would meet to review  the results and assess what changes to Trust practices or procedures are  warranted. However, the draft MOU does not mention some audit  subjects, such as fiduciary responsibility and conflicts of interest policies,  and does not specify that key subjects should be addressed within  specified timeframes for addressing particular areas subject to audit.
section_title: Establish External Investigative Authority
paragraphs: Larger private sector DB plans have, according to experts we contacted,  performance audit practices resembling those of the Trust. However, in  response to participant complaints or other information, such plans are  also potentially subject to EBSA investigations. As we have previously  reported, EBSA does not conduct routine compliance audits, but rather  investigators rely on various sources for case leads, such as staff reviews  of plan annual reports or media reports, participant complaints, or  referrals from other agencies. As noted previously, the Board can bring  a civil action against the Trust for violations of law. Trust officials are  subject to fiduciary standards similar to those under ERISA, and are  prohibited from transactions in the trustees’ own interest, or receiving any  benefit from any party dealing with Trust assets. However, the Trust’s  authorizing statute does not provide for any mechanism other than a  lawsuit with regard to a violation.
Trust officials stated that establishing an external investigative authority  might have limited benefits because railroad retirees and survivors do not  interact with the Trust in the same way that retirees interact with a DB  plan. A Trust representative noted that because the Trust’s sole duty is to  manage the assets pertaining to Tier II benefits, it does not have  responsibility for determining benefit levels, making benefit payments, or  the other matters about which a pension plan may communicate with  beneficiaries. According to Board representatives, workers taking issue  with some aspect of Trust management or actions would likely contact the  labor representative on the Board, and management officials would likely  contact the Board’s management representative.
section_title: Establish Office of Internal Audit
paragraphs: An office of internal audit is common in state plans, but according to  stakeholders, the Trust may be too small an organization to justify such a  unit. The majority of the state plans were subject to audits conducted by  an internal audit department. Internal auditors generally conducted audits  on an ongoing basis, following a routine audit plan.
Both Board and Trust officials stated that, given the small size of the  Trust’s staff, an office of internal audit would not be suitable. One Trust  representative noted that, if the Trust was comparable in size to a large  public pension plan, establishing an internal office would make some  sense. However, he noted that the Trust employs few staff, and  investment management is entirely carried out by external firms. The  official stated that such an entity would need considerable skill—including  in-depth expertise in investment, accounting, and financial controls—and  such a professional would likely command a much higher salary than the  Trust would be willing to pay for someone who would have limited  responsibility for most of the year. A trustee also expressed concern  about the substantial cost of such a position given that there would not be  much for them to do most of the time.
A representative of the OIG stated that establishing an internal  compliance officer or auditor is a reasonable idea, but expressed concern  about the operational independence of such a position. This official was  not familiar with the status of internal audit offices within public pension  plans, but indicated that such an office would need to be independent of  management and Trustees, just as the OIG is independent of the Board.
section_title: Statutory Amendment or Administrative Agreement
paragraphs: With respect to the policy options we discussed with stakeholders, Trust  and Board officials stated that they would prefer any changes be  established through an interagency agreement such as an MOU as  opposed to a statutory amendment. Representatives of the Trust and  the Board strongly preferred to avoid a statutory change. Trust  representatives explained that any statutory amendments would offer less  flexibility and opportunity for modification than would an administrative  agreement such as an MOU. Further, Trust and Board officials expressed  concern that the process of a statutory change might bring unexpected  and disruptive consequences. For example, once begun, industry or labor  might use the legislative process to impose additional amendments,  which could cause unnecessary strife. An OIG official noted advantages  and drawbacks to both options, noting for example that while the statutory  option could be more difficult to achieve, it would have the benefit of  greater permanence, since the Trust could not legally opt to discontinue  new oversight practices.
section_title: Concluding Observations
paragraphs: The National Railroad Retirement Investment Trust manages a $25 billion  pool of federal assets that are critical to providing retirement benefits for  railroad workers and their families. To protect these assets—and the  entity that manages them—from political influence, the Trust was  established independent of the federal government and explicitly  exempted from the title 31 of the U.S. Code, which governs the financial  operations of the federal government and establishes the powers and  duties of GAO. However, the Trust is not without oversight beyond  mandatory financial audits. Through regular reports and other  communications, the Trust’s financial condition is monitored by the Board  and other agencies of the federal government. Further, the Trust has  appropriately recognized the importance of oversight and transparency by  taking the initiative to commission four performance audits since it was  organized in 2002. These voluntarily initiated audits are comparable to  and in some cases more comprehensive than those of the state pension  plans we reviewed.
Nonetheless, our review suggests that there are aspects of the approach  to accountability for the Trust that could be strengthened. First, while 42  of the 50 state plans we surveyed and both federal agencies we reviewed  are subject to performance audits that are initiated and conducted by  external entities, the Trust is not. Instead, it has commissioned private  firms to conduct audits whose subject and scope the Trust defines.  However, a lack of independently initiated audits raises the risk that  auditors could be directed away from potentially problematic issues.  Second, 29 of the 50 state plans we contacted are subject to external  audits on a specific calendar cycle, and those plans with an internal  auditor are audited on an ongoing basis. Although the Trust has opted to  commission performance audits every 2 to 3 years since its creation, it  does not have a written policy requiring such audits, defining their scope,  or establishing their frequency. Finally, while some states require that  specific subjects be periodically reviewed, the Trust does not. For  example, one state now requires plans to undergo ethics and conflict of  interest reviews every 3 years—the most recent of which assessed  whether fiduciaries act for the sole benefit of participants, and whether the  highest ethical practices were being upheld.
Any improvement in Trust’s performance audit oversight should help  ensure that its investment decisions are insulated from political influence.  Our review of state pension plans and selected federal programs  suggests that while external audits are not necessarily a source of such  influence, such influence may not be beyond the bounds of possibility.  However, concerns about such “political risk” should be balanced against  the management and financial risk that exists in situations where  oversight is not clearly independent.
The Trust’s recent initiative to document a performance audit policy and  to involve the Board in determining the subject and scope of future audits  adds a welcome external perspective that is likely to enhance the  independence of future audits. However, Trust action—including any  interagency agreements—would not necessarily be permanent, and  under current law the parties could revoke such an agreement at any  time. After more than a decade of Trust operation, it may be time to  consider whether such an arrangement should be made permanent, while  still ensuring that Trust assets are managed solely with the long term best  interest of railroad retirees and their families in mind.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the National Railroad Retirement  Investment Trust, the Railroad Retirement Board, and the Railroad  Retirement Board Office of Inspector General for review and comment.  We received formal written comments from all three organizations, and  each generally agreed with our findings and analysis. Among other  comments, the Trust indicated that it would seek to address two issues  GAO noted with regard to the draft memorandum of understanding  between the Trust and the Board regarding performance audits between  the Trust and the Board. The Board’s OIG summarized some of its long- standing concerns about oversight of the Trust, and raised other  concerns. For example, the OIG stressed the importance of audits  conducted by independent external entities, and expressed opposition to  any arrangement that would allow the Trust and the Board to control  performance audits. The OIG also disagreed with the concern expressed  by the Board that its audits could lack independence or be a source of  political influence. The Trust, Board, and OIG formal comments are  reproduced in appendixes II, III, and IV, respectively. The Trust and  Board also provided a number of technical comments, which we  incorporated as appropriate.
Because performance audit policies or the work of the Pension Benefit  Guaranty Corporation, the PBGC Office of Inspector General, the Federal  Retirement Thrift Investment Board, and the Department of Labor’s  Employee Benefit Security Administration are reflected in our report, we  also provided those agencies with a copy of the report for technical  review and comment. None provided formal written comments, but the  Federal Thrift Investment Board and the PBGC provided technical  comments, which we have incorporated at appropriate.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from its  issue date.  At that time, we will send copies of this report to appropriate  congressional committees, the agencies named above, and other  interested parties. In addition, this report will be available at no charge on  the GAO website at http://www.gao.gov.
If you have any questions about this report, please contact Charles  Jeszeck at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are found in  appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to answer the following questions:  1.  What performance audit policies and practices exist for the oversight  of the National Railroad Retirement Investment Trust (Trust)?  2.  What performance audit policies apply to comparable organizations,  such as large state public pension plans?  3.  What options, if any, could be pursued to improve Trust performance  audit policies and what tradeoffs do stakeholders believe such options  entail?
To answer our first question, we reviewed applicable federal laws,  regulations, and Railroad Retirement Board (Board) policies and  procedures regarding oversight of the Trust and the memorandum of  understanding established between the Board, the Trust, the Office of  Management and Budget (OMB), and the Department of the Treasury.  Additionally, we interviewed representatives of the Board, the Trust, and  the Railroad Retirement Board’s Office of Inspector General (OIG) to  determine the nature and frequency of oversight and audit policies and  practices regarding the Trust. We also obtained and reviewed relevant  documents including each of the four Trust-commissioned performance  audit reports, the Trust’s annual reports to Congress, and the Trust’s  financial statement audit reports. Additionally, we reviewed relevant OIG  reports and communications between the Board and OIG related to Trust  audit and oversight.
To answer our second question, we conducted in-depth illustrative case  studies of audit policies and practices in seven states: California, Florida,  Illinois, New York, Tennessee, Texas, and Pennsylvania. We purposefully  selected case studies based on region, plan participation, and  governance and oversight structure.interviewed representatives of the state’s Auditor General or equivalent  and either representatives of the state’s largest public employee pension  plan or state agency that, similar to the Trust, solely managed the  investment of pooled pension assets. Further, we obtained and reviewed   As part of each case study, we  relevant state performance audit reports. Specifically, we reviewed  relevant state audit reports issued since 2008. We generally obtained  these reports from the website of the states’ Auditors General or  equivalent. During interviews with state Auditors General or equivalent  and state pension officials, we discussed these reports and asked for  copies of other relevant audit reports issued since 2008. Where available,  we also reviewed audit reports produced by state plans’ offices of internal  audit. As internal audit reports are generally not publically available, we  asked officials to provide us with copies of these reports particularly those  that reviewed aspects of the plan related to investment strategy and  management that would be most applicable to the functions of the Trust.  To obtain higher-level data regarding the performance audit policies and  practices of the remaining 43 states, we also conducted structured  interviews with officials of each state’s largest defined benefit (DB) public  employee pension plan or pension investment entity as available. To  identify the state DB plans or pension investment entities, we used  information obtained from Pension and Investment’s Research Center  and the National Association of State Retirement Administrators  (NASRA).questions and held pre-tests with officials in two states to obtain feedback  on the clarity and relevance of our questions. While the majority of our  questions could be answered with a yes or no response, we also included  more open ended questions regarding the frequency of external and  internal performance audits and to what extent plan officials found such  audits useful.
Based on our audit objectives, we developed standard  To obtain information on comparable federal entities, we also interviewed  officials from the Pension Benefit Guaranty Corporation’s (PBGC) single  employer insurance program and the Federal Retirement Thrift  Investment Board that administers the Thrift Savings Plan. While the  functions of these organizations are not completely analogous to the  functions of the Trust, like the Trust, both programs manage large asset  pools for the benefit of retirees and their beneficiaries. Further, we also  interviewed officials from two federal agencies that have audit authority of  these programs—respectively, PBGC’s Office of Inspector General and  the Department of Labor’s Employee Benefit and Security  Administration—to determine the nature and frequency of their audit  practices. Additionally, we obtained and reviewed relevant federal audit  reports issued since 2008. Further, we interviewed representatives of  NASRA, and the Association of Public Pension Fund Auditors to discuss  audit practices of public plans. To obtain information on the audit  practices of private sector DB plans, we reviewed relevant provisions of  the Employee Retirement Income Security Act of 1974 (ERISA) and  interviewed private sector plan fiduciary experts, ERISA experts, and  representatives of an external consulting firm that has been  commissioned by private sector plans to conduct performance audits.
To answer our third question, we developed four policy options regarding  improved Trust oversight. These options were based substantially on the  oversight models that apply to state pension plans or comparable federal  agencies, as developed under objective 2. We then interviewed experts  and stakeholders familiar with the Trust—including representatives of the  Board, the Trust, the OIG, and other federal officials, as well as railroad  labor and management—to discuss the potential benefits of establishing  independent performance audits of the Trust. We discussed with them the  benefits and drawbacks of four possible policy options: 1) permitting OIG  audits, 2) requiring periodic audits with external input on scope, 3)  establishing external investigative authority, and 4) establishing an office  of internal audit. We also solicited input on the mechanisms—statutory or  otherwise—by which the options could be implemented. We also obtained  and reviewed existing principles and guidelines regarding the audit and  oversight of DB pensions plans, especially those applicable to investment  management activities. Examples of such principles include the  guidelines published by the Organisation for Economic Cooperation and  Development (OECD) and the National Conference on Public Employee   Additionally, we reviewed  Retirement Systems (NCPERS) among others.academic articles on pension plan governance and oversight and relevant  auditing and internal control standards such as the American Institute of  Certified Public Accountants Statements on Auditing Standards,  Government Auditing Standards, International Standards for the  Professional Practice of Internal Auditing (Standards), and Standards for  Internal Control in the Federal Government.
We conducted this audit from April 2013 to May 2014 in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient and  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Comments from the National Railroad Retirement Investment Trust
section_title: Appendix III: Comments from the Railroad Retirement Board
section_title: Appendix IV: Comments from the Railroad Retirement Board Office of Inspector General
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, David Lehrer (Assistant Director),  Michael Hartnett, and Justin Dunleavy made key contributions to this  report. In addition, key support was provided by Susanna Clark, Mimi  Nguyen, Kate van Gelder, Walter Vance, and Craig Winslow.