Understanding the Red Flags in NJ’s Latest Pension Investment Audit

A new audit from the New Jersey Office of Legislative Services (OLS) highlights concerns about staffing, delayed procurement, and outdated technology within the New Jersey Department of the Treasury’s Division of Investment – the unit that’s responsible for handling billions of dollars connected to state pension systems.

The audit, published earlier this month, covers three years (July, 2022 through June 2025) and reported compliance with laws, regulations and noted that the DOI was meeting its fiduciary responsibilities but that the DOI is doing more with less. The audit points to fault lines that carry big implications for oversight, reliability and risk management in one of the state’s most important financial responsibilities.

800,000 and Billions

According to the audit, the DOI managed pension investments for ~ 837,000 members across New Jersey’s public retirement systems.

In April 2024 the division transferred $20.8 billion in assets to be managed by the Police and Firemen’s Retirement System (PFRS) due to changes in state law. The audit notes that as of June 30, 2025, the division still managed $9.2 billion in alternative investment assets that couldn’t transfer.

 Red Flag on Staffing

The audit noted the Division’s vacancy rate was nearing 30% and identified signs of leadership churn and salary issues- noting a section director left for sweeter deal at PFRS and that three asset class heads resigned in July 2025.

This can lead to more external advisors and reduced internal oversight and continuity.

Red Flag on Procurement

By May 2025, the DOI had 15 RFPs with cost estimates totaling over $79 million and auditors found that few procurements had been pending over 4 years – this can be a sign the DOI is relying on outdated/unsupported systems despite the need for modernization having been identified years earlier.

Red Flag on Technology

Next up is the DOI’s biggest weak spot – a 25-year-old “off-the-shelf” trade order management system.

The report identifies multiple technology and control issues..

-An operating system where support ended in January 2020 (the DOI was still running it in 2021)

-System outages in for two months in 2022 that “prevented staff from executing trades”

-In 2023, the system produced duplicated trades and also allowed “trades [to be] initiated without authorization,”

Barriers in reconciling trading activity to custodian records

In addition, the system doesn’t provide a clear audit trail showing who approved each trade. In other words, the tech isn’t living up to baseline expectations most people would have.

System Costs: The audit provides a specific figure for another failed tool: a multi-asset analytical tool that cost more than $2.86 million but is currently “unusable”.

Erroneous Stock Sales: The audit highlights three specific erroneous stock sales due to DVP system errors:

December 2023: 45,320 shares sold that were already tendered.

December 2024: 10,000 shares sold before being received into custody.

April 2025: 861,000 shares sold that were not available.

Compliant, Sure

The audit’s doesn’t accuse the DOI of violating laws. and found it to be in compliance and on top of its fiduciary responsibilities.

But ‘compliant’ is not the same as ‘healthy’….. the red flags documented show an entity handling a massive financial responsibility with staffing gaps, slow modernization, and stone-age tech that present with significant risks.

Now consider that the NJ Legislature passed through a rushed 128 Million Dollar Budget Supplemental the same week the Audit report was released and while not a dime appears to be going to the DOI ‘s $79 Million Dollar modernization backlog – the lions share of $26 million will be going to event marketing activities connected to the World Cup.

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