HONOLULU -- State Auditor Marion Higa released a report Wednesday criticizing the management of the state's $7.1 billion public employee retirement system.

Among other things, Higa said the Employee Retirement System takes much too long to finalize a retirees benefits, needs to get a new and efficient computer system and failed to properly manage the system's assets.

The auditor said the ERS board's investment performance is poor with returns over the past five years below the bottom 15 percent when compared with other retirement systems across the country.

Higa said the state's retirees, and current employees building up their pensions should worry.

"Yeah, they should worry because of the underperformance and poor performance and poor performance of this retirement system and their management of the beneficiaries assets," Higa said. "Tax payers would have to be concerned yes because the state is backing this fund."

Higa's report said the handling of an underperforming investment manager was questionable and may have cost the system as much as $128 million.

That firm is 3Bridge and among its principles is Stanley Siu, former administrator of the Hawaii ERS. Higa said that relationship appears to have delayed the board's decision last August to terminate 3Bridge from its list of investment managers.

The retirement system's staff issued a statement, saying Higa's report contained "egregious errors, misstatements and unsupported conclusions."

"It is clear to us at the retirement system that the legislative auditor did fully understand what we do and did not have the expertise to accurately access some of our functions," ERS administrator David Shimabuku said.

It said the report demonstrates the auditor's lack of understanding of the retirement system's processes and procedures.