That amount, spent on outside advisers, was up from the $143 million paid for those services during the 2008 budget year, according to the State Auditor’s office, which reviewed the Division of Investment, an agency within the Department of Treasury that manages the state’s $67 billion pension funds, according to the Newark Star-Ledger.

The auditors took issue with how much the state is spending each year on financial advisers for its investments in emerging markets such as China and India, which have been allowed since 2006. Of the $6.4 million spent during the 2009 budget year on financial advisers for emerging market investments, the auditors suggest the Division of Investment could have paid “an estimated $5 million less” if the emerging markets accounts were managed in-house, the news report said.

If the allocation to emerging markets increased, something the Division of Investment controls, the savings could rise to $20 million annually, the auditors contended. “We recommend the Division of Investment be provided with the additional staff and travel resources necessary to forgo advisers’ fees and instead actively manage the emerging markets portfolio internally,” the report said.

In a written response to the audit, William G. Clark, director of the Division of Investment, agreed with the audit’s findings, but noted several major impediments, including the salary and bonuses that would be demanded by financial professionals the state would have to hire to manage the emerging market portfolio, as well as the overseas travel costs they would incur.

“These assets could likely be managed internally at a reduced cost to the pension fund relative to our existing external advisers,” Clark said, according to the Star-Ledger. “It would be necessary, however, to obtain assurance that these issues could be adequately addressed before proceeding to implement this recommendation.”

The New Jersey pension funds, which cover pensions for teachers, police officers, firefighters and other government employees, face a more than $30 billion funding shortfall.

The audit report is available here.