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There are some good things cooking at the Governmental Accounting Standards Board (GASB).
GASB is the group that tells accountants for government agencies how to count the beans and then fully and properly report on them. When auditors audit the financial statements, they are making sure that the books and records comply with the standards promulgated by GASB.
GASB is a big deal.
Well, GASB has gotten wind of the fact that there are problems with public pensions (I’m having a little problem keeping a straight face here). But, to their credit, they intend to take a look at the reporting requirements to determine whether or not they need to change things. For example, GASB 25 says that a 30-year amortization schedule for an unfunded liability is OK. As we here in San Diego know, use of such a schedule results in negative amortization.
Oops – maybe it is a good idea for GASB to take a peek.
They would also like to know about the process used by retirement boards to set such things as actuarial assumptions and amortization methodologies. They expressed concern that criteria other than the health of the retirement plan may be being used. Could it be true?
I listened in to their last meeting – the one where they approved the project. One part made me laugh: The staff was going to gather data strictly based on a questionnaire. One of the GASB board members questioned the methodology saying “if you send out a questionnaire to parents, everyone will respond that they are good parents.” No kidding. My guess is that no one will admit to beating their child because it could get them jail time.
Oh, the GASB board also asked that the project be fast-tracked … another good sign.
Over time, it’s become clear to me and others throughout California that this huge problem is never going to be fixed jurisdiction-by-jurisdiction. Unfortunately, I see little hope that the state Legislature will weigh in. Action by GASB could be a global fix.
How exciting! In fact, I was so delighted that I put the champagne on ice. It’s too soon to open it, but this sure is encouraging.
– APRIL BOLING