8/26/2009 - TRUTH IN ACCOUNTING: STATE AND LOCAL GOVERNMENTS SHOULD DISCLOSE REAL BURDENS
ACCOUNTING STANDARDS FOR GOVERNMENTS:
FULL DISCLOSURE IS CONSTITUTIONAL
(ATLANTA/WASHINGTON, DC, August 26, 2009): Southeastern Legal Foundation (SLF), in cooperation with the Institute for Truth in Accounting, today submitted a formal comment to the Government Accounting Standards Board (GASB) requesting that pension accounting and financial reporting enter a new era of transparency related to state and local government disclosure of financial burdens shouldered ultimately by taxpayers.
SLF executive director and chief legal counsel, Shannon Goessling, points out in the comment posted below that “it is impossible to determine the exact costs of government programs, if total compensation for employee services is not included in these [employee retirement] costs.”
“Lawmakers have little or no idea about the true costs of state and local government when multi-billion dollar burdens are kept off-budget for reporting purposes,” said Goessling. “Taxpayers have an absolute right to know what the real costs of government are – and this is a good starting point.”
Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting, will be testifying before the GASB on August 28.
SLF Comment submitted to GASB below.
August 21, 2009
SUBMITTED VIA EMAIL TO firstname.lastname@example.org
Director of Research and Technical Activities
Governmental Accounting Standards Board
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116
Re: Response to Invitation to Comment – Pension Accounting and Financial Reporting
Southeastern Legal Foundation is a public interest law firm which advocates limited government, individual economic freedom, and the free enterprise system. The public and groups like ours cannot determine if taxpayer dollars are being used effectively and efficiently, if they are not given an honest assessment of the state and local governments’ costs and liabilities. This is especially true in relation to employees’ retirement costs. It is impossible to determine the exact costs of government programs, if total compensation for employee services is not included in these costs. The total compensation includes the promised postemployment benefits earned by the employees during the period. These costs should be reported on the Statement of Activities in the period they are earned by employees. Because the employer has incurred an obligation for these benefits, a corresponding liability should be reported on the government’s balance sheet (statement of net assets).
Here in Georgia, there are constitutional restraints against impairment of pension contract, yet none of the more than $1 billion of the Employees’ Retirement System pension liability is reported on the State’s balance sheet. While only $158 million of the State’s OPEB liability is reported on the balance sheet, more than $16 billion is maintained off-balance sheet. How do the citizens of Georgia and organizations, like ours, know exactly what financial condition the State is in when the largest liability is not reported?
Georgia’s Teachers’ Retirement System is a cost-sharing multi-employer system. It is difficult to determine, but we believe that none of the pension liability related to this plan is reported on the State’s balance sheet. The fact that this plan is a cost-sharing plan versus a single employer plan does not diminish the State’s liability to pay benefits to its employees.
We believe is not useful to play semantics when dealing with billions of dollars. The very definition of a liability is an obligation. We find it difficult to understand why an “unfunded actuarial accrued liability” would not be reported on governmental entities’ balance sheets as a liability.
Here in Georgia, like most states, there is a constitutional requirement to balance the budget. It is impossible for us to determine if this requirement is being met, if all costs, including pension costs are not reported accurately. This is not what could accurately be described as “transparent.”
Being sophisticated users of state and local governments, but not accountants, we do not have the capability to answer the questions detailed in your invitation to comments. But we believe it is unconscionable that the Governmental Accounting Standards Board, which sets Generally Accepted Accounting Principles for state and local governments, would not mandate the governmental entities to produce financial reports that are transparent, does not support accountability and are not useful for purposes of establishing an accurate and, therefore, accountable disclosure system.
Southeastern Legal Foundation would like to again thank you for the opportunity to respond to your Invitation to Comment on Pension Accounting and Financial Reporting. Please consider that citizens and advocacy organizations working on behalf of the public need to be able to see the facts about their governments’ financial position when you deliberate.
We appreciate your time and attention to this matter.
Shannon L. Goessling
Executive Director & Chief Legal Counsel