Tag Archives: GASB

Auditors: Skunks at the Garden Party?

Pair of baby skunks, standing side by side on a fallen log.

 

Auditors are those wonderful people you wait anxiously to see every year, and when they appear it’s just like Christmas morning.  Okay, maybe it isn’t exactly that way.  You may look at audits as a necessary evil, but they really do serve an important role for your organization.

Here at LAGERS, we have lots of audits.  Lots.  We have an internal auditor (me), and we have multiple external audits as well.  In addition to our regular external financial audit (which many, if not all, LAGERS employers also have), our auditors are now performing an additional audit of internal controls over member data and employer financial data. This is called a Service Organization Control Report, or SOC Report.  This additional review is due to a recent pronouncement by the Governmental Accounting Standards Board (GASB).  Then for the first time in many years, Missouri’s State Auditor conducted a performance audit of LAGERS and issued a report in August 2015.

Why are we telling you this?  Not so you’ll feel sorry for us, really.  The fact is that while an audit can be a bit intrusive, it really can be an important part of the oversight of your organization.  At LAGERS we are fiduciaries for the trust fund on behalf of all participants, and our ultimate duty is to maintain that trust for the exclusive benefit of members and beneficiaries.  As a public entity, we want to be transparent to all stakeholders, including the taxpayers, that help fund the benefits provided.  Having independent audits of our finances and operations can help us provide assurance to all parties that we take this responsibility very seriously and are accomplishing our mission.  Internal audit reports directly to the Audit and Finance Committee of the Board of Trustees in order to maintain this crucial independence and objectivity. You may have heard us say “LAGERS is getting it right,” and the results of the multiple audits mentioned support that statement.

Generally speaking, auditors aren’t always “skunks at the garden party,” but they can and will be if necessary.  Depending on the type of audit though, it shouldn’t be only about finding problems, but hopefully offering ideas for ways to improve.  Someone who doesn’t do your job every day but who can objectively observe may be in a good position to offer suggestions.  I like to think of the goal as “better,” and auditors can be just the people to help make that happen.

To view the most recent available external financial audit, visit our website. The SOC Report mentioned above will be available when complete (fall 2015) to all LAGERS employers on the Employer Web Portal of ECLIPSE.

 

Pam Hopkins, Compliance Officer/Internal Auditor

Pam Hopkins, Compliance Officer/Internal Auditor

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Changes are Coming, But Your Benefit is as Secure as Ever

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If you haven’t already, you may begin to hear about new accounting standards required of employers that participate in LAGERS.  These standards may make some LAGERS employers look worse off when it comes to their LAGERS pensions – even if they’re not. The important thing to remember is the only thing that is changing is the reporting and measurement of pension costs, not how much a pension costs.

As these new standards take effect, here are four important facts to remember:

  1. Neither actual pension costs nor obligations have changed, only the way in which they are measured and reported. The Governmental Accounting Standards Board (GASB) is the entity that sets such standards.  Historically, GASB standards have always held a close link between accounting and funding measures. As the new standards are implemented, accounting and funding measures will become disconnected.

 

  1. Some LAGERS employers may appear to be more under-funded as a result of these new standards, even if they’re not. One reason for this is that LAGERS-participating employers will now have to publish future pension obligations on their balance sheets.  For some employers, this will show up as a liability.  Pension liabilities have always been fully reported and transparent, but placing them on the balance sheets will make them more visible than before.  In addition, GASB now says that some employers may have to use a different discount rate to determine pension liabilities in today’s dollars.   In the past, pensions have calculated liabilities using the long-term expected rate of return on pension plan investments.  While most LAGERS employers will not be in this position, a few may have to discount at least a portion of liabilities using the municipal bond rate.  Since the municipal bond rate is lower than the long-term expected rate of return, this could make some participating employer pensions appear more underfunded than before.

 

  1. Benefits for employees and retirees are still as secure as they have ever been. LAGERS has a 50 year history of sound, structured, stable funding procedures.  These new GASB accounting standards will not affect any of that.  Retirees will continue to be paid on-time, each month and members can expect their earned benefits to be fully paid for without interruption.

 

  1. LAGERS employers will not have to pay more for their benefits. LAGERS participating employers diligently pay their full bill each and every month.  This will continue, as normal, with no changes whatsoever in this process.  LAGERS will be providing new reports for employers to comply with the GASB standards in the Fall of each year and employers will work with their auditors to comply, but the month-to-month funding mechanisms and calculation of employer contributions will remain in place.

Initially the new GASB standards may cause some headaches for participating employers.  But we will be here every step of the way to help.  LAGERS has set up a page dedicated to GASB on our web site. Employers can refer to this page for updated information on resources that are available regarding these changes.

 

Jeff Kempker, RPA, CRC

Jeff Kempker
Manager of Member Services

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