In June 2012, the Government Accounting Standards Board (GASB) issued two new standards that will substantially change the accounting and financial reporting of public employee pension plans and the state and local governments that participate in such plans. GASB Statement No. 67, Financial Reporting for Pension Plans, revises existing guidance for the financial reports of most governmental pension plans. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits. GASB Statement No. 67 is effective for financial statements for periods beginning after June 15, 2013. GASB Statement No. 68 is effective for financial statements for fiscal years beginning after June 15, 2014.
There are numerous accounting and auditing issues facing employers that participate in multiple-employer plans of which the State and Local Government Expert Panel (SLGEP) has been working very diligently to address. The GAQC has issued two whitepapers that address issues and suggested best practice solutions related to cost-sharing multiple-employer plans (cost-sharing plan) and the participating employers. See next section.
The SLGEP continues to work on a similar series of papers related to agent multiple-employer plans which are further from completion because the issues are so much more complex. In trying to address the issues at hand, the SLGEP has had many discussions internally as well as with stakeholders including actuaries, plans, governmental employers, and even the GASB.
Whitepapers Released Relevant to Cost-Sharing Plans, Participating Employers, and Auditors
With the implementation of GASB Statement No. 68 employers will be required to recognize a liability as employees earn their pension benefits (that is, as they provide services to the government). For the first time, employers participating in cost-sharing plans will recognize their proportionate share of the collective pension amounts for all benefits provided through the plan. The SLGEP has addressed numerous issues from the employer and employer auditor perspective that arise from the change in accounting. The SLGEP has also addressed responsibilities of the plan and its auditor regarding the completeness and accuracy of all census data underlying certain financial statement elements of the plan. These papers are discussed in more detail below:
- Whitepaper on Employer and Related Auditor Issues. The whitepaper titled, Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans: Issues Related to Information for Employer Reporting, addresses issues related to how employers participating in cost-sharing plans obtain all necessary information to properly recognize and disclose pension amounts in their financial statements and how their auditors obtain sufficient appropriate evidence to support their opinions on the employer financial statements. The SLGEP recommends that cost-sharing plans calculate and disclose in schedules each employer’s allocation percentage and collective pension amounts. The SLGEP further recommends the plans engage their auditors to obtain reasonable assurance and report on the schedules in accordance with AU-C section 805, Special Considerations – Audits of Single Financial Statements and Specific Element, Accounts, or Items of a Financial Statement. The employer and employer auditor have their own responsibilities in regard to the information provided by the plan, as discussed in the whitepaper, but the plan auditor’s report on the schedules provides evidence that the pension amounts allocated to the employer and included in the employer’s financial statements are not materially misstated. The issues and recommended best practices are discussed in detail in the whitepaper.
Resources on Pensions Currently Available
If you are an auditor of a governmental pension plan or participating government and need additional resources in advance of the implementation of the new standards, there are numerous resources available which are highlighted below.
GASB Pronouncements. The GASB has made available the following pronouncements on its website: Statements of Governmental Accounting Standards (including GASB Statement Nos. 67 and 68); Concepts Statements; GASB Interpretations; and GASB Technical Bulletins
GASB Educational Resources. The GASB has made available numerous resources on its website that include podcasts, fact sheets, articles, and more which are all available to the public.
- GAQC Archived Web Events on Pensions (available now to GAQC members). The GAQC offered a two-part series of Web events on the GASB pension standards. The first titled, An Overview of the New GASB Pension Accounting Standards: Part I, addresses the new accounting. The second titled, New GASB Pension Standards - An Auditor's Perspective: Part II, addresses some of the auditing challenges related to the new standards.
- GAQC Upcoming Web Events. In anticipation of the whitepapers and related guidance, the GAQC has planned two Web events in May. Mark your calendars and watch for a GAQC Alert regarding registration information for the following programs:
- May 6, 2014 - The GASB’s Pension Standards Part I: Considerations for Cost-Sharing Plans, Participating Employers, and Their Auditors; and
- May 7, 2014 - The GASB’s Pension Standards Part II: Considerations for Agent Plans, Participating Employers, and Their Auditors.
- AICPA Governmental Conferences. Anticipating the significant effect the new GASB pension standards will have on plans, employers, and their auditors, the AICPA will provide extensive coverage of these matters in the 2014 governmental conference agendas. Consider attending: