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As you may have heard, many states in our union have budget troubles; one of the biggest problems being underfunded pensions. Reuters reports that estimates put the gap in the range of $700 to $3 trillion. Despite the range being akin to saying, “I’m somewhere between Ohio and Nevada” the shortfall has gotten a whole host of people bent out of shape. It’s gotten so bad that Bill Gates has chimed in, evoking Enron for crying out loud (and here we thought that was only for journalists who cover accounting once every decade).
All this has the GASB to going back to the drawing board as David Bean, the GASB’S Director of research and technical activities, announced that the more disclosures will be proposed this summer. There are plenty of areas that up for debate but Mr. Bean mentioned that certain topics get especially contentious, apparently to the point that it comes to blows.
“Where the fistfights occur is with the discount rate,” Bean said about returns on pension funds’ investments, which affect how well a government can cover those liabilities. The board would require governments to disclose their long-term expected rate of return on plan investments as determined by actuaries, Bean said. “This is the actual expected rate of return as recommended by the actuaries,” he said. “We’re going to make very clear this is not a number that is pulled out of the air. This is based on solid science.”
It’s pretty clear that this problem will only get worse. If you were suddenly told that you had to use science rather than a dartboard, wouldn’t you want to punch someone’s lights out?
When @FAFNorwalk launched on August 4, 2010, it was supposed to be an awesome attempt at connecting government accounting to the 439 people interested in it (don’t trip, FAFN, y’all will get your massive following).
The day after signing up, they mustered up the courage to send out their first tweet:
Welcome to FAF/FASB/GASB! Stay Tuned For Updates.
First of all, we’re not sure if FAF, FASB and GASB know this but Twitter accounts are free so you are totally allowed to get your own. As far as I know, you are even allowed to get several as long as you can come up with an email address for it so there’s no need to share, although that can get messy. What if one of you is trying to tweet about the latest comment period (Disclosures of Certain Loss Contingencies – I’m sure that will garner quite a bit of interesting commentary) while the other wants to talk about new lease rules?
Secondly, is this the best they can do? I’d really like to see some more thoughtful commentary from Norwalk that truly opens the conversation. They can think of this as a comment letter in 140 characters.
Thirdly, what’s up with the one and only person FAFNorwalk is following? We don’t know who the hell @Badwissen is but maybe they are just really into FASBs and @FAFN could totally vibe that when they started their little Twitter co-op.
Lastly, let’s try to work a little better on the turnaround, eh @FAFN? Compliance Week already had an entire story up about new lease rules by the time @FAFN got around to tweeting about it… fine, @FAFN tweeted it around 2 and the CW story went up after 5 but still, with @FAFN’s access to insider information, I want to see @FAFN tweets about lease rules a full two hours (or a day!) before anyone, come on.
If you are looking for a truly dull Twitter follow with zero interaction, @FAFNorwalk is totally for you. Personally I like my accounting feeds with slightly more bite, even if that means a simple @ every now and then.
How’s that for a fucking comment letter?
Technically it’s the Financial Accounting Foundation that has the handle: @FAFNorwalk and it also includes anything the GASB but really the FASB is who we expect to go on the offensive here.
They’ll be able to take on the haters with pithy commentary, give us the latest on their (less) ambitious convergence efforts and maybe, if we’re really, really, really lucky Bob Herz will spin off his own version of @CrankyKaplan. @DisturbedHerz, perhaps?
We have hope.
If we still care about financial reform, we should especially care about proposed changes to the Government Accounting Standards Board because, let’s face it, government accounting could really use a helping hand. Were government pensions forced to use the same reporting rules as every other pension, a $3 trillion hole would open up and we would see immediately that rules in desperate need of repair have remained broken because the current system allows the truth to be buried in the footnotes.
As is, GASB is funded by voluntary contributions given by state and local governments out of the goodness of their hearts (yeah right) and through sales of its publications.
The concern is that should GASB be unable to pay the bills, the federal government may be forced to swoop in and babysit. The potential for conflicts of interest should not escape dear reader as this would be akin to investors owning the SEC or Fed-regulated banks owning the Federal Reserve (oh wait, they already do). Is that any worse than what we’ve got now?
How bad is their financial situation? GASB reported a $3.83 million budget shortfall in 2009 and projected a $4.46 million shortfall for 2010.
So why, if we’re still talking about financial reform, are we not talking about its potential impact on GASB?
Under new financial reform rules, the GAO would be forced to evaluate GASB’s role (read: usefulness) in standards setting within 180 days of the proposal’s passage. How likely would it be for the GAO to call an issuer-funded agency that’s allowed government pensions to conceal $3 trillion in liabilities a blaring and obvious failure? The SEC could then direct FINRA to collect assessments from dealers that would go towards funding GASB. Obviously this piece of legislation has been written by Congressmen who don’t know how to do anything without making it as complicated as possible.
Financial reform has already cleared the House while the Senate is expected to vote within the next two weeks after returning from recess.