WASHINGTON - The Governmental Accounting Standards Board has unanimously voted not to delay the implementation of new reporting requirements for governments that provide their employees with pensions, after the Government Finance Officers Association and other groups pressed for a postponement.
The requirements of GASB statement 68 are effective for fiscal years beginning after June 15, 2014. The guidance will require state and local governments that offer defined benefit pensions, for the first time, to report a net pension liability in their financial statements.
GFOA made the first request for a delay in having to implement the guidance and other groups then also requested it, said GASB Chairman David Vaudt.
The groups want GASB's guidance delayed "until related auditing procedures have been implemented for a sufficient period," the board said in a release. They are concerned that governments in multiple-employer pension plans will receive a modified rather than clean audit opinion on their financial statements until then.
Jeffrey Esser, GFOA's executive director and chief executive officer, said the problem is not with GASB but with the American Institute of Certified Public Accountants, which governs auditors and the standards auditors use for state and local governments. The AICPA hasn't put out guidance in a timely fashion, so auditors can't produce clean opinions under the new GASB standards, he said.
Modified opinions give the appearance that governments did something bad. If a government receives a modified opinion from an auditor after the new pension standards are implemented, lawmakers and taxpayers may mistakenly think that the government did a poor job of their financial reporting or management, Esser added.
Some groups, however, requested that GASB not delay implementation of statement 68, GASB said.
The National Association of State Auditors, Comptrollers and Treasurers did not request a delay but urged the GASB and the AICPA to work to find an alternative plan that would not result in modified audit opinions for governments that participate in "agent multiple-employer pension plans."
After receiving requests for a delay, GASB reached out to groups to get their perspectives on their readiness to implement the new standards. Based on the feedback, the board decided against a delay.
One reason for GASB's decision was that many governments would face the prospect of a modified audit opinion even if they followed the previous pension standards. This is because the AICPA's guidance would apply under the old pension reporting requirements as well as the new ones, Vaudt said.
Also, pension plans are already well into the process of implementing related GASB standards that apply to them, he said. If the standards are postponed, some governments would have extra costs because they would need to get an actuary to provide information under the old standards as well as the information already obtained under the new standards, GASB said.
The financial statement users who gave the GASB feedback strongly opposed a delay. In the opinion of the users, a clearly worded modification would not hurt their analyses of government finances, the GASB said.
And the board added that it was aware of the issues relating to implementing statement 68 when it first considered the costs and benefits associated with setting the original implementation date.
