1. 1 Issues Involving Public Pension Funds: Accounting and Financial Reporting Karl Johnson Project Manager Governmental Accounting Standards Board Norwalk, CT 13 th Annual Rutgers Governmental Accounting & Auditing Update Conference Piscataway, NJ, December 12, 2006 The views expressed are those of the speaker and are not official representations of the Governmental Accounting Standards Board, which expresses itself through written pronouncements issued after extensive due process.

2. 2 Pension Accounting Research Project: Background Added to GASB Technical Plan in January 2006 Objective: to review the effectiveness of GASB Statements 25 and 27 in meeting financial objectives set for them Accountability Decision usefulness Assessment of interperiod equity implications of pension decisions Being done pursuant to GASB’s commitment to review how well standards are working, once in effect long enough to assess Statements 25 and 27 became effective in periods beginning after June 15, 1996 and 1997, respectively Not directly related to FASB’s pension project No preconceived agenda or end result

3. 3 Pension Accounting Research Project: Essential Questions Is the pension accounting model created in Statements 25 and 27 decision useful before the fact in informing decision processes regarding: Administration of employee compensation (valuation of defined pension benefits as part of a total compensation package for employee services)? Financing of pension benefits/contributions to the plan? Proposed changes in pension benefits? Does the information required to be publicly reported by Statements 25 and 27 provide for transparent accountability after the fact to assist report users in understanding and assessing the financial implications of pension policies and decisions made? Does the information reported assist report users in assessing the benefits and costs of pension policies and decisions to citizens and taxpayers of past, current, and future periods (interperiod equity)?

4. 4 Phase 1: Information Gathering Involves fact-finding related to the application of Statements 25 and 27 by defined benefit pension plans and employers Planned methods include: Review and analysis of existing sources of information—for example, NASRA’s survey of approximately 140 public pension plans Research of CAFRs issued online by the 174 largest public plans Request for and research of CAFRs issued by a sample of smaller plans Supplementary questions to plan and employer officials related to accounting, compensation, funding, and benefit decisions for which information generally would not be available in CAFRs

5. 5 Pension Accounting Research Project: Phase 2 Will involve: Invitations for interested parties to comment regarding accounting and financial reporting issues, views, and suggestions for improvement of standards Comments and suggestions of interested parties or groups may be obtained through, for example, written comments, teleconferences, focus groups, or selective use of individual interviews The Board anticipates that a broad spectrum of views will be presented Consideration of issues raised in relation to financial reporting objectives

6. 6 Pension Accounting Research Project: Other The Board and staff will be assisted in this project by a Task Force of knowledgeable financial report preparers (plans and employers), auditors, financial report users with a variety of backgrounds and interests, and actuaries At the end of the project (projected for spring 2008), staff will provide comments and recommendations to the Board The outcome of the project will be consideration by the Board of whether or not to add a standard-setting project to the Technical Plan to consider amendments to Statements 25 and 27 (that is, no standards will be set in the research project)

7. 7 Additional Resources GASB website, www.gasb.org:www.gasb.org Summaries of GASB Statements Order information for GASB Statements, Interpretations, Technical Bulletins, Implementation Guides, User Guides, etc. Technical inquiry system/form Announcements Exposure Drafts during public comment periods And more Telephone (203) 847-0700