By Frank Lewis
Portsmouth City Auditor Trent Williams said the city will be required to comply with new requirements for local municipalities to report to the state all unfunded pensions as liabilities. According to the Government Accounting Service Board, the reports will not count against that municipality’s audit or bond rating.
The Auditor of State’s office is currently drafting guidance for local governments to create the smoothest possible transition when GASB 68 becomes effective for fiscal years beginning after June 15, 2014.
“The City of Portsmouth would then be required to comply within its annual financial report for the year of January 1 through December 31, 2015, that is compiled beginning in January 2016,” Williams said.
Auditor of State David Yost told the Daily Times, if that figure is large in that particular municipality, it could actually cause the balance sheet to go from being in the black to being in the red. He said the system does not effect the annual budget.
“As I understand it, we’ll probably have to report the proportionate share of our unfunded pension liability as a separate line item in our Comprehensive Annual Financial Report (CAFR) with the detail of OPERS and OP&F participation in the footnotes,” Williams said. “We’ll also have to include language in the CAFR’s Management Discussion & Analysis (MD&A) that explains Ohio’s legal environment and the limitations on enforcement of the unfunded pension liability as against the City of Portsmouth as well as other local governments”.
Yost said the way the law is set up in Ohio there is no way for anybody to go to Portsmouth and say the city owes, for example, a million dollars to the pension fund and to order the city to pay up.
“As to how this will impact the City’s financial health indicators as a measure of fiscal distress and bond ratings with the reporting of additional liability, the State Auditor has told us their office will not be using this liability in the calculation for determination of fiscal caution, watch or emergency and that two of the major rating agencies, Fitch Ratings and Moody’s, have indicated the implementation of GASB 68 will not affect their ratings. Each use methods of analysis that are separate from the accounting of the liability GASB 68 requires,” Williams said.
According to the Government Accounting Service Board, the primary objective of the statement is to improve accounting and financial reporting by state and local governments for pensions. Williams said the city will continue to seek guidance through the Auditor of State’s office and the two pension systems to keep the City’s financial reporting in compliance and provide full disclosure to the public.
Frank Lewis can be reached at 740-353-3101, Ext. 1928, or on Twitter @FrankLewispdt.