Government

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Government

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You are an independent auditor writing a formal letter to the Finance Director of a government agency—select an existing government agency that has a single employer defined benefit pension plan (e.g., city of Boca Raton, city of New York; how big or small of an agency is your choice).  Your task is two-fold:

  1. Explain the GASB 67 & 68 changes.
  2. Explain the effects of implementing these changes:
    1. Compare how these changes affect the agency’s financial statements (show a side-by-side comparison).
    2. Explain how these changes affect funding.
    3. Explain how these changes affect citizens.

Here is some background information to get you started:

The primary objective of GASB Statement 68 is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency.

This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this Statement.

Statement No. 67, Financial Reporting for Pension Plans, revises existing standards of financial reporting for most pension plans. This Statement and Statement 67 establish a definition of a pension plan that reflects the primary activities associated with the pension arrangement—determining pensions, accumulating and managing assets dedicated for pensions, and paying benefits to plan members as they come due.

The scope of this Statement addresses accounting and financial reporting for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts that have the following characteristics:

Contributions from employers and non-employer contributing entities to the pension plan and earnings on those contributions are irrevocable.

Pension plan assets are dedicated to providing pensions to plan members in accordance with the benefit terms.

Pension plan assets are legally protected from the creditors of employers, non-employer contributing entities, and the pension plan administrator. If the plan is a defined benefit pension plan, plan assets also are legally protected from creditors of the plan members.

This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service.

  • Clearly organize the memo:
    • The introductory paragraph establishes the letter’s purpose and previews the major points covered in the body—the major headings. (Note:  Do not begin the letter with any kind of heading; use only body headings.)  The introduction establishes the memo’s purpose, organization, and tone.
    • Use subheadings, list (bullet or enumerated points), and tables as appropriate. Be sure to introduce lists or tables before they appear.
    • Write cohesive paragraphs. (If you need help, consult Dorchies, G. (n.d.). Cohesion. Retrieved from http://www.clarkson.edu/writingcenter/docs/cohesion.pdf)
    • Create a concluding paragraph that ties together all the key points and reinforces the memo’s overall purpose.
  • Create a professional, but not stuffy tone—use language the reader will understand.
  • Write concisely—thoroughly address the task using only the number of words/pages necessary.
  • Check your letter for proper grammar, spelling, and punctuation.

(https://owl.english.purdue.edu/owl/resource/560/10/).

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