Holding California County Pension Funds Accountable HOME    About    Contact    Newsletter
General for All Counties   Focus on Mendocino County  

Helping Citizens Understand

Old Mendocino County Courthouse Around 1915

California County Pension Debt


Stories and Evidence

1998 Retiree Healthcare Policy - Board Policy 40 - Diversions of Contributions - Part 2

Stories and Evidence

Choices -

Who Done It?

'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 1

'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 2

'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 3

San Diego - IRS - Excess Earnings

Increase Pensions When Already Deep in Debt

Staffing & Compensation Chaos

Deeply Flawed Pension Fund Financial Statements - Part 1

Deeply Flawed Pension Fund Financial Statements - Part 2

Deeply Flawed Pension Fund Financial Statements - Part 3

Retiree Healthcare

Assumed Investment Profits Too High

Plans to Increase Debt

County Puts Off Bad News

The Myth of 80% Funding

Numerous Financial Errors


In his cover letter to his 3/17/10 written report to the Retirement Board former County Treasurer and Retirement Administrator Knudsen also said:

With the receipt of this information (that we were violating the County Employee Retirement Law) we immediately reverted to the (previous) system ... and repaid the full amount that had been diverted from the county contribution amounts. We also recognized an amount ($3,427,200) that would cover expected health insurance payments for the remainder of that FY thereby using a total of $9,557,912 from the actuary recommended plan. It should be noted here that this amount has remained on the retirement systems books since that time and has been carried in the "Actuarial Value of Unrecorded Earnings" (account).

"We Paid the County Back" (Huh?)

In the March 2010 meeting Knudsen said MendoCERA "paid the County back". With what? The money was gone. And it isn't about paying the County back - it's about the money is supposed to be in the Pension Fund. "Paying the County back" isn't the issue - paying the Pension Fund back is. And the County should have paid the full $9.6 million that had been spent for retiree healthcare out of the Pension Fund and the County's contributions to the Pension Fund.

(I'm leaving aside two issues:

  • The retirees were supposed to pay half that amount according to the 1998 Retiree Healthcare policy which was still "supposedly" in force all this time. But they didn't pay any more than usual. - Remember this.
  • My calculations indicate the amount was significantly more than $9.6 million - but this is all complicated enough so I've never raised the issue.)

This is what that transaction should have looked like in accounting terms.

  Cash Paid by the County to the Pension Fund   $9.6 million
    "Credit" for the County Having Paid the Pension Fund   $9.6 million

So - did the County "pay the Pension Fund back" like this?


"Actuarial Value of Unrecorded Earnings"

A few months after the March 2010 Retirement Board meeting I analyzed the Retirement Association's June 2010 "internal" monthly financial statement. Although these "internal statements" are included in background materials for Retirement Board meetings which are public documents - they aren't "official" audited annual financial statements.

(It's quite normal for organizations to produce frequent "internal" statements and only one annual audited statement. The "internal" statement's purpose is to keep managers and governing bodies up to speed with finances as they go through each year. There's nothing nefarious about producing interim internal financial statements that don't conform to "auditing" standards.

But every now and then - it's "interesting" when they don't.)

Actuarial Value of Unrecorded Earnings - the Fake Receivable

There it was - an asset titled "Actuarial Value of Unrecorded Earnings" worth $9.6 million. "What the heck is that?"

It turned out the Retirement Association had this asset on its internal statements from about 2006 until 2010.

But this asset never showed up on the Pension Fund's audited public financial statements. It was "spread out" over the Fund's other assets - stocks, bonds, mutual funds, etc.

Although the actual transaction entered into the Retirement Association's books may have been a bit different - this is essentially what it had to be (in my professional opinion).

  Actuarial Value of Unrecorded Earnings   $9.6 million
    "Credit" for the County Having Paid the Pension Fund     $9.6 million

The "right side" - the "credit" is how the Retirement Association made it appear the County had complied with CERL by making its full contribution to the Pension Fund.

But what's the asset "Actuarial Value of Unrecorded Earnings"? And what does it have to do with the County?

In effect it was a claim against future Excess Earnings if and when they might ever occur. That isn't an asset - you can't claim you have a right to be paid for income you haven't yet earned. (And that leaves aside the essential absurdity of the concept of Pension Fund "Excess Earnings" in the first place - see The Fraud of Pension Fund Excess Earnings).

I believe the County gave the Retirement Association nothing related to this transaction. As far as the County is concerned - there is no substance in this transaction.

County Given "Double Credit"

The bookkeeping entry above in the Retirement Association did NOT replace the original entries shown on the previous page in which the County was given credit for contributing $6 million to pay retiree healthcare. It couldn't because then the Retirement Association would have no way to explain where it got that money.

That means to this day both the County and Retirement Association report the County was credited as if it paid $6 million more to the Retirement Association than it really did.

 Valid XHTML 1.0! Home  Pension Basics  Reporting Fraud  21 County Funds  Mendo Debt  Debt Impact  Immediate Causes  Stories & Evidence  Basic Causes  Official Denial  Archives-Articles 
Contact Us

© 2008 - 2017 YourPublicMoney.Com
PO Box 301, Redwood Valley, CA 95470
Click to Send Email