Providence admits actuary questioned its pension math

July 1st, 2014 at 12:54 pm by under Nesi's Notes

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Lawyers for Providence Mayor Angel Taveras have rewritten bond documents to acknowledge that its actuary disagrees with the way the city reported how much money is in its cash-strapped pension fund.

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4 Responses to “Providence admits actuary questioned its pension math”

  1. Mario says:

    Honestly, I don’t think this is that bad. At first I was afraid that they were including multiple years of future payments — but one year’s payment, appropriately discounted, and already in the budget? Not too big a deal. Obviously, the actuary was right to tell them to stop (there is no valid reason to include it except to artificially inflate the assets), but in the realm of poor financial practices, this is like jaywalking; the worst you can conclude is that it might be an indicator of actual nefarious activity elsewhere.

    1. Michael Riley says:

      Mario i know we live in a state that believes in setting low bars..but purposely overstating assets is fraud.

      1. Mario says:

        Promising to pay people at some later date for services provided today when you have no mechanism to enforce it, no evidence that you will later have to means to do so, and no willingness to even provide an adequate amount of funds today to make progress towards fulfilling that promise is fraud. Promising outlandish cost of living increases to make up for those policy shortfalls is even worse. Including in your assets the discounted value of an immenent payment is a far less serious crime than the pension system as a whole.

        If Providence simply paid the money to the pension system earlier in the budget year and then took the money back as a short-term loan, it seems to me that they could claim the same amount of inflated assets, and yet, while it would be at least as terrible a practice, it would not be even slightly fraudulent. Just run-of-the-mill awful.

  2. Jim Jackson says:

    Using imaginary accounting practices is fraud.