San Diego Union Tribune: Kroll report details misconduct that lead to financial crisis

“Consultants investigating the city’s finances issued a detailed and critical report Tuesday documenting misconduct by former and current City Council members and former top administrators.

“San Diego city leaders ‘fell prey’ to the same type of ‘corruption of financial management’ that afflicted Orange County before it sought bankruptcy and corporations like Enron before it collapsed, the 266-page report issued by Kroll Inc. stated.”

New York Times: San Diego Broke Laws in Pension Crisis, Panel Says

“Independent experts brought in to help San Diego dig its way out of a deepening financial hole said yesterday that city officials broke federal securities laws and other statutes as they tried to conceal their failure to put enough money into the city’s pension fund for police, firefighters and other public employees. The investigators, led by a former Securities and Exchange Commission chairman, Arthur Levitt Jr., recommended that San Diego be placed under the supervision of an independent monitor who would report to the S.E.C.”

Also see:

1. Key findings in Kroll report
2. Report of the Audit Committee of the city of San Diego

Unrelated to the Pension Crisis: Mayor calls accounting ‘sloppy bookkeeping’

“San Diego should reimburse its water and sewer funds more than $1 million to correct accounting errors that led to the city’s ratepayers being charged for work that should have been paid out of tax revenue, Mayor Jerry Sanders said yesterday.”

The New York Times published Public Pension Plans Face Billions in Shortages, the first in a series articles “that will examine actions of state and local governments that have left taxpayers with large unpaid bills for public employee pensions:”

Across the nation, a number of states, counties and municipalities have engaged in many of the same maneuvers with their pension funds that San Diego did, but without the crippling scandal — at least not yet.

It is hard to know the extent of the problems, because there is no central regulator to gather data on public plans. Nor is the accounting for government pension plans uniform, so comparing one with another can be unreliable.

But by one estimate, state and local governments owe their current and future retirees roughly $375 billion more than they have committed to their pension funds.

Some estimates have the funding gap at $500 billion or more. How could this occur?

Still, the lack of a national response to what would seem to be a nationwide problem underscores a peculiarity of the public pension world: like banks and insurance companies, the pension plans are large and complex financial institutions, but they face no comparable systems of checks and balances.

“There’s no oversight; there’s no requirements; there’s no enforcement,” said Lance Weiss, an actuary with Deloitte Consulting in Chicago who advised Illinois on its pension problems. “You’re kind of working off the good will of these public entities.”

Experts do not think that is good enough.

It’s another case of a complicated, technical problem (government pensions) caught somewhere between the experts (staff, bankers, lawyers) and the politicians who can’t be held accountable until calamity strikes. It took a whistle-blower in San Diego. Hurricane Katrina and failed levees in New Orleans.

What’s happening in your neck of the woods?