Public Pension Accounting Responsibility Act Exposed

The Public Pension Accounting Responsibility Act was considered by ALEC's Tax and Fiscal Policy Task Force at the 2011 States and Nation Policy Summit on December 2, 2011. This bill was part of the ALEC task force agenda between 2010 and 2012, but due to incomplete information, it is not known if the bill passed in a vote by legislators and lobbyists at ALEC task force meetings, if ALEC sought to distance itself from the bill as the public increased scrutiny of its pay-to-play activities, or if key operative language from the bill has been introduced by an ALEC legislator in a state legislature in the ensuing period or became binding law.

ALEC Draft Bill Text

Summary

In order to provide accountability in state retirement systems, The Act applies standards similar to Sarbanes-Oxley to the principal executive and financial officers of the State. Officers are charged with certifying that the Comprehensive Annual Financial Report (CAFR) is, to the best of their knowledge, accurate. They are further required to establish effective internal controls for monitoring state retirement systems. Knowingly violating any provision of this Act shall result in a fine, imprisonment, or both.

Model Legislation

{Title, enacting clause, etc.}

Section 1 {Title}

This act may be cited as the Public Pension Accounting Responsibility Act.

Section 2 {CAFR Certification Requirements.}

The principal executive officer or officers and the principal financial officer or officers, or persons performing similar functions, of the State and each incorporated municipality and the principal officers of the retirement system shall certify annually that--

(A) The signing officer has reviewed the Comprehensive Annual Financial Report (CAFR) of the retirement system;

(B) Based on the officer's knowledge, the CAFR does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading;

(C) Based on such officer's knowledge, the financial statements, and other financial information included in the CAFR, fairly present in all material respects the financial condition and results of operations of the issuer as of, and for, the periods presented in the CAFR;

(D) The signing officers—

(1) are responsible for establishing and maintaining internal controls;

(2) have designed such internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared;

(3) have evaluated the effectiveness of the issuer's internal controls as of a date within 90 days prior to the CAFR; and

(4) have presented in the CAFR their conclusions about the effectiveness of their internal controls based on their evaluation as of that date;

(E) The signing officers have disclosed to the issuer's auditors and the audit committee of the trustees (or persons fulfilling the equivalent function)--

(1) all significant deficiencies in the design or operation of internal controls which could adversely affect the issuer's ability to record, process, summarize, and report financial data and have identified for the issuer's auditors any material weaknesses in internal controls; and

(2) any fraud, material misrepresentation, or failure to present information in a non-misleading fashion either to investors or beneficiaries, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and

(F) The signing officers have indicated in the CAFR whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Whoever knowingly violates any provision hereof shall be fined under this title, imprisoned not more than 20 years, or both.