BENTONVILLE -- A new accounting standard incorporated into the School District's most recent audit report might lead some to believe the district is more than $78 million behind in its contributions to employee pension funds.
That would be false, according to Chris Cluck of Beall Barclay and Co., the firm that audits Bentonville schools each year.
ATRS Contributions
This is how much money the Bentonville School District has paid to the Arkansas Teacher Retirement System for each of the past five fiscal years.
2015: $10,459,951
2014: $12,110,979
2013: $9,823,433
2012: $10,532,505
2011: $10,109,283
Source: Bentonville School District
"(The district) is not behind in its funding," Cluck said. "They've funded the way they are required to fund."
Confusion over the pension liability stems from a rule that went into effect for fiscal years that began after June 15, 2014. The district's latest audit is for the fiscal year that began July 1, 2014.
Previously, school districts and governmental organizations were required to report only the difference between what they were required to pay to pension plans and what they actually paid in a given year.
Under the new rule implemented by the Governmental Accounting Standards Board, these organizations must report their share of the net pension liability -- the difference between pension plan assets and obligations.
The district's share of the liability as part of the statewide Arkansas Teacher Retirement System plan was $78,530,488 as of June 30, according to a draft of Beall Barclay's audit report.
"Basically, if they didn't make any more contributions, the district closed down and they had to pay off the rest of their retirees, that's their liability," Cluck said.
The Rogers School District, which resembles Bentonville in size, will report $76,459,598 in pension liability, according to Jake Haak, Rogers' chief financial officer.
A variety of factors -- such as projected returns on investments and changes in contribution rates -- go into the calculation of pension liability.
"It's a liability at a point in time. This time next year it could be half of what it is. You don't know because so many factors play into it," Cluck said.
The new rule is causing a lot of confusion among the public, he said.
Cluck discussed the audit and the new accounting standard when he met with the Bentonville School Board last week. Once the audit is approved by the board, it must be submitted to the state Department of Education and other agencies from which the district receives money.
Travis Riggs, board president, told board members the pension liability shouldn't alarm them much because the district is paying what it should be paying to the pension fund. Riggs noted, however, the added attention to pension liability could be a signal districts soon will be asked to increase their contributions.
"It makes me feel like it's a significant enough number at the state level they're concerned about it, and this is a subtle way to disclose it," Riggs said.
Employers participating in the Arkansas Teacher Retirement System must contribute at a rate of 14 percent of annual payroll. The system has contributory and non-contributory members. Contributory members must contribute 6 percent of their salary.
There was discussion last year at the state level about increasing districts' contribution percentages, said Nathalie Brunell, the district's outgoing finance director.
"They chose against it because the markets started doing better and they thought they were going to monitor it a little bit more," Brunell said. "The way the state is handling the fund has gotten a lot better. They don't anticipate a change, but it could happen at any point."
There's also been discussion about requiring employees to contribute more, she said.
The Governmental Accounting Standards Board periodically reviews its standards to determine whether they support accountability and provide useful information for financial statement users, according to information posted on the organization's website. Pension standards had been in place for more than a decade.
The latest pension standards, approved in 2012, "should substantially improve the transparency, consistency, and comparability of the pension information reported by state and local governments and pension plans," according to the organization's website.
NW News on 01/30/2016