WI and the tooth fairy

There is a slightly disturbing item in WI’s 2010 accounts [PDF]:

1.5 Deferred Pension Funding

In accordance with accounting practice for  non-commercial State bodies in the Republic of Ireland, Waterways Ireland recognises an asset representing resources to be made available by the UK and Irish Exchequers for the unfunded deferred liability for pensions on the basis of a number of past events. These events include the statutory backing for the superannuation schemes, and the policy and practice in relation to funding public service pensions in both
jurisdictions including the annual estimates  process. While there is no formal agreement and therefore no guarantee regarding these specific amounts with the funding bodies, Waterways Ireland has no evidence that this funding policy will not continue to progressively meet this amount in accordance with current practice. This treatment is inconsistent with  accounting practice for UK Non-Departmental Bodies, where, due to the absence of a formal guarantee, a funding liability is not recognised until the commitment falls due.

IANAA, but an absence of evidence for the non-existence of the tooth fairy would not convince me that it does exist. I suppose it’s the same for any other unfunded pension scheme, and (unlike the UK practice) at least acknowledges the size of the problem, but it’s not exactly reassuring, either to taxpayers or to future pensioners. If I’ve misunderstood it, perhaps some kindly accountant will correct me.

5 responses to “WI and the tooth fairy

  1. You are more or less correct. I think I can speak with some authority on this issue as I was the manager of the Financial Accounts section and Budget Officer for a NCSSB when FRS17 (the accounting standard that gave rise to the verbiage above) was implemented and as this NCSSB was the first out of the traps to get its accounts audited every year, the torturous wording above was arrived at after discussion between the Chief Accountant of said NCSSB, myself, the Audit Manager for our audit and the C&AG’s technical bod. The reasons for the Sir Humphrey’s style speak is that the Department of Finance will not specifically state that the unfunded pension liabilities of NCSSBs will be met and have not guaranteed these.

    IIRC, the UK position for NCSSBs was different in that they actually showed the entity as being in net liability situation (i.e., instead of having positive figures at the bottom of their balance sheet, they had negative figures as the pension liability was greater than their assets!).

    Anyway, to some extent, it is bullshit as it assumes that the accrued liabilities must be paid at the date of the financial statements, whereas obviously, the liability is only due after many years – for example, yours truly has 7 years preserved benefit from the NCSSB in question which is due to be paid from 2034.

  2. Thanks, Ewan: that’s helpful. I can see the DeptFin’s position, but it doesn’t exactly provide certainty for anyone.

    I didn’t realise you were THAT young!

    bjg

  3. I am 38 (the pension is due at age 60). So definitely the youth wing of the IHAI!

  4. You’re making me feel old. Wait a minute, I am old …. bjg

  5. Pingback: Waterways Ireland’s pensions burden | Irish waterways history

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