Another Accounting Problem At The Arizona Public Safety Pension

Pensioners First – Arizona PSPRS’ Board Chairman Brian Tobin, Administrator James Hacking, and Chief Investment Officer Ryan Parham have been running with scissors. Again!

In November 2013, the Arizona Auditor General issued a report stating that PSPRS’ management did not follow accounting standards when valuing the Desert Troon real estate portfolio.  The Auditor General only provided PSPRS with accounting guidance on what NOT to do.  PSPRS was allowed to respond to the AG’s report as it saw fit to do so.  PSPRS choose how to better comply with accounting standards.  Pensioners First doubts PSPRS selected a conservative accounting repair.

At the February 26,2014, Arizona Public Safety Personnel Retirement System Board of Trustees meeting, Board Chairman Brian Tobin admitted that PSPRS had another NEW accounting problem.  According to the Arizona Republic, the public safety pension overstated (counted too much) some of its real estate by $40 million.  This resulted in another write-down of $40 million.

  • These are more monies that pensioners don’t have!
  • These are more monies that taxpayers will need to fund!
  • This means the pension system is even more underfunded!

After the Arizona Auditor General informed Administrator Hacking that his real estate valuation practices were inconsistent with accounting principles, Hacking stated that the $24.7 million write-down was immaterial and; therefore, insignificant.

Pensioners and taxpayers – do you think this new $40 million accounting error is immaterial and insignificant?

The PSPRS is the most generous retirement system in Arizona. The average retiree enrolled in PSPRS retires at the age of 51, with 23.6 years of service, and receives an annual pension of $48,842 – See more at:
The PSPRS is the most generous retirement system in Arizona. The average retiree enrolled in PSPRS retires at the age of 51, with 23.6 years of service, and receives an annual pension of $48,842 – See more at:

The average retiree enrolled in PSPRS retires at the age of 51, with 23.6 years of service, and receives an annual pension of $48,842, according to the Reason Foundation.

With a $49,000 per year pension benefit, it would take a PSPRS retiree 816 years to amass $40 million!

Mr. Hacking – A $40 million accounting error is NOT insignificant!

At the February 2014 Board of Trustees meeting, PSPRS’ Brian Tobin chewed out Chief Compliance Officer/ Internal Audit Officer Bridget Feeley for missing the double-counting of real estate properties.

PSPRS’ external auditor Heinfeld Meech & Co. must have been counting fingers AND toes.

Pensioners First’s Half-Truth-O-Meter is spiking AGAIN, as PSPRS is AGAIN attempting to blame its problems on the investment analysts who, according to the Arizona Republic, resigned last year in protest of Administrator Hacking’s real estate valuation practices.

According to the Republic, Deputy Chief Investment Officer Marty Anderson is trying to blame those former employees for PSPRS’ current accounting problems.  Really?  Nine months after Hacking acknowledged the resignations?  Well, according to news articles and Board agendas/ minutes, it appears Administrator Hacking did use ABC 15 News to throw former Administrator Jack Cross under the bus 10 years after Mr. Cross was no longer in charge and six years after Hacking took charge (see Corporate Rule #1).   Mr. Anderson – when you point a finger at someone else – you have three fingers pointing back at you (unless you are one of the Simpsons).  The article states that former employee Mark Selfridge warned the pension not to double-count the real estate properties before he resigned in protest.  Pensioners First wonders if PSPRS’ CAFR or Comprehensive Annual Financial Report will need to be restated?

  • Corporate Rule #1 – always blame the guy who is not around anymore. 
  • Corporate Rule #2 – when management is seriously screwed up, see Rule #1.

Governor Brewer – when are you going to hold Chairman Brian Tobin, your appointee, accountable for the malfeasance and W.R.O.N.G.S. taking place at the public safety pension?  How much more of the pensioners’ money must be lost?

Does management need to walk out of the building with duffel bags full of pensioners’ cash?

Wait!  Have they done that?

Yes!  Yes, essentially they have!  If they manipulated real estate valuations that affected bonuses.

An excerpt from the Republic’s front page article in the March 8 paper-

The pension system last week disclosed that it was restating its real-estate portfolio for the end of 2013, reducing the value of the portfolio by nearly $ 40 million, because of accounting errors — including the double counting of some property values — and upon the recommendation of the state Auditor General’s Office.

Marty Anderson, deputy chief investment officer, blamed some of the accounting problems on a former employee but did not elaborate. The system repeatedly declined to disclose the identity of that person.

All three analysts who quit last year told The Arizona Republic this week that they had nothing to do with the accounting problem. One, Mark Selfridge, said he warned the system not to double-count land values before he resigned in mid-July.

The system manages a $7.7billion trust to pay for the retirement benefits of public-safety officers, elected officials and correctional officers. It has more than 53,000 members.


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