Grits didn’t raid pension plans

Few crimes are more heinous than a corrupt employer improperly plundering a pension fund. Pocketing the money that rightfully belongs to working people is deeply wrong — and illegal.

So when auditor general Bonnie Lysyk implies the Ontario government is trying to do just that — and casts herself as the last safeguard blocking Liberals from raiding workers’ pensions — one is tempted to hail our hero.

That, at least, is the narrative pushed out by the auditor general’s office.

But that bizarre claim turns out to be a sideshow, designed to cover up her own miscalculations after an outside panel of experts found that the auditor herself had conflated facts and confused figures. Lysyk’s fanciful tale that she single-handedly stopped the government from reaching into the cookie jar boils down to a pile of cookie dough.

Auditors fulfil a critical function in any enterprise, government or private. But as we’ve seen in the private sector, when auditors become conflicted — in this case between fact and fiction — they render their office untrustworthy and irrelevant.

In 2002, a previous auditor agreed with a then-PC government that it could count a pension surplus as a budget asset. Last year, the current auditor had second thoughts, suddenly criticizing the Liberals for booking a $10.7 billion surplus from two jointly-sponsored public-service pension plans. The effect was to wipe away $1.5 billion from the current budget just when the Liberals were on the verge of hitting their deficit elimination target.

The government sought a second opinion from outside professionals, in this case a panel of top accounting and pension experts. Their verdict is complicated but also common sense:

You can’t pretend an asset doesn’t exist merely because it isn’t liquid. Experts at OPTrust, one of the joint pension plans with a surplus, reached a similar conclusion as the outside panel earlier this month.

Yet on Thursday, Lysyk continued to insist that a jointly sponsored pension plan is different, because the employees’ union shares control — so the employer requires their written permission to access the money before it can be counted as an asset. Interesting but irrelevant.

In fact, the government would never seek such permission because it wouldn’t and couldn’t withdraw money from any pensions — they are segregated and protected by law. When the outside experts pointed out the internal inconsistency in the auditor’s logic, Lysyk shifted to damage control mode.

Rather than acknowledge her errors, she compounded them: In a statement, Lysyk dismissed the experts as a “hired” panel, but then falsely claimed the government has a “desire to have unfettered access to that money,” adding with ominous overtones: “That money is for the benefit of employees and retirees.” This is a straw man topped with cookie dough.

Lysyk knows perfectly well that the spectre of raiding is a red herring. When I asked the auditor to explain how, in light of those legal prohibitions, the government could go about raiding a pension, she declined comment.

Headed by Tricia O’Malley — a member of the Canadian Accounting Standards Oversight Council and Canadian Actuarial Standards Oversight Council — the panel is puzzled. How can the auditor suggest that merely counting an asset puts it up for grabs?

“One of the things that continues to disturb me about the dialogue, frankly, is people going on and on about taking assets out of the plan — that is, in fact, not doable,” she told me Thursday.

Her panel concluded that the pension surpluses are absolutely assets because they have a future economic benefit — they allow the employer (and employees) to reduce their contributions in future, offset against that surplus (by the same accounting logic, pension deficits are counted as liabilities, often requiring future contributions to be increased).

Rebalancing isn’t raiding. There are established mechanisms for both sides to reduce contributions because it’s pointless to pile up infinite surpluses.

By insisting that a surplus can’t count as an asset, merely because withdrawals are too complicated, Lysyk conflates an actuarial surplus with actual cash. O’Malley uses the analogy of a joint venture or partnership in the private sector, which can be difficult to dissolve — but doesn’t preclude you from booking your share as an asset. (No, it’s not worth nothing.)

Like it or not, that’s the arcana of accounting — and banking. Just because you don’t have the cash in hand doesn’t mean you don’t count it.

We rely on auditors to provide value for money audits. Not to introduce their own values, making up untested accounting standards as they go along. Martin Regg Cohn’s political column appears Tuesday, Thursday and Saturday. mcohn@thestar.ca, Twitter: @reggcohn