A standard sheet of office paper weighs 4.5 grams. So, if you were to download and print the 2019 Comprehensive Annual Financial Report, you’d find yourself with 1.358 pounds of information about PERA—about the same weight as a bottle of Coke (though a much shorter digital version is also available).

Books known for their size—a dictionary, a telephone book—are often the authoritative text on their subject. The CAFR is just that; the go-to source for PERA’s financial situation, demographic information, funded status, and more. For a book with so many answers, however, there are often as many questions asked about it. Why is the 2019 report released halfway through 2020? How can any non-accountant possibly glean anything from the tables of information?

The best place to find answers to those types of questions isn’t in the CAFR, but with the people who help make it. About 40 people at PERA are actively involved in the production of the CAFR, about half of them accountants. Most of them work on a portion of the CAFR in addition to other roles. A smaller team of five—the “CAFR team”—spends much of their time throughout the year preparing it. Understanding the work that goes into creating the CAFR can unlock a better understanding of what’s inside.

361 On, 4 Off

If you just glance through a few of the 19 different CAFRs archived online, they might appear to be identical, with the exception of the numbers in the tables. But changes and improvements take place every year.

Some changes are technical and more formal, made in order to comply with updated guidelines from the Governmental Accounting Standards Board (GASB). But other changes are the result of people like Catherine Maninger, PERA’s Controller and a member of the CAFR team, who go through the latest CAFR every summer, days after it was released, to see what could be done better, much like an NFL quarterback might stay up late Sunday night going over film from a game earlier that day.

Simplification and elimination of duplication were the themes for changes to the 2019 CAFR. Prior to this CAFR, a change to any of the actuarial assumptions PERA uses was described in written form. This year, that text was transformed into charts, allowing a person to visually grasp the changes quickly. Also, the section devoted to discussion and analysis by PERA management has been pruned back compared to past years, contributing, in part, to the 2019 CAFR being 20 pages shorter than last year’s.

Now that 2019’s version has been released, the CAFR team is setting their sights on next year. The team didn’t have long to rest after the 2019 CAFR was released on Friday, June 19. The kickoff meeting for the 2020 CAFR took place on June 24. 

Seeing the Big Picture

The Accounting department is on the seventh floor of PERA’s building, southeast of downtown Denver. Most of the windows on this floor face east. From here, you can see the landscape of the city, as tall apartment buildings and dense neighborhoods nearer downtown give way to single-family homes miles away. On the horizon, you can make out where buildings dwindle altogether, replaced by open land.

It takes being seven stories up to get a perspective like this, allowing a person to take in vast swathes of information at once. It helps you see the forest among the trees. It’s hard to visualize that view with its many details while standing on the sidewalk below.

Gaining a broad perspective on the CAFR is a crucial part of its creation. Instead of traveling up an elevator to get it, however, the circle of those involved in its creation is expanded.

Any proposed changes to the following year’s CAFR are reviewed by PERA executives and the PERA Board of Trustees in the fall. “We have a very active Board Audit Committee,” Maninger said. “They take their fiduciary duty seriously and are really involved in reviewing the CAFR before it is published.” As an example, she said the committee posed more than 150 questions to PERA staff about the 2019 CAFR during their review this spring.

Rebecca Shelton and Joshua Neugebauer work in PERA’s Investment Division and also play a major role in the CAFR’s creation. “Investments and accounting work at things through different lenses,” Shelton said. “The CAFR needs to make sense from both an accounting standpoint and an investment standpoint.” These differing points of view are used to make the CAFR better.

Neugebauer said that evidence of one such collaboration can be seen in the 2019 CAFR. “We reviewed several CAFRs from other states last fall, and we noticed that a few other plans highlighted internal management costs”, he said. “Because that is such a compelling story—how we’ve structured the investment program—we thought we’d highlight that a bit more in this year’s CAFR.”

It’s a straightforward idea, but it required a lot of legwork. Determining how costs are assigned to investing activities ended up requiring a lot of work between multiple divisions. The end result—a chart on page 124—might not immediately stand out to the average reader and probably won’t grab any headlines. It wasn’t required by any regulatory agency or accounting rule. But this small change represents something much bigger: an ongoing internal commitment to finding new and better ways of sharing how PERA works.

Transparency is not a one-time event. A single, dramatic display of transparency can be indicative of a long overdue need for it. On the flip side, a culture of transparency is built by focusing on making incremental improvements, year after year. Over time, it adds up.

This is the first installment of a two-part story. Read the second installment here.