Dannel P. Malloy may well be the only governor in the country who tries to rev up audiences with references to “generally accepted accounting principles.” But that wasn’t enough Monday, not for the Connecticut Society of Certified Public Accountants.
On behalf of 300 of his fellow CPAs, Michael L. Kraten wanted more from Malloy, the accountant-in-chief, at the CSCPA’s annual meeting at the Aqua Turf Club in Southington.
“Perhaps you can prefer to speak to a choice that apparently your administration made to go with modified accrual GAAP accounting, as opposed to full accrual GAAP accounting?” Kraten asked.
Or perhaps not.
“I don’t know enough, quite frankly, about what you feel the substantive differences are,” Malloy said. He smiled and added, “Remember, I am a lawyer, not an accountant.”
True, but his first order of business as governor was to sign Executive Order No. 1 requiring the state to adhere to GAAP principles, which Malloy sees as a way to keep the state from hiding its considerable fiscal liabilities.
“Understood,” Kraten said. “I would certainly understand if you were to say that, because your executive order simply referred to GAAP, as opposed to modified, as opposed to full accrual, that you do need some time to think about the study and assess.”
But Kraten, who later would say he personally admires the governor for forcing the state to confront pension and other obligations ignored by predecessors, also noted that on Page 9 of the administration’s “Plan for Conversion to GAAP-based Budgeting” there is an assertion that modified accrual is preferable to full accrual.
One of the society’s “bedrock principles” is full accrual accounting, so Kraten persisted: Could Malloy share some of the “thought process” that went into the choice of modified accrual?
“You know, unfortunately for you, you got me and not Ben,” Malloy said, referring to Benjamin Barnes, the secretary of the Office of Policy and Management. “He’s a lot brighter than I am. So we can certainly make him available to you and your executive committee at some appropriate time.”
Malloy, who actually inserted a reference to GAAP in what was otherwise a red-meat political speech on Democratic principles to an audience of 1,200 people at a Democratic dinner last week, seemed to take in stride his inability to go deep enough on the subject for the CPAs.
His message of fiscal stability and responsibility found an appreciate audience, including in Kraten, his questioner.
Besides, the governor later rallied, recalling that the UConn Health Center claims to be losing money based on full accrual accounting, which includes the depreciation of capital facilities, even though the state pays separately for the health-center’s physical plant.
So, the governor challenged, is full accrual always appropriate?
“I pushed back,” Malloy said smiling, as he left the meeting. “Actually, I stumped him. Would you put that in your story?”