PSAB Reporting Model

1. PSAB Reporting Model MMAA Annual Conference Brandon, MB April 29. 2009

2. Presentation Outline • PSAB Reporting Model • Major Changes in the F/S • Budgeting & Reporting • Things to Do • Training Sessions

3. “A Look at the Big Picture” Tangible Capital Assets Accruals 2007 MRE & Consolidations Landfill Liabilities Liability for Contaminated Sites 2008 PSAB Reporting Model Budgeting 2009 Now, we’re here

4. PSAB Reporting Model • PSAB serves the public interest: • By setting financial reporting standards for governments. • Enhance public confidence in public sector reporting. • Prior to 2009, PSAB had separate standards for local governments.

5. PSAB Reporting Model • Beginning January 1, 2009 all governments will use the same financial reporting model. • Federal • Provincial • Territorial • Local

6. PSAB Reporting Model • 4 statements req’d by PSAB • Statement of Financial Position • Statement of Operations • Statement of Change in Net Debt • Statement of Cash Flow

7. PSAB Reporting Model • Fund statements become schedules. Still need to report on utilities & reserves. • All required statements, notes and schedules should include comparativebalances. • PSAB requires enhanced note disclosure.

8. PSAB Reporting Model • F/S manual & template will soon be available from the AMM PSAB web-site. • Recommend that you review both before the training sessions.

9. PSAB Reporting Model PSAB Reporting model provides a more comprehensive set of F/S that places equal emphasis b/t the annual surplus/deficit & the overall financial health of the muni. The accumulated surplus is a key indicator of a muni’s financial health

10. PSAB Reporting Model The accumulated surplus does not represent a pool of surplus cash. What’s does the accumulated surplus represent?

11. PSAB Reporting Model • The accumulated surplus represents: • Muni’s net worth • Amount by which all assets exceed liabilities • Net financial assets + Non–Financial Assets • Net resources available to provide future services • Sum of all annual surpluses and deficits since muni existed

12. PSAB Reporting Model • Accumulated Surplus is one amount on the F/S but is comprised of: • Equity in TCA (i.e. capital surplus) • Restricted Surplus (i.e. reserves) • Unrestricted Surplus (i.e. nominal surplus)

13. PSAB Reporting Model

14. Major Changes in the F/S

15. Old F/S Prepared on a modified accrual basis. Expenditures only recorded only when cash is disbursed. PSAB F/S Prepared on a full accrual basis. Expenses are recorded as incurred. Landfills, severance, vested sick leave Major Changes in the F/S

16. Old F/S Capital Expenditures are charged directly to ops or transferred to capital fund. 100% of cost is expenditure of accounting period. PSAB F/S Capital payments recorded as TCA. Cost of TCA is amortized over its useful life. Cost is charged to several periods. Major Changes in the F/S

17. Old F/S Debt service charges includes interest & principal payments PSAB F/S Debt service charges only includes interest Principal payments reduce the liability Major Changes in the F/S

18. Old F/S F/S only report on the funds of the municipality. Each fund is presented separately in the F/S. General Operating Fund Reserves General Capital Fund Utility Operating Fund Utility Capital Fund PSAB F/S F/S includes all the funds and orgs that are controlled by the municipality. Funds & controlled organizations are consolidated into one set of F/S. Inter-fund & inter-org balances & transactions are eliminated. Consolidated statements are only req’d for y/e audited F/S Major Changes in the F/S

19. Major Changes in the F/S • Transfers to reserves are not expenses • Transfers from reserves & nominal surplus are not revenues Will have a significant effect on reported PSAB surpluses/deficits!

20. Budgeting & Reporting “The landscape has remained the same, but the picture is being taken from a different perspective” Daryl Wilson Chair of PSAB February 10, 2003

21. Budgeting & Reporting • No changes to legislation • Still budgeting on a “cash basis” as in previous years • Not required to budget for amortization • Still need to prepare a balanced budget

22. Budgeting & Reporting • Existing legislative requirements still apply: • Cannot budget for a deficit without the Minister’s prior written approval – 165(1) • Minister must be immediately advised of an anticipated deficit– 165(2)

23. Budgeting & Reporting • Under the legislation you can balance your budget by transferring a balance from reserves or the nominal surplus. • PSAB Statement of operations will not include the transfer. • This could lead to a difference b/t your budget & what is reported in your F/S

24. Budgeting & Reporting Why are my F/S results so different from my budget? This may be an example of the “Budget Disconnect”?

25. Budgeting & Reporting • What is the “Budget Disconnect”? • Budget disconnect is the difference b/t what is budgeted on a cash basis and the operating results reported under PSAB. = Surplus Reported Under PSAB Budgeted Cash Surplus

26. Creates Surpluses Transfers to reserves Capital expenditures Debt payments Creates Deficits Transfers from reserves Appropriations of surpluses Amortization Accrued liabilities Causes of the Budget Disconnect Remember ! For most munis, all these causes that create differences are occurring at the same time.

27. Budgeting & Reporting • All provinces are facing the “budget disconnect” issue. • No province has changed their legislation for 2009. • What is MB going to do for 2009?

28. Budgeting & Reporting • If muni reports a deficit in the PSAB statement of operations, Province will: • Review nature of deficit • May recommend future actions where necessary • Objective of review is to evaluate the financial position & sustainability of the muni.

29. Tangible Capital Assets • S/B completed as of Jan 1/09 • Most munis have completed their TCA • Time is running out! • Critical that you complete ASAP

30. Tangible Capital Assets • Help is still available! • Questions – Call Michel @ 945–4864 • AMM Field Consultant Program • Consultants for hire are available

31. Identify controlled entities & gov’t partnerships (GP) Ensure entity F/S will be available on time Municipal Reporting Entity • Difficulties with entities will create problems for June 30, 2010 deadline • Discuss with your auditor as to the level of assurance required for each entity - Depends on materiality of entity. • Remember legislative requirements – Municipal Act 186(1).

32. Complete your estimates for your 2009 F/S Capacity (yrs, volume, weight) Remaining capacity (2007-09) Expenditures to close Discount expenditures (2007-09) Accrue liability based on capacity used Landfill Liabilities Many examples are available in Section 3 of the manual Call Michel @ 945-4864

33. Liability For Remediation of Contaminated Sites • Identify your existing & potential contaminated sites. • Value and record as of Jan 1/09 & Dec 31/09. • Record liability if: • Contamination exceeds an environmental standard; • Muni is directly responsible or accepts responsibility; and • Reasonable estimate of the cost can be made. • Otherwise disclose

34. Training Sessions • When: Summer of 2009 (June to Sept.) • Where: • Winnipeg (8) • Brandon (7) • Dauphin (2) • Russell (2) • Portage la Prairie (1) • Thompson (1) • Final dates, times & locations will be announced by the AMM sometime in May

35. Training Sessions • All municipal staff & elected officials are invited to attend. • 2 auditors only training sessions will be held in late September/09. • All registration will be done online through the AMM PSAB web-site.

36. Questions?