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TO: All Senior Financial Officers
RE: Allowances for Valuation of Assets and
Liabilities for the Fiscal Year Ended March 31,
2005
In
order to finalize the 2004-2005 Financial Statements of the Government of
Canada, the policy on Allowances for Valuation of Assets and Liabilities
requires an annual assessment of the collectability of financial claims.
Also, any liabilities of a material amount that are not recorded in the
departmental accounts must be reported to the Treasury Board Secretariat.
Guidance on these reporting requirements is attached. All departments and agencies that are included in the accounting entity
of the government of Canada are required to respond to this call letter
including, where appropriate, providing a nil return.
Departments are also required to report on liabilities related to contaminated sites as
required by the Policy on Accounting for Costs and Liabilities Related to
Contaminated Sites. The template to
report contaminated sites is attached as Appendix B. Note that a nil response
is required where appropriate.
In fiscal year 2004-2005, the liability for contaminated sites has been devolved to
departments. As a result, departments must record their year-end liability for
contaminated sites in their trial balance.
The template is still required to provide information on contaminated
sites needed to reconcile the total liability for the government and to collect
information on contingent liabilities related to contaminated sites. In future years,
the year-end update by departments to the Federal
Contaminated Sites Inventory should provide TBS with the required information on
liabilities.
Please ensure that the information requested by this
call letter for the valuation of assets and liabilities, or a nil return if
applicable, is received at TBS by May 6, 2005. Due
to the additional information requested for contaminated sites, the reporting
deadline for this item is extended to May 20, 2005. Compliance with these reporting deadlines will be considered in
evaluating the timeliness and accuracy of submissions by departments required
for completion of the Public Accounts. The
performance by departments has continuously improved over the last few years.
Your continued co-operation is greatly appreciated.
Suzanne Shirreff
A/ Executive Director
Financial Management and Accounting Policy Directorate
Allowances for Valuation of Assets and Liabilities -
March 31, 2005
1. VALUATION OF ASSETS
Objective: Where the collectability of loans and advances is in question, the resulting
impairment in the value of these financial claims should be reflected in the
allowance for valuation of assets.
Scope: The claims to be assessed are loans and advances due to
the Government by Crown corporations and loans and advances due to the
Government by outside parties (domestic and foreign). For the purpose of recording allowances, there are two types
of loans receivable: those that are charged to a budgetary appropriation (A and
B authority codes) and those that are charged to a non-budgetary appropriation
(G and H authority codes). In the
case of loans receivable charged to a budgetary appropriation, departments are
responsible for recording an allowance for those loans where collection is in
doubt. In the case of loans
receivable charged to a non-budgetary appropriation, departments will only
record an allowance if Treasury Board Secretariat has devolved the allowance.
For all other non-budgetary loans receivable, departments are to report
in their response to this call letter the necessary information for Treasury
Board Secretariat to record the allowance.
Departments should not include in their
response allowances that they have recorded (nor the related loan) such as: the
allowances on accounts receivable, including interest receivable; or the
allowance on unconditionally repayable contributions.
Note: Assessment of investments in share capital,
contributed capital or other equity in Crown
corporations, joint and mixed enterprises, and
subscriptions to the share capital of international
development organizations will be done by the Treasury
Board Secretariat. Any information required will be
requested separately from the departments and corporations
involved. However, to facilitate our assessment, we invite
all organizations to provide any information that may be
useful to us in this regard.
Information Required: An up-to-date estimate of the collectability of the
financial claims is required. In addition, a summary of the terms and conditions of loans
and advances should be provided in cases where these terms and conditions are significantly
concessionary. Terms and conditions would include interest rate, repayment term, grace period and any other
condition that confers a significant benefit on the recipient. Loans and advances would be considered to be
concessionary if any of the terms and conditions, at the time the loans and
advances were made, were considerably more favourable to the borrower than the
prevailing market terms and conditions. The data needed for each Financial Reporting Account
(FRA) and a suggested reporting format are outlined in Appendix A
Report the most accurate year-end
account balances available, since the FRAs will not necessarily be finalized
by the required reporting date. Revised reports are not required
unless there are material changes to amounts previously reported as uncollectable,
doubtful or concessionary.
The valuations are based on the amounts recorded in the FRAs. Nil FRA balances need
not be reported.
2. UNRECORDED LIABILITIES
Objective: In order to present a fair and complete picture
of the financial position of the Government of
Canada, it is necessary to recognize all liabilities that have been
identified at the balance sheet date
Scope: Departments should review liabilities within their
operations that are not or
cannot be recorded in the accounts of Canada through their departmental
entries.
Information Required: Details of unrecorded liabilities should be
reported to the treasury Board Secretariat separately from Appendix
A and must include the following information as applicable:
- Reason why the liability cannot be recorded in departmental
accounts.
- General description of the debt which will also specify if the amount is owing as at March 31 for work performed, goods received, services rendered, contractual arrangements, etc.
- Identification of the party to whom the debt is owed.
- Total amount of the liability together with the details of calculations for an estimated debt or reference to a payment‑claiming document for a determinate debt.
Note: Reporting requirements relating to contingent liabilities,
including loan guarantees, are found in section
15.3.5 of Chapter 15 of the Receiver General Manual.
The information required is reported to the Receiver General in
accordance with this reference. Information on contingent
liabilities should not be included in the response to this call
letter.
3. OTHER ITEMS RELATED TO THE VALUATION OF ASSETS AND
UNRECORDED LIABILITIES
Guidelines for Assessment: These guidelines are found in the
Policy on Allowances for Valuation of Assets and Liabilities,
which is available on line at http://www.tbs-sct.gc.ca/Pubs_pol/
dcgpubs/TBM_142/siglist_e.html
Audit: Details of the calculations involved
in establishing the items to be included in the allowances must be retained by departments for examination by the Office of the Auditor General.
Financial Statements: Details of the individual
items included in the allowance should not be disclosed in a department's financial
if such disclosure could jeopardize recovery of the amount.
4. LIABILITIES FOR CONTAMINATED
SITES
The requirements for custodial departments to report to the Treasury Board Secretariat on the liabilities for contaminated sites and solid waste landfills are described in the Policy on Accounting for Costs and Liabilities Related to Contaminated Sites that can be found at http://www.tbs-sct.gc.ca/pubs_pol/dcgpubs/tbm_142/aclcs-ccpsc_e.asp
Additional guidance on the accounting for environmental liabilities can be found
at http://www.tbs-sct.gc.ca/rpm-gbi/rpmdpubs/liabilities-passifs_e.asp
A total liability of less than $100,000 for a department need not be reported but nil returns are still required. Custodial departments are requested to report these data to the Secretariat using the reporting format found in Appendix B. Please provide the report in both hard copy. An assessment of the completeness of the efforts to identify all contaminated sites and to quantify the related liability for remediation is required.
New
this year, the liability for contaminated sites has been devolved to
departments. As a result,
departments must record the year-end liability in their trial balance. The information contained in Appendix B is required for the reporting of
contingent liabilities related to contaminated sites and also permits Treasury
Board Secretariat to reconcile the year-end liability for the Government.
Guidance on accounting for solid waste
landfills:
Solid
waste landfills that are no longer in use should be accounted for as a
contaminated site.
For solid waste
landfills that are actively in use, a liability for closure and post-closure
care should be recognized as the landfill site’s capacity is used.Departments with active landfills should indicate so in their response so
that the appropriate accounting treatment can be discussed
Financial statement disclosure:
The
devolution of the liability for contaminated sites requires a
change in the
disclosure on departmental financial statements.
A department may list the liability separately on its
financial statements or group it under other liabilities.
Suggested note disclosure includes:
Summary of significant accounting policies:
Environmental liabilities reflect the estimated costs related to the management
and remediation of environmentally contaminated sites.
Based on management’s best estimates, a liability is
accrued and an expense recorded when the contamination occurs or when the
department becomes aware of the contamination and is obligated, or is likely to
be obligated to incur such costs.
If
the likelihood of the department’s obligation to incur these costs is not
determinable, or if an amount cannot be reasonably estimated, the costs are
disclosed as contingent liabilities in the notes to the financial statements.
Contingent Liabilities - Contaminated sites:
Liabilities
are accrued to record the estimated costs related to the
management and remediation of contaminated sites where the
department is obligated or likely to
be obligated to incur such costs.
The
department has identified approximately xx sites (xx sites in 2004) where such
action is possible and for which a liability of $xx million ($xx million in
2004) has been recorded.
The
department has estimated additional clean-up costs of $x million ($x million in
2004) that are not accrued as these are not considered
likely to be incurred at
this time.
The department’s
ongoing efforts to assess contaminated sites may result in additional
environmental liabilities related to newly identified sites, or changes in the
assessments or intended use of existing sites.
These liabilities will be accrued in the year in which
they become known.
Departments
should tailor the disclosure depending on the materiality
of amounts
5. REPORTING
The data required by the Treasury Board Secretariat should be designated as confidential. The information regarding the departmental assessment of assets and reporting of unrecorded liabilities should be received by
May 6, 2005. The reporting deadline for tcontaminated
sites is May 20, 2005. The data should be submitted to:
Chantal Lemyre
Senior Analyst, Government Accounting Policy
Financial Management and Accounting Policy Directorate
Office of the Comptroller General
Treasury Board Secretariat
L'Ésplanade Laurier
8th Floor, West Tower
300 Laurier Avenue West
Ottawa, Ontario
K1A 0R5
If there are any questions or if there are difficulties in providing the required information, please notify Chantal Lemyre at (613) 957-2527 or at lemyre.chantal@tbs-sct.gc.ca.
Appendix A
Department (Name)
Analysis of Financial Claims
As at March 31, 2005
|
Results of Assessments
|
FRA
No. (1) |
Description |
Balance |
Uncollectable |
Doubtful |
Concessionary |
Criteria used, terms and other comments(2)
|
(1) Financial Reporting Account (FRA) Description and Balance
- All items should be identified by a FRA number. Where there are separate FRAs for amounts repaid during the fiscal year, they should be grouped with the relevant loan account balances.
(2) Criteria Used, Terms and Other Comments
- Claims which have been assessed as collectable but which have not been collected to date in accordance with existing terms must be explained. A general description of terms and conditions relative to the item must be included.
- "Pass-through" loans to Crown corporations must be identified.
- For concessionary loans and advances, the following information should be provided: interest rate, repayment term, grace period, date of signing of agreement, date of initial disbursements, and any other relevant terms and conditions. For loans and advances that are used by outside organizations to make concessionary loans, a general description of their loan portfolios should be provided.
Appendix B
DEPARTMENT: ____________________
SUMMARY OF CONTAMINATED SITES
As at March 31, 2005
| |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
|
Contaminated Site # |
CCME NCS Class |
Total Suspected |
OPENING LIABILITY April 1,
2004 |
CHANGES TO LIABILITY ESTIMATE IN
04/05 |
REMEDIATION, CARE &
MAINTENANCE EXPENDITURES FOR 04/05 |
CLOSING LIABILITY March 31,
2005 |
TOTAL CONTINGENT LIABILITIES
March 31, 2005 |
ASSESSMENT EXPENDITURES
FOR
2004/05
|
% of completion to quantify liability at March 31,
2005 |
|
1 |
2 |
3 |
N |
I |
|
12345-001 |
|
X |
|
|
|
|
$8,027,000 |
$6,500,000 |
-$1,000,000 |
$13,527,000 |
$0 |
|
|
|
12345-002 |
|
|
X |
|
|
|
$0 |
$0 |
$0 |
$0 |
$500,000
|
|
|
|
12345-xx |
|
|
|
|
|
2 |
|
|
|
|
$1,000,000 |
$10,000 |
|
|
TOTAL |
0 |
1 |
1 |
0 |
0 |
2 |
$8,027,000 |
$6,500,000 |
-$1,000,000 |
$13,527,000 |
$1,500,000 |
$10,000 |
98% |
Columns:
- Opening Liability - 1 April 2004: report the liability balance
reported for 31 March 2004.
- Changes to Liability Estimate in 2004/05: include increases to liability as a result of the identification of new contaminated sites and increases/decreases to previous estimates of costs.
- Remediation, Care & Management Expenditures in 2004/05: include
remediation, care and management expenditures incurred in year on
contaminated sites.
- Closing Liability 31 March 2005: equals column 1 + column
2 + column 3..
- Contingent liabilities: include the estimate of remediation,
care and maintenance costs for sites where it is unclear whether the government is
obligated or if the government is unlikely to incur such costs.
- Assessment Expenditures for 2004/05: include
assessment costs incurred in the year to determine whether contamination
exists (i.e. costs associated with steps 1 to 4 of the 10-step process for
addressing a contaminated site). This data is being collected for
information purposes only.
- % of completion to quantify liability at 31 March 2005:
include estimate of the percentage of completeness to quantify liability.
Estimate is for the entire inventory (not by site). Estimate should
consider the number of sites which the department has yet to assess and
whether the department suspects to find contamination. For example
where a department has only assessed 70% of its sites but does not suspect
contamination exists on the remaining sites, the percentage of completion
should be close to 100% (i.e. rather than being 70%). This percentage
is a "best guess" and is being collected for information purposes
only.
*All amounts should exclude GST.
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