Policy on Accounting for Costs and Liabilities Related to Contaminated Sites
(Publié aussi en français sous le titre Politique sur la comptabilité des coûts et du passif relatifs aux sites contaminés)
Table of Contents
Effective Date
Policy Objective
Policy Statement
Application
Policy Requirements
Monitoring
References
Enquiries
Appendix A
Definitions
Appendix B
Appendix C
Appendix D

Effective Date
This policy is effective for the fiscal year beginning April 1, 2002, and subsequent fiscal years.
Policy Objective
To ensure that all costs and liabilities related to management and remediation of environmentally contaminated sites, for which the Government of Canada has ongoing responsibility, are accounted for and reported in the financial statements of the government in the fiscal year in which environmental damage is incurred, or in the fiscal year in which costs and liabilities are identified.
Policy Statement
It is the policy of the government to account for costs and liabilities related to the management and remediation of environmentally contaminated sites when contamination occurs if the government is obligated, or is likely to be obligated, to incur such costs:
a)	for reasons of public health and safety;
b)	due to contractual arrangements; or 
c)	to meet standards set out in an act or regulation of a government (federal, provincial or municipal) in Canada or abroad which are considered to be acceptable to the government.
For purposes of applying paragraph c) of the policy statement, it is not intended that the federal government waive immunity from legislation, regulations or by-laws passed by other levels of government; in cases of voluntary compliance with such legislation, regulations or by-laws, it will constitute a financial obligation for the purposes of this policy.
A department is obligated or likely to be obligated when there is little or no discretion to avoid a future transfer of assets (probably in the form of cash) to remediate a contaminated site.  However, a general policy intention to remediate, where no public health and safety concerns, no contractual arrangements or no legislation, regulation or by-law exist, is not sufficient to establish a liability.
Departments will account for and report closure and post-closure liabilities related to solid waste landfills in accordance with the direction contained in Section PS 3270 of the Public Sector Accounting Recommendations issued by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA). Such liabilities  represent a special class of contaminated site and the government will base its reporting on the standard as issued. 
Application
This policy applies to all organizations considered to be departments within the meaning of Section 2 of the Financial Administration Act.
Policy Requirements
1.	Costs are to be accounted for when the damaging event takes place and not when site management or remediation is undertaken.  Should damage not be identified when it is incurred, costs for such damage will be accounted for in the fiscal year when the damage is identified.
2.	Departments must report as liabilities expected management and remediation costs related to contaminated sites assessed as Classes 1 and 2 under the classification system established by the Canadian Council of Ministers of the Environment (CCME) (see Appendix A) or any classification system which produces similar results.
3.	If it is unclear whether the government is obligated or if the government is unlikely to incur remediation costs, the costs should be considered as contingent liabilities.
4.	Departments should estimate costs using the most appropriate methods for their circumstances.  Methods may include technical or engineering estimates, historical comparisons or other analytical tools.  The costs should be estimated based on the technology and costs at the time the damage is incurred or identified (current cost estimate).  Estimates will be reassessed and adjusted annually to recognize technological advances, inflation and progress toward remediation as appropriate.  The inflation rate to be used for the annual adjustment is the change in the consumer price index.
5.	The recording of liabilities under this policy by the Government of Canada for purposes of financial reporting will be in accordance with direction issued from time to time by  the Treasury Board Secretariat.  Costs will only be charged against appropriations at the time site management and remediation work is undertaken.
6.	Site management and remediation costs which are not obligations as defined in this policy, should only be recorded when site remediation work is undertaken.  The provisions of the Treasury Board Accounting Standard (TBAS) 3.1 Capital Assets will apply where appropriate.
7.	Solid Waste Landfills, as special cases, will be accounted for based on the Public Sector Accounting Recommendations issued by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.
8.	Guidelines on financial reporting and record keeping requirements are contained in attached appendices.  Departments need not report a total liability less than $ 100,000.
Monitoring
Accounting for site management and remediation costs and liabilities will be reviewed by departmental internal audit groups on a regular basis.
References
This policy is issued under the authority of the Financial Administration Act.
For Solid Waste Landfills, Section PS 3270 of the Public Sector Accounting Recommendations issued by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants applies.
Treasury Board Accounting Standard (TBAS) 3.1 – Capital Assets will apply as appropriate.
Treasury Board Real Property Policies and Guidelines an be found at the below listed URL:
http://www.tbs-sct.gc.ca/rpm-gbi/home-accueil.asp?Language=EN
Enquiries
Enquires concerning this policy should be directed to your departmental headquarters.  For interpretations of this policy departmental headquarters should contact:
	Treasury Board Secretariat
	Comptrollership Branch
	Financial Management and Accounting Policy Directorate
	Government Accounting Policy Division
	Ottawa, Ontario
	K1A 0R5
	Telephone:	(613) 952-1530 or
	Facsimile:	(613) 941-8487

Appendix A
Definitions
A contaminated site as defined by the Contaminated Sites Management Working Group is a site at which substances occur at concentrations (1) above background levels and pose or are likely to pose an immediate or long term hazard to human health or the environment, or (2) exceed levels specified in policies and/or regulations.
A solid waste landfill site is a defined area of land or excavation that receives waste that may include household waste, commercial solid waste, non-hazardous sludge and industrial solid waste. (CICA)
The Canadian Council of the Ministers of the Environment (CCME) has developed a national classification system to provide a basis for classifying sites according to their current and potential adverse impact on human health and the environment.  The system provides a convenient basis for assessing the need for remediation at individual sites, and for establishing the relative priority for implementing remedial measures among the sites that have been classified.
Contaminated sites are placed into one of five classes, namely:
•	Class 1 – available information (assessment) indicates that action is required to address existing concerns for public health and safety,
•	Class 2 – available information (assessment) indicates that there is a high potential for adverse off-site impacts, although threat to human health and the environment (public health and safety) is generally not imminent.  Action is likely required,
•	Class 3 – available information (assessment) indicates that the site is not a high concern. Additional investigation may be carried out to confirm the classification and some degree of action may be required,
•	Class N - available information (asssessment) indicates that there is probably no significant environmental impact or human health threats, and there is likely no remedial action required, and
•	Class I – some assessment action has been taken but there is insufficient information to classify the site.
Any other suitable classification system which produces comparable results may be applied to a particular site if considered by the department to be more appropriate in the circumstances.

Appendix B
Guideline on Departmental Records

General:  This guideline is intended to indicate the minimum record keeping required and to complement the requirements of the Treasury Board Contaminated Sites Inventory Input Guide and the Solid Waste Landfill Inventory Input Guide which can be found at:
http://www.tbs-sct.gc.ca/rpm-gbi/home-accueil.asp?Language=EN
Contaminated Sites
Departments will be required to keep appropriate records of sites in their custody that are contaminated or suspected of being contaminated.  This inventory, related to the Property Number assigned in the Directory of Federal Real Property (DFRP), will contain sufficient information to permit the department to manage their contaminated sites and to allow external auditors to form an opinion on the effectiveness, efficiency and economy of the management of contaminated sites.  As a minimum, the following data will be maintained:
a)	DFRP Property Number; 
b)	Site Identification: departmentally assigned in sufficient detail to permit location of the site within the property; 
c)	Description of contamination or suspected contamination;
d)	Classification of the site in accordance with the National Classification System for Contaminated Sites (including the date the classification was assigned);
e)	Action Plan for further evaluation or remediation;
f)	Estimated Cost for further evaluation or remediation (date estimated and pertinent assumptions) and classification as liability or contingent liability;
g)	Costs incurred on a particular site by fiscal year;
h)	Other information considered significant.

Solid Waste Landfills
As a minimum the following data will be maintained:
a)	DFRP Property Number1;
b)	Site Identification: departmentally assigned in sufficient detail to permit location of the site within the property;
c)	The nature and source of landfill closure and post-closure care requirements;
d)	The basis of recognition and measurement of the liability;
e)	The reported liability for closure and post-closure care at the balance sheet date, the estimated total expenditure for closure and post-closure care, and the amount remaining to be recognized;
f)	The remaining capacity of the site and the estimated remaining landfill life in years;
g)	The estimated length of time needed for post-closure care;
h)	Costs incurred on a particular site by fiscal year.

Appendix C
Guideline on Reporting Requirements
Reporting requirements will be in accordance with this policy and direction from time to time issued by the Treasury Board Secretariat.  Examples of the detail required follow (data are for illustrative purposes only):
CONTAMINATED SITES
DEPARTMENT/AGENCY				As at March 31, 2002
DFRP
Property
Number	Number of Contaminated Sites	Estimated Cost of Evaluation and Remediation	Expenditures Fiscal Year 01/02	
	Assessed	Suspected	Total	Liability	Contingency		
XXXXX	25	78	103	$256,000	$2,999,000	$9,567	
YYYYY	11		11	$87,900	$987,760		
ZZZZZ	8	9	17	$8,788,700	$888,800	$8,777	
TOTAL	44	87	131	$9,132,600	$4,875,560	$18,344	

Contaminated Sites Assessed
DEPARTMENT/AGENCY				As at March 31, 2002
DFRP
PROPERTY
NUMBER	CATEGORY (CCME)1	
	1	2	3	N	I	TOTAL	
XXXXX	4	11	7	2	1	25	
YYYYY	5	4	0	2	0	11	
ZZZZZ	6	1	1	0	0	8	
TOTAL	15	16	8	4	1	44	
Note 1:  A contaminated site can only be assigned to a category after some assessment work has been undertaken.  Suspected sites that have not been assessed are not to be included in this table nor assigned a classification of I.

Solid Waste Landfills1
DEPARTMENT/AGENCY				As at March 31, 2002

A	B	C	D	E	F		
DFRP Property Number	Estimated Total Expenditure
	Cumulative Capacity Used To Date	Total Estimated Capacity	Expenditures Previously Recognized	Change in Liability Current Year
(B*(C/D)-E)	Total Expenditure Recognized to Date
(E+F)	
AAAAA	$150,000	5,000	50,000	$	$15,000	$15,000	
BBBBB	$200,000	8,000	100,000	$	$16,000	$16,000	
CCCCC	$1,000,000	84	100	$	$840,000	$840,000	
TOTAL					$871,000	$871,000	
Note 1:  Based on the PSAB Recommendations

Appendix D
Guideline on Liabilities and Contingent Liabilities Related to Federal Contaminated Sites
The Contaminated Sites Management Working Group has developed a guideline on the application of the Policy on Accounting for Costs and Liabilities Related to Contaminated Sites.  This guideline is endorsed by the Treasury Board and may be found at the following internet address:
http://www.tbs-sct.gc.ca/rpm-gbi/home-accueil.asp?Language=EN