Implementation of Public Sector Accounting Board Standards in New Brunswick Municipalities General Overview -- Questions and Answers Q: A: Why

must New Brunswick follow the PSAB standards? All jurisdictions across Canada must follow the PSAB standards. PSAB is a requirement of the CICA and has not been imposed on municipalities by the Province of New Brunswick. The federal government, all provinces and territories and all municipal governments must use PSAB. What are the benefits of adopting PSAB? PSAB provides significant benefits, such as: a more complete picture of a municipalitys financial position, including accounting for tangible capital assets which are a key component in the delivery of municipal services highlights the effects funding decisions have on municipal assets enhanced transparency and accountability better information for council decision making comparability with municipalities in other provinces a foundation for asset management PSAB provides information for the development of financial and capital investment strategies. Municipalities can start to consider how they use up their assets, replace/upgrade assets, and finance them. Q: A: How do the new standards differ from current practice? Accounting Basis Current standards: Fund - i.e., separate budgets and accounts are established for general operations, water and sewer operating and related capital and reserve accounts. Public Sector Accounting Board Standards: Consolidated - summary financial statements that include all funds and entities under local government control present the full financial picture. There are four required financial statements to be presented: a statement financial position; a statement of operations; a statement of changes in net debt; and a statement of cash flows.

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Related link: http://www.psab-ccsp.ca/item14959.pdf (pages 5-7) Accrual Basis Current standards: Modified Accrual while full accrual has always been the objective certain items, such as vested sick leave have generally not been accrued. The requirement has been that significant items which have not been accrued be disclosed in the notes to the financial statements. Public Sector Accounting Board Standards: Full Accrual all liabilities are accrued as they are incurred. This would include such items as salary and wages payable, vacation payable, vested sick leave and environmental liabilities. Reporting on Related Entities Current standards: All of the entities or funds under the stewardship of the elected officials are to be reported in the annual financial statements of the Municipality. Note: In recent years, as a result of consultations with the municipal treasurer and their auditor, a number of municipalities have been required to consolidate certain controlled entities into their General fund. Public Sector Accounting Board Standards: All of the entities or funds under the control or shared control of the municipality are to be consolidated into the annual financial statements of the Municipality. Capital Assets: Current standards: Recorded in capital fund and are to be classified in the capital fund balance sheet by function (General Government Services, Protective Services, Transportation Services, Environmental Health Services, Recreation and Community Services, etc.). Depreciation of assets is not to be recorded. Public Sector Accounting Board Standards: All tangible capital assets are to be reported and amortized. I.e. depreciation is reported as an expense.

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What does this mean for municipal budgets and the setting of tax rates and user fees? Municipalities will adopt PSAB compliant budgets and will also adopt nonconsolidated financial plans (budgets) for purposes of setting tax rates and user fees. Adjustments will be required to deal with certain cash and non- cash items. Revised budget forms will be developed. How will fund surpluses and deficits be addressed? The intention is to develop a methodology that will accommodate the need to report on a PSAB basis and accommodate the current legislation with respect to fund accounting and the carry forward of surpluses and deficits. This will require that financial statements include audited schedules for the individual operating funds. The general and utility funds surplus or deficit definitions would be included in the revised municipal financial reporting manual. Where can I get more information? 1. Definitive Source: The definitive source for public sector accounting Board standards is the CICA Public Sector Accounting Handbook: Other PSAB resources: PSAB What It Is and What It Does
http://www.psab-ccsp.ca/item14959.pdf

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https://www.knotia.ca/kStore/Catalogue/ProductPricing.cfm?productID=10&language=1&URLCode=psab-ps

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Other non-authoritative guidance: - 20 Questions about the Government Reporting Entity - Guide to Accounting and Reporting for Tangible Capital Assets - 20 questions About Government Financial Reporting
http://www.psab-ccsp.ca/other-non-authoritative-guidance/index.aspx

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Other provinces web sites: Nova Scotia: http://www.gov.ns.ca/snsmr/muns/manuals/ Newfoundland: http://www.ma.gov.nl.ca/ma/for/psab/index.html Manitoba: http://www.pub.gov.mb.ca/pdf/water/tca.pdf Ontario: http://www.amcto.com/psab/assetmgmt.asp Department of Local Government : AMA Preconference workshop in Miramichi May 19th, 2010 Communiqus Web site (under development) Training sessions

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Will municipalities require additional resources to implement PSAB?

A: Implementing PSAB standards is a major project which will require dedicated resources. A number of municipalities may find that outside assistance is required. Municipalities can use some of their allocation from the Gas Tax Fund to cover the cost of inventorying and valuing capital assets. Please contact Mr. Luc Theriault (Luc.Theriault@gnb.ca) for further information. They might also consider the hiring of summer students through the Student Employment Experience Development (SEED) Program - http://www.gnb.ca/0311/index-e.asp. Additionally, municipalities that do not have internal accounting resources may want to consider partnering with other municipalities to acquire the expertise they require.