Capitalization of Fixed Assets

Res #: 6-07M
Number: 6
Year: 2007
Midterm: Yes
Expired: Yes
Responses Received: No
Departments: Saskatchewan Government Relations

Resolution No. 6 -07M
Capitalization of Fixed Assets

WHEREAS effective January 1, 2009 local governments are required to have a complete list of capital assets as well as an amortization schedule in place;

WHEREAS this change in financial reporting on the municipalities’ financial statement will only serve to confuse the average ratepayer;

WHEREAS collecting the necessary data will be time consuming and require extra administrative costs;

WHEREAS amortizing the depreciation of capital assets of a municipality serves no real purpose to municipalities as they do not pay income tax; and

WHEREAS municipalities never asked for this change to take place in the first place;

BE IT RESOLVED that SARM lobby the Provincial Government to remove the requirement for municipalities to compile a list of capital assets such as road, lagoons, etc as well as the requirement to depreciate these capital assets.

Ministry of Municipal affairs RESPONSE

·         It appears that there may be some misunderstanding in the resolution, as Canadian accounting standards are set by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants (CICA).   The Provincial Government has no authority to change the CICA accounting standards.
·         Saskatchewan’s municipal legislation requires that municipalities prepare their financial statements in accordance with generally accepted accounting principles for local governments as recommended by the CICA.
·         The Ministry of Municipal Affairs provides a suggested financial reporting format to municipalities in an effort to assist them to comply with the national accounting standards.
·         The Ministry strongly encourages municipalities, which are a level of government, to meet the accounting standards set for public sector bodies by the CICA.
·         The Ministry understands that the CICA changes to accounting standards are an issue for municipalities to manage.  To this end, a joint committee with representation from the Institute of Chartered Accountants of Saskatchewan, Saskatchewan Urban Municipalities Association, Saskatchewan Association of Rural Municipalities, Urban Municipal Administrators Association of Saskatchewan, Rural Municipal Administrators Association of Saskatchewan, municipal auditors and the Ministry is working to provide guidance, instructions, and direction to assist municipalities in complying with generally accepted accounting practices.  However, the onus is on municipalities, with advice and guidance from their auditors, to ensure that their financial statements comply with the CICA accounting guidelines.
·         It should also be noted that if municipalities fail to prepare their financial statements in accordance with established accounting standards, the Provincial Auditor may cite the Ministry and demand it to take the necessary steps to ensure that municipalities comply with national accounting standards.
·         The federal government’s strong interest during gas tax negotiations that municipalities across Canada move to be Public Sector Accounting Board compliant by 2010 was also noted.