HomeMy WebLinkAboutCST 13-11c~~, o~
PICKERING
Report To
-Council
Report Number: CST 13-11
Date: March 21, 2011
91
From: Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject: 2011 Budget & Ontario Regulation 284/09
Recommendation:
1. That Report CST 13-11 of the Director, Corporate Services & Treasurer regarding
the exclusion of certain expenses from the Budget in accordance with the
provisions of Ontario Regulation 284/09 of the Municipal Act 2001 be received; and,
2. That Council confirm that the 2011 budget was developed by using the cash basis
of accounting and has excluded the following accrual expenses: amortization and
employee future benefits cost in accordance with Ontario Regulation 284/09 of the
Municipal Act 2001.
Executive Summary: As part of the new Public Sector Accounta-bility Board's
Tangible Capital Asset regulations, Ontario Regulation 284/09 allows the exclusion of
expenses of amortization, post employment benefits and solid waste Iandfill closure in a
municipal budget. It further requires that the municipality must report as to whether these
expenses were included in the Budget and that the report must be adopted by resolution.
As in past years, amortization and post employment benefit costs were excluded from the
City of Pickering's 2011 budget. The solid landfill closure and post closure expenses do
not apply to Pickering. This Regulation allows a municipality to exclude estimated
expenses for these items from the annual budget, however, the municipality is required to
report on the financial effects. The required reporting provides reconciliation between the
budget preparation method (cash flow) and the Public Sector Accounting board (PSAB)
standards for financial statement reporting purposes. Adoption of this report by Council
fulfills the reporting requirements of the Regulation.
Financial Implications: There is no financial impact from the exclusion of these
expenses as the annual budget is prepared on a cash flow basis.
Sustainability Implications: This report does not contain any sustainability implications.
Report CST 13-11 March 21, 2011
9~Subject: 2011 Budget and Ontario Regulation 284/09 Page 2
L
Background: Ontario Regulation 284/09 (O. Reg. 284/09) is a relatively new regulation
under the Municipal Act 2001, S.O. 2001, C. 25 as amended (Municipal Act). This
Regulation allows a municipality to exclude expenses from the 2011 Budget for the
following:
i Amortization expenses
ii Post employment benefit expenses
iii Solid waste landfill closure and post closure expenses
Starting with the 2009 year end, accounting standards and reporting requirements have
changed dramatically; most significantly with the introduction of tangible capital asset
accounting. The new accounting standards, however, do not require budgets to be
prepared on the same basis. The City of Pickering, like most municipalities, continues to
prepare budgets on the traditional cash basis, which provides for clear and concise
understanding of critical budget information.
The annual budget process is an important municipal exercise that considers plans for the
current and future activities for the City. One of the main outcomes of this process is to
set the tax rate which Council is asked to approve. The tax rate is determined on the cash
basis of accounting and does not include PSAB reporting requirements regarding accrual
accounting and accounting for non-financial assets and liabilities such as amortization
(depreciation) and post employment benefits.
Amortization Expenses
By definition, amortization expense, frequently referred to as depreciation, in its simplest
terms, is defined as the annual expense or use of the asset over its estimated useful life.
Amortization expense is a tool used by financial professionals to predict the future annual
financial commitment required for asset replacements. For 2010, amortization expenses
ace expected to exceed $9.7 million. For 2009, the net assets reported were $186 million.
Post-Employment Benefit Expense
Post-Employment Benefit expense represents the change in the accrued benefit liability
for both post-retirement extended healthcare benefits and accrued sick leave entitlement.
Since the City is self insured, it also represents the accrued liability for Workplace Safety
and Insurance Act Benefits. PSAB standards do not require liabilities associated with
these benefits to be fully funded, however, actuarial reviews are conducted to estimate
these unfunded liabilities which are estimated to increase by approximately $473,000 for
2010.
Financial Summary
The estimated change in the accumulated surplus of the City for 2011 resulting from the
exclusion of these expenses from the budget is as follows:
N
Report CST 13-11 March 21, 2011
Subject: 2011 Budget and Ontario Regulation 284/09 , Page 3
3
PSAB Additions to 2011 Budget (Reduces Surplus - expenses that were excluded)
Amortization
Post-Employment Benefits
Total PSAB Additions
PSAB Reduction to 2011 Budget (Increases Surplus)
Tangible Capital Asset Acquisition
Debt Principal Payments
Total PSAB Reductions
Net (Increase) Decrease in Accumulated Surplus
2012 Budget
$9,684,000
543,000
$10,227,000
$(15,239,138)
(3,660,256)
$(18,899,394)
$(8,672,394)
For the 2011 budget and future years, it is anticipated Regulation 284/09 will be met by
reporting in conjunction with the adoption of the annual budget.
Attachments
Prepared By:
Not applicable
.
Stan Karwowski
Manager, Finance & Taxation
Copy: Chief /Administrative Officer
Approved / Endorsed By:
~
Gillis A. Paterson
Director, Corporate Services & Treasurer
Recommended for the consideration of
Pickering Ci Council
. i ~ 20/1
Tony Pre edel, P.Eng.
Chief Administrative Officer