Public Sector Accounting Standards

Year: 2022


Whereas public sector accounting standards require that all controlled entities (including sub committees) of a municipality be consolidated into their financial statements, and government partnerships be proportionately consolidated into their financial statements; and


Whereas public sector accounting standards require that inter-company transactions between the above noted entities be eliminated upon consolidation; and


Whereas, for example: this means water utilities cannot be charged out to the Recreation Board facilities without the expense to the facility being reversed and the income for the Utility being reversed in the consolidated financial statements, even though logically the accounting of the expense should go to Recreation and Culture and the accounting of the income to Utilities -Water; and


Whereas these entities are often times small and the effort involved in combining them into our financial statements, reversing the transfers between entities, along with the additional costs in audit fees is disproportionate to the value in doing so; and


Whereas many of the municipalities themselves are small, and the cost of consolidation or proportionately consolidating entities for them outweighs the benefits.


Therefore be it resolved that SUMA Advocate the Public Sector Accounting Board to amend the required Public Sector Accounting Standards (including PS 1300 and PS 3060) to make consolidation or proportionate consolidation an option; an accounting policy choice. If required, there could be stipulations such as the size of the municipality, or size of the controlled entity or governments partnership, in relation to the size of the municipality.


ACTS AFFECTED: Public Sector Accounting Standards


Provincial Response

SUMA hosted a meeting with the Director of the Public Sector Accounting Board and a representative from the Town of Shaunavon to discuss the issue on August 10, 2022.

Because the standards apply very broadly across different entities of vastly varying sizes, it’s extremely difficult to provide thresholds and exemptions from individual pieces that would make sense in the context of the standards that PSAB oversees. However, all auditors have the ability to determine a threshold of “materiality”—that is, a financial threshold that determines what their clients must report. The Audit and Finance Committee (or council, if there is no such committee) should be discussing this threshold with their auditors to make sure the threshold makes sense in the context of their overall municipal budget. That will allow the municipality to avoid the work of reporting on committees and boards with very limited budgets, and save administrative efforts for larger issues.

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