Archived - Policy on Accounting for Costs and Liabilities Related to Contaminated Sites

This policy is effective for the fiscal year beginning April 1, 2002, and subsequent fiscal years.

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.

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:

1. for reasons of public health and safety;
2. due to contractual arrangements; or
3. 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.

This policy applies to all organizations considered to be departments within the meaning of Section 2 of the Financial Administration Act.

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.

Accounting for site management and remediation costs and liabilities will be reviewed by departmental internal audit groups on a regular basis.

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 can be found at the below listed URL:

http://www.tbs-sct.gc.ca/rpm-gbi/home-accueil.asp?Language=EN

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