2013-09-05 Finance Committee MinutesFINANCE COMMITTEE
CITY OF SAINT JOHN
MINUTES
THURSDAY, SEPTEMBER 5, 2013 - 4:30 p.m.
Present:
Councillor Merrithew
Councillor Strowbridge
Councillor Lowe
Councillor MacKenzie
Greg Yeomans
Cathy Graham
Kevin Fudge
Emily Dipaolo — Deloitte
Alexis Brown — Deloitte
Gloria Banks — Consultant, Grant Thornton
Also present — Barbara Mahaffy, Recording Secretary
Pat Woods spoke briefly before the meeting got underway and challenged the Committee
members to determine the what it is from their perspective in terms of their accountability
to the public — how to use this new financial reporting mechanism to report to the public, to
assess performance, to understand the City's current position, financially or operationally.
He asked them to also determine how they can use this as a tool to deal with reporting
back to the public.
Approval of Agenda
Moved by Councillor MacKenzie
Seconded by Councillor Strowbridge
THAT the agenda for the September 5, 2013 meeting be approved as
circulated.
CARRIED
Approval of Minutes — June 27, 2013
Moved by Councillor MacKenzie
Seconded by Councillor Strowbridge
THAT the minutes of the June 27, 2013 meeting be approved as circulated.
CARRIED
Teach In on Public Sector Accountina Financial Statements — Gloria Banks
Gloria Banks opened her presentation by stating that it will serve as a refresher about the
changes and the major changes undertaken by the City staff to get ready for the
implementation. She will also review some sample financial statements which were given
to the municipalities by the provincial government to use as a guideline. She will make
note in the sample statements of what is applicable to the City of Saint John.
She gave a history of PSA and how it came about. It was put in place to provide for
national consistency in financial reporting and accounting policies.
The objectives of PSA are:
• To provide for a full account of the services that are provided to the residents of the
local government; to look at the affairs and resources that have been entrusted to a
municipal government.
• To provide information on the City's financial position at year -end; describe changes
year -to -year from that position
• To provide financial accountability and legislative compliance — some required by
standards and some required by province
It is important because everyone is now operating under the same framework in the same
position — allows for consistent assessment and reporting.
PSA Standards Board is the body that issues the pronouncements that change the way
items are accounted for. New standards are issued every year. It is an on -going evolution
to get to the model that they are happy with. There will always be changes. They want to
ensure that the information is useful to the readers so that informed decisions can be
made.
Why follow PSA? It gives readers confidence in the statements; are able to compare one
municipality with another more easily due to consistency in reporting. The main goal of a
municipal government is to provide services, not make a profit — reason there are separate
standards from a business model.
Gloria noted that the reason for doing this now was the risk of the loss of gas tax funding
from the federal government if the financial statements are not PSA compliant.
She reviewed the major changes in the financial statements as a result of PSA:
• Consolidation of all entities controlled into one statement of financial position
• One statement of financial activities
• Presentation of balance sheet different
• New statement of net debt
• Required statement of cash flows
• Significant note disclosure
She made note of the major projects that needed to be done in regards to completing PSA
compliant statements:
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• Controlled Entities project — needed to identify all entities under the City control
using specific criteria
• Determine how to consolidate — each entity contacted and City works with
them to have their statements changed over to be consolidated
• Caseware software was chosen as the product to do the consolidation
• Tangible Capital Asset project — needed to identify every type of asset owned by the
City; how long owned in order to depreciate; determine cost, useful life, how to
group assets.
• The Province came out with guidelines for identifying assets.
• Need to look at replacement value of assets, where cost cannot be
determined — province has provided data for that as well
• Benefit — will now have complete listing of all assets the City owns and their
life cycles
• Can now project forward to know when to replace certain assets
• Calculating amortization has never been done — enormous undertaking —
new to City's statements
• There was discussion on infrastructure deficit
• Represents a significant change in the way the City does business
• Amortization recognizes that assets do not live forever — helps to identify
what should be done and invested in
• Will also show gain or loss on disposal of equipment and assets
Gloria discussed other major changes as a result of PSA:
• Retirement and post - employment benefits — done by actuary
• List of liabilities to be recorded in financial statements concerning
employment
• Sick time — is new and only applicable in PSA — idea of accruing sick time;
needs to be recorded as a liability under PSA; requires actuarial calculation
of that balance as well
• Intangible assets — City has none; no such thing in PSA. They are expensed as
incurred.
• Financial instruments — not applicable to the City until 2015; disclosure could be
significant
• Segment disclosure — new; required to identify segments — service delivery areas
o Need breakdown of revenues and expenses by identified segment
Gloria reviewed the sample financial statements. This review will help Council focus in on
the areas that are important to them and allow them to see the big picture of what the City
offers to its residents, with all the entities included.
She looked at the Statement of Operations — revenues and expenses (formerly the
Statement of Revenue & Expenses) — page 1.
• Categories can be added to the ones listed, as needed.
• Columns will consist of a Budget column, the current year Actual and the prior year
Actual. It will break down the functions of the services provided by the City.
• Made note of differences in revenue under PSA - "Other Government Transfers" —
government grants for capital purchases are considered to be revenue
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• Expenditures — should be consistent with what was budgeted; broken down into the
services that are delivered
• Key number - annual surplus or deficit (on consolidated basis) — will be positive or
negative
• Ends with accumulated surplus or deficit, end of year (from the beginning of time) —
net value of assets
• Surplus not necessarily a good thing — could mean that some things that were
planned and budgeted for were not done
• Budget needs to be realistic
She then looked at the Statement of Financial Position (the Balance Sheet) — page 2
• Financial assets — are assets that are easily converted to cash
• Non - Financial assets — not held for the purpose of selling — held for the purpose of
delivering services to the residents
• Liabilities — water is included in this — will affect net debt significantly
• If net surplus — means that prior residents have paid for all the capital the City has;
net debt — means that future residents have to pay for all capital City has
• Will identify infrastructure issues
• Accumulated surplus figure ties back to accumulated surplus on Statement of
Operations
Gloria noted that the Statement of Change in Net Debt and the Statement of Cash Flow
are continuities of two items on Balance Sheet
• Net debt position at beginning of year and why it changed to be the net debt
position at end of year; outlines driving factors that cause net debt to go up or down
• Capital assets, tangible capital assets — how you spend on that is going to be one of
the driving factors in the change of net debt
• Statement of Cash Flow — reconciliation of cash balance from last year to this year;
shows where you were last year as compared with where you are this year
The statements also contain explanatory notes and supporting information for the financial
statements. Some of the notes will be one -time notes because the City is changing their
framework to PSA.
She touched on a few of the notes, specifically:
• Page 6 — are following PSA standards and when the change took place
o Need to list entities that are consolidated within the statements
• Page 13 — reporting requirements that are legislated
o Auditors have to ensure that City has complied with various pieces of
legislation
• Page 15 — one -time note; reconciliation as result of changes to PSA
o Lists all changes, entries, eliminations, etc.; tied back to the ending balance
on Statement of Operations
• Page 16 — Schedule of Segment Disclosure — breaks down revenues and expenses
by service areas
• Page 17 — Reconciliation of Annual Surplus — required by Province
o To continue into the future
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• Page 19 — require Council resolutions regarding transfers to and from reserves —
signed and sealed
Greg Yeomans explained the process concerning the financial statements and auditors.
The Finance Committee needs to have an understanding of the statements. He offered
the Committee members any assistance they need to reach this understanding.
The Financial Statements should be ready by mid - October as they need to go to the
Province by October 31.
Greg will meet with Councillor Merrithew, Chair of the Committee, to discuss how he wants
to proceed from here.
The meeting adjourned at 6:00 p.m.
Councillor David Merrithew, Chairperson
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