Town adopts change to 2024 reserve funding accounting policy
By John Watson Local Journalism Initiative Reporter
Town of Strathmore council met during a special meeting on April 7, to discuss an accounting policy change to the 2024 reserve funding.
It was recommended by administration they be directed by council to fund the change in accounting policy, reflected in the 2024 year-end audited financial statements, out of the financial stabilization reserve in the amount of $125,000.
“Administration has substantially completed the 2024 financial statement audit … last year, we were issued a qualified opinion on our 2023 statements as had not yet accounted for asset retirement obligation (ARO) at that time, which we now have completed and accounted for,” said Riley Brolly, manager of financial planning, budgeting and reporting for the Town of Strathmore. “In collaboration with our auditors at Avail LLP, we have determined the best course of action is to retroactively apply these ARO calculations as they are now reflected in the 2023 annual audit statements.”
Brolly explained the change in policy necessitates a $125,000 reduction in the financial stabilization reserve to reflect the impact of applying the ARO, being the best practice to ensure reserves are accurately accounted for.
This change goes does not alter the town’s financial position in any way, rather it simply accounts for the retroactive changes correctly.
ARO is the public sector accounting standard which the Town of Strathmore falls under, implemented in the last couple of years, which is related to municipalities having to account for the cost of decommissioning assets when there is a legal obligation related to it.
“Depending on the municipality, there can be a wide array of things. In our case, it is older buildings that have asbestos in them – so it is basically accounting for the cost of remediating and abating the asbestos today based on when we expect to do it,” said Brolly.
Town administration noted they agreed with the recommendations presented by Avail LLP. The draft financial statements which will be presented at the April 16 regular meeting of council will be required to reflect the impact of the motion due to timing requirements of having financial statements to be approved and submitted to Municipal Affairs no later than May 1.
“When we think of reserves, we think of having put funds aside for the future however we choose to spend them. Based on this standard, we have to consider this a liability to us because we have to expend these funds now. There is no discretion on it,” said Brolly.
Coun. Richard Wegener motioned that council direct administration to fund the change in accounting policy as recommended in the meeting agenda. This motion was carried unanimously by council.