With the requirements of the Public Sector Accounting
Board's "Accounting Standard on Liability for Contaminated
Sites" (PS 3260) applying to the 2014-2015 fiscal year, public
sector entities (federal, provincial and municipal governments,
universities, schools and hospitals) may find themselves scrambling
to meet their obligations to identify, report and account for long
forgotten buried liabilities. Under PS 3260 public sector entities
must now account for the remediation liabilities associated with
"contaminated sites", which are sites where contamination
exceeds the applicable environmental standards, but does NOT
include closed solid waste landfill sites that are subject to a
separate standard. PS 3260 requires that an estimate of remediation
liability be included for all such contaminated sites that are no
longer in active or productive use, and for which a public sector
entity is responsible either as a result of legal or voluntary
assumption of remediation obligations.
For example a municipality that owns an inactive maintenance
shop and yard where the bulk storage of fuel, road salt, waste oil,
etc. and the storage and servicing of municipal vehicles may have
resulted in past releases of these contaminants at the site is
likely required to identify the yard as a contaminated site under
PS 3260, and would also be required to develop and provide an
estimate of remediation liability for the site.
Clearly a key issue for most entities implementing PS 3260 is
that there may be a lack of information not only about the sites
that should be considered to be "contaminated sites" but
also regarding the nature and extent of remediation liability. A
critical first step for meeting the requirements of the standard is
to prepare an inventory of all active and inactive potential sites
with an "environmental past". This task involves
gathering all available information about such sites such as
records of use, ownership, environmental site assessment reports,
information from regulators, incident reports, etc. to determine
whether a given site would constitute a contaminated site under PS
3260 and the public sector entity could incur liability as a
While preparing the inventory, information gaps will likely be
identified that require existing records to be supplemented,
particularly for sites with a long history of use, where the site
history is unknown or where the site was subject to multiple
owners, multiple uses or both. In particular, assessing whether a
given site meets the criteria for a contaminated site under PS 3260
requires specific information regarding the likelihood, nature and
extent of contamination at that site, and this may require the
commissioning of environmental site assessments to identify and
delineate whether the site has been contaminated. In addition,
assessing whether a site meets the criteria also requires an
understanding of the specific legal and voluntary obligations of
the public sector entity for the site and for the type of
When a public sector entity has concluded that a given site
does meet the criteria for a contaminated site
under PS 3260, a reasonable estimate of the financial costs
directly attributable to carrying out the required remedial actions
must also be developed. Although there is some guidance provided in
the standard with respect to what types of costs should be included
in a remediation liability assessment, in order to yield an
accurate, reasonable and defensible liability estimate, issues such
as the treatment of long-term monitoring costs and the application
of various types of discounts, contingencies and escalation factors
are all dependent on the exercise of professional judgment and the
development of reasonable working assumptions. Identifying sites
and preparing liability estimates requires specialized technical
and legal advice as the process of accounting for environmental
liabilities remains much more of an art than a science.
Although the standard was introduced some time ago, with four
years given to prepare public sector entities for the initial
reporting period of 2014-2015, this issue appears to have remained
a bit of a "sleeping dog." Consequently, indications from
external auditors and environmental consultants are that public
sector entities may have considerable difficulty meeting their
obligations for the initial reporting period. For those public
sector entities that find themselves caught short by these
requirements, there is still time to get the required information
gathering and assessment underway, but the window for taking such
steps is rapidly closing.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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