Allocation of Proceeds from the Disposition of Capital Assets

Date came into force or revised

Issued February 18, 2004.

Status

Current

Policy statement

The proceeds received by a board of education from the disposition of a capital asset must be allocated between local capital funds and minister-restricted capital funds, based on the original expenditure for the capital asset.  When the proportion of the original expenditure cannot be determined, the allocation will be 25 percent as local capital funds and 75 percent as minister-restricted capital funds.

Rationale

The setting of a default allocation:

• streamlines the process of determining the allocation of proceeds between local capital funds and minister-restricted capital funds; and
• enables boards to recover capital funds originally contributed from local sources

Authority

• Sections 100 (3) and 100.1 of the School Act (PDF)
• Section 6 Disposal of Land or Improvements Order (PDF)

Policy in full

In accordance with the School Act (PDF), when a board of education receives money from the disposition of a capital asset, the proceeds must be allocated between the minister as minister-restricted capital funds and the board as local capital funds. These funds may be apportioned according to the original contributions to the acquisition of the property made by the Province and the board of education, respectively.

The board of education must determine how any proceeds should be allocated, based on its historical records of the capital fund sharing arrangement between the province and the board for site acquisition and any improvements.

In situations where the original contributions by the province and a board cannot be determined, the minister has the authority, under section 100 (3) of the School Act, to allocate the proceeds.

By this authority, the minister has determined that the proceeds of a disposition may be apportioned at 25 percent as local capital funds and 75 percent as minister-restricted capital funds. This applies to those cases where the board cannot determine the original provincial or local contributions, or the board's original contribution is known to be equal to or less than 25 percent.

The established default allocation reflects the provincial average capital-sharing ratio previously used for debt servicing costs related to the funding of capital projects.

The minister may exercise the discretion provided under section 100 (3) of the School Act (PDF) to allocate the money in any circumstance where the allocation of proceeds is determined to be inappropriate.

A board’s local capital funds may only be used by the board for capital projects at its own discretion. A board’s minister-restricted capital funds may only be used by the board for capital projects with the approval of the minister.

These provisions do not apply to money received in respect of the leasing of a board’s capital assets where the lease is for a term of not more than five years and does not provide for an option or right to purchase. In these instances, under section 100.1 of the School Act (PDF) the board may allocate revenues to either capital expenditures or operating expenditures.