GASB 34

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  • Asset management is a business process and a decision-making framework that covers an extended time horizon, draws from economics as well as engineering, and considers a broad range of assets. The asset management approach incorporates the economic assessment of trade-offs among alternative investment options and uses this information to help make cost-effective investment decisions.   Asset management has come of age because of          changes in the transportation environment,          changes in public expectations, and          extraordinary advances in technology.   An Asset Management philosophy focuses on the benefits of investment, as well as its costs, and takes a comprehensive view of the entire portfolio of transportation resources. Asset Management is an improved way of doing business that responds to an environment of increasing system demands, aging infra-structure, and limited resources.  
  • GASB 34

    1. 1. GASB#34 Asset Management TEAM Transportation Fair Presentation by: Charles J. Nemmers, P.E. October 8, 2004 St. Louis, Missouri
    2. 2. Today’s Presentation: <ul><li>Define: </li></ul><ul><ul><ul><li>”What is GASB#34 ? Why Should I Care?” </li></ul></ul></ul><ul><li>Why is it important </li></ul><ul><ul><ul><li>“ Why Worst First Is Worst” </li></ul></ul></ul><ul><li>Implement: </li></ul><ul><ul><ul><li>“ Asset Management” </li></ul></ul></ul>
    3. 3. GASB #34 What is it? Why should I care?
    4. 4. GASB <ul><li>Government Accounting Standards Board </li></ul><ul><li>NOT a government agency </li></ul><ul><li>Sets standards for States and Local entities </li></ul><ul><li>Basis of audit opinions </li></ul>
    5. 5. #34 <ul><li>“Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments” </li></ul><ul><li>June 1999 </li></ul><ul><li>Changed reporting from Optional to Required </li></ul>
    6. 6. GASB #34 Objective: <ul><li>To make government accounting more like private sector accounting </li></ul><ul><li>Defined Infrastructure Assets </li></ul><ul><ul><li>roads </li></ul></ul><ul><ul><li>bridges </li></ul></ul><ul><ul><li>water and sewer systems </li></ul></ul><ul><ul><li>drainage systems </li></ul></ul><ul><ul><li>dams, tunnels, ... </li></ul></ul>
    7. 7. Asset Valuation: GASB #34 <ul><li>Requirements: </li></ul><ul><li>state and local agencies to include the value of physical assets in their financial statements </li></ul><ul><li>value based on depreciated historical cost, or historical cost without depreciation if the agency can demonstrate that they: </li></ul><ul><ul><li>inventory their assets </li></ul></ul><ul><ul><li>assess every 3 years </li></ul></ul><ul><ul><li>spend funds sufficient to maintain at an established condition. </li></ul></ul>
    8. 8. GASB #34 gives 2 options <ul><li>1) Depreciate </li></ul><ul><li>2) Modified Approach </li></ul>
    9. 9. Modified vs. Depreciation Modified Depreciation Expense: Maintenance & Maintenance Preservation Capitalize: Additions and Preservation costs Improvements Additions & Improvements
    10. 10. GASB #34 recognizes that factors vary among jurisdictions and among infrastructure assets
    11. 11. In a Nutshell Governments generally don’t depreciate their assets and the private sector does, but now the rules have changed !!
    12. 12. Why “Worst First” is “Worst” Comments on how to build an effective public works infrastructure program
    13. 13. Worst First occurs because : <ul><li>Easy to sell - lots of roads are in poor shape </li></ul><ul><li>Funding / budgets tilt toward new construction </li></ul><ul><li>No Ribbon Cutting </li></ul><ul><li>Deferred maintenance </li></ul>
    14. 14. But “Worst First”: <ul><li>Costs more - 6X more </li></ul><ul><li>Drags the whole system down </li></ul><ul><li>Is difficult to recover from </li></ul><ul><li>Is a difficult concept to counter </li></ul>
    15. 15. Maintenance : <ul><li>Routine </li></ul><ul><li>Reactive </li></ul><ul><li>Preservation / Preventive </li></ul>
    16. 16. Build: <ul><li>Replace / Reconstruct (improve structural condition) </li></ul><ul><li>Expand / New Facilities (add new capacity) </li></ul>
    17. 17. Pavement Condition Optimal Timing Time/Traffic Rehabilitation Trigger Prevention Trigger Original Pavement
    18. 18. Current Condition I (0-2) III (8-12) II (3-7) IV (13-17) V (18-22) VI (23-27) (years) Pavement Remaining Life Categories From Michigan DOT -- Galehouse 19% 10% 40% 8% 6% 17%
    19. 19. Remaining Service Life Distribution State RSL average 8.32
    20. 20. Remaining Service Life Distribution County Average RSL 6.9
    21. 21. Ideal Condition I (0-2) III (8-12) II (3-7) IV (13-17) V (18-22) VI (23-27) (years) Pavement Remaining Life Categories 11% 18% 18% 16% 17% 20%
    22. 22. Remaining Service Life Distribution State
    23. 23. Remaining Service Life Distribution-Tooele County
    24. 24. Remaining Service Life Distribution-Tooele County
    25. 25. Reconstruction Strategy (25 Year Fixes)
    26. 26. Combined Reconstruct and Rehab Strategies (15, 20 & 25 Years Design Life)
    27. 27. Combined Reconstruct, Rehab, and Preventive Maintenance Strategies
    28. 28. Keys to Success (from MiDOT/GaDOT): <ul><li>Promote Preventive Maintenance Philosophy </li></ul><ul><li>Fix pavements BEFORE they are broken-select good pavements for treatment </li></ul><ul><li>Budget & fund Preventive maintenance </li></ul><ul><li>Shorten the time between assessment and maintenance </li></ul><ul><li>Build them excellent the first time </li></ul>
    29. 29. “ Asset Management” to meeting GASB #34 using the Modified Approach
    30. 30. Asset Management <ul><li>What is it? </li></ul><ul><li>Improved way of doing business </li></ul><ul><li>Draws from economics & engineering </li></ul><ul><li>Focuses on benefit of investment </li></ul><ul><li>Shows How, When & Why resources were committed </li></ul><ul><li>Planning tool </li></ul>
    31. 31. Asset Management <ul><li>Inventory assets </li></ul><ul><li>Condition assessment </li></ul><ul><li>Value Assets </li></ul><ul><li>Performance prediction </li></ul><ul><li>Alternative / Decision analysis </li></ul><ul><li>Monitor and feedback </li></ul>
    32. 32. Condition Survey
    33. 33. Condition Assessment <ul><li>. </li></ul>
    34. 34. RSL of 0
    35. 35. RSL of 8
    36. 36. RSL of 20
    37. 37. Pavement Performance Curve * Terminal Serviceability Lowest Annual Resurfacing Cost (Rehabilitation Treatments) Preventative Treatments
    38. 38. Network Performance Objectives (Recommendations) State Network Interstate +12 Years 5% or less +15 Years 3% or less Percent Requiring Reconstruction Average RSL Arterials/Major Collectors (NHS and High Volume Roads) Major Collectors (Low Volume) and Minor Collectors + 10 Years 5% or less No more than 5% 10 Year(min.) Local Roads and Streets
    39. 39. Needs Assessment County and City Networks
    40. 40. Routine (reactive) Maintenance
    41. 41. Preventative Maintenance
    42. 42. Rehabilitation
    43. 43. Reconstruction
    44. 44. Predicted 10 Year RSL Average- Heber City
    45. 45. Thank You Charlie Nemmers

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