tangible capital assets where are we at? what next? aamdc spring convention & trade show...
TRANSCRIPT
Tangible Capital Assets
Where Are We At? What Next?AAMDC Spring Convention & Trade Show
Edmonton, Alberta
March 18, 2008
Christina ParkinsFinancial Advisory ServicesMunicipal Affairs
Harold Johnsrude, CA
Harold Johnsrude Consulting Inc.
Barb Lyons, CGA
Director of Corporate ServicesYellowhead County
Presenters
2
Provide tools and training
Raise awareness
Mitigate the cost
AMA Project Goals
3
Status Report
TCA Toolkit
On-site example
What’s next
Session Overview
4
angible – can be touched
Definition
5
apital – lasts over time
sset – has measurable value
Global View
6
Australia1998
New Zealand1990
USA2006
Canada & Provinces 2000-2003
Canadian Municipalities2009
Why?
7
Budget and
Reporting Requirements
Long Term Decisions by Short Term Councils
Not New
and Exciting
Aging Infrastructure
Property Tax Rate Sensitivity
Awareness
Out of Sight /
Out of Mind
Outside Contributions
8
Provincial grants Federal grants
Developers
Constructed assets funded from third parties require replacement
Toolkit
9
www.MEnet.ab.ca
Toolkit Overview
10
Section 2 - Implementation
PS 3150Summary of PS 3150Implementation planImplementation budget
Toolkit Overview
11
Section 3Policies & Guidelines
Major Asset Classifications
12
Land
Land improvements
Buildings
Engineered structures
Machinery & equipment
Vehicles
Cultural & historical
Engineered StructuresMinor Asset Classifications
13
Roadway system
Light rail transit system
Water system
Wastewater system
Storm system
Fibre optics
Electricity system
Gas distribution system
Guideline #2 – Useful Life and Amortization Methods
14
Recommended maximum life
Amortization methods
Guideline #3Capitalization Thresholds
15
The minimum value of an expenditure that meets the
criteria of a TCA and that will be recorded as a TCA.
Capitalization Thresholds
16
Factors to consider:
MaterialityRecord keepingAsset managementRate setting
Suggested Rural Thresholds
17
Land $0
Land improvements $5,000
Buildings $50,000
Engineered Structures $50,000
Machinery & Equipment $5,000
Vehicles $5,000
Guideline #5 – Networks, Segments & Components
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Networks
19
Network
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Segments
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Components
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Simplest form
Easier to track
Historically – easier to value
More difficult to• Establish capitalization thresholds
• Determine the value of components replaced
Network Approach
23
Better basis for asset management
More accurate information
Easier to identify costs of assets replaced
More detail requires more recording
Segment Approach
24
Better basis for asset management
More accurate – useful life and amortization
Deals with unique components better
More detail requires more recording
Component Approach
25
Network by road typeGravelChip sealAsphalt
Townships
Intersections
Mile
Road System Networks
26
Initially, keep it simple!
Progressively increase detail.
Network Decision
27
Change in municipal entity
Dissolution
Amalgamation
Annexations
Guideline #6 – Valuation Date
28
Capital Asset Policy
29
1. Purpose & Scope2. Asset Definitions &
Classification3. Asset Recording & Valuation4. Amortization Methods and
Rates5. Review & Write-downs6. Maintaining Records7. Asset Disposal8. Systems9. Reporting & Budgeting
Toolkit Overview
30
Section 4 – Asset Inventory & Valuation
Guidelines to determine asset data
Data to record by type of assetEssentialImportantOptional
Actual Cost
Estimated CostReproduction (discounted)Replacement (discounted)Appraisal (discounted)ResidualNominal
Valuation Approaches
31
Valuation Tools
32
Linear
Roads
Drainage
Water & Wastewater
Bridges
Implementation Example
33
Yellowhead County
Barb Lyons, CGADirector of Corporate Services
Project Overview
34
18 months and still more to do!
Supportive Council
Provided necessary resources
Supports finance staff
Funding provided for
Computer hardware/software
Staff time
Project Principle
35
Benefit of having the information must
outweigh the cost of collecting it.
Benefits Expected
36
Will provide a picture of assets owned with the age and condition.
Will assist in determining future infrastructure requirements resulting in better resource allocation.
Free Resources!
37
Other municipalities
Government Finance Officers Association
Accounting manuals
Workshops
AMA toolkit
Capital Policy
38
Formal approval of a TCA policy is crucial!
Technical Side of Project
39
Data Entry
Verification of historical cost
New software training
Interface with GIS
Asset valuation
Recording amortization
Future Challenges
40
Asset valuation
Meeting the January 1, 2009 deadline
Budgeting for annual amortization
Revised financial statement format
Revised Financial Information Return
Important Points to Remember
41
Keep the project in perspective
Use good judgment and common sense
Take advantage of all the resources available
Don’t re-invent the wheel
Impact to Our Municipality
42
Each municipality will be different.
Factors include:
Age of TCA
TCA’s recorded/not recorded
Donated assets
TCA’s on Balance Sheet will be:
At cost, less amortization and write downs
Amortization and write-downs will be a charge against annual income
PS 3150
43
Brings a non-cash dimension to financial reporting and budgeting
Full Accrual Accounting
This change does not require a change in behavior, but it may cause you to change because there will be more information available
Impact of Recording TCA’s
44
Municipalities will not be required to fund amortization
Legislative Impact
45
PS Handbook 1200Changes to Financial Reporting
Future Changes
46
Summary
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Next Steps• Replacement cost reassessment• Status of reserve fund levels• Asset Management
Benefits• Awareness of problem and magnitude• Better internal information for decision makers • Significant step towards good asset management
Resources• Considerable work is required to implement this change• Resources and expertise will be required •Involve auditors, engineers and facility management personnel early on!
Questions?
48