The GFOA of BC and the Ministry of Community Services

have joined together to assist BC local governments

with the New TCA reporting requirements impacting

communities throughout Canada.

GoalGoal

Meet legislated requirements Meet legislated requirements

Standardize TCA reportingStandardize TCA reporting

Meet legislated deadlinesMeet legislated deadlines

TANGIBLE TANGIBLE CAPITAL CAPITAL ASSETSASSETS

What are

TCA’s?Is there a concern?

What can we

do?

How do we do

it? Will it be enough?

OverviewOverview

Definition

apital – lasts over time

angible – can be touched

sset - has measurable value

Tangible Capital AssetsTangible Capital Assets

Linear Assets

•Water InfrastructureWater Infrastructure

•Sewer InfrastructureSewer Infrastructure

•Roads, sidewalks bridges and lanes Roads, sidewalks bridges and lanes

Discrete AssetsDiscrete Assets•LandLand•BuildingsBuildings•VehiclesVehicles•EquipmentEquipment

Infrastructure Deficit !

Problem

2. Money is not set aside for replacement

1. Assets deteriorate over time

Global Global ViewView

New Zealand 1990

Australia 1998

Government of Canada & Provinces 2002-2003

United States 2006

Canadian Municipalities 2009

The IssueThe Issue ““Our $60 Billion Our $60 Billion national municipal national municipal infrastructure infrastructure deficit grows by deficit grows by $2 Billion per $2 Billion per year, and the year, and the longer we take to longer we take to erase it, the more erase it, the more it will cost it will cost Canadians.”Canadians.”Michael Coleman, President, Federation of Canadian Municipalities

Aging Infrastructure

Awareness

Out of Sight /

Out of Mind

Not New

and ExcitingBudget and

Reporting Requirements

Long Term Decisions by Short Term CouncilsProperty Tax Rate Sensitivity

Why?

Gifts

• Provincial Grants • Federal Grants

• Developer Cost Charges • Amenity Contributions

Constructed assets funded from third parties require replacement

Gift Acceptance

Review

Tangible Capital Assets (TCA) defined

Problem Quantification

Global Issue

Why the TCA issue was not addressed earlier?

Solution

Review

Legislated

Requirement

CICA - PSAB 3150

Ministry of Community Services Community Charter Section 171

The municipal auditor must report to the Council on the annual financial statements …

The report must be in accordance with the form and reporting standards recommended by the Canadian Institute of Chartered Accountants (CICA)

Standards

CICA - PSAB 3150

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at December 31

2009 2008

FINANCIAL ASSETSCash and Investments 62,500,000$ 48,200,000$ Accounts Receivable 10,200,000 10,700,000 Due from Other Governments 1,400,000 1,200,000

74,100,000 60,100,000

LIABILITIESAccounts Payable & Accrued Liabilities 25,600,000 25,600,000 Deferred Development Cost Charges (Schedule VI) 3,000,000 1,700,000 Long-Term Debt, Net of Sinking Fund Deposits (Note 4) 10,600,000 3,400,000

39,200,000 30,700,000

NET FINANCIAL ASSETS 34,900,000 29,400,000

TANGIBLE CAPITAL ASSETS 239,500,000 227,900,000

274,400,000$ 257,300,000$

EQUITYFinancial Equity 45,500,000 40,300,000

Investment in Tangible Capital Assets 228,900,000 217,000,000

274,400,000$ 257,300,000$

Current Current ViewView

CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIESFor the Year Ended December 31

2009 2009 2008Budget Actual Actual

(Unaudited) (restated - note 11)

REVENUEProperty Taxation and Other Levies (Note 8) 39,000,000$ 38,700,000$ 37,100,000$ Utility Fees and Charges 37,400,000 37,000,000 36,600,000 Sale of Services 7,500,000 8,300,000 7,600,000 Grants and Contributions 13,700,000 9,000,000 8,000,000 Other Revenue (Note 9) 8,400,000 9,200,000 8,100,000

106,000,000 102,200,000 97,400,000

EXPENSESGeneral Government 9,000,000 8,700,000 8,700,000 Protective Services 25,500,000 25,400,000 24,400,000 Transportation and Parking Services 4,400,000 4,300,000 4,300,000 Environmental Development Services 1,100,000 1,100,000 1,100,000 Recreation and Cultural Services 13,200,000 13,100,000 13,100,000 Utility Operations 30,500,000 29,200,000 28,700,000 Interest and Bank Charges 900,000 800,000 800,000 Capital Expenditures 22,200,000 14,000,000 13,000,000 Debt Retirement 300,000 300,000 400,000

107,100,000 96,900,000 94,500,000

INCREASE (DECREASE) IN FINANCIAL EQUITY (1,100,000)$ 5,300,000 2,900,000

Financial Equity, beginning of year (note 11) 40,300,000 37,400,000

FINANCIAL EQUITY, end of year 45,600,000$ 40,300,000$

Current Current ViewView

Current Current ViewView

5. Tangible Capital Assets2009 2008

Tangible Capital Assets consist of the following:

Capital Assets

Land $ 14,000,000 $ $13,000,000Buildings 51,000,000 50,000,000 Machinery and Equipment 36,000,000 33,000,000 Park Improvements 12,000,000 11,000,000 Engineering Structures 124,800,000 119,500,000

$ 237,800,000 $ $226,500,000

Inventory of Supplies $ 1,700,000 $ 1,400,000

Net Tangible Capital Assets $ 239,500,000 $ 227,900,000

TCA’s on Balance Sheet will be:

– Written down when non-contributing

– less amortization

– at cost

Amortization and write-downs will be a charge against annual income

– less disposal

Timeline

Planning and Policy Development

Resource Identification and Acquisition

Inventory Listing

Valuation & Amortization

Reporting & Presentation

InventoryManagement

January 1, 2009

Step 1

Step 4

Step 2

Step 3

Capital Asset

Policy

Presentation

Accounting

Write-downs

Disposals

Amortization

Segmentation

Aggregation

Thresholds

Principles

Scope

Policy

Resources - Software

Define Needs – Assess current software – Research new software

Report– Inventory data roll up to

General Ledger– Inventory Reports – Financial Statements

Consult – Engineering– Facilities – IT departments– Other Municipalities

Data Entry– sufficiently detailed to

meet PSAB requirements– Consistent classification

of assets

Resources & Information Sources

Resources

Consultant and/or in-houseTime & Budget Capital Asset SoftwareAuditors

Information Sources

Invoices

GIS database Departmental SpreadsheetsPublished Industry StandardsSite Visits

Inventory

Develop an Inventory Listing

Item

Number

Item

Description

Historical

Cost

Replacement Reproduction or Appraisal

AgeUseful Life in Years

Discount Factor

Salvage Value

Audit Considerations

ExistenceOwnership

CompletenessSufficient auditable support

Inventory

Develop an Inventory Listing

Item

Number

Item

Description

Historical

Cost

Replacement Reproduction or Appraisal

AgeUseful Life in Years

Discount Factor

Salvage Value

Linear Assets

• By Feeder

• By Component Part

• By Linear Measure

Discreet Assets

• Per item for large assets

• In aggregate for smaller assets purchased in volume

Condition

Assessment

Inventory

Develop an Inventory Listing

Item

Number

Item

Description

Historical

Cost

Replacement Reproduction or Appraisal

AgeUseful Life in Years

Discount Factor

Salvage Value

TA001 Main Street

TA001-1 Asphalt Surface

$100,000 N/A 5 yrs 15 yrs. N/A $0

TA001-2 Subsurface $200,000 N/A 20 yrs 50 yrs. N/A $0

TA001-3 Land $0 N/A > 50 yrs N/A N/A N/A

RF001 Community Centre

RF001-1 Bldg. Envelope

Unknown $5,000,000 30 yrs. 70 years CPI $0

RF001-2 Roof $500,000 N/A 10 yrs. 20 yrs. N/A $0

RF001-3 HVAC $100,000 N/A 5 yrs. 12 yrs. N/A $0

Valuation

Item

Number

Item

Description

Replacement Reproduction or Appraisal

Discount Factor

AgeUseful

LifeHistorical

Cost

RF001-1 Building Envelope

$5,000,000 2% 30 70 $2,000,000

A B C D

Historical Cost

E = A (1- (B * C))

E

Historical cost is today’s cost (A) divided by a total of a discount factor (B) multiplied by

the age (C) of the asset

PSAB 3150 – Tangible Capital Assets are recorded at historical cost on the Statement of Financial Position.

Item

Number

Item

Description

AgeUseful Life

Historical Cost

Salvage Value

Amortiz’n Rate

Accum. Amortiz’n

RF001-1 Building Envelope

30 70 $2,000,000 $0 1/70 $857,000

F = 1 / DC D

Accumulated Amortization

H = (E – G) * FC

E

Amortization

G

PSAB 3150 – Tangible Capital Assets net of Accumulated Amortization are recorded on the Statement of Financial Position. Accumulated Amortization is disclosed in the Notes to the Financial Statements.

Accumulated amortization is historical cost less salvage value multiplied by

the asset’s amortization rate and age.

H

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at December 31

2009 2008

FINANCIAL ASSETSCash and Investments 62,500,000$ 48,200,000$ Accounts Receivable 10,200,000 10,700,000 Due from Other Governments 1,400,000 1,200,000

74,100,000 60,100,000

LIABILITIESAccounts Payable & Accrued Liabilities 25,600,000 25,600,000 Deferred Development Cost Charges 3,000,000 1,700,000 Long-Term Debt, Net of Sinking Fund Deposits 10,600,000 3,400,000

39,200,000 30,700,000

NET FINANCIAL ASSETS 34,900,000 29,400,000

Non Financial AssetsTangible Capital Assets 237,300,000 225,200,000 Inventory of Supplies 1,400,000 1,600,000 Prepaid Expenses 800,000 1,100,000

239,500,000 227,900,000

ACCUMULATED SURPLUS 274,400,000$ 257,300,000$

New F/SNew F/S

2009 2009 2008Budget Actual Actual

(Unaudited)

REVENUEProperty Taxation and Other Levies 39,000,000$ 38,700,000$ 37,100,000$ Utility Fees and Charges 37,400,000 37,000,000 36,600,000 Sale of Services 7,500,000 8,300,000 7,600,000 Grants and Contributions 5,500,000 9,000,000 8,000,000 Other Revenue 8,400,000 9,200,000 8,100,000

97,800,000 102,200,000 97,400,000

EXPENSESGeneral Government 9,000,000 8,700,000 8,700,000 Protective Services 25,500,000 25,400,000 24,400,000 Transportation and Parking Services 4,400,000 4,300,000 4,300,000 Environmental Development Services 1,100,000 1,100,000 1,100,000 Recreation and Cultural Services 13,200,000 13,100,000 13,100,000 Utility Operations 30,500,000 29,200,000 28,700,000 Interest and Bank Charges 1,200,000 1,100,000 1,200,000 Amortization 14,000,000 14,000,000 13,000,000

98,900,000 96,900,000 94,500,000

INCREASE (DECREASE) IN SURPLUS (1,100,000)$ 5,300,000 2,900,000

Accumulated Surplus, beginning of year 269,100,000 266,200,000

ACCUMULATED SURPLUS, end of year 274,400,000$ 269,100,000$

New F/SNew F/S

5. Accumulated Amortization2008 Amortization 2009

Accumulated Amortization of Tangible Capital Assets for the year is as follows:

Capital Assets

Buildings 51,900,000$ 800,000$ 52,700,000$

Machinery and Equipment 12,500,000 5,200,000 17,700,000$

Park Improvements 3,000,000 400,000 3,400,000$

Engineering Structures 27,000,000 7,600,000 34,600,000$

94,400,000$ 14,000,000$ 108,400,000$

5. Tangible Capital Assets Accumulated2008 Additions Disposals Write-downs Amortization 2009

Tangible Capital Assets consist of the following:

Capital Assets

Land 40,300,000$ 4,000,000$ 2,500,000$ 41,800,000$

Buildings 111,800,000 3,500,000 500,000 200,000$ 52,700,000$ 61,900,000

Machinery and Equipment 35,500,000 9,000,000 1,000,000 17,700,000 25,800,000

Park Improvements 10,000,000 2,000,000 700,000 3,400,000 7,900,000

Engineering Structures 122,000,000 14,500,000 2,000,000 34,600,000 99,900,000

319,600,000$ 33,000,000$ 6,000,000$ 900,000$ 108,400,000$ 237,300,000$

Financial Financial Statement NoteStatement Note

Financial Financial Statement NoteStatement Note

PSAB 3150.42 Disclose amortization method for each major category of TCA

Provide complete list of TCA’s including:

Work in Progress

Gifted or Donated Assets

Assets with Nominal Values

Art and historic treasures

Capitalized Interest

Management

Maintain an Inventory

Item

Number

Item

Description

Historical

CostAccumulated Amortization

Additions Disposals Write-downs

Amortization begins the month the asset is put into use

Items are recorded in their high level category

New Inventory is recorded as additions

Disposals are recorded if new assets replace old or if old assets are disposed

Construction Assets recorded as work in progress until put in use

Write-downs are only possible if permanent

Aggregate assets if purchased in volume – in accordance with capital asset policy

Summary

Resources• Considerable work is required to implement this change• Resources and expertise will be required

Involve auditors, engineers and facility management

personnel early in the process

Benefits• Awareness of problem and magnitude• Better internal information for decision makers • Better standardized comparative information between

local governments• Significant step towards good asset management

Next Steps• Replacement cost reassessment every three years • Status of reserve fund levels• Asset Management