Tangible Capital Assets ProjectAlberta Regional GFOA .ppt

1、Tangible Capital Assets Project Alberta Regional GFOA Workshops,June 2007,2,Presentation Overview,Review PS 3150 Policies and Guidelines Implementation Plan Resources Required Implementation Budget Other “work in progress” information,3,Why Capitalize TCA?,The principal reason for governments record

2、ing capital assets is to get a better appreciation of the stock & the cost of using these assets, which should lead to an improved decision-making process regarding their management.Reporting this capital asset information also provides accountability to taxpayers regarding the capital resources acq

3、uired, used & managed by governments.Public Sector Accounting Board,4,What problems are going to be encountered in complying?,5,Current TCA practices,Some capitalize all assets except roads Some only capitalize debt financed assets Contributed capital is not capitalized No asset inventory listing Ba

4、lance Sheet number is a number only,6,Implications for municipalities,Process implementation & on-going Resources required Financial reporting Budget processes Financial statement analysis,7,What will be gained?,8,Impacts (stated by PSAB),Better asset management More transparent to you, the public &

5、 others Increased awareness of a national issue Data supports funding needs Explains level of tax & user fees Promotes better capital planning,9,Better asset management More transparent to you, the public & others Increased awareness of a national issue Data supports funding needs Explains level of

6、tax & user fees Promotes better capital planning,10,Asset Management Rationale,Life cycle asset management minimizes total costs Poorly maintained assets increase liability concerns Provides better and more consistent levels of service Assets in good condition provide better and more efficient servi

7、ces Increased expectations for accountability and good stewardship Improve compliance with full cost recovery regulations,11,Better asset management only if:,Meeting the TCA requirement is taken seriously A good inventory of assets is developed Replacement cost information is added There is dedicate

8、d sincere analysis of the information,12,GFOA TCA Task Force,Group One: Asset Classes, Useful Life, Thresholds Carol Engelking, City of Edmonton Don Knutson, City of Medicine Hat Carmela Krebes, City of Edmonton Joanne Parkins, City of Red Deer Dean Screpnek, Parkland County Debbie Turner, Town of G

9、ibbons,13,GFOA TCA Task Force,Group Two: 2007 F/S Note Glen Jarbeau, City of Spruce Grove Susan Koch, City of Calgary (previously),14,GFOA TCA Task Force,Group Three: Financial Reporting, Balanced Budget Legislation Glen Jarbeau, City of Spruce Grove Chris Parkins, Alberta Municipal Affairs & Housin

10、g Kim Ordway, City of Lethbridge Barry Sawada, City of Lethbridge Rick Wojtkiw, Sturgeon County,15,PS 3150 Overview,16,TCA Definition,A significant economic resource managed by governments & a key component in the delivery of many government programs.,17,TCA Definition contd,Includes such diverse it

11、ems as roads, buildings, vehicles, equipment, land, water & other utility systems, aircraft, computer hardware & software, dams, canals, & bridges. (.02),18,Who Owns the Roads?,Key words in TCA definition Manage and Control; not ownership Sections 16, 18 and 22 (MGA)All roads, excluding provincial h

12、ighways, are to be recorded as a TCA by the local municipality.,19,And What About Bridges?,“.bridge structures on municipal roads are under the control and management of the Municipality,”Rural Transportation Funding Option Report, Q & A AAMD&C,20,TCA are non-financial assets that,are held for use i

13、n the production and supply of goods and services useful lives extend beyond accounting period used on a continuing basis and not for sale. (.05),21,TCA should be:,reported as assets on statement of financial position (.07) recorded at cost (.09),22,Why Historical Cost?,Reliable agrees to actual tra

14、nsaction Capable of independent verification Reasonably free from error or bias Provides consistent, verifiable foundation Consistent basis for stating the financial position,23,Amortization,amortized over its useful life in a rational and systematic manner appropriate to nature and use (.22) should

15、 be expensed in statement of operations (.23) method and useful life should be regularly reviewed and revised when appropriate. (.29),24,Write-downs,TCA no longer contributes to government services or value of future economic benefits decreased (.31) Expensed (.32) Should not be reversed (.33),25,Di

16、sposals,Difference between net proceeds on disposal and net book value to be recorded as revenue or expense in statement of operations. (.38),26,Presentation & Disclosure (Notes),For each major category of TCA: (.40) Beginning and end of period Cost, accumulated amortization, net book value For the

17、period Additions, disposals, write-downs, amortization,27,Other information: (.42),Amortization method Net book value of TCA not being amortized Nature and amount of TCA received during period Nature and use of TCA at nominal value Nature of works of art and historical treasures Amount of interest c

18、apitalized,28,Transitional Provisions,Effective in 2009 (.43) Progress report required in notes of 2007 financial statements (.45),29,Existing Asset Valuation,In the absence of historical cost, other valuation methods may be used. (.47) Fully amortized assets still in use need to be recorded. (.48),

19、30,What are the recommended guidelines?,31,Asset Classes,Major classifications for TCA and minor classifications under Engineered Structures should be consistently used by all Alberta municipalities for financial reporting.,32,Major Asset Classes,Land Land Improvements Buildings Engineered Structure

20、s Machinery & Equipment Vehicles Cultural & Historical,33,Engineered Structures Minor Classes,Roadway system LRT system Water system Wastewater system Storm system Fibre optics Electricity system Gas distribution system,34,Engineered Structures,Classification exception: Buildings and Machinery & Equ

21、ipment,35,Useful Life and Amortization Methods,Not greater than recommended maximum useful life Straight line method most common Unit of use or output and declining balance also used 50% of annual amortization in year of acquisition/disposal,36,Capitalization Thresholds,Definition The minimum value

22、of an expenditure which meets the criteria of a tangible capital asset and will be recorded as a tangible capital asset.,37,PS 3150 TCA Definition,Non-financial assets having physical substance that: are held for use in the production or supply of goods & are not for sale in the ordinary course of o

23、perations,38,Capitalization Thresholds (cont),Each municipality determine thresholds No threshold for Land Value per item not by group purchased Same threshold for each major asset class,39,Capitalization Threshold Factors,Materiality Record Keeping Asset management Rate setting,40,Capitalization Th

24、reshold Principles,Asset management a key driver Accounting policy not the driver Manageable Good judgment Review with your auditor,41,Suggested Minimum Capitalization Thresholds,42,TCA Progress Report,CICA Accounting Guideline PSG-7 Information on some but not all TCA categories (5) Indicate catego

25、ries excluded Similar information as PS 3150 For fiscal years 2007 until TCA implementation Sample note approved by AICA; provided in June, 2007,43,TCA Implementation Plan,Absolutely Essential! Good sample plans available on Complex project Important first step to an asset management plan Multi-yea

26、r plan,44,Getting Started,What is the status of our financial records? Where are other sources of information? What do we own and where are they? How will we gather the data? What priority is this project? How will it be staged?,45,Initial Departments Meeting,PSAB requirements overview Stress import

27、ance and magnitude 2007/2008 report cards and 2009 completion Must meet audit requirements Determine types of TCA Establish project team manager and departmental team leaders,46,Project Schedule,Multi-year Consider staging Set target dates,47,Capital Policies,Asset definition, single asset vs compon

28、ent, valuation methods, amortization methods, capitalization thresholds, useful life, maintenance or betterment, additions/disposals,48,Other Purposes for Recording TCA,Risk management Maintenance Security Safety,49,Taking the Inventory,Identify data sources Locations Data required Develop unique in

29、ventory forms Future identification Data transfer Test the process Inventory instructions and training Verify the data,50,Value Existing Assets,All assets must be valued in some manner. Value can be estimated when historical cost is not known. Level of precision is less for existing assets.,51,Valua

30、tion Method Sequence,Historical cost Reproduction cost discounted Replacement cost discounted Appraised cost discounted Residual value when fully amortized Nominal value; i.e. conservative estimate of cost,52,Discounting Process,Determine year of construction or purchase. A pre-determined earliest y

31、ear may be established provincially; for example, 1949. Apply a consistent Consumer Price Index to current replacement cost.,53,Steps Taken to Simplify Valuation Process,Bridge Files Alberta Infrastructure and Transportation has determined the historical cost for most bridge files.,54,Steps Taken to

32、 Simplify Valuation Process,Engineered Structures Municipal Affairs is researching the potential of developing a manual of replacement costs for most engineered structures which municipalities can use for consistent valuations.,55,Recording Engineered Structures & Systems Network or Components?,Netw

33、ork one unitLess detail, easier to manageMore difficult to value replacements,56,Recording Engineered Structures & Systems Network or Components?,Component major components as separate assetsMore accurate, better informationBetter basis for asset managementMore time in maintaining records,57,Another

34、 Consideration - Segmentation,Division of linear systems into geographical sections More accurate Easier to identify replacement costs Better information Increased recording time,58,Betterment or Maintenance?,Network or component approach impacts the answer.See PS 3150:19-21,59,Further Information,M

35、Enet Website with links towww.ombi.cawww.psab-ccsp.ca,60,TCA Software,Financial software provider is key stakeholder Determine current and future TCA software capabilities Determine general ledger and subsidiary ledger interfaces What are the reporting capabilities? Software vendors development sche

36、dule,61,Include Your Auditor,Your auditor needs to review your plan. Determine audit requirements audit trail, verification, valuation, asset life Auditor should include TCA in 2007 audit,62,Budgets and Financial Reporting,Full accrual budgets non cash items Revised financial reporting in 2009 Plan

37、for educating/training elected and appointed municipal officials,63,And After 2009,Processes for additions and disposals Policies for regular TCA review,64,Resources Required & Training,65,Resources Required & Training,66,Resources Required & Training,67,Implementation Budget Factors,Size and comple

38、xity of asset base Condition of historical records In-house expertise,68,Implementation Budget Components,Planning and policy development Human resources Asset inventory Software needs Engineering assistance Audit requirements,69,Other Work-in-Progress Information,Capital policy guidelines Inventory

39、 data Valuations Software Financial reporting and budgets Balanced budget legislation,70,Future Information,Quarterly newsletters Toolkit June/07 Financial statement note, June/07 Additional guidelines/recommendations Western GFOA Conference, Calgary, Sept, 2007,71,This will be an ongoing work-in-progress project. We are interested in your comments, questions, experiences and suggestions.,72,Thank you for attending.We wish you success in your TCA project!,