The following HTML text is provided to enhance online
readability. Many aspects of typography translate only awkwardly to HTML.
Please use the page image
as the authoritative form to ensure accuracy.
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
Executive Summary
BACKGROUND
The federal government owns approximately 500,000 facilities and associated infrastructure worldwide. Facilities are complex structures with numerous separate but interrelated systems and components. Inevitably, over time the performance of facilities declines due to aging, wear and tear of systems and components, functional changes, and a variety of other factors. The life of facilities can be optimized, however, through adequate and timely maintenance and repair. Conversely, delaying or deferring maintenance and repairs can, in the short term, diminish the quality of services and, in the long term, lead to shortened facility life and reduced asset value. The existence of deferred maintenance is significant because it implies the quality and reliability of service provided by infrastructure on which maintenance has been deferred is lower than it should be, and thus the infrastructure is not, or will not later be, adequately serving the public (The Urban Institute, 1994).
In 1996 the Federal Accounting Standards Advisory Board (FASAB) 1 enacted Standard Number 6, Accounting for Property, Plant, and Equipment (PP&E), the first government-wide initiative requiring federal agencies to report dollar amounts of deferred maintenance annually. The FASAB has identified four overall objectives in federal financial reporting: budgetary integrity, operating performance, stewardship, and systems and control. FASAB Standard Number 6, as amended, focuses on operating performance and stewardship.
STUDY ORIGIN
The FASAB has determined that information about deferred maintenance is of importance to users of federal financial reports and for measuring an agency's efficiency and effectiveness in managing property, plant and equipment. Recognizing that this is a
1
The Federal Accounting Standards Advisory Board was established in October 1990 by the Secretary of the Treasury, the Director of the Office of Management and Budget, and the Comptroller General of the United States. The board was created to consider and recommend accounting standards and principles for the federal government to improve the usefulness of federal financial reports.
Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole. Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 1
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
Executive Summary
BACKGROUND
The federal government owns approximately 500,000 facilities and associated infrastructure worldwide. Facilities are complex structures with numerous separate but interrelated systems and components. Inevitably, over time the performance of facilities declines due to aging, wear and tear of systems and components, functional changes, and a variety of other factors. The life of facilities can be optimized, however, through adequate and timely maintenance and repair. Conversely, delaying or deferring maintenance and repairs can, in the short term, diminish the quality of services and, in the long term, lead to shortened facility life and reduced asset value. The existence of deferred maintenance is significant because it implies the quality and reliability of service provided by infrastructure on which maintenance has been deferred is lower than it should be, and thus the infrastructure is not, or will not later be, adequately serving the public (The Urban Institute, 1994).
In 1996 the Federal Accounting Standards Advisory Board (FASAB) 1 enacted Standard Number 6, Accounting for Property, Plant, and Equipment (PP&E), the first government-wide initiative requiring federal agencies to report dollar amounts of deferred maintenance annually. The FASAB has identified four overall objectives in federal financial reporting: budgetary integrity, operating performance, stewardship, and systems and control. FASAB Standard Number 6, as amended, focuses on operating performance and stewardship.
STUDY ORIGIN
The FASAB has determined that information about deferred maintenance is of importance to users of federal financial reports and for measuring an agency's efficiency and effectiveness in managing property, plant and equipment. Recognizing that this is a
1
The Federal Accounting Standards Advisory Board was established in October 1990 by the Secretary of the Treasury, the Director of the Office of Management and Budget, and the Comptroller General of the United States. The board was created to consider and recommend accounting standards and principles for the federal government to improve the usefulness of federal financial reports.
OCR for page 2
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
new standard, the FASAB believed that a period of experimentation was desirable to determine the best methods to report deferred maintenance.
The implementation experience to date with FASAB Standard Number 6, as amended, has raised concerns with both agencies and auditors regarding the number of different interpretations of the standard, as well as cost-benefit and audit issues. For these reasons, in the summer of 1999 the Chief Financial Officers (CFO) Council 2 initiated an interagency effort led by the Department of Defense (DoD) to review deferred maintenance reporting for real and personal property, national defense PP&E, heritage assets, and stewardship land. The Federal Facilities Council (FFC) 3 Standing Committee on Operations and Maintenance, supplemented by staff from other agencies, provided technical assistance for the interagency effort by identifying and reviewing issues arising from FASAB Standard Number 6, as amended, as it related to deferred maintenance reporting for facilities (real property).
3
The FFC is a cooperative association of federal agencies, each of which requires the acquisition, maintenance, and operation of a significant inventory of buildings and other constructed facilities in support of its mission. The federal agencies that sponsored this study through the FFC are the U.S. Air Force, Air National Guard, U.S. Army, U.S. Department of Energy, U.S. Department of the Interior, U.S. Navy, U.S. Department of State, U.S. Department of Veterans Affairs, Federal Bureau of Prisons, Food and Drug Administration, General Services Administration, Indian Health Service, Internal Revenue Service, National Aeronautics and Space Administration, National Institutes of Health, National Institute of Standards and Technology, National Science Foundation, Office of the Secretary of Defense, Smithsonian Institution, and the U.S. Postal Service. (See Internet site at http://www4.nationalacademies.org/cets/ffc.nsf for additional information.)
STUDY OBJECTIVES
The work of the FFC Standing Committee on Operations and Maintenance and this report focused on fulfilling two primary objectives. The first is to identify issues related to the reporting of deferred maintenance for facilities as required by FASAB Standard Number 6, as amended. The second objective is to identify for consideration potential approaches for reporting deferred maintenance for facilities that (a) will have credibility in the facilities community, federal agencies, and Congress; (b) can be used to track trends within and across agencies; and (c) do not require an inordinate investment of time and resources to implement.
The FFC Standing Committee on Operations and Maintenance has prepared this report to identify potential issues that should be considered in any future amendments to the standard and to suggest approaches for resolving them. The committee's intent is to assist the CFO Council, federal agencies, the FASAB, and others as they consider how best to meet the objectives of federal financial reporting for facilities. It is important to note that the FFC Standing Committee on Operations and Maintenance has not made
2
The Chief Financial Officers Council is comprised of chief financial officers and deputy chief financial officers of the largest federal agencies and senior officials of the Office of Management and Budget and the Department of the Treasury. Members work collaboratively to improve financial management in the U.S. government.
OCR for page 3
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
any recommendations for reporting deferred maintenance for facilities or advocated specific positions. 4
ISSUES RELATED TO DEFINITIONS
One of the difficulties that federal agencies have found in complying with Standard Number 6, as amended, as it relates to facilities, has been the use of terms that are not typically used in the facilities management field, that are loosely defined, and/or that do not accurately reflect facility maintenance and repair practices. Of specific concern were the FASAB (1996) definitions for maintenance and deferred maintenance, which are:
maintenance—the act of keeping fixed assets in acceptable condition. It includes preventive maintenance, normal repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it continues to provide acceptable services and achieves its expected life. Maintenance excludes activities aimed at expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, those originally intended.
deferred maintenance—maintenance that was not performed when it should have been or was scheduled to be and which, therefore, is put off or delayed for a future period.
These definitions are intended to apply to a broad class of assets, including facilities, vehicles, weapons system, and other types of property, plant, and equipment. These classes of assets have life cycles ranging from a few to 50 or more years and substantial variations in characteristics, complexity, and uses. In the case of facilities, some of these assets may be historic in nature. When applying these general definitions to specific classes of assets, problems arise. For facilities the treatment of repairs as a subset of maintenance, the use of the term “expected life,” and references to “originally intended uses” were identified as problematic.
The committee has proposed for consideration the following revised definitions that it believes better reflect current facility management practices for maintenance and repair:
4
The NRC was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with the general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the federal government, the public, and the scientific and engineering communities. Under operating procedures approved by the National Research Council, the FFC conducts activities carried out by standing committees composed primarily of federal employees to address issues of common interest. Because FFC standing committees are not appointed by the NRC and are not required to meet NRC requirements for committee composition and balance, bias, and conflict of interest, or report review, FFC reports cannot contain specific recommendations and are published under the aegis of the FFC, not the NRC.
OCR for page 4
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
maintenance and repairs—activities directed toward keeping fixed assets in a condition to effectively support the mission. Activities include preventive maintenance, repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it continues to support the mission. Maintenance and repairs exclude activities aimed at expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than its current use. 5
deferred maintenance and repairs—maintenance and repairs that were not performed when they should have been or were scheduled to be and which, therefore, were put off or delayed for a future period.
ISSUES AND POTENTIAL APPROACHES RELATED TO METHODOLOGIES FOR DEFERRED MAINTENANCE REPORTING
FASAB Standard Number 6, as amended, specifies that federal agencies report dollar amounts of deferred maintenance based on methodologies that use condition assessment surveys, a total life-cycle cost method 6 , or their equivalent. Applying explicit methodologies (or their equivalent) to a broad class of assets again can be problematic in the case of a specific class. For example, the data elements for the total life-cycle cost method required by FASAB Standard Number 6 are not reflective of facilities management practices.
Condition assessment surveys are a recognized, valid, facilities management tool for identifying and reporting maintenance and repair needs. However, concerns were raised that the standard implies or could be interpreted to imply that condition assessment information should be available for all facilities in an inventory and that such information should be updated annually. In practice, the availability of condition assessment data varies widely from agency to agency. For those agencies that have instituted inventory-wide condition assessment programs, facilities are typically inspected on a cycle of every three to five years or longer.
In Chapter 3 of this report, the committee identifies a number of alternative methodologies that are similar to condition assessment surveys or the total life-cycle cost method or combine elements of the two. Allowing agencies greater flexibility in choosing methodologies, including statistical sampling, to report deferred maintenance and repairs for facilities may help to better align the objectives and methodologies of federal financial reporting and FASAB Standard Number 6, as amended.
5
During the review process, alternative wording was suggested. The alternatives are noted in Chapter 2.
6
Throughout FASAB Standard Number 6, life cycle costing is described or defined using several terms. The terms life cycle cost plans, life cycle cost forecasts, life cycle costing and total life cycle cost method are used interchangeably. In order to remain consistent, this report uses one term, total life cycle cost method.
OCR for page 5
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY CONDITION
FASAB Standard Number 6, as amended, implies that the dollar value of deferred maintenance is a surrogate (estimate) for management 's ability to maintain facilities. Although the existence of deferred maintenance may indicate that the quality and reliability of services are substandard, calculating a dollar figure for deferred maintenance and repairs does not indicate how well facilities are performing or their overall condition (operating performance). Because of the variations in size, composition, and value of facility inventories, a dollar amount alone does not place the number in context with the size or value of an individual agency's facilities inventory and it does not allow for comparisons across agencies. A single dollar amount also does not indicate whether agencies are using their available maintenance and repair funds efficiently or effectively or provide an indication of whether the government's financial situation has improved or deteriorated (stewardship). In the committee's opinion, deferred maintenance and repairs would be a more meaningful indicator if it is (1) used in conjunction with other indicators, (2) derived by each agency in a consistent manner over time and (3) tracked over a period of time so that trends can be observed. In Chapter 4, the committee identifies some potential indicators that might be used in conjunction with deferred maintenance and repairs. This issue, however, requires further study.
REFERENCE
The Urban Institute . 1994 . Issues in Deferred Maintenance: The Federal Infrastructure Strategy Program . Alexandria , VA : Institute for Water Resources Publications .
OCR for page 6
DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
This page in the original is blank.
Items in cart [4]
