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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
4
Deferred Maintenance and Repairs as an Indicator of Facility Condition
FASAB Standard Number 6, as amended, is intended to help fulfill federal financial accounting standards for operating performance and stewardship. These objectives include addressing the efficiency and effectiveness of the government's management of its assets and identifying if the government's financial position improved or deteriorated over the period, among others. The accounting standards established to meet these objectives are intended to provide information to help assess the efficiency and effectiveness of asset management and report on asset 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. As noted in Chapter 1, the significance of the existence of deferred maintenance and repairs is that it may indicate that the quality and reliability of service provided by infrastructure are lower than they should be and that the infrastructure is not, or will not later be, adequately serving the public. However, a dollar figure alone does not indicate overall condition of facilities; it does not place the number in context with the size or value of an agency's facilities inventory; it does not allow comparisons across agencies because of the variation in size and composition of the inventories. For example, the Department of Defense (DoD) has reported $37 billion in deferred maintenance and repairs, while the National Aeronautics and Space Administration (NASA) has reported $1.4 billion. 20 Looking at these numbers, it is not possible to determine the overall condition of either agency's facilities inventory, whether DoD or NASA has a larger backlog in relation to the size of their respective inventories, whether the size of the backlog actually constitutes a problem or if it is of a size that might be expected given the number of facilities. A total dollar amount of deferred maintenance and repairs also does not indicate whether agencies are using the funds allocated to them efficiently or effectively. Finally, reporting a single annual number for deferred maintenance gives no indication whether the government's financial position has improved or deteriorated. To be meaningful, deferred maintenance and repair amounts need to be (1) used in conjunction
20
Deferred maintenance amounts reported in DoD and NASA 1998 accountability reports.
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
4
Deferred Maintenance and Repairs as an Indicator of Facility Condition
FASAB Standard Number 6, as amended, is intended to help fulfill federal financial accounting standards for operating performance and stewardship. These objectives include addressing the efficiency and effectiveness of the government's management of its assets and identifying if the government's financial position improved or deteriorated over the period, among others. The accounting standards established to meet these objectives are intended to provide information to help assess the efficiency and effectiveness of asset management and report on asset 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. As noted in Chapter 1, the significance of the existence of deferred maintenance and repairs is that it may indicate that the quality and reliability of service provided by infrastructure are lower than they should be and that the infrastructure is not, or will not later be, adequately serving the public. However, a dollar figure alone does not indicate overall condition of facilities; it does not place the number in context with the size or value of an agency's facilities inventory; it does not allow comparisons across agencies because of the variation in size and composition of the inventories. For example, the Department of Defense (DoD) has reported $37 billion in deferred maintenance and repairs, while the National Aeronautics and Space Administration (NASA) has reported $1.4 billion. 20 Looking at these numbers, it is not possible to determine the overall condition of either agency's facilities inventory, whether DoD or NASA has a larger backlog in relation to the size of their respective inventories, whether the size of the backlog actually constitutes a problem or if it is of a size that might be expected given the number of facilities. A total dollar amount of deferred maintenance and repairs also does not indicate whether agencies are using the funds allocated to them efficiently or effectively. Finally, reporting a single annual number for deferred maintenance gives no indication whether the government's financial position has improved or deteriorated. To be meaningful, deferred maintenance and repair amounts need to be (1) used in conjunction
20
Deferred maintenance amounts reported in DoD and NASA 1998 accountability reports.
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
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.
Performance measures are critical elements of a comprehensive management system for facility maintenance and repairs. Determining how well the maintenance function is being performed or how effectively maintenance funds are being spent requires well-defined measures (NRC, 1998). A study by the National Research Council, Measuring and Improving Infrastructure Performance, found that “no adequate, single measure of performance has been identified, nor should there be an expectation that one will emerge. Infrastructure systems are built and operated to meet basic social needs, but those needs are varied and complex” (NRC, 1995). Therefore, the measures used to evaluate facilities and infrastructure performance should vary. The report goes on to state that “infrastructure performance is the degree to which infrastructure provides the services that the community expects of that infrastructure, and communities may choose to measure performance in terms of specific indicators reflecting their own objectives.”
The report concluded that these indicators generally fall into three broad categories, measuring performance as a function of effectiveness, reliability, and cost. “Infrastructure that reliably meets or exceeds broad community expectations, at an acceptably low cost is performing well.” Although this was a study of infrastructure systems at the community level, the principle that the performance of facilities maintenance and management functions can and should be measured by the condition of the facilities inventory as measured against cost and effect on agency mission is also applicable to the maintenance and repair of federal facilities (NRC, 1998).
The Department of Energy (DOE), in addition to dollar amounts for deferred maintenance, also collects at the assets level “annual required maintenance” and “annual actual maintenance,” and will be collecting “failure rate” and “availability.” The DOE uses replacement plant value with these other data elements, to calculate a Facility Condition Index to produce a more useful indicator of the health/status of a building or the agency's aggregate facilities inventory. These indicators will be tracked over time to help evaluate whether the condition of the entire inventory is improving or deteriorating.
NASA also tracks a series of measures related to facilities maintenance. These include backlog of maintenance and repairs as defined in NASA 's facilities maintenance performance metrics. They also include unconstrained annual maintenance and repair requirement, initial operating plan for maintenance and repair, annual maintenance and repair funding, cost of scheduled work, number of predictive testing and inspection “finds,” preventive maintenance and predictive testing and inspection completed versus scheduled, breakdown repair costs versus total maintenance and repair costs, significant facilities and systems failure costs due to constrained resources, and significant facilities and systems failure costs avoided by using predictive testing and inspection.
Another indicator that might be used in conjunction with a dollar amount for deferred maintenance and repairs is deferred maintenance and repair as a percentage of current (or plant) replacement value of an agency's facilities inventory. This could be tracked over time to observe trends as long as an agency used a consistent methodology for calculating deferred maintenance and repair and current (or plant) replacement value. For example, using hypothetical numbers, if the current replacement value of DoD's facilities inventory is $740 billion and the deferred maintenance backlog is $37 billion, deferred maintenance would be equal to 5 percent of the current replacement value. If the
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
current replacement value were, instead, $370 billion, deferred maintenance would equal 10 percent of current replacement value, which could indicate a more deteriorated condition. Similarly, using hypothetical numbers, if the current replacement value of NASA's inventory were $18 billion, a backlog of $1.4 billion would be equal to 7.8 percent of current replacement value and would appear to indicate that NASA 's facilities might be in better overall condition that DoD's. However, these types of comparisons would still not be particularly meaningful unless and until they were tracked over time using consistent methodologies for calculating both deferred maintenance and repairs and current replacement value at each agency (i.e., the agencies would not have to use the same methodology). Over a 5-year period, if DoD's backlog of maintenance and repair as a percentage of current replacement value decreased while NASA's increased, it could indicate that the overall condition of DoD's inventory was improving while NASA's was declining. The factors underlying these trends could then be investigated.
Some federal agencies, such as the U.S. Army, track the condition of their facilities using a rating system (i.e., excellent, good, fair, unsatisfactory) and a computerized database. From the rating information contained in the database, agencies could generate a report identifying the percentage of their facilities falling into the lowest category—for example, 15 percent of facilities have been rated unsatisfactory. This information would provide the percentage of an agency's facilities that are below a satisfactory condition and may be another approach for providing information regarding the condition of federal facilities. This approach could be useful for tracking trends over time and to review whether the condition of an agency's facilities has improved or declined.
The Federal Facilities Council Standing Committee on Operations and Maintenance was not tasked with determining what combination of measures might best fulfill the objectives of federal financial accounting. Additional study and consideration of potential measures that could be used in conjunction with deferred maintenance and repairs to help evaluate the condition of federal assets are needed.
REFERENCES
NRC (National Research Council). 1995. Measuring and Improving Infrastructure Performance. Board on Infrastructure and the Constructed Environment. Washington, D.C. : National Academy Press.
NRC. 1998. Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets. Board on Infrastructure and the Constructed Environment. Washington, D.C. : National Academy Press.
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