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. Goal Meet legislated requirements Standardize TCA reporting Meet legislated deadlines

TANGIBLE CAPITAL ASSETS

What are TCA’s? Is there a concern? What can we do? How do we do it? Will it be enough? Overview

Definition apital – lasts over time angible – can be touched sset - has measurable value

Tangible Capital Assets Linear Assets Water InfrastructureWater Infrastructure Sewer InfrastructureSewer Infrastructure Roads, sidewalks bridges and lanesRoads, sidewalks bridges and lanes Discrete Assets LandLand BuildingsBuildings VehiclesVehicles EquipmentEquipment

Infrastructure Deficit ! Problem 2. Money is not set aside for replacement 1. Assets deteriorate over time

Global View New Zealand 1990 Australia 1998 Government of Canada & Provinces United States 2006 Canadian Municipalities 2009

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

Aging Infrastructure Awareness Out of Sight / Out of Mind Not New and Exciting Budget and Reporting Requirements Long Term Decisions by Short Term Councils Property 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

Current View

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 Inventory Management January 1, 2009 Step 1 Step 4 Step 2 Step 3

Capital Asset Policy Policy Scope Principles ThresholdsAggregationSegmentationAmortizationDisposalsWrite-downsAccounting Presentation

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-house Time & Budget Capital Asset Software Auditors Information Sources Invoices GIS database Departmental Spreadsheets Published Industry Standards Site Visits

Inventory Develop an Inventory Listing Item Number Item Description Historical Cost Replacement Reproduction or Appraisal Age Useful Life in Years Discount Factor Salvage Value Audit Considerations Existence Ownership Completeness Sufficient auditable support

Inventory Develop an Inventory Listing Item Number Item Description Historical Cost Replacement Reproduction or Appraisal Age Useful 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 Age Useful Life in Years Discount Factor Salvage Value TA001Main Street TA001-1Asphalt Surface $100,000N/A5 yrs15 yrs.N/A$0 TA001-2Subsurface$200,000N/A20 yrs50 yrs.N/A$0 TA001-3Land$0N/A> 50 yrsN/A RF001Community Centre RF001-1Bldg. Envelope Unknown$5,000,00030 yrs.70 yearsCPI$0 RF001-2Roof$500,000N/A10 yrs.20 yrs.N/A$0 RF001-3HVAC$100,000N/A5 yrs.12 yrs.N/A$0

Valuation Item Number Item Description Replacement Reproduction or Appraisal Discount Factor Age Useful Life Historical Cost RF001-1Building Envelope $5,000,0002%3070$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 Descriptio n Age Useful Life Historical Cost Salvage Value Amortiz’n Rate Accum. Amortiz’n RF001-1Building Envelope 3070$2,000,000$01/70$857,000 F = 1 / DCD 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

New F/S

Financial Statement Note

PSAB 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 Cost Accumulated Amortization AdditionsDisposalsWrite-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