1. MEOA Annual General Meeting & Trade Show

2. Dave Seavey, CAFM daveseavey@publicfleetsummits.com 360.556.3708
The Financial Side of Fleets
Dave Seavey, CAFM

3. What is the value of your fleet assets?

4. The paradigm has changed in front of our eyes
We all came into fleet at different stages of the changes that have taken place in the last 15 years.

5. GAAP – What is it and why was it established?
a set of commonly-followed accounting rules and standards for financial reporting (standardization)
to establish high standards of accounting, auditing, and financial reporting
to ensure that financial reporting is transparent and consistent from one government agency to another
fleet financials flow into government accounting

6. Statement of Net Assets
every government agency is required to produce a Statement of Net Assets, or a Balance Sheet
provides a snapshot of the financial condition of a government agency at the end of a fiscal year
it represents a government agency’s assets and liabilities at its fiscal year-end
Assets – Liabilities = Net Assets
each year, Fleet assets and liabilities “flow” into the government agency’s Balance Sheet

7. Balance Sheet terms Capital Assets or fixed assets
long-life assets used in the conduct of a government agency’s business
minimum 3-5 useful life
$$ threshold varies
assets determined by a government agency’s capitalization policy (size)
learn your policy!

8. Balance Sheet terms Liabilities simply put, “money that you owe”
accounts payable – unpaid bills
accrued expense – goods and services received but no Invoice
debt – bonds, loans

9. Fund Accounting
the finances of a government are broken into separate funds, such as General, Enterprise, and Internal Service, or Special Funds
an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, other individuals or organizations or by law
emphasizes accountability not profitability
Why is that?

10. General Fund Sources of Revenue
Property Tax
Sales Tax
Business Tax
Miscellaneous Fees (permits, Parks, parking, etc.)
the primary or “catch-all” fund of a government agency
records all assets and liabilities that are not assigned to a special purpose fund
provides the resources necessary to sustain the day-to-day activities and pays for all administrative and operating expenses
a government agency’s primary fund

11. Enterprise Fund
is a fund that provides goods or services to a public for a fee
fees collected are used to support the Enterprise Fund activity
examples include water, sewer, garbage, electricity
fees collected must not subsidize other funds

12. Internal Service Fund
is used by government agencies to account for goods and services pro- vided by one internal department to another
the goal is to collect only that amount needed to “break even” – rev/depts
Fleets, Facilities, IT

13. Capital Replacement Fund
a fund that receives revenues (in the form of rates) in order to make future expenditures to replace fleet vehicles
a component of overall Rental Rates
funds collected must not intermingle with other rates

14. Depreciation
simply put, it is the reduction of value of an asset over the passage of time
when we purchase a new vehicle it becomes less valuable over time as we use it
capitalized cost – residual value = depreciation $25,000 - $5,000 = $20,000 (net depreciation)
monthly depreciation = net depreciation / total months in service

15. Depreciation

16. When managing a government fleet, our goal is not to make a profit or end the fiscal year at a loss. In order to “break even” you must understand all of your true costs. If you don’t, how do you know what to bill other departments in order to break even?

17. Direct vs. Indirect Costs
costs of providing services to vehicles
easiest to capture
labor
parts
fuel
depreciation (by vehicle)
costs associated with fleet that cannot be assigned to a vehicle
harder to capture
personnel costs
office supplies
building rental
computer costs
training

18. Words to heed …
He or she that fully understands the flow of money within a government agency is best suited to get his or her capital projects and funds needed to improve the fleet operation approved.

19. Breaking Down and Understanding Your Fleet Rental Rates

20. We established it’s about the break even…
Why Charge Rental Rates?
cost recovery (break even)
opportunity to improve operations; competitiveness
Rates are usually assigned by class of equipment, but can be charged by individual vehicle when usage varies.

21. Rental Rate Components

22. Before we start, it’s important to know…
rates are broken down into components in order to make apple - to - apple comparisons with outside providers
rate components provide program transparency
communicating and explaining rates is key!
an auditor will slay everyone if all revenues and expenses come from one barrel

23. Calculating Capital Rates

24. Calculating Capital Rates
Must Add Interest
Calculate Rate
Year – $29,851 / 12 = $2,457.61
Month – $29,851 / 72 = $414.60
$ is billed monthly to that vehicle’s department to recover the cost for its future replacement

25. Calculating the Fuel Markup
Data You Need First
all Fuel Program direct and indirect costs – separate Cost Center
the total number of gallons dispensed
program costs / gallons = markup

26. Calculating the Fuel Markup
$168,000 / 1,2000,000 = $0.14 It is important that the markup you calculated supports all Fuel Program operations.

27. Calculating Fuel Rates
Data You Need First
educated prediction of next year’s fuel prices
fuel markup calculation
each department’s historical fuel usage (3 year average)
(pred. + markup) x gallons = fuel rate

28. Calculating Fuel Rates
Police has averaged 218,000 gallons of fuel in the last three years (understand trends)
Fleet predicts next year’s average cost of fuel plus the markup will be $3.76 a gallon
218,000 x $3.76 = $819,680
Fleet recommends Police budgets $819,000 for fuel during the next fiscal year

29. Calculating the Parts Markup
Data You Need First
all Parts Program direct and indirect costs – separate Cost Center
the total number of parts issues
program costs / parts issues = markup
$183,000 / 710,000 = 26%

30. Calculating Parts Rates
determine the three-year average parts spend for each department (look at trends)
recommend to departments their parts spend during the next fiscal year

31. Rental Rates – example to department

32. Report your findings to departments.
Each quarter…
Labor and Capital Rates are set in stone. Fuel and Parts Rates contain predictors.
check your Fuel and Parts predictions
price of fuel
department’s fuel consumption - trends
department’s part spend – trends
Report your findings to departments.

33. Thank You!
Dave Seavey