1. Tangible Capital Assets Where Are We At? What Next? AAMDC Spring Convention & Trade Show Edmonton, Alberta March 18, 2008

2. Christina Parkins Financial Advisory Services Municipal Affairs Harold Johnsrude, CA Harold Johnsrude Consulting Inc. Barb Lyons, CGA Director of Corporate Services Yellowhead County Presenters 2

3. Provide tools and training Raise awareness Mitigate the cost AMA Project Goals 3

4. Status Report TCA Toolkit On-site example What’s next Session Overview 4

5. angible – can be touched Definition 5 apital – lasts over time sset – has measurable value

6. Global View 6 Australia 1998 New Zealand 1990 USA 2006 Canada & Provinces 2000-2003 Canadian Municipalities 2009

7. Why? 7 Budget and Reporting Requirements Long Term Decisions by Short Term Councils Not New and Exciting Aging Infrastructure Property Tax Rate Sensitivity Awareness Out of Sight / Out of Mind

8. Outside Contributions 8 Provincial grants Federal grants Developers Constructed assets funded from third parties require replacement

9. Toolkit 9 www.MEnet.ab.ca

10. Toolkit Overview 10 Section 2 - Implementation PS 3150 Summary of PS 3150 Implementation plan Implementation budget

11. Toolkit Overview 11 Section 3 Policies & Guidelines

12. Major Asset Classifications 12 Land Land improvements Buildings Engineered structures Machinery & equipment Vehicles Cultural & historical

13. Engineered Structures Minor Asset Classifications 13 Roadway system Light rail transit system Water system Wastewater system Storm system Fibre optics Electricity system Gas distribution system

14. Guideline #2 – Useful Life and Amortization Methods 14 Recommended maximum life Amortization methods

15. Guideline #3 Capitalization Thresholds 15 The minimum value of an expenditure that meets the criteria of a TCA and that will be recorded as a TCA.

16. Capitalization Thresholds 16 Factors to consider: Materiality Record keeping Asset management Rate setting

17. Suggested Rural Thresholds 17 Land$0 Land improvements$5,000 Buildings$50,000 Engineered Structures$50,000 Machinery & Equipment$5,000 Vehicles$5,000

18. Guideline #5 – Networks, Segments & Components 18

19. Networks 19

20. Network 20

21. Segments 21

22. Components 22

23. Simplest form Easier to track Historically – easier to value More difficult to Establish capitalization thresholds Determine the value of components replaced Network Approach 23

24. Better basis for asset management More accurate information Easier to identify costs of assets replaced More detail requires more recording Segment Approach 24

25. Better basis for asset management More accurate – useful life and amortization Deals with unique components better More detail requires more recording Component Approach 25

26. Network by road type Gravel Chip seal Asphalt Townships Intersections Mile Road System Networks 26

27. Initially, keep it simple! Progressively increase detail. Network Decision 27

28. Change in municipal entity Dissolution Amalgamation Annexations Guideline #6 – Valuation Date 28

29. Capital Asset Policy 29 1.Purpose & Scope 2.Asset Definitions & Classification 3.Asset Recording & Valuation 4.Amortization Methods and Rates 5.Review & Write-downs 6.Maintaining Records 7.Asset Disposal 8.Systems 9.Reporting & Budgeting

30. Toolkit Overview 30 Section 4 – Asset Inventory & Valuation Guidelines to determine asset data Data to record by type of asset Essential Important Optional

31. Actual Cost Estimated Cost Reproduction (discounted) Replacement (discounted) Appraisal (discounted) Residual Nominal Valuation Approaches 31

32. Valuation Tools 32 Linear Roads Drainage Water & Wastewater Bridges

33. Implementation Example 33 Yellowhead County Barb Lyons, CGA Director of Corporate Services

34. Project Overview 34 18 months and still more to do! Supportive Council Provided necessary resources Supports finance staff Funding provided for Computer hardware/software Staff time

35. Project Principle 35 Benefit of having the information must outweigh the cost of collecting it.

36. Benefits Expected 36 Will provide a picture of assets owned with the age and condition. Will assist in determining future infrastructure requirements resulting in better resource allocation.

37. Free Resources! 37 Other municipalities Government Finance Officers Association Accounting manuals Workshops AMA toolkit

38. Capital Policy 38 Formal approval of a TCA policy is crucial!

39. Technical Side of Project 39 Data Entry Verification of historical cost New software training Interface with GIS Asset valuation Recording amortization

40. Future Challenges 40 Asset valuation Meeting the January 1, 2009 deadline Budgeting for annual amortization Revised financial statement format Revised Financial Information Return

41. Important Points to Remember 41 Keep the project in perspective Use good judgment and common sense Take advantage of all the resources available Don’t re-invent the wheel

42. Impact to Our Municipality 42 Each municipality will be different. Factors include: Age of TCA TCA’s recorded/not recorded Donated assets

43. TCA’s on Balance Sheet will be: At cost, less amortization and write downs Amortization and write-downs will be a charge against annual income PS 3150 43

44. Brings a non-cash dimension to financial reporting and budgeting Full Accrual Accounting This change does not require a change in behavior, but it may cause you to change because there will be more information available Impact of Recording TCA’s 44

45. Municipalities will not be required to fund amortization Legislative Impact 45

46. PS Handbook 1200 Changes to Financial Reporting Future Changes 46

47. Summary 47 Next Steps Replacement cost reassessment Status of reserve fund levels Asset Management Benefits Awareness of problem and magnitude Better internal information for decision makers Significant step towards good asset management Resources Considerable work is required to implement this change Resources and expertise will be required Involve auditors, engineers and facility management personnel early on!

48. Questions? 48