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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. - PowerPoint PPT Presentation
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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.
GoalGoal
Meet legislated requirements Meet legislated requirements
Standardize TCA reportingStandardize TCA reporting
Meet legislated deadlinesMeet legislated deadlines
TANGIBLE TANGIBLE CAPITAL CAPITAL ASSETSASSETS
What are
TCA’s?Is there a concern?
What can we
do?
How do we do
it? Will it be enough?
OverviewOverview
Definition
apital – lasts over time
angible – can be touched
sset - has measurable value
Tangible Capital AssetsTangible Capital Assets
Linear Assets
•Water InfrastructureWater Infrastructure
•Sewer InfrastructureSewer Infrastructure
•Roads, sidewalks bridges and lanes Roads, sidewalks bridges and lanes
Discrete AssetsDiscrete Assets•LandLand•BuildingsBuildings•VehiclesVehicles•EquipmentEquipment
Infrastructure Deficit !
Problem
2. Money is not set aside for replacement
1. Assets deteriorate over time
Global Global ViewView
New Zealand 1990
Australia 1998
Government of Canada & Provinces 2002-2003
United States 2006
Canadian Municipalities 2009
The IssueThe Issue ““Our $60 Billion Our $60 Billion national municipal national municipal infrastructure infrastructure deficit grows by deficit grows by $2 Billion per $2 Billion per year, and the year, and the longer we take to longer we take to erase it, the more erase it, the more it will cost it will cost Canadians.”Canadians.”Michael Coleman, President, Federation of Canadian Municipalities
Aging Infrastructure
Awareness
Out of Sight /
Out of Mind
Not New
and ExcitingBudget and
Reporting Requirements
Long Term Decisions by Short Term CouncilsProperty Tax Rate Sensitivity
Why?
Gifts
• Provincial Grants • Federal Grants
• Developer Cost Charges • Amenity Contributions
Constructed assets funded from third parties require replacement
Gift Acceptance
Review
Tangible Capital Assets (TCA) defined
Problem Quantification
Global Issue
Why the TCA issue was not addressed earlier?
Solution
Review
Legislated
Requirement
CICA - PSAB 3150
Ministry of Community Services Community Charter Section 171
The municipal auditor must report to the Council on the annual financial statements …
The report must be in accordance with the form and reporting standards recommended by the Canadian Institute of Chartered Accountants (CICA)
Standards
CICA - PSAB 3150
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at December 31
2009 2008
FINANCIAL ASSETSCash and Investments 62,500,000$ 48,200,000$ Accounts Receivable 10,200,000 10,700,000 Due from Other Governments 1,400,000 1,200,000
74,100,000 60,100,000
LIABILITIESAccounts Payable & Accrued Liabilities 25,600,000 25,600,000 Deferred Development Cost Charges (Schedule VI) 3,000,000 1,700,000 Long-Term Debt, Net of Sinking Fund Deposits (Note 4) 10,600,000 3,400,000
39,200,000 30,700,000
NET FINANCIAL ASSETS 34,900,000 29,400,000
TANGIBLE CAPITAL ASSETS 239,500,000 227,900,000
274,400,000$ 257,300,000$
EQUITYFinancial Equity 45,500,000 40,300,000
Investment in Tangible Capital Assets 228,900,000 217,000,000
274,400,000$ 257,300,000$
Current Current ViewView
CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIESFor the Year Ended December 31
2009 2009 2008Budget Actual Actual
(Unaudited) (restated - note 11)
REVENUEProperty Taxation and Other Levies (Note 8) 39,000,000$ 38,700,000$ 37,100,000$ Utility Fees and Charges 37,400,000 37,000,000 36,600,000 Sale of Services 7,500,000 8,300,000 7,600,000 Grants and Contributions 13,700,000 9,000,000 8,000,000 Other Revenue (Note 9) 8,400,000 9,200,000 8,100,000
106,000,000 102,200,000 97,400,000
EXPENSESGeneral Government 9,000,000 8,700,000 8,700,000 Protective Services 25,500,000 25,400,000 24,400,000 Transportation and Parking Services 4,400,000 4,300,000 4,300,000 Environmental Development Services 1,100,000 1,100,000 1,100,000 Recreation and Cultural Services 13,200,000 13,100,000 13,100,000 Utility Operations 30,500,000 29,200,000 28,700,000 Interest and Bank Charges 900,000 800,000 800,000 Capital Expenditures 22,200,000 14,000,000 13,000,000 Debt Retirement 300,000 300,000 400,000
107,100,000 96,900,000 94,500,000
INCREASE (DECREASE) IN FINANCIAL EQUITY (1,100,000)$ 5,300,000 2,900,000
Financial Equity, beginning of year (note 11) 40,300,000 37,400,000
FINANCIAL EQUITY, end of year 45,600,000$ 40,300,000$
Current Current ViewView
Current Current ViewView
5. Tangible Capital Assets2009 2008
Tangible Capital Assets consist of the following:
Capital Assets
Land $ 14,000,000 $ $13,000,000Buildings 51,000,000 50,000,000 Machinery and Equipment 36,000,000 33,000,000 Park Improvements 12,000,000 11,000,000 Engineering Structures 124,800,000 119,500,000
$ 237,800,000 $ $226,500,000
Inventory of Supplies $ 1,700,000 $ 1,400,000
Net Tangible Capital Assets $ 239,500,000 $ 227,900,000
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
InventoryManagement
January 1, 2009
Step 1
Step 4
Step 2
Step 3
Capital Asset
Policy
Presentation
Accounting
Write-downs
Disposals
Amortization
Segmentation
Aggregation
Thresholds
Principles
Scope
Policy
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-houseTime & Budget Capital Asset SoftwareAuditors
Information Sources
Invoices
GIS database Departmental SpreadsheetsPublished Industry StandardsSite Visits
Inventory
Develop an Inventory Listing
Item
Number
Item
Description
Historical
Cost
Replacement Reproduction or Appraisal
AgeUseful Life in Years
Discount Factor
Salvage Value
Audit Considerations
ExistenceOwnership
CompletenessSufficient auditable support
Inventory
Develop an Inventory Listing
Item
Number
Item
Description
Historical
Cost
Replacement Reproduction or Appraisal
AgeUseful 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
AgeUseful Life in Years
Discount Factor
Salvage Value
TA001 Main Street
TA001-1 Asphalt Surface
$100,000 N/A 5 yrs 15 yrs. N/A $0
TA001-2 Subsurface $200,000 N/A 20 yrs 50 yrs. N/A $0
TA001-3 Land $0 N/A > 50 yrs N/A N/A N/A
RF001 Community Centre
RF001-1 Bldg. Envelope
Unknown $5,000,000 30 yrs. 70 years CPI $0
RF001-2 Roof $500,000 N/A 10 yrs. 20 yrs. N/A $0
RF001-3 HVAC $100,000 N/A 5 yrs. 12 yrs. N/A $0
Valuation
Item
Number
Item
Description
Replacement Reproduction or Appraisal
Discount Factor
AgeUseful
LifeHistorical
Cost
RF001-1 Building Envelope
$5,000,000 2% 30 70 $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
Description
AgeUseful Life
Historical Cost
Salvage Value
Amortiz’n Rate
Accum. Amortiz’n
RF001-1 Building Envelope
30 70 $2,000,000 $0 1/70 $857,000
F = 1 / DC D
Accumulated Amortization
H = (E – G) * FC
E
Amortization
G
PSAB 3150 – Tangible Capital Assets net of Accumulated Amortization are recorded on the Statement of Financial Position. Accumulated Amortization is disclosed in the Notes to the Financial Statements.
Accumulated amortization is historical cost less salvage value multiplied by
the asset’s amortization rate and age.
H
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at December 31
2009 2008
FINANCIAL ASSETSCash and Investments 62,500,000$ 48,200,000$ Accounts Receivable 10,200,000 10,700,000 Due from Other Governments 1,400,000 1,200,000
74,100,000 60,100,000
LIABILITIESAccounts Payable & Accrued Liabilities 25,600,000 25,600,000 Deferred Development Cost Charges 3,000,000 1,700,000 Long-Term Debt, Net of Sinking Fund Deposits 10,600,000 3,400,000
39,200,000 30,700,000
NET FINANCIAL ASSETS 34,900,000 29,400,000
Non Financial AssetsTangible Capital Assets 237,300,000 225,200,000 Inventory of Supplies 1,400,000 1,600,000 Prepaid Expenses 800,000 1,100,000
239,500,000 227,900,000
ACCUMULATED SURPLUS 274,400,000$ 257,300,000$
New F/SNew F/S
2009 2009 2008Budget Actual Actual
(Unaudited)
REVENUEProperty Taxation and Other Levies 39,000,000$ 38,700,000$ 37,100,000$ Utility Fees and Charges 37,400,000 37,000,000 36,600,000 Sale of Services 7,500,000 8,300,000 7,600,000 Grants and Contributions 5,500,000 9,000,000 8,000,000 Other Revenue 8,400,000 9,200,000 8,100,000
97,800,000 102,200,000 97,400,000
EXPENSESGeneral Government 9,000,000 8,700,000 8,700,000 Protective Services 25,500,000 25,400,000 24,400,000 Transportation and Parking Services 4,400,000 4,300,000 4,300,000 Environmental Development Services 1,100,000 1,100,000 1,100,000 Recreation and Cultural Services 13,200,000 13,100,000 13,100,000 Utility Operations 30,500,000 29,200,000 28,700,000 Interest and Bank Charges 1,200,000 1,100,000 1,200,000 Amortization 14,000,000 14,000,000 13,000,000
98,900,000 96,900,000 94,500,000
INCREASE (DECREASE) IN SURPLUS (1,100,000)$ 5,300,000 2,900,000
Accumulated Surplus, beginning of year 269,100,000 266,200,000
ACCUMULATED SURPLUS, end of year 274,400,000$ 269,100,000$
New F/SNew F/S
5. Accumulated Amortization2008 Amortization 2009
Accumulated Amortization of Tangible Capital Assets for the year is as follows:
Capital Assets
Buildings 51,900,000$ 800,000$ 52,700,000$
Machinery and Equipment 12,500,000 5,200,000 17,700,000$
Park Improvements 3,000,000 400,000 3,400,000$
Engineering Structures 27,000,000 7,600,000 34,600,000$
94,400,000$ 14,000,000$ 108,400,000$
5. Tangible Capital Assets Accumulated2008 Additions Disposals Write-downs Amortization 2009
Tangible Capital Assets consist of the following:
Capital Assets
Land 40,300,000$ 4,000,000$ 2,500,000$ 41,800,000$
Buildings 111,800,000 3,500,000 500,000 200,000$ 52,700,000$ 61,900,000
Machinery and Equipment 35,500,000 9,000,000 1,000,000 17,700,000 25,800,000
Park Improvements 10,000,000 2,000,000 700,000 3,400,000 7,900,000
Engineering Structures 122,000,000 14,500,000 2,000,000 34,600,000 99,900,000
319,600,000$ 33,000,000$ 6,000,000$ 900,000$ 108,400,000$ 237,300,000$
Financial Financial Statement NoteStatement Note
Financial Financial Statement NoteStatement Note
PSAB 3150.42 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
CostAccumulated Amortization
Additions Disposals Write-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