The GFOA of BC and the Ministry of Community Services

1. 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

2. TANGIBLE CAPITAL ASSETS

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

4. Definition T angible – can be touched apital – lasts over time C A sset - has measurable value

5. Tangible Capital Assets Linear Assets • Water Infrastructure • Sewer Infrastructure • Roads, sidewalks bridges and lanes Discrete Assets • Land • Buildings • Vehicles • Equipment Tangible Capital Assets

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

7. Global View Government of Canada & Provinces 2002-2003 United States 2006 Australia 1998 New Zealand 1990 Canadian Municipalities 2009 Tangible Capital Assets

8. 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 Tangible Capital Assets

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

10. Gifts Gift Acceptance • Provincial Grants • Federal Grants • Developer Cost Charges • Amenity Contributions Constructed assets funded from third parties require replacement

11. Tangible Capital Assets (TCA) defined Review Review Global Issue Problem Quantification Why the TCA issue was not addressed earlier? Solution

12. Legislated Requirement 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) CICA - PSAB 3150 Tangible Capital Assets

13. Standards CICA - PSAB 3150 Tangible Capital Assets

14. Current View Tangible Capital Assets

15. Current View Tangible Capital Assets

16. Current View Tangible Capital Assets

17. TCA’s on Balance Sheet will be: • at cost • less amortization • less disposal PSAB 3150 • Written down when non-contributing Amortization and write-downs will be a charge against annual income

18. Timeline Inventory Management January 1, 2009 Reporting & Presentation Step 4 Valuation & Amortization Inventory Listing Step 3 Resource Identification and Acquisition Step 2 Planning and Policy Development Step 1 Tangible Capital Assets

19. Capital Asset Policy Tangible Capital Assets

20. Resources - Software Define Needs • Assess current software • Research new software Consult • Engineering • Facilities • IT departments • Other Municipalities Report • Inventory data roll up to General Ledger • Inventory Reports • Financial Statements Data Entry • sufficiently detailed to meet PSAB requirements • Consistent classification of assets Tangible Capital Assets

21. 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 Tangible Capital Assets

22. Inventory Develop an Inventory Listing Audit Considerations Existence Ownership Completeness Sufficient auditable support Tangible Capital Assets

23. Inventory Develop an Inventory Listing Condition Assessment 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 Tangible Capital Assets

24. Inventory Develop an Inventory Listing Tangible Capital Assets

25. Valuation A D E B C Historical Cost E = A (1- (B * C)) PSAB 3150 – Tangible Capital Assets are recorded at historical cost on the Statement of Financial Position. Historical cost is today’s cost (A) divided by a total of a discount factor (B) multiplied by the age (C) of the asset Tangible Capital Assets

26. Amortization C D E G F = 1 / D H Accumulated Amortization H = (E – G) * FC 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. Tangible Capital Assets

27. New F/S Tangible Capital Assets

28. New F/S Tangible Capital Assets

29. Financial Statement Note Tangible Capital Assets

30. Financial Statement 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 Tangible Capital Assets

31. Management Maintain an Inventory 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 Amortization begins the month the asset is put into use Tangible Capital Assets

32. 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 Tangible Capital Assets

33. Comments? Tangible Capital Assets