Alignment of Financial Planning, Accounting, and Physical Assets - A Case Study

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1 Gregg Houser City of Moncton Ben Moller Assetic Peter Simcisko Watson & Associates Economists Ltd. Alignment of Financial Planning, Accounting, and Physical Assets - A Case Study

2 Learning Objectives Understanding how much asset information is needed to begin the asset management journey Reconciling financial assets with physical assets Understanding at what scale value is realized from assets (individual asset, system, or portfolio)

3 City of Moncton

4 City of Moncton

5 ISO Assets exist to provide value to the organization and its stakeholders. Asset management enables an organization to realize value from assets in the achievement of its organizational objectives Asset management involves the balancing of costs, opportunities and risks against the desired performance of assets, to achieve the organizational objectives.

6 Beginning of AM Journey The City of Moncton requires an asset management system that identifies opportunities for real-time inventories and reporting of an integrated asset management database. Implementation of the resulting solution will help ensure the City is able to provide reliable, timely and uninterrupted service to its current and future residents in a cost effective and sustainable manner. All of the City of Moncton s tangible Capital Assets will be included in the asset management system. * The City knew they did not have an asset register that would support their future asset management program.

7 Initial State FINANCIAL ASSETS PHYSICAL ASSETS ORACLE Fixed Assets GIS Hansen/Infor Harfan Fleet Maintenance

8 Objective...to ensure the City is able to provide reliable, timely and uninterrupted service to its current and future residents in a cost effective and sustainable manner. No formal Asset Management Policy No formal Strategic Asset Management Plan No formal Asset Management Plans (for different asset types/classes) Haven t worked out the How...need to clarify the What (value)

9 Financial Register Global similarities Canada IFAC USA What is it: List of fixed assets that belong to an accounting entity. Purpose: Track value of assets for depreciation (or valuation) to be recorded for management and taxation purposes.

10 Financial Register Ownership Financial view of asset Asset consumption based on accounting data ( Financial Consumption ) Value of the asset.. NOT.. Value from the asset

11 Financial Register 3% annual consumption (amortization)

12 Physical Register

13 Physical Register

14 Physical Register Capital treatment selected based on a well-defined set of situations

15 Business Process Asset Creation Asset Renewal (Capital Works Project Financial Reporting Subdivision development Capital works projects

16 Business Process Synchronizing with the City s GIS Tracking valuation with financial transactions (Accounting Module) Output for Predictor Maintaining historical condition assessments (future)

17 Business Process Functional Location (Road Name) System Navigation Road Segment Asset Sync with GIS/Predictor modeling Surface Component Road Bed Component Accounting Reporting

18 Data cleanup Road stubs 2,762 road segments 6,041 financial records

19 How much information is needed? Clear idea of what you own (what your assets are) Condition data Understanding of priorities (criticality), documented if possible Financial register clarity having an asset register that is as clean as possible before merging with physical asset register CONSISTENCY Documenting business process understanding what different parts of the organization do, how, and why

20 Aligned Register Financial Register Physical Asset Register Asset Management Register Aligned Register

21 Financial view of assets Physical view of assets Aligned Register

22 Aligned Outcome Old Moncton Service Level New Moncton Service Level Funding Programs Funding Programs Budget Budget

23 Unaligned Service Outcome Current Budget: 1.4% of Replacement Value

24 Aligned Service Outcome Ideal Roads Budget: 2.5% of Replacement Value < Financial Amortization > Current Budget

25 Value from Assets Starting point: detailed condition assessment reports on City s major facilities (33/187 facilities, but 74% of replacement value) Each dept. managed their own facilities based on available budget and apparent condition of their assets Very reactive vs. proactive Due to newly available data, tendency to fall into trap of maintenance management vs. lifecycle management

26 Value from Assets Ability to obtain funding was a main objective Needed to be able to show which assets needed to be funded. Looking at the long term vs. short-term annual needs.

27 Next Steps Asset Management Policy Strategic Asset Management Plan Implementing tools to support Asset Management Plan Asset Management Plan

28 Questions? Contact Me: Gregg Houser City of Moncton, Deputy Treasurer Peter Simcisko Senior Consultant