White Paper Directory
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Capital Asset Assessment, Maintenance and Replacement Policy, Commentary on the GFOA Best Practices Part 1.
Commentary on the GFOA Best Practices Part I
In our ongoing mission to assist local governments in the optimization of their capital investments, CIPPlanner™ is continuing to evaluate the recommended best practices adopted by the Government Finance Officers Association (GFOA). This six part analysis will focus on the recently revised Capital Asset Assessment, Maintenance and Replacement Policy. This policy has been reworked by the GFOA just three years after its initial adoption. We see this change as a sign of the rapid evolution of the thought process around Capital Program Management and its growing importance in unifying the planning, financing, and implementation and performance measurements across the governmental enterprise. Specifically the recommended best practice is bringing together the key elements of both the finance and engineering points of view… Read more.
Capital Asset Assessment, Maintenance and Replacement Policy, Commentary on the GFOA Best Practices Part 2.
Commentary on the GFOA Best Practices Part 2
Part 1 of our commentary focused on what information needs to be gathered to facilitate Capital Asset Assessment best practice. This week’s analysis focuses on recommendation number 2 covering condition measures and performance standards. These measures and standards define the meaning of information that is gathered in response to recommendation number 1. Together recommendation one and two create the lens thru which capital policy will be set.
GFOA Recommendation
2. Establishing condition/functional performance standards to be maintained for each type of capital assets. The condition measures and related standards should be understandable and reliable. Such standards may be dictated by mandated safety requirements, federal, state, or provincial funding requirements or applicable engineering and other professional standards,2 including available software models. Use these standards and a current condition assessment as a basis for multi-year capital planning and annual budget funding allocations for capital asset maintenance and replacement… Read more.
Capital Asset Assessment, Maintenance and Replacement Policy, Commentary on the GFOA Best Practices Part 3.
Commentary on the GFOA Best Practices Part 3
Recommendation 3 of the GFOA centers on what we call capital project prioritization and filtering. By prioritization we mean ranking the projects to reflect the empirical, financial and political dimensions that we discussed last week. However this section makes a number of specific recommendations that we will respond to on a line by line basis.
GFOA Recommendation
- Evaluating existing assets to determine if they still provide the most appropriate method to deliver
services.
Commentary
Service applicability should consider a triple bottom line approach of (1) functional ability to meet current needs, (2) physical ability to meet need and (3) consequence of failure. As an example, a utility line that has been in service for many years may not provide the capacity needed for current conditions; it could be degraded below its original capacity and could be in proximity to interrupt other services if it failed. We find that much of this information exists in an organization’s asset management and GIS systems; however it is not consistently applied to the Capital Program Management process…. Read more.
Capital Asset Assessment, Maintenance and Replacement Policy, Commentary on the GFOA Best Practices Part 4.
Commentary on the GFOA Best Practices Part 4
Recommendation number four of the GFOA Replacement Policy focuses on matching funding to the level of service a government has committed to provide.
GFOA Recommendation
- Allocating sufficient funds in the multi-year capital plan and annual operations budget for condition assessment, preventative maintenance, repair and replacement of capital assets in order to continue the provision of services that contribute to public health, safety, and quality of life of the public…. Read more.
Capital Asset Assessment, Maintenance and Replacement Policy, Commentary on the GFOA Best Practices Part 5.
Recommendation five of the GFOA Replacement Policy focuses on performance measurement against the defined service level goals.
GFOA Recommendation
- Monitoring and communicating progress toward stated goals and the overall condition of its capital assets with appropriate controls to ensure the validity and accuracy of the information. This process should describe how actual facility condition and performance compares to the targeted standard for each asset type. Governments should also review and report the operating impacts related to capital investments during project implementation and for a specified time period following project implementation… Read more.
Money is NOT the Top Priority.
Is more money really the top priority for answering the infrastructure renewal issues of the U.S.? While the evidence suggesting that we need greater infrastructure renewal investment continues to increase, we are coming to the view that money is not the first step to solving our infrastructure renewal issues. We see improving justification for infrastructure investments as the starting point for finding the required funding.
A pair of recent KPMG surveys provides some important perspectives to better understand these issues. This article will highlight the differences in those perspectives and provide some guidance of where to get started in improving your agencies justification process.
Frontline-Views-from-Infrastructure-Providers
The-Changing-Face-of-Infrastructure-public
The KMPG surveys asked both public sector infrastructure executives and private infrastructure providers: “Which of the following are the greatest public sector impediments to more infrastructure investment? “
Decisions, Decisions, Decisions… Make or Buy. The Public Sector. One of the most complex and ignored examples of the “Service Industry” and associated “Service Economy”.
The age old question for many cities (as is the case in private industry) is whether to purchase or build the tools its needs to manage their operations…. the old “make or buy” decision. The factors driving that decision are typically driven from both a technical/performance perspective and a financial perspective. In many instances these two perspectives are at odds with one another when evaluating them from the 50,000 foot perspective.This was truer several years ago when the availability of tools capable of meeting the needs of a city were to say the least scarce.
So what are the realistic evaluative factors to be considered? Obviously when one considers the technical or performance factor one needs to determine whether there exists a Commercial Off the Shelf (COTS) product that satisfactorily meets the needs of the city or agency that will be the end user.In making this determination one needs to be pragmatic about what meeting those needs really means.It is highly unlikely that any COTS product will meet the needs and requirements of an organization 100%.So the question here becomes what % of need is met by the product under consideration, and is that performance level acceptable? The problem in this instance is that this question in and of itself does not address the full range of issues associated with making the critical determination of whether the best solution is to “Buy” a product or to “Make” the product… Read more.
The Capital Program Management (CPM) Wars… A Pragmatic Perspective What’s the “Killer Arsenal”… The Silver Bullet, The Best of Breed, or is there an Alternative?
Some would argue that the killer IT arsenal is the collection of “Best of Breed” solutions.Others would argue that what is needed is the “Silver Bullet” solution … the single application that does it all. For the sake of Reality, let’s do something really radical. Let’s look at this question from a pragmatic, or even worse, (dare we say it), a “common sense” approach. I always liked the “common sense” approach to things, ever since my father told me to… “You have about as much common sense as…” but that’s another story. At any rate, let’s examine these solutions in terms of the environment they must exist in, the needs and objectives to be met, and the strengths and weaknesses of each, all with an eye toward determining the most effective arsenal to successfully conduct the CPM wars. Are these or should these be the weapons of choice? Is there an alternative?
First, make no mistake, defining and getting approval (including funding) for the Optimal Capital Program, and ultimately managing that Capital Program throughout its lifecycle is a “War”. When one considers the complexity of the process, the number of diverse “stake holders”, the broad spectrum of information and data required and their diverse sources, the funding constraints, the dynamics or to be more precise the unstable economic and social conditions defining the overall environment that these Capital Programs are meant to address; to categorize Capital Program Management (CPM) as anything but a “War” is not giving it its due. CPM requires an arsenal of tools capable of addressing the Financial, Portfolio, Project, and Planning elements of a Capital Program(s).
What can Capital Program Management (CPM) and Processes Mean to The Bond Rating of a Municipality?
As was evident from ASCE’s 2005 Report Card for America’s Infrastructure as reported in CIPPlanner’s ACE June Newsletter the infrastructure across the U.S. is in a major state of disrepair. As a result, the need of municipalities to address this issue has become a critical driver in setting the agenda and direction that they are to take over the next 5 – 10 years. In fact a number of municipalities have embarked upon a task of establishing 10 and 20 year planning horizons in an effort to understand the magnitude and impact of this challenge.The underlying question faced by municipalities across the U.S. is very straight forward…. where will the money come from and how will it be managed going forward?
Obviously there are numerous fund generating sources available to municipalities to address this challenge including taxation, revenue generating projects, grants from the Federal and State governments, and Municipal Bonds. Each of these options carries its own set of issues, constraints, benefits, and risks and each deserves its own “time”. Having said that, this white paper will address the alternative of Municipal Bonds as a means of raising the necessary initial capital to undertake the financing of a city’s or municipality’s capital program and will do so in the context of Capital Program Management (CPM) including the process required to effectively plan and implement Capital Programs. This paper will not attempt to evaluate or comment upon the metrics, performance indicators, or criteria used in determining a Municipalities Bond Rating and in turn its probability of securing the financing necessary to meet its objectives and needs.
Capital Improvement Program Optimization
The state of infrastructure across this nation has become a critical factor relative to its well being. This is a rather broad brush statement but if one considers the changes that have taken place in this country over the last ten years alone, one can see drastic shifts in economic and socio/political demographics in this country which have redefined its infrastructure needs. Add to this the impact of technology adoption on a global level, and it becomes quite clear that the ability to manage our nation’s infrastructure lifecycle (Infrastructure Lifecycle Management) must be considered a key element and competency for this nation to maintain its global leadership position.
An assessment of this nation’s infrastructure conducted by the American Society of Civil Engineers (ASCE) resulted in ASCE’s 2005 Report Card for America’s Infrastructure. The report card assessing the same 12 infrastructure categories as done previously in 2001 augmented by 3 new categories showed that there had been little if any improvement since receiving an overall grade of D+ in 2001 with some areas slipping toward failing grades. Figure 1.1 displays the findings of this assessment as represented in the ASCE report card.
Capital Project Monitoring… Commentary on the GFOA Best Practices.
This is the first of a seven part series on recommended practices on Capital Project Monitoring. CIPPlanner Corporation strives for better Capital Program Management for our customers. As we reviewed the GFOA recommended practice released last October, we were excited that the GFOA is making concrete strides in articulating exactly how to do this. Our perspective in working intimately with local governments and agencies as they implement our software puts us into day to day contact with the subtle issues that are the tips and tricks of helping the rubber meet the road in implementing the GFOA’s recommended practices. This article seeks to point by point analyze the recommended practice and offer up our warnings, tips, tricks and recommendations about how to get the most out of those practices.
The first element of the recommended practice focuses on:
Identify and incorporate jurisdictional and fiduciary requirements into capital project monitoring and reporting.
Because finance officials are typically entrusted with ensuring that capital project activity is consistent with applicable laws and organizational rules and procedures, initial efforts should focus on understanding requirements related to:
- Auditing and financial reporting consistent with generally accepted accounting principles and jurisdictional accounting and grant requirements.
We find that tracking of project financials are critical to Capital Program Management at large. Key challenges that we find are the limitations of current tools such as general ledger financial systems which are focused on a static chart of accounts for the transactions and not cost breakdown structures that are needed to both estimate and then track the implementation of a project. These breakdowns need to be both intuitive and meaningful. As an example, cost breakdowns are a critical element of “Earned Value”, which is a primary performance metric for monitoring the “health” of a Capital Project.
Seven Part Series on the GFOA Best Practices.
Our special multi-part series regarding commentary on the GFOA best practices.
Complete Seven Part Series:
Download (PDF, 473 KB)
To see how CIPAce can fulfill many of the GFOA practices, please visit the following link: