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Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended (2001)

Chapter: 3 Methodological Issues and Alternative Approaches for Calculating Deferred Maintenance for Facilities

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Suggested Citation:"3 Methodological Issues and Alternative Approaches for Calculating Deferred Maintenance for Facilities." National Research Council. 2001. Deferred Maintenance Reporting for Federal Facilities: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended. Washington, DC: The National Academies Press. doi: 10.17226/10095.
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Page 23

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DEFINITIONAL ISSUES AND POTENTIAL REVISIONS 23 3 Methodological Issues and Alternative Approaches for Calculating Deferred Maintenance for Facilities FASAB Standard Number 6, as amended, specifies two methods that can be used to calculate deferred maintenance for all classes of property, plant, and equipment: condition assessment surveys or a total life-cycle cost method. The standard states that “other methods” may be used but stipulates that the other methods must be identical or similar to the total life-cycle cost method or condition assessment surveys (FASAB, 1996). It is the federal agency management's discretion to determine which method to use. As noted in Chapter 2, developing definitions to apply to classes of assets with substantial variations in character, life cycle, complexity, and use can be problematic when applying them to a particular class of asset. Similarly, specifying methodologies for deferred maintenance reporting for different classes of assets can be problematic. An additional consideration is the level of resources required to implement these methodologies that will depend, in part, on the methodology itself and also on the availability of data. When data are available, the costs of implementation can be minimized. However, when the specified data are not available, the cost of gathering the data can be high, and this raises cost-benefit issues. Methodologies based on condition assessment surveys and total life-cycle cost are appropriate and valid for deferred maintenance reporting for facilities. However, several concerns were raised by the committee regarding specific aspects of FASAB Standard Number 6, as amended. One concern was that the standard implies or could be interpreted to imply that condition assessment survey data should be available for all facilities in an agency's inventory and that such data should be updated annually. In practice, the availability of condition assessment data varies from agency to agency. Data collection procedures also vary; typically, those agencies that have instituted comprehensive condition assessment survey programs reinspect facilities on a cycle of every 3 to 5 years or longer. A second concern was that the data elements required by the standard for the total life-cycle cost method are not reflective of facilities management practices and limit the use of this methodology for deferred maintenance reporting for facilities. This chapter focuses on issues related to methodologies for deferred maintenance reporting for facilities and describes additional approaches that are similar to condition

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In 1996 the Federal Accounting Standards Advisory Board (FASAB) 1 enacted Standard Number 6, Accounting for Property, Plant, and Equipment (PP&E), the first government-wide initiative requiring federal agencies to report dollar amounts of deferred maintenance annually. The FASAB has identified four overall objectives in federal financial reporting: budgetary integrity, operating performance, stewardship, and systems and control. FASAB Standard Number 6, as amended, focuses on operating performance and stewardship. The FFC Standing Committee on Operations and Maintenance has prepared this report to identify potential issues that should be considered in any future amendments to the standard and to suggest approaches for resolving them. The committee's intent is to assist the CFO Council, federal agencies, the FASAB, and others as they consider how best to meet the objectives of federal financial reporting for facilities.

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