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EXECUTIVE SUMMARY 1 Executive Summary BACKGROUND The federal government owns approximately 500,000 facilities and associated infrastructure worldwide. Facilities are complex structures with numerous separate but interrelated systems and components. Inevitably, over time the performance of facilities declines due to aging, wear and tear of systems and components, functional changes, and a variety of other factors. The life of facilities can be optimized, however, through adequate and timely maintenance and repair. Conversely, delaying or deferring maintenance and repairs can, in the short term, diminish the quality of services and, in the long term, lead to shortened facility life and reduced asset value. The existence of deferred maintenance is significant because it implies the quality and reliability of service provided by infrastructure on which maintenance has been deferred is lower than it should be, and thus the infrastructure is not, or will not later be, adequately serving the public (The Urban Institute, 1994). 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. STUDY ORIGIN The FASAB has determined that information about deferred maintenance is of importance to users of federal financial reports and for measuring an agency's efficiency and effectiveness in managing property, plant and equipment. Recognizing that this is a 1 The Federal Accounting Standards Advisory Board was established in October 1990 by the Secretary of the Treasury, the Director of the Office of Management and Budget, and the Comptroller General of the United States. The board was created to consider and recommend accounting standards and principles for the federal government to improve the usefulness of federal financial reports.