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Suggested Citation:"4 Deferred Maintenance and Repairs as an Indicator of Facility Condition." 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 41
Suggested Citation:"4 Deferred Maintenance and Repairs as an Indicator of Facility Condition." 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 42

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DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY CONDITION 41 4 Deferred Maintenance and Repairs as an Indicator of Facility Condition FASAB Standard Number 6, as amended, is intended to help fulfill federal financial accounting standards for operating performance and stewardship. These objectives include addressing the efficiency and effectiveness of the government's management of its assets and identifying if the government's financial position improved or deteriorated over the period, among others. The accounting standards established to meet these objectives are intended to provide information to help assess the efficiency and effectiveness of asset management and report on asset condition. FASAB Standard Number 6, as amended, implies that the dollar value of deferred maintenance is a surrogate (estimate) for management's ability to maintain facilities. As noted in Chapter 1, the significance of the existence of deferred maintenance and repairs is that it may indicate that the quality and reliability of service provided by infrastructure are lower than they should be and that the infrastructure is not, or will not later be, adequately serving the public. However, a dollar figure alone does not indicate overall condition of facilities; it does not place the number in context with the size or value of an agency's facilities inventory; it does not allow comparisons across agencies because of the variation in size and composition of the inventories. For example, the Department of Defense (DoD) has reported $37 billion in deferred maintenance and repairs, while the National Aeronautics and Space Administration (NASA) has reported $1.4 billion. 20 Looking at these numbers, it is not possible to determine the overall condition of either agency's facilities inventory, whether DoD or NASA has a larger backlog in relation to the size of their respective inventories, whether the size of the backlog actually constitutes a problem or if it is of a size that might be expected given the number of facilities. A total dollar amount of deferred maintenance and repairs also does not indicate whether agencies are using the funds allocated to them efficiently or effectively. Finally, reporting a single annual number for deferred maintenance gives no indication whether the government's financial position has improved or deteriorated. To be meaningful, deferred maintenance and repair amounts need to be (1) used in conjunction 20 Deferred maintenance amounts reported in DoD and NASA 1998 accountability reports.

DEFERRED MAINTENANCE AND REPAIRS AS AN INDICATOR OF FACILITY CONDITION 42 with other indicators, (2) derived by each agency in a consistent manner over time, and (3) tracked over a period of time so that trends can be observed. Performance measures are critical elements of a comprehensive management system for facility maintenance and repairs. Determining how well the maintenance function is being performed or how effectively maintenance funds are being spent requires well-defined measures (NRC, 1998). A study by the National Research Council, Measuring and Improving Infrastructure Performance, found that “no adequate, single measure of performance has been identified, nor should there be an expectation that one will emerge. Infrastructure systems are built and operated to meet basic social needs, but those needs are varied and complex” (NRC, 1995). Therefore, the measures used to evaluate facilities and infrastructure performance should vary. The report goes on to state that “infrastructure performance is the degree to which infrastructure provides the services that the community expects of that infrastructure, and communities may choose to measure performance in terms of specific indicators reflecting their own objectives.” The report concluded that these indicators generally fall into three broad categories, measuring performance as a function of effectiveness, reliability, and cost. “Infrastructure that reliably meets or exceeds broad community expectations, at an acceptably low cost is performing well.” Although this was a study of infrastructure systems at the community level, the principle that the performance of facilities maintenance and management functions can and should be measured by the condition of the facilities inventory as measured against cost and effect on agency mission is also applicable to the maintenance and repair of federal facilities (NRC, 1998). The Department of Energy (DOE), in addition to dollar amounts for deferred maintenance, also collects at the assets level “annual required maintenance” and “annual actual maintenance,” and will be collecting “failure rate” and “availability.” The DOE uses replacement plant value with these other data elements, to calculate a Facility Condition Index to produce a more useful indicator of the health/status of a building or the agency's aggregate facilities inventory. These indicators will be tracked over time to help evaluate whether the condition of the entire inventory is improving or deteriorating. NASA also tracks a series of measures related to facilities maintenance. These include backlog of maintenance and repairs as defined in NASA's facilities maintenance performance metrics. They also include unconstrained annual maintenance and repair requirement, initial operating plan for maintenance and repair, annual maintenance and repair funding, cost of scheduled work, number of predictive testing and inspection “finds,” preventive maintenance and predictive testing and inspection completed versus scheduled, breakdown repair costs versus total maintenance and repair costs, significant facilities and systems failure costs due to constrained resources, and significant facilities and systems failure costs avoided by using predictive testing and inspection. Another indicator that might be used in conjunction with a dollar amount for deferred maintenance and repairs is deferred maintenance and repair as a percentage of current (or plant) replacement value of an agency's facilities inventory. This could be tracked over time to observe trends as long as an agency used a consistent methodology for calculating deferred maintenance and repair and current (or plant) replacement value. For example, using hypothetical numbers, if the current replacement value of DoD's facilities inventory is $740 billion and the deferred maintenance backlog is $37 billion, deferred maintenance would be equal to 5 percent of the current replacement value. If the

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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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