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Suggested Citation:"REASONS FOR DEFERRING MAINTENANCE AND REPAIRS." 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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Suggested Citation:"REASONS FOR DEFERRING MAINTENANCE AND REPAIRS." 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 10

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INTRODUCTION 9 Preventive maintenance has been defined as the planned scheduled periodic inspection, adjustment, cleaning, lubrication, parts replacement, and minor repair of equipment and systems for which a specific operator is not assigned (FFC, 1996). It consists of many checkpoint activities on items that, if disabled, would interfere with an essential installation operation, endanger life or property, or involve high cost or long lead time for replacement. Programmed major maintenance includes those maintenance tasks that are planned to occur on a multiyear cycle, such as every three or five years. Examples include painting, roof maintenance, road and parking lot maintenance, and utility system maintenance. Predictive testing and inspection refers to activities that involve the use of specialized tests, such as ultrasonic testing, infrared thermography, vibration analysis, and lubricant and wear particle analysis, to identify maintenance requirements (FFC, 1996). Routine repairs and replacements include actions taken to restore a system or component to its original capacity. The need to replace an item or system may arise from obsolescence, cumulative effects of wear and tear, premature service failure, or destruction by fire and other hazards (NRC, 1990). Replacements do not significantly increase the capacity of the item involved and would be considered routine repairs if they are required for the continued operation of a facility (FFC, 1996). Service calls include requests for system or equipment repairs that are unscheduled and unanticipated. They are generally received when a system or component has failed. Systems or components not included in a preventive maintenance program are candidates for run-to-failure repair (unplanned), programmed major maintenance (planned), or planned maintenance and repair based on condition and need. Typically, components included in a run-to-failure strategy are small noncritical components that can be repaired or replaced on a service call (FFC, 1996). REASONS FOR DEFERRING MAINTENANCE AND REPAIRS Maintenance and repairs for federal facilities are deferred for many reasons. These issues have been documented in the report Stewardship of Federal Facilities: A Proactive Strategy for Managing the Nation's Public Assets (NRC, 1998). They include: • A focus on design and construction costs, the so-called first costs of facilities ownership, as opposed to life-cycle costs, in the federal budget process. • Inadequate funding for maintenance and repairs. • Aging facilities that require increased levels of maintenance and repair to keep them operating effectively. • Lack of information that would assist facilities program managers in making compelling arguments for maintenance and repair budgets to decision makers. • Lack of accountability for stewardship. 2 2 See Appendix A for excerpts from the Stewardship of Federal Facilities report.

INTRODUCTION 10 As of 1998, the cost to substantially reduce total deferred maintenance for federal facilities was estimated to be in the tens of billions of dollars. 3 In the past, public officials have called into question the methodologies that federal agencies used to define building deficiencies and to calculate the costs involved in repairing them. Officials have also expressed concern that agencies included inappropriate items in the maintenance backlog to increase the overall estimate and argue for larger budget appropriations (NRC, 1998). Several causes have been noted for these concerns. First, prior to 1996, there was no government-wide requirement to report deferred maintenance. Thus, the responsibility for developing methodologies fell to individual agencies. FASAB Standard Number 6, as amended, seeks to address this issue. Second, fundamental differences exist among accounting structures used to track expenditures for maintenance and repairs from agency to agency. These differences influence maintenance and repair practices and how deferred maintenance is quantified. For example, the General Services Administration (GSA) uses two accounts: Operations and Maintenance and Repairs and Alterations. GSA's Operations and Maintenance account includes operations, maintenance, and maintenance repairs (up to a certain dollar threshold), and the Repairs and Alterations account includes all repairs, replacements, improvements, and alterations in excess of a certain dollar threshold with no upper limit. At the National Institutes of Health (NIH), the various institutes are assessed a given amount each year to cover the cost of maintenance by government personnel and minor repairs by contractors. NIH also receives a direct appropriation from Congress as part of the Building and Facilities Budget to cover major repairs and improvements by contractors. The Smithsonian Institution has three categories of maintenance and repair accounts, the State Department has four. The National Aeronautics and Space Administration (NASA) is funded for human space flight, science and technology, and mission support; major programs in the agency fund field installation activities, including maintenance and repair (FFC, 1996; NRC, 1998). An example from the University of Virginia (UVA) illustrates how accounting structures can influence facilities maintenance and repair practices. Prior to 1996, if a UVA facility had a malfunctioning sprinkler system it could be identified as a deficiency, and maintenance funds could be used to repair it. However, if a facility had no sprinkler system yet needed one, it could not be paid for from maintenance funds and therefore could not be identified as a deficiency, an “all-to-common scenario [which] made for a dramatically inaccurate backlog total and campuswide FCI [facilities condition index]” (Syme and Oschrin, 1996). Similar scenarios arise in federal agencies and can lead to substantial differences in calculating dollar amounts of deferred maintenance for facilities. Third, there are no government-wide standards for determining items that are appropriately included in maintenance and repair budgets/accounts. This stems in part from the accounting systems and from overlaps and gray areas of maintenance and repair work, operations, and alteration projects. For example, some government facilities 3 FFC sponsor agencies reported in their 1998 accountability reports the following deferred maintenance amounts: Department of Energy, $927 million; Department of the Interior, $7 billion to $16 billion; Department of State, $155 million; NASA, $1.4 billion; Department of Defense, $37 billion; Indian Health Service, $438 million.

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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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