Appendices to a Review of DOT Compliance with GASB 34 Requirements (2004)

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NCHRP 19-04 PB Consult Inc. Appendix B: GASB 34 Survey Answer Matrix Codebook Appendix B serves as a guide for Appendices C and D. The question numbers in this appendix are column headings in Appendix C and reference comments made by each state regarding various questions in Appendix D.

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 1 1 Mark the most challenging issues that the DOT faced in implementing the infrastructure provisions of GASB 34 (mark all that apply) Value Label 1 Deciding which reporting method - depreciation or modified approach - to use. 2 Developing a methodology to establish historical cost or current value. 3 Accounting for additions to and retirements from the system. 4 Establishing a methodology for computing depreciation. 5 Determining the estimated lives for various asset classes 6 Determining whether expenditures should be expensed or capitalized 7 Identifying ROW costs. 8 Finding accurate data to use in establishing or estimating historical cost or current value. 9 Converting data to a format that could be used in reporting. 10 Establishing accurate inventory figures. 97 Other: Comment 1A Of those answers you selected in question # 1, which ONE did you consider to be the most challenging issue? Value Label 1 Deciding which reporting method - depreciation or modified approach - to use. 2 Developing a methodology to establish historical cost or current value. 3 Accounting for additions to and retirements from the system. 4 Establishing a methodology for computing depreciation. 5 Determining the estimated lives for various asset classes 6 Determining whether expenditures should be expensed or capitalized 7 Identifying ROW costs. 8 Finding accurate data to use in establishing or estimating historical cost or current value. 9 Converting data to a format that could be used in reporting. 10 Establishing accurate inventory figures. 97 Other: Comment 2 What reporting method did you principally use for infrastructure assets (excluding buildings and equipment)? Value Label 1 Depreciation 2 Modified 3 Combination of both 2A [If Q2=depreciation] Did you seriously consider using the modified approach? Value Label 1 yes 2 no 2B [If Q2=modified] Did you seriously consider using depreciation? Value Label 1 yes 2 no 3 Were there different perspectives in your agency among the engineers, planners and finance people about the reporting method selected? Value Label 1 yes 2 no

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 2 3 [If Q3=Yes] Specify 4 In what year did the DOT begin its GASB 34 infrastructure implementation initiative? 5 Do you expect to change your approach to reporting infrastructure assets within the next 5 years? Value Label 1 yes 2 possibly 3 no 5A [IF Q5= yes or possibly] If you plan to change your approach or are considering it, please explain why. 6 Has the DOT noticed any significant increase in the activities of any auditor group (external, internal, legislative, etc.) with respect to the infrastructure requirements of GASB 34? Indicate the nature of the increased auditor activities the DOT has noticed. (mark all that apply) Value Label 1 Advising on the development of procedures over infrastructure assets 2 Evaluating (asking questions about) internal control over infrastructure assets 3 Comparing infrastructure listings with information included in maps or similar public documents 4 Testing the historical cost of infrastructure assets 5 Testing the calculation of depreciation expense 6 Observing condition assessments 7 Advising on the form and substance of the GASB 34 required information 8 Evaluating the method to calculate asset useful life 97 Other: Comment 98 None 6 If Other, specify 7 Regardless of the method your agency uses, which reporting method do you feel is more challenging to implement and report? Value Label 1 Modified approach 2 Depreciation 3 Neither is more challenging 8 Which method do you feel is more helpful to making financial and management decisions? Value Label 1 Modified approach 2 Depreciation 3 Both are equally helpful 4 Neither is helpful 9 Was determining ownership of infrastructure assets ever a significant issue during GASB 34 implementation? Value Label 1 yes 2 no 9 [If Q9=yes] Specify

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 3 10 Are all transportation infrastructure assets operated and/or managed by the state accounted for in the State DOT’s reporting? Value Label 1 yes 2 no 10A If Q10=no, why are all assets not accounted for? (mark all that apply) Value Label 1 Some assets are owned by other agencies. 2 Some assets are owned by localities and not included in the state’s financial reports. 3 Some projects, jointly constructed by the DOT and another political subdivision, are accounted for, at least partially, by the other political subdivision. 11 Does DOT transfer ownership of assets to localities or other political subdivisions? Value Label 1 yes 2 no 11A [If Q11=yes] If yes, does the State DOT continue to report these assets in financial statements? Value Label 1 yes 2 no 11B [If Q11A=no] If No to question # 11a, how are the assets valued at time of transfer? Value Label 1 Historical cost depreciated to the date of transfer 2 Historical cost without depreciation 3 Replacement value 4 Nominal value 7 Other: Comment 11B If Other, specify 12 What were the total estimated or actual costs involved in implementing GASB 34 requirements? Value Label Not Known 12A How many additional staff were hired to implement the infrastructure requirements of GASB 34? Value Label 0 None 99 Don’t know 12B How many hours of staff time were used in implementing GASB 34 requirements? Value Label 99 Don’t know

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 4 12C What role did outside consultants play in GASB 34 implementation? (mark all that apply) Value Label 1 None were hired 2 Historical cost estimates model validation 3 Organizational management 4 Inventory assessment 5 Auditing of financial reports 7 Other: Comment 12C If Other, specify 13 What was the single most important source used to clarify information about the implementation of GASB 34 infrastructure requirements? Value Label 1 GASB 2 National Association of State Auditors, Comptrollers and Treasurers 3 AASHTO workshops 4 Other State DOTs 5 Outside consultants 7 Other 13 If Other, specify 14 To what degree were existing automated financial / accounting systems modified? Value Label 1 Total system replacement (describe) 2 Major modifications (describe) 3 Minor modifications (describe) 4 No modifications needed 5 DOT has no automated systems in place related to GASB 34 6 DOT had no automated systems, new systems put in for GASB 34 14 Descriptions Q15 through Q24 asked only of those who selected Depreciation in Q2 15 Which issues were influential in selecting the depreciation approach? (mark all that apply) Value Label 1 Depreciation smooths the peaks and valleys of preservation costs. 2 The funding of preservation costs under the modified approach (recorded as an expense) with debt (recorded as a liability) could result in the reporting of a deficit. 3 Changing from the modified approach to the depreciation approach when condition targets are not met could result in the reporting of higher depreciation costs as the result of shorter estimated lives. 4 The use of the modified approach has a higher risk of making the DOT appear less favorable in comparison with other DOTs. 5 There was uncertainty in the ability to achieve target conditions. 6 The department does not have asset management systems adequate to provide the information required in the modified approach. 7 Other: Comment 8 None 15 If Other, specify

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 5 15A Of those answers you selected in question #15, which ONE did you feel had the greatest influence? Value Label 1 Depreciation smooths the peaks and valleys of preservation costs. 2 The funding of preservation costs under the modified approach (recorded as an expense) with debt (recorded as a liability) could result in the reporting of a deficit. 3 Changing from the modified approach to the depreciation approach when condition targets are not met could result in the reporting of higher depreciation costs as the result of shorter estimated lives. 4 The use of the modified approach has a higher risk of making the DOT appear less favorable in comparison with other DOTs. 5 There was uncertainty in the ability to achieve target conditions. 6 The department does not have asset management systems adequate to provide the information required in the modified approach. 7 Other 8 None 16 What methods of depreciation are used? (mark all that apply) Value Label 1 Straight line 2 Modified Accelerated Cost Recovery System 3 Declining Balance 7 Other: (specify) 16 If Other, specify 17 What policies have been adopted to allocate expenditures among the capital, preservation and maintenance categories? (mark all that apply) Value Label 1 If the expenditure increases the capacity or efficiency of an asset, it is treated as a capital asset. 2 If the expenditure extends the useful life of an asset, it is treated as a capital asset. 3 If the expenditure neither increases capacity/efficiency nor extends the useful life of the asset, it is a maintenance cost. 4 Capitalization thresholds are used to help determine if an expenditure is capitalized. 7 Other: (specify) 17 If Other, specify

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 6 18 Which of the following represent asset classes used in reporting with the depreciation approach? (mark all that apply) Value Label 1 Roads 2 Interstates 3 National Highway System 4 State Highway System 5 Bridges 6 Interchanges 7 Ferries 8 Tunnels 9 Buildings 10 Docks, piers, etc 11 Dams 12 Rail track and rail systems 13 Rolling stock 14 Signs and appurtenances 15 Equipment 16 Right of Way 17 Single infrastructure asset (entire network) 97 Other: Comment 18 If Other, specify 19 Does the State accounting system have the ability to break out costs by the asset class detail desired or required for financial reporting? Value Label 1 yes 2 no 20 How were useful lives of infrastructure assets determined? Value Label 1 Comparison with lives used by others 2 Actual internal experience 3 Use of outside appraisers, engineers, etc. 7 Other, including published guidelines 20 If Other, specify 21 How was the beginning value for depreciation established? Value Label 1 Historical construction costs 2 Current replacement value deflated to time of construction 3 Combination of both 7 Other 21 If other, specify 22 Are salvage values assigned to infrastructure assets? Value Label 1 yes 2 no

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 7 22 If yes, specify 23 Who made the final decision concerning the specifics of the depreciation method used such as the length of useful life, salvage value, etc.? Value Label 1 DOT's Chief Financial Officer 2 DOT's Chief Engineer 3 Committee within the DOT 7 Other 23 If Other, specify 24 Do you plan to report the condition of infrastructure assets being depreciated as supplementary information in the financial report? Value Label 1 yes 2 no

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 8 Q25 through Q31 asked only of those who selected Modified in Q2 25 Which issues were influential in selecting the modified approach? (mark all that apply) Value Label 1 The modified approach provides more useful information. 2 The modified approach is consistent with the DOT's asset management philosophy. 3 The depreciation method does not reflect the economics of financing infrastructure as reported to the public by the DOT (e.g., the smoothing effect of depreciation masks the peaks and valleys of preservation costs). 4 Estimated lives and related salvage costs used to compute depreciation are inconsistent with the characteristics of infrastructure assets. 7 Other 8 None 25 If Other, specify 25A Of those answers you selected in question #25, which ONE did you feel had the greatest influence? Value Label 1 The modified approach provides more useful information. 2 The modified approach is consistent with the DOT's asset management philosophy. 3 The depreciation method does not reflect the economics of financing infrastructure as reported to the public by the DOT (e.g., the smoothing effect of depreciation masks the peaks and valleys of preservation costs). 4 Estimated lives and related salvage costs used to compute depreciation are inconsistent with the characteristics of infrastructure assets. 7 Other 8 None 26 Was it difficult to convince people at the DOT or State that the modified approach would provide better information for financial reporting purposes? Value Label 1 yes 2 no 27 What policies have been adopted to allocate expenditures among the capital, preservation and maintenance categories? (mark all that apply) Value Label 1 If the expenditure increases the capacity or efficiency of an asset, it is treated as a capital asset. 2 If the expenditure extends the useful life of an asset, it is treated as a preservation cost. 3 If the expenditure neither increases capacity/efficiency nor extends the useful life of the asset, it is a maintenance cost. 4 Capitalization thresholds are used to determine if an expenditure is capitalized. 7 Other 27 If Other, specify

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 9 28 Mark all of the following that represent asset classes used in reporting with the modified approach. (mark all that apply) Value Label 1 Roads 2 Interstates 3 National Highway System 4 State Highway System 5 Bridges 6 Interchanges 7 Ferries 8 Tunnels 9 Buildings 10 Docks, piers, etc 11 Dams 12 Rail track and rail systems 13 Rolling stock 14 Signs and appurtenances 15 Equipment 16 Right of Way 17 Single infrastructure asset (entire network) 97 Other: Comment 28 If Other, specify 29 What determinations for the financial reporting of infrastructure assets under the “modified approach” were the most challenging for the DOT’s required supplementary information (paragraphs 132-133 of GASB 34)? (mark up to 3) Value Label 1 The frequency of performing condition assessments. 2 The estimated annual costs to maintain and preserve at (or above) the condition level established and disclosed by the government compared with amounts actually expensed. 3 The basis for the condition measurement and the measurement scale used to assess and report condition. 4 The condition level at which the government intends to preserve eligible infrastructure assets. 5 Factors that significantly affect trends in the information reported in the required schedules. 7 Other 30 How did you arrive at a historical cost for your assets? Value Label 1 Historical construction costs 2 Current replacement value deflated to time of construction 3 Combination of both 7 Other 30 If Other, specify

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 10 31 How was minimum acceptable condition policy determined? (mark all that apply) Value Label 1 Based on current condition 2 Based on previously held standards 3 Based on likely funding / budget scenarios 4 Decision made by DOT staff 5 Decision made by State staff 7 Other 31 If Other, specify Q32 through end are asked of all respondents 32 Who determined your policies for conforming with the infrastructure provisions of GASB 34? (mark all that apply) Value Label 1 The DOT's Chief Financial Officer 2 The DOT's Chief Engineer 3 A committee within the DOT 7 Other: (specify agency and/or position) 32 If Other, specify 33 What agencies (other than the DOT) were involved in GASB 34 infrastructure implementation? (mark all that apply) Value Label 1 State Auditor 2 State Comptroller 3 State Land Office 4 State Treasury 5 State Department of Natural Resources 6 State Office of Finance and Administration 7 Other: 8 None 33 If Other, specify 34 Did representatives from other state agencies (such as the The State Auditor’s Office or State Comptroller’s Office) disagree with the DOT on what reporting approach should be used for the infrastructure provisions of GASB 34? Value Label 1 yes 2 no 34 If yes, specify 35 Do you feel implementing GASB improved lines of communication among the engineering, finance, and maintenance departments? Value Label 1 yes 2 no

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 11 35A [If Q35=yes] Do you feel that improved lines of communication between engineering and finance departments (regarding infrastructure conditions) will improve how dollars are allocated between expansion and preservation? Value Label 1 yes 2 no 36 Is the information generated by the reporting of infrastructure assets being utilized by parties outside the DOT? Value Label 1 yes 2 no 36 [If Q36=yes] Specify 37 What internal expenses are included in the total actual or estimated historical cost of a typical project? (mark all that apply) Value Label 1 Design expenses 2 Environmental expenses 3 Administrative expenses 4 Transportation expenses (equipment, personnel, etc) 5 Internal expenses are not included in project costs 7 Other 37 If Other, specify 38 At what point are project costs capitalized? Value Label 1 When construction has started 2 When construction has finished 3 When project has opened to traffic 4 Upon approval of construction 5 Construction costs accrued each year capitalized that year 7 Other 38 If Other, specify 39 In which of the following ranges does the capitalization threshold fall? Value Label 1 No capitalization thresholds are employed 2 Less than $25,000 3 $25,000 to $75,000 4 $75,000 to $125,000 5 $125,000 or greater 7 Multiple thresholds for different classes of assets employed: (please list) 39 If multiple thresholds, list 40 What time period represents the years of cost data included in your DOT’s calculation of historical cost / current value? Enter the beginning year

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 12 41 What sources of information were used to establish the historical cost of infrastructure assets? (mark all that apply) Value Label 1 "AASHTO: The First 50 Years" 2 Financial Statements 3 Bond Records 4 Budget Records 7 Other 41 If Other, specify 42 What index was used to deflate the current replacement value of infrastructure assets to reflect the historical cost? Value Label 1 CPI 2 Federal Construction Cost Index 3 California Construction Cost Index 4 ENR Construction Cost Index 5 DOT did not use an index in its historical cost calculation 7 Other 42 If Other, specify 43 To what degree were existing condition assessment systems modified? (mark all that apply) Value Label 1 Total system replacement: (describe) 2 Major modifications: (describe) 3 Minor modifications: (describe) 4 No modifications needed 5 The DOT has no automated systems in place that are related to GASB 34 6 The DOT had no automated systems, but new systems had to be put in place for GASB 34 infrastructure implementation. 43 Descriptions 44 In response to GASB 34, in what new ways does the DOT intend to use the information from the condition assessment? (mark all that apply) Value Label 1 Has no new plans to use the information, other than to comply with GASB 34. 2 Aid in budgeting and funding requests. 3 Strategically allocate dollars to parts of the system with the greatest need. 4 Development of long range plans. 7 Other 44 If Other, specify 45 What is the primary cycle for inspecting different bridge structure based on span length? Value Label 1 Every year 2 Every two years 3 Every three years

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 13 45A Are there different cycles for inspecting bridge structures based on span length or other critieria? Value Label 1 yes 2 no 45A If yes, specify 46 What bridge management system does the DOT use? (mark all that apply) Value Label 1 In-house developed system 2 PONTIS 7 Other 8 None 46 If Other, specify 47 What is the cycle for inspecting pavements? Value Label 1 Continuously 2 Every year 3 Every two years 4 Every three years 5 More than every three years 48 How is inspection of pavements conducted? Value Label 1 Visual inspection by engineers 2 Instrumented vehicle or other pavement inspection equipment 3 Both 7 Other 48 If Other, specify 49 What pavement management system does the DOT use? (mark all that apply) Value Label 1 Vendor-supplied system 2 Vendor-customized system 3 In-house developed system 7 Other 8 None 49 If Other, specify 50 What is the total estimated value (book value) of your state’s highway infrastructure network? (If value is a range, provide the mid-point) 51 What is the total estimated current replacement value of your state's highway infrastructure network? (If value is a range, provide the mid-point)

Appendix B: GASB 34 Survey Answer Matrix Code Book NCHRP 19-04 PB Consult Inc. 14 52 Overall, what is the DOT's belief as to the usefulness to the state and other users of the information that will be generated due to the additional reporting requirements of GASB 34? (mark all that apply) Value Label 1 Useful in preparing budgeting and funding requests 2 Useful in strategically allocating resources 3 Useful in developing long range plans 4 Useful in making case for funding infrastructure 7 Other: (specify) 9 Not useful 52 If Other, specify C1 What is the MAIN issue you would like to see addressed as part of this study? COMNT Please use the space below to provide comments on any GASB 34 implementation issues. Note: If respondent provided comments to questions that were closed ended (either over the phone or on the paper survey form, those responses were recorded in this field. If that is the case, the comment begins by referencing the question number, then lists the comment(s).