Simply good business

James R. McKinnon
J.R. McKinnon Consulting
Columbia, Missouri

The subjects of self-assessment/accreditation, asset management, and Governmental Accounting Standards Board Statement 34 (GASB 34) have become common topics for discussion among groups of public works professionals. At first glance, the self-assessment/accreditation program developed by APWA does not seem to be relevant to the other topics. However, there is a common goal shared by the subjects: organizational improvement and the increased efficiency of public works agencies.

APWA's Public Works Management Practices Manual is the basis for a self-assessment program designed by and for members of the public works community. The manual states, "The objectives of the program are to:

  • Create impetus for organizational self-improvement and stimulate a general raising of standards.
  • Offer a voluntary evaluation and education program rather than government regulated activity.
  • Recognize good performance and provide motivation to maintain and improve performance.
  • Improve public works performance and the provision of services.
  • Increase professionalism.
  • Instill pride among staff and the local community."
More than 400 recommended management practices provide an outline of the policies and practices that are required for a public works agency to function in a more organized manner. The Public Works Accreditation Process Guide states, "The recommended practices provide a series of statements and commentary designed to help an agency conduct a self-examination of each aspect of its performance and determine how the practice ensures effective delivery of public works services."

As a member of the Accreditation Committee for the City of Columbia, Missouri, Public Works Department, I believe wholeheartedly that any agency that conducts a self-assessment will reap benefits far in excess of the time and effort that is invested in the program. As an agency reviews the recommended practices contained in the manual, it becomes apparent that gathering and creating written documentation in support of the recommended practices is, in effect, creating an operations manual for the department. This collection of written guidelines (or references to sources) provides answers to questions of what does the department do (levels of service), and how does it accomplish specific tasks (sequence of events and responsibilities).

Some of the people who I have spoken with about the accreditation program voice concerns about the huge scope of the process. I believe everyone who has been involved in the accreditation of an agency will confirm that it is a tremendous undertaking and requires substantial investment of resources. Maybe we have placed the cart before the horse in the way many of us view the program. The primary purpose of the Management Practices Manual is to provide a means by which an agency can become better managed, and thereby more effective and efficient. The realization of the purpose is unrelated to accreditation, and does not require an agency to complete a self-assessment within a specific period. The key issue that may have become obscured to some of us, is that the manual supplies us with a tool to be used for the continuous improvement of our agencies. Even if an agency addresses only a limited number of its practices per year, the primary purpose of the Management Practices Manual is fulfilled, and the agency will be a better organization.

Asset management has been defined by the American Association of State Highway and Transportation Officials and the Federal Highway Administration as, "...a systematic process of maintaining, upgrading, and operating physical assets cost-effectively. It combines engineering principles with sound business practices and economic theory, and it provides tools to facilitate a more organized, logical approach to decision-making."

Many agencies became interested in pavement management, an early form of asset management, because of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). It was a catalyst for changing our philosophy on management systems. Before ISTEA, many considered management systems to be flashy (and expensive) frills. By the mid 1990s, transportation professionals were convinced that pavement management systems were well worth the investment required for their purchase, implementation, and maintenance. It is widely accepted that $1.00 of properly planned maintenance will prevent expenditures of $6.00 (or more) for extensive rehabilitation.

The asset management systems of today are capable of storing staggering amounts of information on an agency's assets including buildings, streets, bridges, sewers, trees, signs and plant facilities. In order to provide accurate cost information, most systems also maintain information on employees, equipment, vehicles, materials, and contractor costs. Asset management systems can supply the means to analyze your entire maintenance operation, to confirm that you are providing services effectively and efficiently, or to help you to identify areas that need improvement.

The cost of computer-based management systems has become more defensible in recent years. Computers, servers, networks, and implementation costs are still significant, but as the number of agencies purchasing systems has increased, so have the stories of substantial savings through increased productivity and more efficient/effective use of financial resources. It is now somewhat routine to find articles relating stories of an agency's ability to reduce maintenance and asset replacement costs by 20 to 30 percent through the use of an asset management system.

The final subject, though certainly not the least discussed, is GASB 34. The accountability of public operations has gained the attention of citizens across the United States. The Asset Management Primer states, "Public skepticism of government, combined with an increasing preference in recent years for using private-sector management approaches in the public sector, has led to demands that government be more accountable and operate more like business." Management systems provide data that can reduce the skepticism of the public. Accurate records of what is done and what it costs are much more defensible than lump-sum maintenance cost figures.

It is the intention of Governmental Accounting Standards Board Statement 34 to provide the public with an accounting of public assets, and what resources are required to maintain them. In Primer: GASB 34 it states, "The changes spurred by GASB Statement 34 are not only significant for public accounting, and therefore the financial markets, but are also important because they alter the way state and local governments offer financial information to the public. Finally, and importantly for the transportation community, the Statement encourages a mechanism by which the traveling public can be kept informed about the infrastructure issues of concern to them." It is safe to say that agencies that have, or are implementing asset management systems are fairly well prepared for the changes that GASB 34 will require. An optional reporting system contained in GASB 34, the "Modified Approach," is defined within the GASB-34 Implementation Guide and states in part, that the management system should:

a. "Have an up-to-date inventory of eligible infrastructure assets;

b. Perform condition assessments of the infrastructure assets and summarize the results using a measurement scale;

c. Estimate each year the annual amount to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by the government."

The Asset Management Primer states, "An Asset Management system will report on progress made in achieving goals and will also evaluate the process relative to the goals...The focus is on assets (dollars, people, and physical resources) and system performance and includes return on investment, maximizing economic efficiency, accountability, opportunity costs, and future requirements." Looking past the additional reporting requirements contained within GASB, many of us in the public works field view it as further justification to acquire the tools we need to operate efficiently, and to provide the public with verifiable data.

Aside from the public pressure and mandates, self-assessment/accreditation, asset management, and the opportunities that GASB 34 provides are simply good business practices, and that is of interest to everyone.

References

American Public Works Association (APWA). Public Works Management Practices Manual - Second Edition, 1995.

American Public Works Association (APWA). Public Works Accreditation Process Guide, 1998.

U.S. Department of Transportation, Federal Highway Administration. Asset Management Primer, 1999.

U.S. Department of Transportation, Federal Highway Administration. Primer: GASB 34, 2000.

Financial Accounting Foundation, Governmental Accounting Standards Board. Implementation Guide, 2000.

James McKinnon has a Master's Degree in Public Administration; was the Accreditation Program Manager for the Public Works Department of the City of Columbia, Missouri; has given numerous presentations on asset management; and provides consulting services to public sector organizations. He can be contacted at (573) 817-1425 or by email at www.nfrastructure.org.