A little management with that asset, please

How is asset management different from maintenance management? What is the best way to get it done? What are outside benefits? These and other questions answered.

By Jim Thorne, P.E.
Columnist, Public Works Online

I have heard and thought about this term "asset management" for a while since hearing it is the new thing in public works. I struggled a bit trying to define and put in my own words what this asset management thing did. I understood asset (I think). It's a physical, touchable thing that has value. It is something useful. In the finance world it may be viewed as something that can be converted into cash.

Defining what the management aspect included got lost among some abstract concepts floating around in my head. What is managing an asset? I looked up "manage" in the dictionary thinking that would clarify the definition and found a few choices:

• To bring about, succeed in accomplishing.
• To have charge of, or responsibility for.
• To dominate or influence.
• To handle, direct, govern, or control in action or use.
• To wield (a weapon, tool, etc.).
• To contrive to bring about or accomplish despite hardship or difficulty.

Hmmm, I guess I would pick a combination of the second and the fourth definitions, though I am intrigued about the one that would lead you to wield the asset like a weapon. Do agency personnel fall within this asset management definition?

Key is timing maintenance for best results
I knew this asset management thing was related to maintenance management and I am familiar with the idea of pavement management systems. Common sense stuff. You inventory those things for which you are responsible, you assess their condition and need for repair, make some decisions about how to invest your money in these facilities to have the greatest impact, and then start doing things. Seal cracks in the pavement, clean the ditches, provide an overlay before the road deteriorates further, etc. The challenge is timing the maintenance activity to get the best return on your investment.

How is asset management different?
So what is asset management and how is it different from maintenance management? Most of the articles I have read about asset management also talk about GASB 34. The Governmental Accounting Standards Board (GASB) says state and local governments should report their financial health as though they are private sector organizations and this includes accounting for all of their capital assets. These assets need to be inventoried and some value attached to them. Statement No. 34 - Management's Discussion and Analysis - for State and Local Governments (GASB 34) is the document that defines how governments should report their assets. Target dates push this standard toward implementation in larger organizations first as indicated below:

• Phase I: Governments with total revenue of $100 million or more begin with the fiscal year after June 15, 2001).
• Phase II: Governments with total revenue of $10 million are to begin with the fiscal year after June 15, 2002.
• Phase III: Governments with total revenue under $10 million are to begin with the fiscal year after June 15, 2003.

Dates apply to new infrastructure only
These dates apply to newly acquired or built infrastructure. Governments have four additional years to report on all pre-existing assets. Don't move this asset management idea out of your short-term memory because you are thinking you have at least four years until you have to begin dealing with this issue. There are steps you will likely want to take now to put your organization in the best position for assessing the value of your community's public works assets. And most of the reasons for doing asset management will likely have nothing at all to do with accounting.

GASB 34 provides two ways of assessing
GASB 34 provides two choices for assessing a value for assets. The depreciation method is the simplest but does not account for maintenance efforts and expenses and the effect they have on the useful life of the facility. The modified valuation method considers the impact of the investment in maintenance and GASB 34 has three guidelines for application of this method. If you have a pavement management system they will sound familiar:

1. maintain a current inventory of all assets;
2. evaluate and report on the condition of all assets at least every three years; and
3. estimate annual maintenance costs.

Has it been made too complicated?
Maybe I made this asset management thing too complicated. Maybe asset management is just the latest term for something many public works managers have been doing to some degree for years. Yes, it may be broader in scope and require more effort (data collection, analysis, interaction with other departments, etc.) than common infrastructure management methods, but the concept seems consistent with the idea of taking care of the things you are responsible for in the most effective manner.

I have had the good fortune to meet and talk with a lot of public works professionals across the U.S. and Canada. I can think of no exception to the observation that all took their responsibilities seriously. There were frustrations with the continuous beat of doing more with less, new unfunded mandates, changing federal or state requirements, and all the other day to day obstacles that present themselves. But the unanimous sentiment seems to be "let's get the job done".

So what does getting the job done mean when talking about asset management? I think it means doing what you have been doing, but maybe with a slightly different perspective. Take a step back to see a bigger picture and think more broadly about how the public works assets of your community affect the quality of life in your community. Do you think the average citizen has any concept of the cost to build, operate and maintain the infrastructure to the level of service that they expect? Do you know the answer to that question if asked? Add up all the roads, sidewalks, sewers, signs, street lights, bridges, tunnels, and traffic signals, for starters. And what about parks, trees, public rights-of-way (that may contain a million or so different utilities), street furniture, bus shelters, easements, and all the other stuff that is part of the public works environment.

What are the trade-offs, or what-ifs, associated with putting more funding into street maintenance, or into storm sewers, or into new traffic signal systems, or street sweeping, or public parks, and so on. Can you assess the value that these public works investments add to the community? A few possible scenarios:

• smoother, longer lasting pavements; less pothole patching; fewer customer complaints.
• smarter traffic signals, more efficient traffic flow, less air quality emissions, less congestion, fewer customer complaints.
• cleaner streets; cleaner storm water runoff; less impact on receiving waters, better fishing.

Now's a good time to implement GIS
Can you integrate all of these different public works elements into an asset management system? If you have not started down the road to implementing a geographic information system (GIS), asset management would be a good reason to head in that direction. I certainly would not want to try to do this in my head, or with a stack of index cards. Asset management may lead a public works manager to evaluate how new technologies can facilitate data collection and management. Global positioning system (GPS) devices can be used to inventory and accurately locate assets in the field. A GIS can be used to integrate all of the various asset data into a corporate database. The value of such a tool goes far beyond satisfying GASB 34.

Some outside benefits seen
More than meeting some financial reporting requirement, I think this concept of asset management can benefit local governments and the communities they serve by bringing to the foreground the impact of investing, or not investing, in the infrastructure that we all tend to take for granted. It may also help to broaden the application of established good practices, such as maintenance management systems or geographic information systems. This may occur both in the number of organizations that use them and in the types of facilities to which they are applied.

Public works officials operate in a complicated environment. Assess management is a hot topic now and will likely affect most public works departments. The details of how it is best accomplished and what is included will evolve over time. The challenge will be to take advantage of this concept and move toward a better way of making decisions about how to invest limited resources (time, money, staff, etc.) in our communities.

Following are a few web resources available for additional reading on this topic:

American Public Works Association
http://www.apwa.net

Federal Highway Administration, Office of Asset Management
http://www.fhwa.dot.gov////////infrastructure/asstmgmt/index.htm

Government Accounting Standards Board
http://www.gasb.org

Government Finance Officers Association
http://www.gfoa.org

National Association of State Auditors, Comptrollers, and Treasurers
http://www.sso.org/nasact/GASB%2034/icgasb.htm

About the author: James D. Thorne, P.E., is a civil engineer whose work experience has included transportation planning and engineering as well as serving as director of research for the American Public Works Association during the 1990s. Among the topics that he has researched and written about are: public works management practices, storm water management, utility cuts, highway and utility coordination, geographic information systems, transportation finance, and road maintenance.