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MUNICIPAL ASSET MANAGEMENT: WHAT IT IS AND WHAT IT MEANS TO THE MUNICIPAL MANAGER

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State and local governmental financial records are maintained according to standard accounting conventions called “generally accepted accounting principles” or “GAAP”. These principles or rules govern how and when governmental financial transactions are recorded and how they are reported in financial statements. All governmental accounting standards are set by a rule-making body called the Governmental Accounting Standards Board or GASB. In June 1999, GASB released a new rule known as Statement 34. Statement 34 radically changes the rules by which governmental financial statements are to be organized and presented to readers.

GASB's Statement 34 will have far-reaching impact on the management of public infrastructure. The Statement, in effect, forces disclosure for the first time, in both text and tables, of how well the community has been managing – preserving – its infrastructure base. For the first time, all infrastructure deployed or renovated since June 30, 1980 will be valued and reflected on the financial statements. A community must choose between 1) depreciating this value, based on the current condition of the asset, or 2) reporting the condition of the asset relative to a targeted level of service. In either case, the management paradigm of municipal management will likely expand over the next several years to embrace asset management as a core management competency.

Asset management is a body of management practices that seeks to get the most performance out of a system of assets over the life of the assets for the investment. A complete asset management system is made up of five component parts: 1) inventory, 2) assessment of condition, 3) valuation, 4) operations and maintenance management, and 5) system analysis and evaluation. A defined level of service for both the asset itself and for maintenance of the asset is core to effective asset management.

America's communities face a substantial challenge in providing for the adequate, sustained management of an increasingly aging and deteriorating infrastructure. Through its new reporting requirements, GASB's Statement 34 requires communities to begin to systematically disclose, then confront, that challenge. Municipal asset management is key to successfully meeting that challenge.
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Document Type: Research Article

Publication date: 2001-01-01

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