GASB 34

Other Resources
The following resources are also available on this site:

Administrative Policy Infrastructure Maintenance GASB 34 Modified Approach

Slide Presentation: Infrastructure Implementation GASB Statement 34 - Modified Approach (This will open in a new window)

Slide Presentation: GASB 34: The Infrastructure and Asset Management Controversy (This will open in a new window)

Slide Presentation: The City of Saco Maine Implementation of GASB 34 Using The Modified Approach (This will open in a new window)

Slide Presentation: GASB 34 - A Brief Overview (This will open in a new window)

Slide Presentation: Saco Maine's Implementation Issues and the Infrastructure Controversy (This will open in a new window)

The City of Saco will be one of the first communities in the nation to comply with GASB 34 requirements thus assuring the community of a continual strong bond rating. Working together, the City's Finance Director, Lisa Parker and the City's Public Works Director, Larry Nadeau developed a plan of action that included the development of GIS-based asset management system to support the reporting requirements of GASB 34 (the city is meeting the requirements by implementing a solution that follows the modified approach). It is expected that the GIS-based asset management system will not only help the city meet their GASB 34 requirements but position them for long-term growth of a city-wide GIS that can serve multiple city departments. We are providing the following information to help other communities begin the process of implmenting solutions to meet GASB 34 requirements.

What is GASB 34?
Municipal officials involved with the management and maintenance of municipal infrastructure assets now have one more consideration - the Governmental Accounting Services Board's (GASB) Statement #34: Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. Among its many new provisions, GASB 34 requires that state and local governments begin to report on the value of their infrastructure assets including roads, bridges, water and sewer facilities, and dams.

GASB34 will require that infrastructure assets in the city are inventoried and inspected for condition assessment.

Statement #34 Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, issued in June of 1999, changes the reporting and accounting of public domain infrastructure fixed assets from optional to required. GASB has defined infrastructure assets to include "long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems. . ."

What Does GASB 34 Mean to Me?
In the past, governing bodies generally didn't depreciate their assets as the private sector does. Now, as a result of GASB 34 the public sector must change their accounting practices using one of two options: 1) depreciate assets over the estimated useful life of the asset or 2) use a "Modified Approach."

Under the depreciation method, GASB requires that historical cost depreciation be measured by allocating the net cost of depreciable assets over the estimated useful lives in a systematic and rational manner. Governing bodies can use any established method of depreciation that is based on the estimated remaining useful life of a class of assets, network of assets, subsystem of a network of assets, or an individual asset.

The Modified Approach was developed in response to input from such groups as the American Public Works Association. Using this approach, the governing body does not need to comply with the full accrual accounting approach (or depreciation). Instead, the option to have maintenance and preservation costs expensed in the period incurred can be used while the costs of additions or improvements that increase the capacity or efficiency of infrastructure assets should be capitalized.

Which Reporting Method Should I Use?
It is not clear which method will emerge as the best way to determine the costs of infrastructure. The depreciation method may be less costly to implement however it may be less appealing to public works directors. Directors may like to use the Modified Approach as a springboard to establish and implement asset inventorying and reporting goals. It may be possible to develop a strategy that considers the merits of both methods — a depreciation cost schedule with the addition of all the Modified Approach information in GASB 34's Required Supplementary Information. This may allow communities to avoid the three-year inspection schedule required under the Modified Approach while still demonstrating stewardship of their infrastructure assets.

The key to meeting GASB 34 requirements using the Modified Approach is having an Asset Management System with the following characteristics:

an up-to-date inventory of assets;

ability to perform condition assessments of assets and summarize these assessments using a measurement scale; and

annual estimates of the amount needed to maintain and preserve the assets at the level established by the jurisdiction.

When Should I Begin?
The schedule for complying with GASB 34 requirements differs depending on annual revenue. The following categories depict this schedule:

governing bodies with an annual revenue of $100 million dollars or more are affected the fiscal year beginning after June 15, 2001;

governing bodies with an annual revenue between $10 and $100 million dollars are affected in the fiscal year beginning after June 15, 2002; and

governing bodies with an annual revenue of less than $10 million dollars are affected the fiscal year beginning after June 15, 2003.

Now is the time to begin planning for GASB 34. Governing bodies must identify key decision issues such as:

How will assets be reported (depreciation schedules or the modified approach)?

How will inventories be established?

How will condition assessments be conducted?

What sources of information are available and what type of system will be used to maintain and report all asset related information?

Governing bodies, specifically Public Works/Engineering Departments need to compare their current system of managing and reporting data with improved systems that manage digital asset inventories (GIS), maintain condition assessments, and produce cost reporting.

Developing a Solution for the City of Saco
The City of Saco decided to implement the Modified Approach to meet their GASB 34 requirements. This was done for several reasons:

The City's Department of Public Works was seeking a solution that would help with long-term operations and maintenance of its infrastructure assets;

The City's Department of Public Works wanted accurate mapping of its infrastructure assets using GIS technologies; and

It is the city's intent to leverage the GIS data and asset management applications to support the city's overall GIS implementation plan.

GASB34 will affect how infrastructure assets are valued.

The project is being completed in several phases. The first phase of the project was to compile any infrastructure asset information that already exists such as CAD drawings and inspection reports. Fortunately, the city had completed a Combined Sewer Overflow Study for approximately 70% of the city so there was a lot of information to start with. Information for the remaining 30% of the city was compiled using a combination of Global Positioning System (GPS) surveys for location information and and inspection surveys for asset condition information. The City had also recently completed a roadway survey which supplied the information necessary for the management of the roadway assets.

The second phase of the project was to build a GIS database of all the mapping information and a separate database with all the inspection related information. Care was taken to ensure that the these data sets were formatted according to the structure of the selected Asset Management System.

In the final phase, all the information will be incorporated into the asset management system and the city will be trained on its use. Cityworks by Azteca Systems was selected as the asset management system because of its "tight" integration with the GIS database. Using the GIS as the primary interface to the asset management system, users will be able to access information about the characteristics and conditions of the infrastructure assets, generate work orders, and report the costs for maintaining assets at certain predetermined condition levels (this will be used for the GASB 34 reporting requirements).

Additional Information
For more information about GASB 34 and how the City is preparing to meet these requirements you can contact Lisa Parker at (207) 283-3303 or visit the links provided below.

Governmental Accounting Standards Board
Government Finance Officers Association - GASB 34 Forum