Maintenance Budgeting and Accounting Challenges for General Fund Departments*

infrastructure assets, and requires the government to perform condition assessments of the eligible assets, summarize the results using a measurement scale, and estimate each year the annual amount to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by the government. Given the amount of resources the modified approach would require and the variations and ambiguities in maintenance reporting that could arise, the City decided to implement the standard approach, while still ensuring full compliance with government accounting procedures. In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls, including the safeguarding of assets against loss from unauthorized use or disposition, and reliability of financial records for preparing financial statements and maintaining accountability for assets. The Controller's Office believes that the City's internal Maintenance accounting controls adequately safeguard assets and provide reasonable Budgeting and assurance of proper recording of financial transactions. Accounting Challenges for 2015-16 General Fund Depts. 2015-16 Civil Grand Jury Maintenance Budgeting and Accounting Challenges for General Fund Depts. CON :FINDINGS Response Template disagree with it, partially (explanation in next column) F:VII.2. The City does not have accounting and financial Controller The Controller's Office partially agrees with this finding. In developing and evaluating the City's accounting system, consideration is given to the systems and processes in place to accurately adequacy of internal accounting controls, including the safeguarding of determine and report the condition of its assets assets against loss from unauthorized use or disposition and the or the extent of its deferred maintenance. reliability of financial records for preparing financial statements and maintaining accountability for assets. The Controller's Office believes that the City's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. The City is now replacing its accounting and financial system, which includes an asset management module, slated to go-live in July 2017. The City's planned new financial system's asset management module includes such fields as City Asset Status, Condition Assessment, and Safety Assessment. Further, a maintenance management module is also being considered for a future phase, post go-live, and the findings noted herein could be considered as part of the functional specifications assessment. However, systems are in place in both the City's Capital Maintenance Planning Program and key enterprise agencies to model and track the Budgeting and state of deferred maintenance needs and expenses for City assets. Accounting Challenges for 2015-16 General Fund Depts. The Controller's Office disagrees with this finding. The City ensures the F:VII.3. The City's capital assets shown in its financial Controller disagree with it, wholly (explanation in next column) completeness and accuracy of its audited financial statement through statements may be overstated because its use of the comprehensive structure of internal accounting controls to provide a straight line depreciation assumes a longer asset reasonable assurance that the financial statements are free of material life span than is likely given the reduced life misstatements. Departments have the ability to reflect impaired asset impact of deferred maintenance. Maintenance value in the event it is materially different. The Controller continues to Budgeting and believe in the accuracy and completeness of the City's financial Accounting statements, as assured by the City's external financial auditors. Challenges for 2015-16 General Fund Depts. agree with finding The Controller's Office agrees with this finding. The Controller's Office F:VII.4. Existing data show that maintaining assets Controller recognizes the importance of making informed and economical decisions extends asset life and is cheaper than regarding the use and stewardship of public assets and resources. The prematurely replacing unmaintained assets. City's Capital Planning Committee (CPC) issues the Capital Plan report that lays out the City's infrastructure investment plans over the next 10 years, including mechanisms and models for funding, prioritizing, and reporting maintenance and renewal projects citywide. The CPC gathers departmental data and prioritizes maintenance and renewal projects, as well as identifies the City's deferred and emerging needs. To address the gap between its capital needs and the resources available, the CPC continues to explore various approaches, including revising funding benchmarks, leveraging the value of City-owned assets as debt-financing Maintenance vehicles, preparing projects for voter consideration at the ballot, forming Budgeting and public-private partnerships, and exploring new revenue sources. Accounting Challenges for 2015-16 General Fund Depts. 2015-16 Civil Grand Jury Maintenance Budgeting and Accounting Challenges for General Fund Depts CON: RECOMMENDATIONS Response Template 2016 Responses (implementation) Respondent #