In 2009, every municipality in Canada will be required to record and report the value of all its assets. Local government and commercial software vendors with expertise in inventory asset management and public sector business processes are working hand-in-hand to develop effective solutions to prepare for the introduction of the new legislation. The Regional Municipality of Halton in Ontario is one such municipality.
Public Sector Accounting Board (PSAB) statements on Tangible Capital Assets – Section PS 3150 requires each municipality to report on its assets, including the original capital cost of each asset and its amortized value, based on the life of the asset. Assets include major capital infrastructure, such as streets and roadways, sewer and water lines, and parks facilities. According to the Canadian Society for Civil Engineering, these assets are valued at more than $1.6 trillion.
Compliance is mandatory: a municipality’s value is composed of its assets, and if assets are not clearly inventoried, the municipality’s debt rating could be adversely affected.
The challenge lies in taking an accurate inventory, calculating depreciation and incorporating record keeping system maintenance. Local governments will also need to consider their accounting system capabilities, determine who will be responsible for different parts of the capital asset accounting system, and establish the necessary changes to policies and procedures to comply.
A few years ago, Halton Region decided sound management of its assets wasn’t just a looming compliance issue, but good business practice. Instead of simply treating the upcoming PSAB PS 3150 requirements as a financial bookkeeping exercise, it approached the notion of an integrated asset management/asset report program as a strategic imperative to the Region.
Halton interviewed stakeholders within and outside its organizations to gain an understanding of the current state of their processes and systems, and mapped out a future vision that encapsulates PSAB reporting requirements and asset management best practices. The region then implemented a governance structure that would oversee a staged implementation of the tools, processes and systems necessary to instill a strategic asset management mindset throughout the region while meeting reporting compliance requirements.
Prepping for compliance
Halton had been working on its requirements for 18 months prior to engaging a partner on the technology vendor side. There were a number of stakeholders involved in the process, including Halton’s auditors, who needed to revise financial reporting methods and adopt new accounting practices. To ensure Halton’s approach was aligned with its municipal comparator group, it liaised with the Ontario Municipal CAO’s Benchmarking Initiative (OMBI).
OMBI is an experts group with a vested interest in municipal performance measurement issues, and studies issues including roads, solid waste, emergency measures service, and wastewater services, to name a few. Halton wanted to develop a methodology and technology system that is relatively easy to implement for any municipality across the country, regardless of size.
In parallel, SAP Canada was working on a solution for PSAB reporting and quickly realized the best way to develop a toolset that addressed customer needs was to develop it in partnership with a customer. Halton and SAP Canada entered into a collaborative effort this past year.
The two organizations ran a series of workshops to determine, refine and confirm requirements. SAP then developed a blueprint of the final solution. It articulated customer needs and configuration of the system, which integrated to Loki Innovations’ Real-time Asset Valuation Analysis software and other third-party applications. SAP also engaged IDS Scheer Canada and Clockwork Inc. to provide configuration and project management services and support. By the end of 2007, the system was in production at Halton Region.
Today, many municipalities have invested in infrastructure asset management software, which allows them to store and manage asset data and support operational and strategic decision-making processes. The question infrastructure asset management software vendors face from municipal clients is: “What are you going to do to help us meet our specific 3150 requirements?”
When Halton created the system framework that would support its strategic asset management vision, it wanted to leverage the investment it had already made in its ERP system and ensure decisions today were consistent with a future-state integrated systems model. This approach supported a region-wide holistic asset management view that would drive strategic asset management decision-making and operational efficiencies in the future.
Halton currently runs infrastructure asset management tools, in addition to other business process tools. In terms of PS 3150, many of its existing asset management tools are technically capable of doing the job, but there are gaps in process and configuration that require appropriate setup, workflow and reporting.
With the experience gained though its previous ERP implementations, Halton understood the change impact of comprehensive IT projects, and decided to take a ‘start small, scale quickly’ approach by starting with a pilot project with the fleet asset class. This approach allows it to define a data model and system framework, then validate the model in a manageable fashion before affecting the rest of the organization.
Halton’s steps forward in infrastructure asset management were dependent upon technology vendors developing modular solutions that fit into existing business process technology systems. The Region partnered with SAP to develop a specific toolset that addresses PSAB 3150 compliance requirements and, importantly, will integrate directly into existing business process systems.
Ralph Blauel is director of technology services at Halton Region. Rob Corazzola is national director for Canadian municipalities at SAP Canada Inc.