Deferred Maintenance

Introduction

Maintenance competes for funding with other Government programs and is often deferred because appropriations are not available or were redirected to other priorities or projects. Deferred maintenance is often not immediately reported -- and sometimes, not at all. Maintenance competes for funding with other Government programs. Maintenance which is deferred because of insufficient funding may result in increased safety hazards, poor service to the public, higher costs in the future, and inefficient operations.

The Federal Accounting Standards Advisory Board (FASAB) has provided guidance to Federal agencies on how to properly account for the unfunded maintenance. The Board believes that "deferred maintenance" is a cost that management, at whatever level, has elected not to fund. However, the Board wished to find a way to recognize this unfunded cost.

As a consequence FASAB has issued guidance to Federal Government agencies for reporting deferred maintenance as part of an agency's annual Financial Statement. This policy is issued to conform with this guidance. This policy applies to all NOAA offices nationwide that are in possession of capitalized personal property and all offices that are in possession of stewardship (heritage) PP&E.

References

FASAB Statement of Federal Financial Accounting Standard (SSFAS) Nos. 6 and 8.

FASAB Statement of Recommended Accounting Standards (SRAS) No. 14.

Definitions

"Maintenance" is described as the act of keeping fixed assets in acceptable condition. It includes preventive maintenance, normal repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it continues to provide acceptable service and achieves its expected life. Management shall determine what level of service and condition is acceptable. Maintenance excludes activities aimed at expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, those originally intended. (SSFAS No. 6, Par. 78) (See NOAA's upgrade policy, this handbook.)

"Deferred maintenance" is maintenance that was not performed when it should have been or was scheduled to be and which, therefore, is put off or delayed for a future period (SSFAS No. 6, Par. 77)

"Disclose" as used in this policy shall be interpreted to mean: to provide the information in the form and in the timeframe requested to the NOAA Finance Office.

Responsibilities

Headquarters Finance Office

• Issue an annual call for the reporting of deferred maintenance
• Report deferred maintenance in NOAA's Financial Statement

Program Offices

• Conduct annual condition assessment surveys, and
• Report deferred maintenance on NOAA Form 37-43 to the Headquarters Personal Property Office.

Reporting

Every year in May, as part of the annual inventory of capitalized property, each Line and Staff Office which has capitalized property is required to report any of these personal property items for which maintenance has been deferred. The NOAA Finance Office will prepare and distribute instructions for collection of deferred maintenance data. NOAA Form 37-43, Report of Deferred Maintenance, will be used for this purpose. Program offices will conduct a condition assessment survey of all capitalized property and make a determination if maintenance is being deferred. For additional information contact NOAA Finance Office.

Measurement

Amounts disclosed for deferred maintenance will be determined using the "Condition Assessment Survey" method - a periodic inspection of Property Plant and Equipment (PP&E) to determine their current condition and to estimate costs to correct any deficiencies. Condition assessment surveys are required only for capitalized equipment ($200K+). Amounts will only be disclosed if the amount for the deferred maintenance is $25,000 or more per item. Though not required and though not reported to the NOAA Personal Property Office, Line and Staff Offices are encouraged to perform yearly condition assessment surveys on their non-capitalized personal property as well. Such surveys may disclose equipment critical to the operation of a program which, if not maintained or repaired, could severely hamper the performance or completion of significant agency programs.

The condition of an asset is based on an evaluation of the physical condition of an asset, its ability to perform as planned, and its continued usefulness. Evaluation of an asset's condition requires knowledge of the asset, its performance capacity, and its actual ability to perform, and expectations for its continued performance. The condition of a long-lived asset is affected by its durability, the quality of its design and construction, its use, the adequacy of maintenance that has been performed, and many other factors, including: accidents (an unforeseen, unplanned, or unexpected event or circumstance), catastrophe (a momentous tragic event ranging from extreme misfortune to utter ruin), disasters (a sudden calamitous event bringing great damage, loss, or destruction) and obsolescence.

Disclosure

For NOAA's financial statements, deferred maintenance is disclosed by the Finance Office in the required supplementary stewardship information section of the Financial Statement. This section must include the following information for all PP&E:

• Identification of each major class of asset for which maintenance has been deferred. Footnote 10 of the Consolidated Finance Statements lists the classes of fixed assets. The major classes currently are: NEXRAD, AWIPS, ASOS, Satellites, Satellites - Ground Systems, AFOS, CRS, Communications, Detection and Radiation Equipment, Donated Transmitters, General Purpose ADPE, Instruments and Laboratory Equipment, Ships and Launches, and Aircraft, and Other.
• Method of measuring deferred maintenance for each major class of PP&E, which in the case of NOAA personal property will be through a condition assessment survey; and
• Range or a point estimate of the dollar amount of maintenance needed to return the property to its acceptable operating condition.

Condition Assessment Survey

The condition assessment survey method requires the periodic inspection of PP&E to determine their current condition and to estimate the cost to correct deficiencies. The following must be disclosed:

• Description of requirements or standards for acceptable operating condition;
• Any changes in the condition requirements or standards;
• The asset's condition and a range or point estimate of the dollar amount of maintenance needed to return the asset back to an acceptable operating condition;
• The methodology of the condition assessment surveys; and
• Any maintenance schedules that have been established for the different types of properties and the methods employed for tracking adherence to the schedules.

It is recommended that methods and standards for the condition assessment survey be applied consistently from period to period. Any change in methods and standards must be explained and justified.