RM of Buckland PS 3150 Pilot Project
Introduction
In early 2009, Vemax Management, Municipal Affairs, and the RM of Buckland came to an
agreement to work on a pilot project for tangible capital asset reporting. The intent of the project
was to develop insight on how to measure and record RM tangible capital assets while
documenting the process for use by other RM’s in the province. During the course of the pilot,
all participants followed the Saskatchewan Tangible Capital Assets Reference Manual found on
www.sasktca.ca.
It was determined that the buildings, equipment, and land assets would be the responsibility of
the RM while Vemax would be responsible for the roads, bridges, and large culverts. Once all
parties agreed to the pilot methodologies, Meyers Norris Penny from Moosomin was contracted
to provide a professional opinion on the proposed methodologies.
The following summarizes the methodologies used by Meyers Norris Penny and Vemax.
A. Methodology for Road Inventory and Valuation
1. Road components (structure & surface)
2. RM of Buckland Map
3. Division of Road segments
4. Road classification
5. Road Age
6. Road Useful Life
7. Road Replacement Cost
Description
1. Road components (structure & surface)
Some sources recommend recording roads as two separate assets (the road structure and
the road surface):
a. This accounts for the difference in useful life between the road structure and
surface.
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Accountants review determined that:
b. RM of Buckland roads that were paved or sealed were two separate assets
(surface and structure); and
c. RM of Buckland gravel surfaced roads were a single asset (structure and surface
combined). Frequency of gravelling determined it should be recorded as
maintenance not a betterment.
2. RM of Buckland Map
It was determined that the road inventory would be completed off the RM map.
The map was provided by the RM of Buckland.
3. Division of Road segments
Typically the road segments were inventoried in lengths equal to a section of land,
however, each segment must have only one:
a.
b.
c.
d.
Classification of road
Year of construction
Useful life
Surface material
4. Road classification
The current road classification system used by the Saskatchewan Ministry of Highways
and Infrastructure is a range of classes from class 1 – class 7.
The classification of a road is determined by the size of the centers accessed by the road.
The older classification system uses road classes such as main farm access, grid gravel,
primary grid, etc.
The inventory was done off of the RM map which uses the old classification system
(used for RM of Buckland).
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RM Map Legend
5. Road Age
Highway’s Municipal Roads Infrastructure Fund (MRIF) database
If the province of Saskatchewan contributed to the funding for the construction of
a road section, the age of the road will be recorded in the MRIF database.
The majority of the roads in the RM of Buckland do not have a recorded date of
construction.
For the remaining in-service dates we consulted a construction foreman who worked with
the RM of Buckland from 1966 until 1999.
6. Road Useful Life
A useful life of 40 years was chosen for all classifications of gravel roads. This was
determined through;
▫
▫
Discussion with accountants;
Standard useful lives used by Saskatchewan Ministry of Highways and
Infrastructure.
7. Road Replacement Cost
The replacement cost of a road can be summarized by the cost to strip the topsoil from
the road right of way, cut excess material from the road ditches, increase the height of the
road with the excess material, replace the topsoil along the ditches and finally place
gravel on the road surface. There is an additional cost for engineering services that needs
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to be included as well. The replacement cost equation is: cost of stripping topsoil +
excess material from road ditches + height of the road costs + topsoil replacement +
gravel placement on road = calculated road replacement cost.
B. Methodology for Bridge Inventory and Valuation
1.
2.
3.
4.
Access Existing Bridge Records (www.sasktca.ca)
Bridge Age
Bridge Useful life
Bridge Replacement Cost
Description
1. Access Existing Bridge Records (www.sasktca.ca)
The provincial bridge database will be available on www.sasktca.ca. This database lists
the bridges located in each RM, along with the properties of the bridge. Some Rural
Municipalities may also have access to a Regional Transportation Planning Committee
report, which may also have a complete list of bridges for each RM in the region.
2. Bridge Age
The year of construction for each bridge can be found in the provincial bridge database.
3. Bridge Useful life
A useful life of 60 years was used for all bridges, this was based on guidance from
Saskatchewan Ministry of Highways and Infrastructure. This was the same useful life as
used in the Regional Transportation Planning Committee report.
4. Bridge Replacement Cost
The replacement cost estimates for bridges based on bridge spans. The span of a bridge
is the distance between supporting members. The lengths and numbers of the spans for
each bridge are provided in the provincial bridge database. The Saskatchewan Ministry
of Highways and Infrastructure provided guidance for replacement costs for bridges with
standard span lengths.
C. Methodology for Oversize Culvert Inventory and Valuation
1. Access existing oversize culvert records (www.sasktca.ca)
2. Oversize culvert age
3. Oversize culvert useful life
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4. Oversize culvert replacement cost
Description
1. Access existing oversize culvert records (www.sasktca.ca)
The provincial oversize culvert database is available on www.sasktca.ca. This database
lists the oversize culverts located in each RM, along with the properties of each oversize
culvert.
2. Oversize culvert age
The year of construction for each oversize culvert can be found in the provincial oversize
culvert database.
3. Oversize culvert useful life
A useful life of 35 years was used for all oversize culverts. This was based on guidance
from the Saskatchewan Ministry of Highways and Infrastructure.
4. Oversize culvert replacement cost
The replacement cost estimates for oversize culverts are based on the size (diameter) and
length of the oversize culvert. The Saskatchewan Ministry of Highways and
Infrastructure provided guidance for replacement costs for oversize culverts.
D. Accountant Methodologies
PURPOSE: To review the recording of the Tangible Capital Assets (TCA) to ensure the
assets are appropriately recorded.
PROCEDURE:
Step One: Determine appropriate sample.
From the TCA register provided from VEMAX, a representative sample of all categories
of assets was chosen for the RM of Buckland. This sample was based on the
amortization amount for depreciable property taking into account an estimated materiality
level for the municipality. Meyers Norris Penny (MNP) then used professional judgment
and chose a representative sample from all categories. For land, professional judgment
was used and a sample of two was selected.
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Step Two: Review the tangible capital asset policy of the RM to determine the thresholds
and useful lives of the individual assets.
Step Three: Review audit trail notes from VEMAX to determine costing of roads and
checked the references to Rural Municipality map provided.
Step Four: Check accuracy of calculations on all asset classes and verified that the
appropriate ‘CPI/NRDCPI’ index was used.
MNP’s Review findings:
Land:
Verified the RM used SAMA assessment to value land owned by the municipality.
Reviewed assessment provided to ensure correct value was attributed to the property.
Recalculated historical cost using CPI.
Confirmed assets not amortized.
Buildings:
Verified the RM used SAMA assessment to value buildings that were not recently
constructed.
Reviewed assessment provided to ensure correct value was attributed to the property.
Verified no amortization in year of acquisition.
Verified amortization calculations.
Verified that the TCA policy was followed for recording of assets and estimated useful
life of assets.
It was noted that there appears to be some confusion as to when historical costs are used
and when replacement costs are to be used as a basis to estimate historical costs.
Historical costs should be used when the information is readily available. When the
information is not readily available, replacement cost should be used.
It was noted that the buildings were recorded on the register using replacement cost as a
basis even though the buildings were built in the years 2000 and 2007. Where assets
have been acquired in the last few years, the financial information should be readily
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available from the books of account. For years 2001 and prior, capital asset additions
were listed on page 4 of the financial statements and can be used as a reference source for
historical cost information.
Machinery & Equipment:
Verified no amortization in year of acquisition
Verified amortization calculations
Verified that the TCA policy was followed for recording of assets and estimated useful
life of assets.
Completed one test on an asset with a residual value that was not in the sample to ensure
calculations using residual value were correct.
Equipment Exceptions:
Equipment Betterment line 512 - invoice value of equipment was $7,409 versus $7,707
on register. The amount of overstatement of this asset is insignificant. The TCA register
has since been updated.
Equipment 3 line 69 - 1986 IHC Sand/Gravel truck invoice amount would appear to be
$17,120 (cost plus PST). The recorded amount on the TCA register is $15,390.
Confirmed that the cheque written to pay for the Sand/Gravel truck was $15,390. It
appears the difference may be due to the manner in which GST and PST was accounted
for. Amount is insignificant to amortization for municipality.
Equipment 9 line 75 - Case Tractor reviewed statement of payments from RM minute
register. Amount paid for Case Tractor was $25,000 no invoice available at time of
review.
Bridges:
Valuation of bridges was taken from the North Central Transportation Planning
Committee bridge study conducted for 2008-2009.
Verified values to copy of the study provided.
Verified no amortization in year of acquisition.
Verified amortization calculations.
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Verified that the TCA policy was followed for recording of assets and estimated useful
life of assets.
Bridge Exceptions:
Based on TCA policy concrete bridges were to have a useful life of 40 year and timber
bridges 30 years. On the amortization schedule all bridges in the RM have a useful life of
60 years. The 2008-2009 study used expected useful lives of 60-70 years. It appears the
RM has adjusted their estimate to extend the useful lives to those used by the study. The
TCA policy needs to be updated.
Culverts: (Oversized)
Culverts were valued based on the information provided by Saskatchewan Ministry of
Highways and Infrastructure database.
Verified valuations based on information provided from this study.
Verified no amortization in year of acquisition.
Verified amortization calculations.
Verified that the TCA policy was followed for recording of assets and estimated useful
life of assets.
No TCA Policy set for culverts. SMHA Capital Asset Reporting Policies and Guidelines
use a useful life of 35 years. It appears the RM has used this as the guideline for
amortizing the culverts.
The TCA policy needs to be updated for capitalization of oversized culverts.
Urban Roads and Seal:
Checked calculations of historical cost to year of construction.
Verified no amortization in year of acquisition.
Verified amortization calculations.
Verified that the TCA policy was followed for recording of assets and estimated useful
life of assets.
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Roads TWP and RR:
Checked calculations of historical cost to year of construction.
Verified no amortization in year of acquisition.
Verified amortization calculations.
Verified that the TCA policy was followed for recording of assets and estimated useful
life of assets.
Only exceptions found were minor and were due to a spreadsheet inputting error.
Amounts have since been corrected.
MNP’s Conclusion:
Tangible capital assets have been appropriately recorded based on the Rural Municipality of
Buckland’s TCA policies.
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Appendix 1
RM of Buckland Map
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