Standard Number 6, it is important to recognize that some, if not all, federal agencies must meet other internal and external regulations and statutes that directly influence how maintenance and repair funds are to be expended.

Since 1990 a number of laws and regulations have been enacted with the general objectives of providing greater accountability by the federal government to its citizens. ⁴ One such measure is FASAB Standard Number 6, Accounting for Property, Plant, and Equipment. Enacted in 1996, Standard Number 6, as amended, is the first government-wide initiative requiring federal agencies to report on deferred maintenance as part of their annual financial reporting statements.

The FASAB is responsible for developing accounting standards to enhance the financial information reported by the federal government, wherein “federal financial reporting helps to fulfill the government's duty to manage programs economically, efficiently, and effectively and to be publicly accountable” (FASAB, 1993). The FASAB has identified four objectives of federal financial reporting:

• budgetary integrity, providing information on the status of budgetary resources, including how budgetary resources have been obtained and used;

• operating performance, addressing the costs of providing specific programs, the efficiency and effectiveness of the government's management of its assets, and the efforts associated with federal programs;

• stewardship, identifying if the government's financial position improved or deteriorated over the period, if future budgetary resources will be sufficient to sustain public services and meet obligations, and if the government's operations have contributed to the nation's current and future well-being;

• systems and control, providing information on whether transactions are executed in accordance with budgetary and financial laws and requirements, if assets are properly safeguarded to deter waste, fraud, and abuse, and that performance measurement information is adequately supported (FASAB, 1993).

The FASAB has established standards for federal agencies to follow to meet the objectives of federal financial reporting. FASAB Standard Number 6 ⁵ is designed to meet objectives for operating performance and stewardship. To meet operating performance objectives, the FASAB has provided accounting standards intended to result in “relevant and reliable cost information for decision-making by internal users (e.g., program

managers, budget examiners, and officials); comprehensive, comparable cost information for decision-making and program evaluation by Congress and the public; and information to help assess the efficiency and effectiveness of asset management (e.g., condition of assets including deferred maintenance)” (FASAB, 1996). The standard also establishes accounting standards that seek to meet the stewardship objectives by requiring information on asset condition; changes in the amount and service potential of PP&E; the cost of PP&E, where applicable; and spending for acquisition of PP&E versus noncapital spending (FASAB, 1996).

Standard Number 6 seeks to provide information on asset condition by requiring agencies to report on deferred maintenance. The standard (FASAB, 1996) defines maintenance 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 services and achieves its expected life. 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.

Deferred maintenance is defined by FASAB as “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” (FASAB, 1996).

Standard Number 6, as amended, acknowledges that facilities may differ as to the level of acceptable condition and that this level may vary across and within agencies; therefore, the standard allows facility management to determine the condition rating. Under the standard, management may estimate the amount of deferred maintenance for its agency through condition assessment surveys, a total life cycle cost method or other methods that are similar or identical to condition assessment surveys or total life-cycle cost.

To comply with FASAB Standard Number 6, as amended, federal agencies must include the following as required supplementary information for all PP&E in their annual financial reports:

1. Each major class of asset for which maintenance has been deferred . The standard states that major classes of assets are to be determined by the agency. Examples of major classes of assets are buildings and structures, furniture and fixtures, equipment, vehicles, and land.

2. The method by which the agency measured the deferred maintenance for each class of PP&E. If the agency has chosen to measure its deferred maintenance by using a condition assessment survey, it should present for each major class of PP&E:

   1. a description of the requirements or standards for acceptable operating condition.

   2. any changes in the condition requirements or standards.

   3. asset condition and a range or point estimate of the dollar amount of maintenance needed to return it to its acceptable operating condition.