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HomeMy WebLinkAbout03.b. Review Draft Position Paper of Proposed Changes to Board Policy 015 Asset ManagementPage 1 of 6 Item 3.b. DCENTRALSAN MEETING DATE: FEBRUARY6, 2024 BOARD OF DIRECTORS POSITION PAPER DRAFT SUBJECT: REVIEW DRAFT POSITION PAPER OF PROPOSED CHANGES TO BOARD POLICY(BP) 015 -ASSET MANAGEMENT SUBMITTED BY: INITIATING DEPARTMENT: GEOFF MICHALCZYK, MANAGEMENT ENGINEERING AND TECHNICAL SERVICES - ANALYST PDS-RATES AND FEES REVIEWED BY: DANEA GEMMELL, PLANNING & DEVELOPMENT SERVICES MANAGER KEVIN MIZUNO, FINANCE MANAGER ROGER S. BAILEY, GENERAL MANAGER ISSUE Staff is directed to take existing Board Policies to the Administration Committee every two years for review. If changes are proposed by staff or the Committee, the changes are scheduled for consideration by the Board. This item is a review of the proposed changes to Board Policy No. BP 015 - Asset Management. BACKGROUND At its meeting of August 2, 2022, The Administration Committee reviewed Board Policy No. BP 015 - Asset Management. Chair Pilecki inquired about the capitalized asset value of $5,000 or greater and requested staff look into the rationale for this amount and to also include additional language in the policy on the asset management program. Staff made the following changes: 1) redefine asset pursuant to the Policy; 2) Add language describing the Asset Management Plan; and 3) Add language describing how assets will be handled for accounting and financial reporting purposes. A strikeout version of the Policy showing the proposed revisions is attached. ALTERNATIVES/CONSIDERATIONS The Board may elect not to adopt the proposed revisions to Board Policy No. BP 015 — Asset Management. This is not recommended, however, as the revisions will provide greater guidance to staff for asset management purposes and will enhance transparency. The Board may direct modifications to the February 6, 2024 Regular ADMIN Committee Meeting Agenda Packet - Page 17 of 63 Page 2 of 6 revisions being proposed to Board Policy No. BP 015— Asset Management or may direct other revisions. Should other revisions be requested that are not specified in this position paper, it is recommended that the Board, via motion, direct specific revisions to be made to the attached draft policy document. FINANCIAL IMPACTS Adoption of the proposed revisions to Board Policy No. BP 015 — Asset Management are not expected to have any immediate or direct fiscal impacts to Central San. COMMITTEE RECOMMENDATION The Administration Committee reviewed this item at its August 2, 2022 meeting and February 6, 2024 meeting and recommended RECOMMENDED BOARD ACTION Adopt the proposed revisions to Board Policy No. BP 015 — Asset Management, revising the definition of an asset, providing a description of the Asset Management Plan, and providing a description of how assets will be handled for accounting and financial reporting purposes. Strategic Plan re -In GOAL ONE: Customer and Community Strategy 1— Deliver high -quality customer service GOAL FOUR: Governance and Fiscal Responsibility Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility GOAL FIVE: Safety and Security Strategy 1 - Reduce and eliminate risks of injury or illness ATTACHMENTS: 1. Revised Policy with markup 2. Revised Policy without markup February 6, 2024 Regular ADMIN Committee Meeting Agenda Packet - Page 18 of 63 ATTACwniE 1 Number: BP 015 Authority: Board of Directors Effective: November 20, 2014 Revised: November 3, 2016 Reviewed: July 21, 2020, December 6, 2022 Initiating Dept./Div.: Engineering/ Planning & Development BOARD POLICY ASSET MANAGEMENT PURPOSE The purpose of this Board Policy is to recognize that the District • has invested significant resources in its assets, and • aims to optimize the management of these assets to deliver high quality and reliable services in a sustainable manner with an acceptable level of risk. DEFINITION An asset pursuant to this Policy refers to both physical and seffi�vr ware intangible assets tLe, software, easements, etc.) �rolue g.greater than $ti 000 and a useful life of at least two years —that are (A) used for and or -critical to operations, regulatory, or safety requirements and (B) have an initial useful life eaual to or areater than two vears. POLICY Asset management is a broad strategic framework that encompasses many disciplines involving the entire District. In support of its Mission, Vision, and Strategic Plan, the District sets forth the following directives related to asset management: Data and Knowledge The District will maintain a comprehensive asset register to facilitate management over the assets' lifecycle. Information Systems The District will make capital and ongoing investments sufficient to own, operate, and maintain a reliable and state-of-the-art security -protected information management system that supports timely, evidence -based decision making at all levels of the organization. Processes and Practices The District will develop processes, procedures and practices for staff in support of this Policy February 6, 2024 Regular ADMIN Committee Meeting Agenda Packet - Page 19 of 63 Page 4 of 6 Number: BP 015 ASSET MANAGEMENT Page 2 of 2 using industry accepted guidelines and practices to provide consistency across the organization. People The District will implement education, training, and mentoring programs to ensure that asset management practices are widely communicated, understood, and implemented throughout the organization. Organization The District will establish organizational responsibility to lead and manage a comprehensive asset management program. Asset Management Plan An asset management plan shall be prepared and adopted by the District and then updated at least once every five years. -The objectives of the plan will include: • Demonstrate Central San's approach to optimizing the lifecycle management of the asset portfolio; • Describe how asset management will deliver the organizational objectives to implement and comply with the Asset Management Policy; and • Describe initiatives and plans of asset level activities for the next 5 years including asset valuation. • To maximize the remainina useful life of the assets Accounting and Financial Reporting The District shall establish procedures to ensure assets, particularly capital assets, are properly accounted for and reported on in the annual audited financial statements to achieve the following objectives: • Establish internal controls to reduce the risk misappropriation of capital assets to an acceptable level; • Compliance with generally accepted accounting procedures as issued by the Government Accounting Standards Board; • Ensuring reasonable capitalization thresholds and methods are applied to ensure the cost of capitalization does not exceed the benefit; and • Standardize the categories of capital assets to be reported on and their estimated 11SP.fIll livP.S_ [Original Retained by the Secretary of the District] February 6, 2024 Regular ADMIN Committee Meeting Agenda Packet - Page 20 of 63 ATTACIfIIRAJ 62 Number: BP 015 Authority: Board of Directors Effective: November 20, 2014 Revised: November 3, 2016 Reviewed: July 21, 2020, December 6, 2022 Initiating Dept./Div.: Engineering/ Planning & Development BOARD POLICY ASSET MANAGEMENT PURPOSE The purpose of this Board Policy is to recognize that the District • has invested significant resources in its assets, and • aims to optimize the management of these assets to deliver high quality and reliable services in a sustainable manner with an acceptable level of risk. DEFINITION An asset pursuant to this Policy refers to both physical and intangible assets (i.e., software, easements, etc.) that are (A) used for and critical to operations, regulatory, or safety requirements and (B) have an initial useful life equal to or greater than two years. POLICY Asset management is a broad strategic framework that encompasses many disciplines involving the entire District. In support of its Mission, Vision, and Strategic Plan, the District sets forth the following directives related to asset management: Data and Knowledge The District will maintain a comprehensive asset register to facilitate management over the assets' lifecycle. Information Systems The District will make capital and ongoing investments sufficient to own, operate, and maintain a reliable and state-of-the-art security -protected information management system that supports timely, evidence -based decision making at all levels of the organization. Processes and Practices The District will develop processes, procedures and practices for staff in support of this Policy using industry accepted guidelines and practices to provide consistency across the organization. February 6, 2024 Regular ADMIN Committee Meeting Agenda Packet - Page 21 of 63 Page 6 of 6 Number: BP 015 ASSET MANAGEMENT Page 2 of 2 People The District will implement education, training, and mentoring programs to ensure that asset management practices are widely communicated, understood, and implemented throughout the organization. Organization The District will establish organizational responsibility to lead and manage a comprehensive asset management program. Asset Management Plan An asset management plan shall be prepared and adopted by the District and then updated at least once every five years. The objectives of the plan will include: • Demonstrate Central San's approach to optimizing the lifecycle management of the asset portfolio; • Describe how asset management will deliver the organizational objectives to implement and comply with the Asset Management Policy; and • Describe initiatives and plans of asset level activities for the next 5 years including asset valuation. • To maximize the remaining useful life of the assets Accounting and Financial Reporting The District shall establish procedures to ensure assets, particularly capital assets, are properly accounted for and reported on in the annual audited financial statements to achieve the following objectives: • Establish internal controls to reduce the risk misappropriation of capital assets to an acceptable level; • Compliance with generally accepted accounting procedures as issued by the Government Accounting Standards Board; • Ensuring reasonable capitalization thresholds and methods are applied to ensure the cost of capitalization does not exceed the benefit; and • Standardize the categories of capital assets to be reported on and their estimated useful lives. [Original Retained by the Secretary of the District] February 6, 2024 Regular ADMIN Committee Meeting Agenda Packet - Page 22 of 63