Magazine article Public Finance

The Road to the Code

Magazine article Public Finance

The Road to the Code

Article excerpt

BY FAR THE biggest capital asset that the UK public sector holds is local authority transport infrastructure assets. However, information on its worth, condition and maintenance requirements is often limited. In today's financial climate, when all spending must be fully justified, this information is more important than ever. For example, there is a perception that insufficient money is being spent on maintaining our transport infrastructure - but this is not backed up by robust, consistent information.

Currently, infrastructure assets are valued at historical cost, which neither represents a realistic value nor helps authorities with their asset management planning. The CIPFA Code of Practice on Transport Infrastructure Assets, published in March 2010, addresses these issues by providing a phased move to a current cost methodology.

This will mean that for Whole of Government Accounts purposes these assets will be valued at modern equivalent asset replacement less deductions for all physical deterioration and impairment.

The code has not been introduced solely to provide more robust information for financial reporting. A key principle is that the same data should be capable of serving the needs of asset management, maintenance planning, budgeting and financial management. This means that the financial information - underpinned by good quality inventories, cost and condition information - will better support decision making and the provision of efficiency savings through effective and informed asset management planning.

Under the phased introduction. 2009/10 was the first year that highways authorities were required to include elements of this information in WGA returns. The minimum requirement was for carriageways' gross replacement costs to be calculated. In theory, this should have been a relatively simple task, requiring the length of road to be multiplied by the central rates provided on the CIPFA supporting materials website. Analysis of the returns showed that a small number of authorities failed to complete the information at all. Of those who did, some managed to make fundamental errors. The spreadsheets have now been altered to reduce the potential for error in the future.

The requirement is greater for 2010/11. with the expectation that more Depreciated Replacement Cost data will be provided as the implementation progresses. CIPFA is developing a toolkit for the 2011/12 returns that will calculate the DRC information for structures such as bridges. …

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