6 have the potential to improve information on maintenance needs. Objectives, Scope, and Methodology

The objectives of our work were to (1) look at the plans and progress of the 11 agencies to implement the deferred maintenance requirements of SFFAS No. 6 and (2) obtain the official position of agency CFOs and IGs with respect to its implementation. Although all agencies said that they have estimated maintenance needs for ad hoc and budgetary purposes, only two agencies—DOI and NASA—indicated that they have made agencywide deferred maintenance estimates. These estimates have not been audited to ensure their reliability or conformance with the new requirements included in SFFAS No. Status of Agency Implementation Efforts

Although some initial steps have been taken, significant work remains to be done for all agencies to effectively implement the deferred maintenance requirements for fiscal year 1998 reporting. Four of the nine IGs expressed confidence that their agency would implement SFFAS No. Inadequate PP&E Reporting Will Impede Implementation Efforts

Improving PP&E reporting is a critical step to implementing the deferred maintenance requirements because deferred maintenance estimates are contingent upon a complete and reliable inventory of PP&E. Even for agencies where independent audits indicated no report modifications pertaining to PP&E, the deferred maintenance requirement of SFFAS No. 6 presents a significant challenge. The necessary flexibility in the standard increases the need for some departmental policies and guidance that are designed to be compatible with agency mission and organizational structure. In addition, adequate data collection and tracking systems will be necessary to gather and verify information on deferred maintenance costs. GAO Observations

If effectively implemented, the new deferred maintenance reporting required by SFFAS No. However, the deferred maintenance requirements present agencies with a significant challenge for which they must adequately prepare. In its deliberations on deferred maintenance reporting, FASAB considered both the need to improve information on the condition of federal assets and the complexities of measuring and reporting this information. As discussed in the Statement of Federal Financial Accounting Concepts No. The disclosure of deferred maintenance is an important management issue. DOD holds approximately 80.5 percent of the federal government’s reported PP&E. 6 to departmental CFO and accounting offices. Although the IG has not yet developed an audit plan for deferred maintenance, she noted that key issues for auditing the deferred maintenance amounts included reviewing the (1) methodology established to value deferred maintenance, (2) qualifications of officials making the determination of the value of deferred maintenance, and (3) completeness and accuracy of the deferred maintenance amounts.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed: (1) the plans and progress of 11 agencies toward implementing the new deferred maintenance requirements of the Statement of Federal Financial Accounting Standards (SFFAS) No. 6; and (2) the official position of agency Chief Financial Officers (CFO) and Inspector Generals (IG) with respect to its implementation.

What GAO Found

GAO noted that: (1) agency officials at the 9 agencies specifically required to implement the standard for fiscal year (FY) 1998 told GAO that they intend to comply with the deferred maintenance requirements of SFFAS No. 6; (2) if effectively implemented, the new federal accounting requirements will improve information on the maintenance of federal assets; (3) accurate reporting of deferred maintenance is an important step toward more informed decision-making; (4) by improving the validity of information on maintenance, the disclosure of deferred maintenance has the potential to improve both the allocation of federal resources and, ultimately, the condition of federal assets; (5) the federal requirement to disclose deferred maintenance amounts presents agencies with a new challenge for which they must adequately prepare; (6) some initial steps have been taken, but significant work remains to be done for all agencies to effectively implement the deferred maintenance requirements promptly; (7) 4 of the cognizant IGs expressed confidence that their respective agencies would implement the deferred maintenance requirements and 5 expressed reservations or were reluctant to assess agency progress; (8) although most agencies do not have experience generating agencywide estimates of deferred maintenance because historically they have not been required to do so, all agencies reported that they have estimated maintenance for ad hoc and budgetary purposes; (9) a critical step in generating a deferred maintenance estimate is a complete and reliable inventory of property, plant and equipment (PP&E) on which to assess maintenance needs; (10) the results of the FY 1996 financial audits show that 4 agencies are hampered in their efforts to report deferred maintenance because they have been unable to fully report PP&E reliably; (11) the Department of Defense holds about 80 percent of the federal government's PP&E, and it faces significant issues to implement the deferred maintenance requirements; (12) even for agencies where the independent audits indicated no report modifications that pertained to PP&E, the deferred maintenance requirements present a significant challenge; (13) the flexibility in SFFAS No. 6 increases the need for agencies to develop departmental policies and guidance that are compatible with agency mission and organizational structure; and (14) adequate data collection and tracking systems will be necessary to gather and verify information on deferred maintenance amounts.