State to assign value on assets

New federal accounting standards require the work. The Governmental Accounting Standards Board wants state and local governments and universities to start keeping their books more like businesses do.

The requirement is part of a package of changes that will help citizens more easily figure out what financial shape their governments are in and how much the services they provide actually cost, said Kelly Chesney, a state Department of Management and Budget spokesperson.

In theory, the changes also could help governments make informed decisions about privatization, selling off public services or assets to the private sector.

But other officials - especially those in local government - say the changes that take effect starting in 2001 will waste time and money and provide little useful information.

''I'm not sure the average citizen is going to find it more user-friendly,'' Kathy Smith-Roy, finance director for the city of Novi and president of the Michigan Municipal Finance Officers Association, told the Lansing State Journal. ''We're just adding another layer to an already large reporting document.''

Grudgingly or not, state and local governments alike are expected to comply with the new standards, even though they're not binding. Failing to comply could drive up borrowing costs, because agencies that give credit ratings to governments would notice.

The accounting standards board approved the new standards this summer, and most governments haven't yet estimated the cost of implementing them.

For the state of Michigan, putting a value on more than 12,000 assets is estimated to cost $3 million, Chesney said. The budget department's Office of Financial Management will head up the project, assisted by financial consultant Plante & Moran of Southfield, she said.

Generally, governments won't have to place a value on assets acquired before 1980. But the Capitol, built from 1872 to 1878, will have to be included because of a major renovation in the early 1990s.

The $64 million estimate the government has placed on the Capitol is largely based on that renovation cost, said Leon Hank, director of the Department of Management and Budget's Office of Financial Management.

The Mackinac Bridge was built in the 1950s at a cost of nearly $100 million, Michigan Department of Transportation spokesman Gary Naeyaert said. But it's likely the state will have to estimate a value for it because a major renovation of the bridge is planned, Hank said.

The state also must put values on 9,600 miles of state highways and 4,657 bridges.

Critics such as Ms. Smith-Roy say existing government staff won't be able to handle the new rules, and the requirement to place values on most assets will mean more work for private auditors, accountants and appraisers.

For local governments in Michigan, ''I don't think it would be tens of millions, but I think it's going to be more than tens of thousands,'' Ms. Smith-Roy said.

09-15-99