Asset Management Plan For Sewage Authority Accounting Essay

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The Sewage Authority provides sewage and wastewater services to a community of about 250,000 people. In recent years, the organization has faced mounting criticism because of maintenance records that are not up to date and because of lapses in quality services provided to customers. Changes in laws that had formally provided the Sewage Authority with a monopoly in providing these services have changed and the organization must now operate with a focus on competing firms. The purpose of this document is to outline an asset management plan for the Sewage Authority to allow the organization to provide better services to its stakeholders, as well as to take advantage of future technologies to operate in a more environmentally friendly manner. The changes that are outlined are to improve remote monitoring systems, move from the use of concrete pipes to PVC pipes, and fully implement a GIS system that is continually updated and that can be accessed by the public. The total of this asset management plan is projected to be nearly 40,000,000 after the benefits that are provided to the system. However, because these costs will be incurred over a 10-year period, the actual yearly increase in fees charged to customers of the Sewage Authority will only be 15.86, or 1.32 per month. The Sewage Authority can achieve a world-class status within the sewage and wastewater industry with a very low increase in costs for its consumers.

Introduction

The asset management plan that is provided within this document is to ensure that the assets of the Sewage Authority, a utility that is responsible for overseeing the removal and treatment of wastewater for a city of about 250,000 people, are properly managed for the future. The purpose of any asset management plan is to ensure that the assets that are managed by a particular organization are operated in the most cost-effective and sustainable manner possible (Carterton District Council, 2007). This plan is designed to allow the Sewage Authority to overcome current problems associated with the operations of the organization's assets, which include poor record management, increased customer complaints about the services that are provided, and a concern about continued degradation of the services that are provided in relation to new competitors that are entering the wastewater market under new legislation that is allowing other companies to offer similar services to those that have previously only been available from the Sewage Authority. Detailed information and recommendations are provided in this report about the actions that need to be taken by the Sewage Authority over the next decade to allow for desired outcomes to be achieved, as well as for the organization to achieve national best practices within five years and world leadership within the next ten years. These recommendations are also meant to allow the Sewage Authority to be able to compete in a market that is facing greater deregulation because of laws already being implemented to remove some of the control over the wastewater and sewage market that the Sewage Authority currently holds within the local community, and one of the reasons why the current problems that exist have allowed the organization to continue to operate without greater difficulty in relation to the problems that have been identified.

Background

The Sewage Authority provides sewage and wastewater services to about 250,000 people in a single community. For several decades, the Sewage Authority has been able to operate essentially has a monopoly in the local community. All homes and businesses in the community have been serviced by the Sewage Authority, which has made it possible to continue to be viable even with growing complaints from customers and concerns about its management of records over its assets. In addition, the organization provides services at a very low rate to customers, which has made it possible for customers to overlook the service problems that they have experienced. However, with recent legislation that has begun to remove the monopoly status from the Sewage Authority, the organization must begin to compete in a more open market in which competitors are making available new technologies and improved services in the sewage and wastewater industry.

The Asset Lifecycle

Table 1 shows the assets that are under the control of the Sewage Authority, as well as the lifecycle of the assets, including the current age of those assets and the expected total life of each of the types of assets. The Sewage Authority has a total of 102 km of underground pipes, of which 80 km are traditional concrete pipes and 22 km are newer pvc pipes. In addition, the Sewage Authority operates a total of 10 pump stations that serve the purpose of pumping water out of low lying areas throughout the city and placing within the generally gravity flow network so that it can be moved to the treatment plant. Finally, the Sewage Authority operates a single treatment plant that is responsible for treating the raw sewage, removing harmful matter, and then releasing the clean water back into the local streams and rivers (Carterton District Council, 2007)

Table 1: Asset Lifecycle of Assets under Sewage Authority Control

Asset

Age

Lifespan

Life Remaining

Concrete Pipe

80

110

30

PVC Pipe

20

110

90

Pump stations

40

60

20

Treatment plant

50

80

30

The table shows that the concrete pipes that are part of the sewage system have been in operation for 80 years. Concrete pipes have an expected total lifespan of around 100 years, and possibility even a little longer than 100 years because of the fact that it does not show significant stress as it ages (Novatech, 2007). The PVC pipe should last about as long as concrete pipe, if not longer. However, being able to estimate a specific lifespan for the PVC pipe that is in use is not possible because of its relative youth as compared to the use of concrete pipes in sewage systems. The 10 pump stations are 40 years old and have an expected total lifespan of 60 years, which means that the pump stations are coming to the end of their lives. Finally, the treatment plant that is operated by the Sewage Authority is 50 years old and has a projected lifespan of 80 years, which also indicates that this is another asset that is coming to the end of its project lifespan.

Stakeholder Expectations

The Sewage Authority performs a vital task for the residents of the local community and stakeholders have an expectation that the services that are provided, which including the removal of wastewater from homes and businesses, as well as the removal of wastewater from low lying open spaces, will be performed on a continual basis with a high degree of success (Ana Jr. & Bauwens, 2007). Stakeholders expect that during periods of heavy rain, the sewage system can remove standing water in an efficient manner so that backups into homes, businesses, and public spaces do not occur. At the same time, stakeholders also expect that the Sewage Authority can provide accurate information about the condition of the assets under its control so that decisions can be made about necessary upgrades and repairs. There is also an expectation that as changes occur to the land in the community because of new housing and business developments, records will be updated and adjusted to take into account changing property lines, community boundaries, and ground levels. It is important to note that these expectations are not out of line with the importance of the services that sewage systems serve in any community. Home and business owners, as well as local leaders require that accurate information and records are available so that they can make decisions that impact the development and growth of the city.

Five and Ten Year Outcomes

Several outcomes have been created for achievement over the next five years that are based on improving the current sewage system infrastructure, as well as a set of goals for achievement over the next 10 years that will allow the Sewage Authority to truly be w a world leader in providing quality services to its stakeholders in an environmentally friendly manner that will aid in the growth and development of the local community. Specifically, within the next five years, the first outcome that is desired is to achieve 100% accuracy of the records of condition and maintenance of the assets under the control of the Sewage Authority. Related to this goal is to the desire to have a publicly available GIS system that can be accessed by stakeholders that is constantly updated and maintained to list information about the repair work on Sewage Authority assets, the location of all assets, and the condition of those assets with regards to any future repairs or maintenance that may be needed.

In addition, the Sewage Authority seeks to have a closed circuit television (CCTV) system in place that will allow for remote monitoring of most of the assets, particularly pump stations, treatment plants, and main sewage lines that serve high population areas of the city (Ibrahim, Cherqui, Le Gauffre & Werey, 2007). The availability of a CCTV system will allow for problems within the sewage system to be identified more quickly than if on-site visual inspects of all 102 km of pipe and other assets have to be conducted on a constant basis.

The Sewage Authority would also like to achieve having at least 75 km of its 102 km of pipe changed from concrete to PVC. The change from concrete to PVC will make repairs of leaks and other sewage system problems easier and faster with less disruption to above ground services such as the use of roads. In addition, PVC pipes are expected to be better able to handle growing demands on the sewage system with less repair work over the long-term (Novatech, 2007).

Within 10 years, the Sewage Authority would like to be a true world leader in the operation of sewage systems in terms of providing world-class service to stakeholders and world-class service with regards to protecting the environment. The first desired outcome is to achieve a customer satisfaction rating of 95%. In addition, the Sewage Authority would like to have a state of the art sewage treatment plant completely online that is able to achieve a 99% rate of water purification so that almost any contamination that is in the water that is treated is removed before it is released back into the environment. Even more, the Sewage Authority would like to achieve a rate of sewage overflows of not more than one overflow in every 20 years (Carterton District Council, 2007).

Finally, in order to truly be a world-class operation within 10 years, the Sewage Authority would like to achieve 100% compliance with all environmental standards, and sustain only one infraction of those standards in a 20 year period. At the same time, this standard of care and concern for the environment should be achieved while providing sewage and wastewater services to the public at a cost that is at least equal to the costs that can be achieved by private sector firms in the wastewater industry (Carterton District Council, 2007).

Performance and Serviceability Requirements and Indicators

As has already been noted, the Sewage Authority seeks to achieve a 95% customer satisfaction rating within the next 10 years. This satisfaction rating will be monitored with annual customer service surveys conducted with all home and business customers (Carterton District Council, 2007). At the same time, the Sewage Authority seeks to achieve a level of major sewage overflows of only one in every 20 years. With such a high standards of performance, the sewage authority will have more time to address service issues, such as installing and maintaining current and future assets and infrastructure. In this regard, the goal for the organization is to achieve complete accuracy of its assets and maintenance records and to make them available to the public in real-time within the next five years using a public GIS system.

In order to provide world-class service to its stakeholders, serviceability will be provided with a 24-hour turnaround of all service needs in 99% of all situations. This means that everything from minor sewage line cleanouts of debris after rain storms to responding to blocked drains that might cause an overflow problem will be addressed in 24 hours. This will be achieved by implementing technologies and systems that will allow for continual monitoring of all Sewage Authority assets so that visual inspections can be avoided as the only source of information about the condition of assets.

Development of a Reliability Asset Inventory

The development of a reliable asset inventory is a major concern and primary goal of the Sewage Authority over the next five years. Currently, there is not a reliable inventory of the assets that are under the control of the Sewage Authority. The development of a reliable inventory will be related to the implementation of a 100% accurate GIS system that is available to the public. The Sewage Authority currently has a GIS system in place, but local leaders and the public do not trust its accuracy for decision-making purposes. The development of the reliable inventory system will be conducted with actual visual inspections of all Sewage Authority assets and the implementation of a computerized system for recording maintenance information and data regarding planned repairs. In addition, the inventory system will also contain accurate information about the placement of Sewage Authority assets in relation to property boundaries and ground level measurements (Ana Jr. & Bauwens, 2007).

Deterioration and Condition Monitoring

Deterioration and condition monitoring will be conducted through the implementation of CCTV cameras throughout the infrastructure of the assets controlled by the Sewage Authority. Within the next five years, most of the monitoring of the conditions of the sewage lines and treatment plans will be conducted from a remote location with the use of CCTV cameras. In addition to the cameras, remote sensors will be used in locations in which cameras are not feasible to allow for remote monitoring of sewage line conditions (Ibrahim, Cherqui, Le Gauffre & Werey, 2007). However, remote monitoring with CCTV and sensors will not replace regular deterioration monitoring conducted through visual inspection. Instead, a complete visual inspection of all Sewage Authority assets will be conducted on an annual basis. The annual visual inspection will allow for a way to double check the remote monitoring that occurs. In addition, the annual visual inspection will be used as a way to check the complete accuracy of the GIS system to ensure that all information, maintenance reports, and other data in the system are completely accurate.

How to Achieve Best Value from the Asset Network

The overall purpose of the continual and annual deterioration and condition monitoring activities is to identify areas of the sewage infrastructure that need repair as quickly as possible. This will allow the Sewage Authority assets to be maintained in the most cost effective manner possible. The current monitoring activities that occur often results in problems only being identified when they have become large enough to result in a sewage backup or other service issue. The continual and annual monitoring combined will allow even the smallest problems to be identified as quickly as possible so that repairs and maintenance can take place. Once investments in assets are made, those investments need to be protected. Having multiple levels of system monitoring in place will allow for assets to be protected from unnecessary damage that can easily be avoided. The result for the Sewage Authority assets will be a prolonged life with fewer major problems for stakeholders, which will also mean reduced costs for the Sewage Authority and its customers.

Current and Future Technologies

Current technologies in the management of sewage and wastewater systems include geographic information systems and closed circuit television cameras (CCTV) to monitor for performance and deterioration (Ana Jr. & Bauwens, 2007; Ibrahim, Cherqui, Le Gauffre & Werey, 2007). Even thought the Sewage Authority is not currently using these technologies, they are largely considered to be standard technologies for the sewage industry, which is why the five-year plan for the organization is to have these technologies fully in place. In addition, many sewage systems throughout the world using ultrasonic and infrared technology to be able to identify deterioration within pipes that would otherwise be difficult or impossible to identify through visual inspection (Allouche & Freure, 2002). Once again, much of the infrastructure that is controlled by the Sewage Authority is not routinely monitored using such technologies. Instead, visual inspection is often used, and then only when major problems are already taking place.

Future technologies that are important to sewage systems are not going to be about monitoring current systems. The technologies for successfully monitoring deterioration and other concerns largely exist at the present time. Instead, future technologies are going to focus on how sewage and wastewater systems can be more environmentally friendly in terms of the way in which wastewater is treated before it is released back into the environment. A technology that is currently viewed as being important for the future is known as electrocoagulation, which is a process of using anodes to create a reaction in water to remove pollutants (Holt, Barton & Mitchell, 2005). While this technology is not necessarily new, it has not been widely used in the past to treat sewage water. Instead, most sewage treatment relies on chemicals and heat to remove pollutants. The use of electricity may provide a way to avoid actually adding further chemicals into water and simply being able to remove pollutants on their own.

Development of an Asset Management Plan

The development of an asset management plan for the Sewage Authority will be based on a risk management standpoint. The idea of a risk management-based asset plan is to implement policies and procedures that allow for the identification, evaluation, and treatment of risks that could result in an organization from fulfilling its stated goals and objectives (Carterton District Council, 2007). The asset management plan for the Sewage Authority will be based on a desire to control the number of service interruptions and sewage backups that occur, as well as the long-term costs of maintaining the sewage infrastructure. Procedures will be implemented, some of which have already been discussed within this document, to actively monitor system usage and deterioration and address problems as they occur. This will not only reduce the overall costs of maintaining the infrastructure, but should also reduce the costs associated with major problems that develop that cause major repairs and damage to existing infrastructure and systems.

Appropriate Asset Management Systems

The asset management system that will be used to evaluate and monitor the costs associated with the upgrades, improvement, and maintenance of the infrastructure controlled by the Sewage Authority will be based on generally accepted accounting practices that rely on the determination of the replacement value of assets (Carterton District Council, 2007). Table 2 shows the projected replacement costs of the assets under the control of the Sewage Authority. These projections are based on current replacement costs for similar types of assets. The asset management system that is used by the Sewage Authority will monitor the costs of these systems in terms of making repairs, conducting routine maintenance, and adding additional systems as growth occurs within the local community and additional infrastructure is needed.

Table 2: Replacement Cost of Existing Assets

Asset

Replacement Cost

Concrete Pipe

24,300,000

PVC Pipe

8,900,000

Pump stations

21,000,000

Treatment plant

15,000,000

Likely Benefits and Costs

Table 3 shows the costs and benefits associated with the plan that has been outlined. The main aspects of this asset management plan is the implementation of a proper and accurate GIS system, environmental upgrades associated with the water treatment plant, CCTV cameras for remote monitoring, annual visual monitoring of the entire sewage system, and normal infrastructure upgrades. In total, the costs associated with these upgrades and improvements to the Sewage Authority's assets over the next 10 years are projected to be 45,650,00. However, it is expected that 1,500,000 a year for a total of 13,500,00 in savings will be incurred because of reductions in damage to the infrastructure and reductions in routine repair costs.

Table 3: Costs and Benefits of Asset Management Plan

 

1

2

3

4

5

GIS System

2,000,000

100000

100000

100000

100000

Environmental upgrades

 

 

 

 

5000000

CCTV cameras

850,000

850,000

850,000

100,000

100,000

Annual monitoring

200,000

200,000

200,000

200,000

200,000

Infrastructure upgrades

1,500,000

1,500,000

1,500,000

1,500,000

1,500,000

 

 

 

 

 

 

Benefits

 

1,500,000

1,500,000

1,500,000

1,500,000

Total Cost

 

 

 

 

 

 

6

7

8

9

10

Total

GIS System

100,000

100,000

100,000

100,000

100,000

2,900,000

Environmental upgrades

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

30,000,000

CCTV cameras

100,000

100,000

100,000

100,000

100,000

3,250,000

Annual monitoring

200,000

200,000

200,000

200,000

200,000

2,000,000

Infrastructure upgrades

 

 

 

 

 

7,500,000

 

 

 

 

 

 

45,650,000

Benefits

1,500,000

1,500,000

1,500,000

1,500,000

1,500,000

6,000,000

Total Cost

 

 

 

 

 

39,650,000

Based on these projections, the total cost to the Sewage Authority for the asset management plan over the next 10 years will be 39,650,000. While this is a large investment for the Sewage Authority, the added costs must be passed on to the customers. However, with an average number of customers of 250,000 and based on a 10-year period, the average cost to each consumer of the Sewage Authority over the next 10 years will only be an additional 15.86. This translates into an added monthly cost of only 1.32. For an added 1.32 per month, consumers of the Sewage Authority can have improved services. Even more, they can be part of what will become a world-class provider of sewage and wastewater services.

Discussion

The asset management plan that has been outlined will result in an added cost for the Sewage Authority of nearly 40,000,000 over the next 10 years. However, the plan that has been outlined is not based on extravagant ideas or technologies. Instead, this plan has been designed to be realistic in terms of its goals and objectives, and the level of service that can be provided to consumers. By implementing the monitoring and service changes and standards that have been outlined, the Sewage Authority can work to achieve a goal of 95% customer satisfaction. Even more, the organization can become more environmentally friendly by using fewer chemicals for wastewater treatment and being able to ensure that the water that is released back into the environment is as clean as possible.

It is important to note that the plan that has been outlined is a 10-year plan with the first five years largely based on bringing the current infrastructure and assets of the Sewage Authority up to the standard that is considered to be standard for the industry. Once the current problems are corrected, then the next five years can be used to truly move from what are considered best practices within the industry to what is considered world-class service. The Sewage Authority will also be able to respond to problems more quickly and avoid past problems of sewage overflows that could not be avoided because deterioration and damage to assets were not identified in an appropriate manner.

Conclusion

The purpose of this report has been to outline an asset management plan for the Sewage Authority in order to allow the organization to provide better services, better maintain its assets, and to compete against other firms that are now able to provide similar services to consumers in the local area. The asset management plan that has been created will allow the Sewage Authority to provide best practices for the industry within the next five years and world-class service within the next 10 years. The organization will not only have multiple systems in place to monitor deterioration, it will also be better able to make information available to stakeholders so that they can make better decisions about the growth and expansion of the local community.

References

Allouche, E. N. & Freure, P., 2002. Management and Maintenance Practices of Storm and

Sanitary Sewers in Canadian Municipalities [online]. Available at: http://www.iclr.org/images/Management_and_maintenance_practices.pdf [accessed 24 April 2011].

Ana Jr., E. & Bauwens, W., 2007. Sewer Network Asset Management Decision-Support Tools:

A Review [online]. Available at: http://www2.gtz.de/Dokumente/oe44/ecosan/en-sewer-network-decision-making-tool-2007.pdf [accessed 24 April 2011].

Carterton District Council, 2007. Wastewater Asset Management Plan [online]. Available at:

http://cartertondc.co.nz/pdfs/AMPWasteWaterExecSum%20(3).pdf [accessed 24 April 2011].

Holt, P. K., Barton, G. W. & Mitchell, C. A., 2005. The Future for Electrocoagulation as

Localised Water Treatment Technology, 59, 355-367.

Ibrahim, M., Cherqui, F., Le Gauffre, P. & Werey, C., 2007. Sewer Asset Management: From

Visual Inspection Survey to Dysfunction Indicators. Leading Edge Conference on Asset Management, 2, 1-11.

Novatech, 2007. Risk Based Asset Management for Wastewater Systems [online]. Available at:

http://devirevues.demo.inist.fr/bitstream/handle/2042/25217/0917_153ugarelli.pdf?sequence=1 [Accessed 24 April 2011].

Alternative options for purchasing, rehabilitating, or replacing assets.

Several financial issues must be considered when comparing alternative options for purchasing, rehabilitating, and replacing assets. One of the first financial issues that must be considered is the cost associated with simply maintaining current systems and trying to make any repairs that are necessary. By examining the costs associated with maintaining current systems through the process of performing repairs, it is possible to establish a baseline for determining costs and benefits of other alternatives (Wild & Chiapetta, 2007). However, another financial issue that must be considered in examining the alternative of maintaining and attempting to rehabilitate current assets is the potential costs associated with any accidents that might occur. For example if an asset presents the risk of causing additional damage or loss of business because of performance failures, then those potential costs need to be considered (Wild, 2005).

In terms of actually replacing assets, there are larger financial issues to consider rather than just the costs associated with buying new assets. An organization that is replacing assets must also consider on the potential cost on training employees to use the new systems and new assets, as well as any costs that might be incurred from the change of current operation procedures due to the installation of a new assets (Wild & Chiapetta, 2007). If the indirect costs associated with replacing assets are not considered, then an organization is not truly considering all of the financial issues that might arise in choosing to replace assets as compared to simply trying to rehabilitate the assets that already exist.

The issue of purchasing assets also raises financial issues because it is possible to incur different levels of costs with different purchasing methods. For example, a company must have the strong capital to introduce new assets without incurring any additional debt. However, a company might need to find financing options to be able to purchase new assets. In the case of the use of financing and debt to make asset purchases, a company needs to consider the financing options that are available. One supplier might perform their own financing with lower interest rates than would be incurred if money were borrowed from a bank. On the other hand, an existing line of credit or other financing option might be available that would result in lower re-payment cost (Wild & Chiapetta, 2007). These issues are important because if money is to be borrowed for an extend period of time, such as 10 or 20 years, then the added interest payments can contribute significantly to the overall costs of the assets during the re-payment period.

Finally, the decision of whether to rehabilitate or replace assets, as well as any purchasing options that are available, should take into consideration the overall performance of the organization and its ability to compete within the larger market. A company might be able to reduce costs by rehabilitating current assets. However, by taking on the additional costs of purchasing new assets, an organization might have the ability to generate new customers and operate more efficiently. The ability to generate new customers and achieve higher revenues might offset any additional costs of purchasing new assets and make the purchase of new assets more beneficial (Wild, 2005).

Overall, what is demonstrated is that there are many financial issues that must be considered in the decision to purchase, rehabilitate, and replace assets. The specific purchase or rehabilitation price is only one part of a large set of financial issues. Ignoring the related financial issues can result in a company choosing an alternative that is not truly beneficial for its needs and operations.

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