ASSET MANAGEMENT REFORM. ISC-CIB Presentation at The Ontario Tribal Council Summit February 5, 2019

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1 ASSET MANAGEMENT REFORM ISC-CIB Presentation at The Ontario Tribal Council Summit February 5, 2019

2 ASSET MANAGEMENT REFORM July 2017 Minister Bennett committed to a review of the O&M policy framework in co-development with the Assembly of First Nations (AFN) December 2017, the AFN passed a resolution to support O&M reform March 2018, An engagement session was held with First Nation and ISC technical experts: Agreement was reached to move towards an Asset Management Lifecycle Approach The Ontario government passed legislation requiring municipalities to have an Asset Management Plan The Asset Management Lifecycle Approach is an industry best practice. It is strongly supported by the Canadian Network of Asset Managers, as well as the Federation of Canadian Municipalities. A new co-developed asset management lifecycle approach will support the reform and commitment for a new fiscal relationship 2

3 Components of an Asset Management Approach Political leadership Business and economics Planning Data management Asset Management Sustainability Risk management Engineering Finance and accounting Strategy and policy 3

4 CONSIDERATIONS FOR AN ASSET LIFECYCLE MANAGEMENT APPROACH Financial Resources Sufficient & Predictable Sustainable Physical Resources Human Resources Laws, Regulations and Information Flexible Funding Arrangements Financing Options for Transfer Payments Communitybased Decisions Engagement & Co-development Pilot Projects Proof of Concept 4

5 CO-DEVELOPING AN ASSET MANAGEMENT APPROACH ASSET MANAGEMENT APPROACH NEEDS Engagement & Co-development Pilot Projects Proof of Concept Laws, Regulations and Information Engagement & Co-Development The Department is working with First Nation organization to co-develop the approach. AFN is holding engagement sessions across the country to provide awareness and seek input from First Nation leadership and their community members Pilot Projects The Department is work with the AFN who will conduct pilot projects on a new framework for O&M service delivery and the FNFA who are supporting a monetization pilot project to test the concept of financing future transfer payments Laws, Regulations & Information Approximately one-third of FNs have expressed interest in the 10-year grant. The Department has worked with the FMB to support the FAL/FAB requirements to qualify for grant funding. Enhanced inspections for infrastructure to be funded through O&M and will inform Asset Management Long-Term Planning. 5

6 Operation and Maintenance Policy The current policy, for O&M, supports Indigenous Services Canada s funding of the operation and maintenance of band-owned, ISC-funded, infrastructure assets and services. Included in the Policy: The Asset Condition Reporting System (ACRS) Municipal-Type Service Agreements (MTSA) Funding Factors: the Net Funding Requirement (NFR) and Gross Funding Requirement (GFR) Roles and Responsibilities The O&M policy was last updated in 1998 The policy is currently under-review 6

7 The Cost Reference Manual - CRM The ISC-CRM provides cost estimates for construction and O&M funding through cost indices The CRM allows for some flexibility based on funding levels available and regional knowledge of existing assets. The Cost Indices Includes O&M base unit costs and are derived from O&M cost definitions, for example: O&M for a Bridge includes; inspections, cleaning and general maintenance Salary for labourers, truck drivers Supplies and materials and Operating costs of road maintenance vehicles such as fuel, parts and licenses The cost indices were developed in the late 1980s, and are adjusted annually for inflation. Third party experts are currently engaged to review the cost indices. 7

8 O&M Current Funding Formula The funding formula applied to determine allocation is based on asset classification and considers variable factors; such as, remoteness and square metres The formulas calculates the GFR the gross funding requirement (GRF) is calculated based on 100% of the estimated cost indices including the variable factors Then the GRF is adjusted to the NFR The net funding requirement (NFR) is based on a percentage of the GFR and applies a methodology that fees are charged for various services, similar to the fees charged in municipalities The NFR is the base funding for annual allocations of O&M to support existing assets Perentages Applied: Schools and teachrages: 100% Fire protection services: 90% Roads and bridges: 90% Utilities (water & waste-water, landfills): 80% Vehicles (garbage truck, water truck): 80% Administrative: 20% Recreational (arena, community hall): 20% 8

9 Other Considerations for O&M As per the O&M policy, regions can also allocate funding outside of the cost indices for activities: such as; Fire Protection Services Capacity Building for example, the Circuit Rider Training Program Maintenance Management Plans Asset Management Plans 9

10 Policy Considerations The NFR is based on the assumption that user fees are being charged and will support some of the costs associated with the O&M of asset Cost indices/asset definitions are dated and in some cases not clear O&M escalators to consider all factors When new assets are built, potential to consider full asset life cycle costing reporting on O&M Review of asset classes Other considerations 10

11 NEXT STEPS Engagements National engagements will be led by the AFN Pilots AFN-led pilots in each region to test the Asset Management approach Updated Costing Formulas are currently under review 11

12 Questions? 12