[Themaintainers] Re proper accounting and budgeting for maintenance costs

[Melinda Hodkiewicz]

The 'Bible' is the IIMM

Originally developed here in Australia but widely used internationally.  Excellent resource, much used by many practitioners

https://www.ipwea.org/publications/ipweabookshop/iimm



-----Original Message-----
From: themaintainers-bounces at lists.stevens.edu <themaintainers-bounces at lists.stevens.edu> On Behalf Of Stewart Brand
Sent: Tuesday, 6 April 2021 12:57 AM
To: themaintainers at lists.stevens.edu
Subject: [Themaintainers] Re proper accounting and budgeting for maintenance costs


The note below from David Albrecht is dead on.

There must be good articles, papers, and BOOKS on the subject of sensible budgeting and funding for maintenance-ideally of all sorts, as well as infrastructure.

What sources do people here recommend?

		-Stewart Brand

> 
> Message: 1
> Date: Sun, 4 Apr 2021 21:03:06 -0700
> From: David Albrecht <albrecht.dr at gmail.com>
> To: Melinda Hodkiewicz <melinda.hodkiewicz at uwa.edu.au>
> Cc: "themaintainers at lists.stevens.edu"
> 	<themaintainers at lists.stevens.edu>
> Subject: Re: [Themaintainers] Maintenance engineering coursework?
> Message-ID:
> 	<CACFrA1PDgF7GCw_RT=6fLmQxwSy1N714WdYwSBuZXyoNt11u7A at mail.gmail.com>
> Content-Type: text/plain; charset="utf-8"
> 
> Rental property operator and software engineer here.
> 
> I don't think a course like this is complete without some discussion 
> of accounting. At the risk of stating the obvious, accounting is the 
> accumulated body of knowledge on how to quantify economic activity.
> Probably half if not more maintenance problems are ultimately rooted 
> in poor accounting, specifically focusing too much on cashflow and not 
> enough on the balance sheet.
> 
> Simple but obvious example to illustrate the point. A municipality 
> spends
> $1 million on a new road with an estimated lifetime of 20 years. Next 
> year, they collect $500k in tax revenue and spend $475k. Yay, a 
> surplus! Cut taxes! Except the simple math of $1 million/20 years for 
> our road shows you need to be tracking the $50k annual wear and 
> tear...somewhere. Most organizations -- many municipalities and 
> unsophisticated rental property operators -- don't do this well, and 
> are caught short when a major capital item hits end-of-life, causing 
> them to scramble to get a loan and fall farther and farther into debt they have no way to service.
> 
> I think the solution is to emphasize a culture of continuous, 
> incremental capital replacement in an organization. I haven't seen too 
> many organizations (especially in the public sector) with the 
> discipline to accumulate huge piles of cash for lumpy capital 
> spending, without shenanigans taking place that cause the money to get 
> redirected for other short-term uses. I'd love to know if I'm wrong about this.
> 
> On Sat, Apr 3, 2021 at 5:02 PM Melinda Hodkiewicz < 
> melinda.hodkiewicz at uwa.edu.au> wrote:

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