Capital Asset Management Framework: 15. Glossary

The terms and definitions provided below apply only to the application of the Capital Asset Management Framework.

A

Acquisition - The process of obtaining goods and/or services to meet material needs by way of purchasing, leasing or contracting. Also referred to as procurement.

Agencies - Financial Administration Act R.S.B.C. 1996.ch 138. These include: ministries, taxpayer- supported and commercial Crown corporations and their subsidiaries, and local agencies such as school districts, health authorities, universities and colleges. 

Alternative Capital Procurement – The acquisition of capital assets involving any of the following three criteria:

1. without direct purchase by the province, or
2. financed with limited or no recourse to the Province, and
3. transferring all or some of the project’s life cycle risks to outside parties

Alternative Financing – Financing through innovative and cost effective alternative methods (excluding direct Provincial debt) that would assist in mitigating and transferring project finance risks to outside parties, protecting the province’s credit rating, and accelerating the delivery of capital infrastructure.

Alternative Service Delivery - In the context of capital asset management, this term refers to the spectrum of strategies which, constitute a change in the way a service is being delivered or asset-related demand is being managed. For the purposes of this framework, alternative service delivery could include private delivery options, non-asset related strategies (e.g. eliminating or reducing demand for a particular service) and existing asset strategies (e.g. using existing assets more intensively rather than expanding capacity).

B

Best Practices - The set of processes, techniques or management methods generally endorsed by professionals in a given field as having either a demonstrable record of success or representing the approach most likely to achieve significant improvements in terms of cost, quality, schedule or other specified criteria.

Betterment - A material cost incurred to enhance the service potential (useful life or capacity) of a tangible capital asset. A betterment will increase the asset’s previously assessed physical output or service capacity, significantly lower associated operating costs (improving efficiency), extend the life of the property or improve the quality of the output.

Business case analysis – The professional analysis of well-developed options and criteria, to select with clearly reasoned justifications a proposed initiative or expenditure, demonstrating its viability, desirability and affordability.

Business case elements – The range of components which constitute a business case, including the analysis or development of preferred options, an evaluation of the options and the rationale for a preferred solution.

C

Calendarized – Broken down by month.

Capital Asset Management Plan - The principal product resulting from the processes an agency uses to: identify its current and future capital expenditure needs; devise strategies and plan specific projects to address those needs; and determine priorities for the ongoing management of its assets.

Capital Expenditure - Any expenditure associated with the planning, development, acquisition, lease, construction, maintenance, repair, deconstruction, disposition or other such activity in the life cycle of a tangible capital asset. This is irrespective of the funding source (i.e. operating expenditures, debt financed/borrowings) and accounting treatment (i.e. whether the expenditure is capitalized and recorded on an agency's balance sheet).

Capital Program - A grouping of capital expenditures or projects with similar characteristics or attributes. Capital programs can generally be subject to standard or simplified evaluation and decision (approval) processes.

Consolidated Capital Planning - The process by which the Province assesses agencies’ capital plans, identifies and prioritizes its multi-year capital needs, and approves capital expenditures.

D

Direct Debt - Funds borrowed directly by the government for operational funding, capital advances, refinancing of maturing debt and other financing transactions.

Discounted Cash Flow - The stream of expected cashflows, including the effect of any risk adjustments generated by the procurement, discounted back to today’s values by applying an appropriate discount rate.

E

Expansion - Expenditures required to provide a new asset or increase capacity to respond to growth in service demand.

F

G

Governance - In the context of this framework, governance refers broadly to the legislation, policy, procedures, controls, decision making processes, systems and reporting relationships that guide the management of capital assets through their full life cycles. Governance concepts can be applied at both the agency and central government levels.

Guaranteed Debt - Debt incurred by agencies, private sector firms and individuals with a provincial government guarantee as to the payment of principal and interest.

H

I

J

Joint Venture - A partnership wherein two or more parties agree to jointly finance and share the risks, responsibilities and rewards of a specific project, according to the terms of a joint venture agreement.

K

L

Lease - A conveyance by a lessor to a lessee of the right to use a tangible asset, usually for a specified period of time, in return for rent. An operating lease is a lease in which the lessor retains substantially all the risks and benefits related to the asset’s ownership. A capital lease transfers substantially all the risks and benefits of ownership to the lessee and is a form of alternative financing.

Life Cycle - The totality of the capital management process including the conceptual, planning, project justification, budgeting, approval, administration, procurement, operation and disposal phases in the economic life of a tangible capital asset. In the context of this framework, “economic life cycle” encompasses an asset’s pre- implementation, implementation and post-implementation stages.

Life-Cycle Cost - The aggregate present value of all capital and operating cash outlays over the economic life of a capital asset, after netting out its terminal value.

Line Ministry - A provincial ministry that is not a central agency.

Local Agency – Generally refers to public-sector entities other than central agencies, ministries and Crown corporations e.g. health authorities, post-secondary institutions and school districts.

M

Mandate Letters – A letter issued annually to all Crown corporations by the minister responsible, setting out the government’s financial and performance expectations for the Crown corporation.

Monitoring - The ongoing review and analysis of actual performance compared to planned performance, including the identification and analysis of variances from the original capital expenditure approval.

Multiple Criteria Evaluation - A methodology used to assess and document the incremental impacts of  different options on a series  financial and non-financial criteria (e.g. environmental, customer service, social and economic) to assist in comparing the advantages and disadvantages of different options.

N

Net Present Value - Most commonly used method to assess the economic impact of a project. It is the present value of expected future net cash flows (cash revenues less cash costs) discounted at an appropriate discount rate

Non-Guaranteed Debt - Debt that is incurred by agencies without the guarantee of the provincial government.

O

Operating Costs - The costs associated with using an asset, including debt service costs and amortization.

P

Pre-Paid Capital Advances (PCAs) - Grants paid to qualifying agencies, private sector firms or individuals for the acquisition of tangible capital assets. These grants are recorded as prepaid expenses and expensed over the useful life of the asset acquired.

Procurement - Acquisition.

Project - An undertaking of defined scope, time frame and budget intended to develop, maintain, improve or acquire a tangible capital asset.

Project Management – The direction and co-ordination of human and material resources through the life of a project (including planning, project justification, budgeting, approval, administration, procurement, operation and disposal) using management techniques to achieve predetermined objectives of scope, cost, time, quality and stakeholder satisfaction.

Projects with Internal Paybacks - Projects which generate sufficient cost savings to fully fund any associated operating and debt service costs (i.e. principal and interest).

Public-Private Partnership (P3) - a venture that formally engages the expertise of both the public and private sectors to meet clearly-defined public needs through the appropriate allocation of resources, responsibilities, risks and rewards. More specifically, a P3 is a partnership between the public and private sectors for some combination of ownership, design, construction, financing, operation and/or maintenance of public capital assets.

Public Sector Comparator (PSC) - a hypothetical costing of outputs that represents the lowest, risk-adjusted life-cycle cost to achieve a desired service output – if the public sector was to finance and deliver the project. Agencies may use a PSC to determine “whether a private investment proposal offers value for money in comparison with the most efficient form of public procurement.” In other words, the PSC is a benchmark for assessing value for money (VFM).

Q

R

Recourse - The right of recovery by the lender in the event of the borrower’s default in payment of its obligations under a financing agreement.

Reporting - The regime by which appropriate stakeholders receive timely and relevant information regarding the status of a project's progress (e.g. scope, schedule, budget, and other identified risks or performance measures) to support informed decision making.

Risk Management - The culture, processes and structures directed to the effective management of potential opportunities and adverse effects. This includes the identification, analysis, and response to risk factors throughout a project’s life cycle.

S

Scope - The limits within which critical objectives are to be achieved and accountability assessed. Scope is fully described by identifying tasks performed, resources consumed and the end products that result, including quality standards.

Self-supporting Debt - Debt of entities which generate sufficient revenues from external sources to cover their operating and capital expenses including debt service payments.

Self-supporting Projects - Projects that rely on user fees or other non taxpayer- supported revenues to recover all or some of the costs associated with debt servicing, operations and capital maintenance. Self-supporting projects can be structured as P3s or without partnership components.

Service Plan – A document prepared annually by each public-sector agency, articulating its plans (including goals, performance measures, challenges and opportunities) for the next three fiscal years, as required under the Budget Transparency and Accountability Act. Service plans are updated annually on a rolling basis and represent an important part of the government’s commitment to openness and accountability.

T

Tangible Capital Assets - Non-financial assets with physical substance that are used in the production or supply of goods and/or services. Tangible capital assets have useful lives extending beyond an accounting period. They are intended to be used on a continuing basis, and are not intended for sale in the ordinary course of operations. Examples include land, structures, equipment, vehicles, roads, ferry and transit systems, schools, hospitals, universities and other capital works. Tangible capital assets do not include intellectual property (e.g. software), information technology, items acquired for resale in the ordinary course of operations, or items required for physical consumption such as operating materials and supplies.

Taxpayer-Supported Debt – direct debt used for government operating and capital purposes, and the debt of taxpayer-supported Crown corporations, agencies and school districts, public post-secondary institutions and health authorities who require an operating or debt servicing subsidy from the provincial government.

Traditional Procurement - The process whereby capital assets are purchased entirely with public money or taxpayer-supported debt and operated predominantly by the public sector, with the Province assuming all risks throughout the asset’s life cycle. Traditional procurement is also referred to as “buy-and-borrow” or “design-bid-build” procurement.

Treasury Board - A statutory Committee of the Executive Council (cabinet) with its roles and responsibilities set out in the Financial Administration Act. Treasury Board is chaired by the Minister of Finance and is the key financial management committee of cabinet, providing advice and recommendations on significant budgetary and fiscal policy matters.

U

Useful Life - Either the period over which a tangible capital asset is expected to be used or the volume of goods and/or services the asset is expected to produce or support. The life of a tangible capital asset may extend beyond its useful life to government. The life of a tangible capital asset, other than land, is finite, and is normally the shortest of the physical, technological, commercial or legal life. It may also be referred to as economic life.

V

W

X

Y

Z

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