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48 there was no reason to create a link to costs reported in the tation in Management Discussion & Analysis is sufficiently accounting system, disaggregated by asset class. Some DOTs persuasive to warrant an improved rating. (e.g., Michigan) were able to address this requirement through The objective of this research topic would be to confirm the use of work type codes. whether improved bond ratings have indeed occurred because The objective of this research topic would be to further of adherence to the modified approach and, if so, to better develop the approaches employed by Michigan and others understand what factors are important in the bond rating into a tool for additions and retirements that could be applied agencies' review. by many states. RESEARCH METHODOLOGY Required Shift to Depreciation Research would be performed through the following Several DOTs questioned the wisdom of requiring a state activities: to shift from the modified approach to depreciation if the con- dition targets were not achieved. They noted that a recurring 1. Enhance initial data collection on infrastructure report- failure to achieve targets indicated a problem, one that war- ing techniques with a follow-up questionnaire, for all rants public scrutiny. Requiring a shift to depreciation seems states and selected local governments, that focuses on to suggest that, in effect, the solution to the problem is to stop the research topics noted above. disclosing it. (However, GASB notes that the logic behind 2. Review and analyze data with follow-up telephone and requiring governments to begin depreciating if the infrastruc- site visits to selected states. ture is not at or about the established condition level is that 3. Determine best as well as most common practices, high- because the condition of the asset has dropped below a sus- lighting differences where appropriate for various state tainable level, it can no longer be preserved indefinitely. Its characteristics. useful life has gone from indefinite to definite.) The DOTs 4. Outline multiple approaches as parameters for use in suggest that states be permitted to continue using the modi- conducting condition assessments. fied approach and that the shortfall continue to be reported, 5. Review results with bond rating agencies to gain insight much as a shortfall in a pension program is reported. into their assessment of the effectiveness of various The objective of this research topic would be to devise a approaches. method by which a state not meeting its condition targets 6. Identify a list of recommended solutions for each of the could continue to use the modified approach, if it so chose. items identified in the Research Topics section above. This method, which ultimately would have to be approved by Review these recommendations with GASB and pre- GASB, would involve directly reporting preservation infor- sent them in cooperation with the GASB staff at the mation in the financial statements, as discussed above. conference described in Step 7. 7. Conduct a second conference on GASB 34 implemen- tation by state DOTs. (During the original survey and Potential Effect on Bond Ratings follow-up case study interviews, it was remarkable how many states noted the 2001 AASHTO conference con- As noted above, several local governments have reported ducted in Tennessee as a key step in their planning improved bond ratings as a result of preparing financial state- process. The research team believes that many DOTs ments in accordance with the modified approach. Although a would welcome the opportunity to compare notes again comprehensive review of local governments' compliance with after the initial 2 years of implementation. The confer- GASB 34 is outside the scope of current or proposed NCHRP ence could also be used to present and receive feedback research, these reports are clearly of great interest to the state on the research topics described above.) DOTs. If confirmed, there could be a substantial effect on 8. Throughout, consult with the NCHRP panel and GASB how state DOTs comply with GASB 34. Of equally great staff for direction that will result in a high probability interest would be to gain insight into the bond rating agen- of achieving complete integration of asset management cies' thinking as they determine whether a particular presen- techniques in the financial reporting process.