Failing to properly quantify the unfunded liability in a reserve study due to factors such as:|
Under reporting occurs when a cost is eliminated from the
capital budget on the assumption that:
- Capex-opex spillover
comprehensive asset inventory that does not include certain assets and
therefore does not contemplate some capital costs.
Under reporting may result in:
- The cost will always be carried in the
operating budget in future years. As a result, the cost disappears from the capital
load and the operating load over the 30-year planning horizon. The problem of "future incumbents" does not guarantee that the cost will show up in future budgets.
- The cost is not material as it falls below a capital cost threshold, either defined by the owner or the consultant.