Municipal PS 3280 Compliance & ARO Valuation

Why use Dillon for your ARO Strategy?

 The “Owner’s Advocate” Advantage

We don’t just identify liabilities; we monetize risk. While accounting firms can identify that a liability exists, they often lack the technical data to quantify what it costs to fix. Dillon acts as an extension of your Risk and Engineering departments to provide:

• Audit Defense: A technical report designed specifically to answer auditor inquiries so you don’t have to.
• Engineering Rigor: We use real-world remediation rates (market-based valuation), not generic “rules of thumb.”
• Operational Insight: We flag “tipping point” assets—identifying which liabilities are imminent and which can be deferred, helping you manage long-term capital planning.

Timeline and Process: The PS 3280 Compliance Framework

Our process is designed to rigorously satisfy the Public Sector Accounting Board (PSAB) requirements. We move systematically from identifying the Legal Obligation to quantifying the Settlement Amount.

Phase 1: The Liability Screen (Weeks 1-2)

“Establishing the Legal Obligation” PS 3280 requires that a liability be recognized only if it meets specific criteria. We review your asset registry and conduct staff interviews to apply the PS 3280 “3-Point Test”:

1. Is there a Legal Obligation? (e.g., Environmental Protection Act, contract terms, or promissory estoppel).
2. Is the Settlement Event Probable? (Is the future sacrifice of economic benefits likely?)
3. Is the Amount Estimatable? (Can we determine a credible cost?) Outcome: A filtered list of “In-Scope” assets, eliminating “theoretical” risks that don’t belong on your balance sheet.

Phase 2: Valuation & Measurement (Weeks 3-6)

“Determining the Best Estimate” Once the obligation is confirmed, we must determine the cost to settle it. We offer two tiers of measurement rigor to fit your portfolio’s complexity:

• Tier 1: Desktop Measurement
  • Best for: Standard municipal assets (Fire Halls, Offices, Simple Lagoons).
  • Method: We apply industry-standard productivity rates and RSMeans data to your asset attributes without site visits.
  • PS 3280 Alignment: Provides a “Reasonable Estimate” for low-complexity portfolios.
• Tier 2: Field Verification
  • Best for: High-risk or complex environmental liabilities.
  • Method: We deploy technical teams for Designated Substance Surveys (DSS) to sample asbestos/lead in aging buildings, or Drone Volumetrics to measure exact closure costs for gravel pits and landfills.
  • PS 3280 Alignment: Provides “High-Fidelity Evidence” for assets where significant material liability exists.

Phase 3: The “Audit Defense” Package (Week 7+)

“Reporting & Disclosure” We translate engineering data into accounting inputs. You receive a comprehensive package designed for your Annual Financial Statements:

1. The Master ARO Ledger: A line-by-line Excel file listing every asset, the specific obligation (e.g., Asbestos Abatement), and the Present Value (PV) cost.
2. The Methodology Report: A written defense of all assumptions, including the Discount Rate and Inflation Rate selections required by PS 3280.
3. Accretion Schedules: (Optional) Projections of how the liability will grow over time, aiding in long-term financial planning.

Timeline depends on the size of the asset portfolio and complexity of environmental liabilities.

Accreditation & Standards

Compliance You Can Trust

• Our valuations adhere strictly to the PS 3280 Standard and leverage our multidisciplinary expertise in:
• Solid Waste Management: landfills, transfer stations
• Environmental Management:  storage tanks, hazardous materials storage areas
• Facilities Engineering: Building hazardous materials (Asbestos/Lead/PCBs).
• Civil Infrastructure: Water/Wastewater lagoons and linear infrastructure.