Most infrastructure assets are expensive to build and maintain, but are the main way that public sector entities, including councils, deliver key services to their communities. Therefore, it is vital that public sector leaders know what assets they will need; not just now, but into the future, and how much they are likely to cost, operate, and maintain. They also need to be able to budget to renew their assets, or if necessary, upgrade them. Ensuring leaders, such as councillors, boards, and executives have this information early is important so they can budget for the highest priority projects. Entities may need 3 or 4 years notice to start planning to replace or upgrade major assets like bridges, police stations or a water treatment plant – clearly much more work than a trip to the local hardware shop.
Our audits over time have found that some public sector leaders don’t place a great deal of importance on longer term planning for asset renewals and upgrades. In our reports to parliament over the years, we have included examples of entities that have gaps in their asset information, or are using asset management plans that are incomplete or out-of-date.
As a public sector leader what should I be asking?
Mayors, councillors, chief executives, boards, and chairs of audit committees: if your entity doesn’t have up to date asset management plans covering all your asset classes, ask your asset management team why.
Leaders are responsible for the financial performance of their entity. Communities expect their assets to be in a reasonable condition now and into the future. If your entity doesn’t plan and budget to replace assets as they age, it may not be ready to begin infrastructure projects in the most cost-effective way.
How do we ensure we build the right assets, well?
Firstly, understand the current state of all your entity’s assets. Do the asset management plans include all the assets that your entity owns and when are they due to be replaced or need major maintenance work? Does your entity have an agreed process to identify critical assets and a way to rank and prioritise capital works? If not, ask for help. Queensland Treasury Corporation has developed some ranking tools that councils have used to prioritise asset projects based on their asset data.
There is often pressure from the community to have new facilities, or to upgrade existing assets, such as sealing gravel roads. We of course appreciate that even the largest public sector entity can’t meet all demands, ideas, and suggestions. Therefore, leaders will need to prioritise the most important of these requests and ensure that they can afford the new without running down the existing. Deferring maintenance of existing assets may be a short-term saving, but it may actually add to the long-term costs. Waiting for an asset to break before you fix it is typically the result of poor planning. Preventive and planned maintenance can be 2 to 5 times cheaper than reactive maintenance once the asset has degraded or failed.
If an existing asset has reached the end of its life and needs renewing, or a new asset will meet growing demand, consider if the designs can meet the current and future needs for that type of facility. A strong business case can ensure that the whole of life cost to the entity and community is appropriate and affordable. Building the asset is one of the costs, but an entity also needs to be sure it can afford to operate and maintain the asset for its life, which can often be 30 or 40 years.
Monitoring the cost of construction or acquisition of the asset is critical to achieving value for the community. Public sector leaders need to monitor delays or design changes closely as small variations can add up and affect not just the build cost but also the ongoing maintenance and operating costs. A decision to save money in the build to use lower quality materials can result in more frequent and more expensive maintenance over the life of an asset.
How do we manage assets to ensure they last?
Once an entity has built or acquired the asset, it needs to manage it well over its life.
If we consider councils, councillors do not directly manage assets, but there are several things they can do to make sure the assets are being well managed. The most important thing a councillor can do is to set the tone for the organisation that maintaining existing assets is just as important as adding new services, works or facilities. Council leaders can reinforce this by ensuring that there are enough resources in the organisation to maintain and operate assets and the information on the condition and defects is reliable.
Recording and reporting on good asset information can help extend the life and reduce the cost of maintaining existing assets. Without good information on asset condition and performance, leaders can’t intervene to reduce damage to assets or address issues of poor service.
How do we manage our assets strategically?
Take the long-term view by understanding what assets are important today and what actions will ensure you have the assets needed for the future.
Given the value of the assets public sector entities manage, as well as the long lives of those assets and the importance of the services delivered, a strategic approach is critical. By integrating an entity’s overall asset strategy with its financial and asset management practices, it helps everyone in the entity to work together to achieve the corporate objectives. A strategic approach emphasises corporate responsibility and establishes a defensible transparent approach and direction.
By taking the long view, the value over the entire life cycle of an asset can be determined and planned for. It can also inform decisions to dispose of costly assets that entities see as unnecessary and generate funding from their sale. A strategic approach to asset management will allow you to understand how effective your assets are in delivering the services the community needs. It can help you achieve greater benefits from your organisation’s significant investment in assets, by:
- identifying surplus assets – reduce insurance, operating and maintenance costs
- reducing overengineering – the right asset for now and the future
- planning proactive maintenance for assets – to make them last
- understanding what it will cost to replace existing assets – so you can budget for it.
Where to from here?
Keep an eye out for our report to parliament on Improving asset management in local government, tabling shortly. See our forward work plan for our upcoming audits and reports: www.qao.qld.gov.au/audit-program.
Reports to parliament where we mention or cover asset management:
- Local government 2022 (Report 15: 2022–23), 2021 (Report 15: 2021–22)
2020 (Report 17: 2022–23)
- Education 2022 (Report 16: 2022–23), 2021 (Report 19: 2021–22), and 2020 (Report 18: 2020–21)
- Health 2022 (Report 10: 2022–23)
- Investing in vocational education and training (Report 1: 2019–20)
- Efficient and effective use of high value medical equipment (Report 10: 2016–17)
- Forecasting long-term sustainability of local government (Report 2: 2016–17)
- Maintenance of public schools (Report 11: 2014–15)
Prior blog posts that mention asset management: