Auditor-General's overview

Managing public assets.

Good management of physical assets is important for the future. The public sector has physical assets valued at more than $210 billion. Public entities need good information about these assets and future asset needs so that they can continue to deliver services that we all need and want, now and into the future.

I wanted to take stock of how physical assets that deliver services to the public are managed. In this paper, we provide an overview of these assets, their condition and value, maintenance and renewals, and what information is reported to decision-makers about these matters. By doing this, I hope to initiate further discussion by provoking relevant questions about the management of public assets.

In late 2012, I requested high-level information about the management of physical assets for more than 340 public entities. It showed that most public entities understand the importance of planning for assets, with plans in place for about 75% of assets. It also confirms what many of us generally experience in our day-to-day lives – that most public assets are currently in suitable condition to provide the services intended.

However, looking to our future, planning for assets alone will not be enough to continue delivering services and meet our future needs. The information we obtained showed that:

  • About 40% of assets were being managed according to plan. The remaining assets were being managed according to plan to varying extents, including some where the plans were not followed at all.
  • For nearly 40% of assets, it was not known whether there is any deferred maintenance or renewals. For about 10%, there is a quantified amount of deferred maintenance and renewals. Combined, these assets with unknown and known amounts of asset maintenance and renewal deferrals had lower condition ratings compared with the over 50% of assets without deferrals.

Decision-makers need good information about their assets and future asset needs to manage maintenance and renewal needs and future asset investments. The results of our stocktake suggest that, for many public entities, asset condition information is not being regularly reported to decision-makers.

My Office has focused on asset management and encouraging good management of public assets throughout the range of our audit work since the introduction of accrual accounting in the late 1980s. We consistently see that best results are achieved when asset management is integrated throughout the business. An integrated management approach involves robust information and systems that are used co-operatively by asset managers, engineers, valuers, planners, corporate finance staff, management, and the governing body to ensure that the right people contribute the right information at the right time.

In looking at the analysis of the information that my staff collected, there are six questions that we are not in a position to answer, but that the public sector needs to consider. These are:

  • How well are asset management plans and financial plans being aligned, and are those plans addressing affordability and our likely future needs?
  • What capability or maturity of asset management systems, information, and expertise will we need to manage the complexity and scale of the public sector's assets in the future?
  • What can we learn from the natural disasters (like the earthquakes in Canterbury, which have caused significant damage to assets) about how asset management practices can be developed to help us better prepare for unlikely but potentially catastrophic events?
  • What are the public sector's asset maintenance and renewal needs over the life cycle of the assets?
  • What is the nature and value of deferred asset maintenance and renewals, and what effect may this have on future services?
  • What kind of information and reporting is relevant and useful for public entities' asset management decision-makers?

This is the first time that my Office has looked at asset management across the public sector, although we have often reported on asset management matters for individual public entities and certain sectors within the overall public sector. In 2013/14, with local authorities, we will be trialling a common approach to auditing asset management information. If successful, we will look to apply this methodology across all our audits.

We also propose in 2013/14 to analyse and provide an overview of the life cycle maturity of local government assets. In general, the construction of public assets has been undertaken in stages, following significant events such as the expansion of the railways and the end of World War II. Managing our assets with a life cycle approach is important, as many of our assets are likely to have similar useful lives and maintenance and upgrade profiles.

I encourage the public entities managing large and complex assets that deliver public services to continue the effort that has seen New Zealand recognised as a leader in asset management planning, so that the risks to future services are understood and actively managed. By doing so, we can ensure that our assets are maintained and developed to be ready for our future needs.

Signature - LP

Lyn Provost
Controller and Auditor-General

20 June 2013

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