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Owning well 

The process of good asset management does not stop at the investment decision. The State Sector Act now explicitly requires departmental chief executives to exercise good asset stewardship.

Owning well is critical to ensuring that maximum benefit is generated from Crown assets at lowest cost. To be successful there needs to be continual assessment of whether the rationale for past investment decisions remains valid. Such a review process would highlight where capital is no longer needed or where new more efficient delivery methods are available. To do this an owner of physical assets should have well formed asset management plans and practices.

Agencies should regularly assess asset performance including asset condition and use, operating cost implications, timing of maintenance and refurbishment, and long-term disposal and investment plans. These are the hallmarks of a mature asset owner (see Box 5.4).

Box 5.4 - Asset management maturity in the public sector

In 2011/12 the Treasury commissioned an independent assessment of the level of asset management maturity within capital intensive departments and Crown entities. The findings showed that:

  • Most agencies were able to demonstrate an intermediate level of asset management maturity, and there were some advanced practices in a number of agencies.
  • Some agencies were close to demonstrating an appropriate level of asset management maturity, but most had more work to do to build people, process and information capability to the level appropriate to their business context and government expectations.
  • The size of some capability gaps (between current and target levels of maturity) suggested that life-cycle decisions may not be as well informed by plans, information and analysis as they should be given the scale and complexity of assets under management.

In the current fiscal environment and with government imperatives for better public services, agencies face more pressure to maintain or strengthen asset management and service delivery capability. Yet without ongoing investment in such capability, agencies (and the Crown) will carry more risk to service failure or poorer quality decisions than would otherwise be the case.

While progress has been made since 2011/12, most agencies still struggle to articulate the strategic linkages between the services they provide and the assets they need to use, and capture that thinking and analysis in their planning documents and in subsequent asset-related performance reporting.

Good asset management practices ensure that assets continue to remain fit for purpose and align with objectives, and that costs of ownership are minimised and asset values are maximised. This will be necessary in the future given demographic changes, which will require considerable adaptation of the balance sheet as the demand for services change. Good asset management is important to all Crown assets regardless of their type, use and ownership arrangements.[49]

Capital asset management

The processes outlined in the chapter are called Capital Asset Management, and are summarised in Figure 5.1.

Figure 5.1 - Capital Asset Management (CAM) regime
Figure 5.1 - Capital Asset Management (CAM) regime   .
Source:  The Treasury

Notes

  • [49]A new international asset management standard has recently been issued by the International Organisation for Standardisation (ISO55000) that reinforces the need for good asset management practices.
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