Summary of key facts relating to the Capital Asset Management EXG review released in December 2006.
What was the main purpose of the review?
To provide ministers with an assessment of whether existing public sector management arrangements encourage effective and efficient use of capital resources, and whether prevailing asset management practices and performance in departments and crown entities represent best practices and performance.
What were the main findings of the review?
Though there are some good pockets of practice, the overall system that applies to departments is not operating as effectively as it should for the scale and sophistication of physical assets involved.
There are mixed indicators of effectiveness of asset management in the crown entity sector - some of the same systemic gaps appear in both crown entities and departmental sectors.
Better information and clearer performance expectations are needed to assist acquisition decisions and monitor asset performance over time.
What changes will be made as a result? What will be the benefits?
Four key changes will be made over twelve months to raise awareness of the benefits of improved asset management, reduce the risk of fiscal and operating surprises related to management of assets, and secure measurable gains from capital spending:
- Central agencies will assume clearer leadership roles in capital asset management and in ICT (Information, communications and technology)
- Treasury will develop and implement a new capital asset management framework applicable to all departments and crown entities, and all asset classes
- The framework will require better quality information to be available for decision making, financial planning and performance monitoring purposes
- Central agencies will provide improved assurance for ministers around the quality of asset-related spending.
In what areas did the review confirm that current practice is providing value-for-money?
Pockets of good practice were identified, though these are often unevenly distributed across and within departments or crown entities. For example, although Police have discovered problems with their vehicle funding model, they have obtained value from centralised vehicle procurement practices that could be replicated elsewhere in agencies with significant numbers of mobile assets.
Among the good practices in the crown entity sector, there is peer and third party reviews of DHB ten year asset management plans. In addition, arrangements for allocating new capital funding amongst DHBs focus on the impact of any investment on service levels and take account of affordability within baselines.
What are the next steps?
- By May 2007 – Report on the costs and benefits of a new capital asset management framework, including how an enhanced quality assurance regime for major projects would operate; and agree to roll out a new framework by December 2007.
- By June 2007 – Report on proposals for information required to be provided to central agencies to enable asset management performance to be monitored and assessed .
- By October 2007 – Report on proposals for improved assurance reporting.
- By December 2007 – New framework in place.
- By December 2008 – Report on the impact of the new regime.