Comparison of existing and required assets

Strategic planning begins by comparing assets that are needed with those that exist or are committed to come into service. Entities must carry out this analysis for all services for which they are responsible, and establish which assets are:

The analysis needs to consider the options in terms of service outcomes, financial implications and risk. This analysis may involve some rationalising or sharing of assets that support different services within the same portfolio.

The asset strategy

The asset strategy should consider various ways of achieving the desired results within the portfolio, and include an evaluation of the costs, benefits and risks associated with each. It should also consider the possible methods and benefits of private sector involvement in all phases of the asset life cycle.

The individual plans that constitute the asset strategy are described below:

Acquisition plan
Assets to be acquired may be purchased (either on the open market, or from another government entity), or custom developed for their purpose. They may also be leased or hired. The asset acquisition plan should define the type and timing of asset requirements, and set out the proposed method of acquisition and financing.

Operations plan
The operations plan defines operating policies (ie in respect to working hours, security, cleaning, energy management and similar) and the resources required to manage the asset. The operational management of individual assets should be assessed to determine whether this function can be contracted out in whole or in part.

Maintenance plan
The maintenance plan defines maintenance standards, describes how the work is to be carried out, and forecasts the necessary maintenance expenditure for the planning period.

Modifications or enhancements are work that is required because of a change in the use of the asset, or a need to improve its functional performance. Works of this nature normally increase the service potential of the asset and are then treated as capital expenditure.

Disposal plan
Disposal options include transfer for alternate use, rental, sale and/or lease-back, and demolition (see Section 6.1).

Funding plan
Entities controlling assets should consider the options available for funding both capital and operating expenditures for assets.

New assets may be funded in whole or in part:

• from the disposal of unused assets;
• by leasing or other form of private investment; or
• from borrowings, including appropriated funds.

Revenues to support borrowing or leasing charges, or to supplement operating expenses, may be obtained from user charges or levies (see Section 8.1).

The funding plan should be based on an analysis of all available possibilities, including utilising private sector funding wherever appropriate.

Risk management plan Entities should prepare a risk management plan which describes the risk management strategies and actions to be implemented for the assets under their control. They are to be: aimed at effective and timely outcomes; geared to meeting the quality standards of industry; and determined in line with best practice.6

Entities must continue to monitor and evaluate the effectiveness of their risk management measures. If necessary, these measures should be redefined.

Insurance

To be managed effectively, assets must be protected against theft or fraudulent use and other hazards such as fire. The consequences of not having the asset available for service delivery must be carefully considered.

Assets must therefore be adequately insured to minimise financial loss to the Government.

Department of Treasury and Finance, Budget and Resource Management Telephone 61 3) 9651 5344 Department of Treasury and Finance, Managed Insurance Fund Telephone 61 3) 9651 2187

5 Budget Sector Asset Management Principles
Budget and Expenditure Review Committee, 1993

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