6.1 Disposal of assets

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Entities are to:

evaluate the effectiveness of their redeployment/disposal strategies in maintaining an asset portfolio that best meets service needs; and establish arrangements for the decommissioning of assets and for under-performing or surplus assets as efficiently as possible, prior to redeployment or disposal.12

Asset disposal decisions are to be made within an integrated service and financial planning framework. The following guidelines are provided to help entities dispose of their assets in an accountable manner. Entities should:

• establish and maintain an asset information system, which records all relevant information, to assist in asset planning and management;

• prepare and evaluate proper costing to support the selection of the most cost-effective disposal methods;

• identify those areas most susceptible to fraud or risks, and introduce appropriate preventive measures;

• identify and communicate the preferred arrangements for disposals to relevant staff;

• engage experts to develop the terms of contract and to assist in preparing the contract (particularly for complex and non-standard disposals) to minimise the exposure to risk;

• provide clear instructions to the agent engaged to undertake the disposal; and

• monitor and evaluate disposal performance regularly for achievement, fair dealing, cost-effective choice of disposal methods and for compliance with the Government’s disposal policies and objectives.

Different disposal methods will be needed for different types of assets. Auctions, for example, may not be appropriate to dispose of some classes of assets. Before deciding on a particular disposal method, the following matters should be considered:

• the nature of the asset (ie a specialised asset or a common item);
• its potential market value;
• other intrinsic value of the asset (ie cultural/heritage aspects etc);
• its location (with respect to its transportation or access);
• its volume;
• its trade-in value;
• its ability to support wider Government programs;
• environmental considerations;
• market conditions; and
• the asset’s life.
• Appropriate means of disposal may include:
• public auction;
• public tender;
• transfer to another entity;
• sale to another entity;
• sale to staff;
• trade-in; and
• controlled dumping (for items that have a low value or are unhygienic).

Professional valuations play an important role in asset disposal (see Section 7). They can help managers to select the most appropriate selling method. They also help to set realistic expectations for the sale. If they are required, valuations must be obtained from experienced agents who have a knowledge of the type of asset(s) for sale and the current market trends. The Office of the Valuer-General can offer advice in this respect.

Supply Policies and Guidelines Victorian Government Purchasing Board, 1995 Department of Treasury and Finance, Victorian Government Property Group Telephone 61 3) 9651 2496 Victorian Government Purchasing Board Telephone 61 3) 9651 3008

Disposal of land
As indicated in Section 4, land includes all improvementsof a permanent nature (ie buildings, infrastructure etc) constructed on the land. Lawsand procedures relating to the disposal of land will therefore also cover the disposal of such improvements.

Crown land
Only the Minister for Finance may dispose of Crown land. Disposal must be in accordance with the provisions of the Land Act 1958. Where improvements in which the Crown has no financial interest are constructed on Crown land (eg a local Water Board residence), the practice has been to share the proceeds of sale between the Crown and the entity that has the financial interest in the improvements.

Other land (freehold land)
Land, other than Crown land, must be sold in accordance with the relevant legislative requirements. For example, the Acts listed below govern disposal of assets by entities within the portfolios stated:

Conservation and Natural Resources
Conservation Forests and Lands Act 1987

Education
Education Act 1958

Equity in any land improvements established under such arrangements as joint venture, licence or lease must be considered when disposing of land. For example, the following issues may be applicable:

• Joint venture: The partner’s costs may need to be reimbursed.

• Licence: The licensee may be required to remove all improvements.

• Lease: The lessee may have to make good or restore the site to its pre-leased state.

Conservation Forests and Lands Act 1987 Education Act 1958 Government Employee Housing Act 1981 Housing Act 1983 Land Act 1958 Project Development and Construction Management Act 1994 Transport Act 1983 Urban Land Authority Act 1979 Various other Acts with development and building provisions. Department of Treasury and Finance, Victorian Government Property Group Telephone 61 3) 9651 2496

Disposal of other assets
With the exception of land and constructed assets, the disposal of assets by entities is governed by the Financial Management Act 1994.

The Regulations and Directions that currently apply essentially require each department to establish a Board of Survey to recommend on asset disposal and to prescribe the approval processes to be followed (based on the value of the assets to be disposed of).

Financial Management Act 1994 Supply Policies and Guidelines Victorian Government Purchasing Board, 1995 Victorian Government Purchasing Board Telephone 61 3) 9651 3008

Relinquishing control of an asset
An entity ceases to be responsible for managing an asset when it relinquishes control of that asset. This may occur in a number of ways:

• in some instances, an entity may elect to do so;

• in others, it is unable to exercise any discretion in the matter.

Not all of these means of relinquishing control of an asset apply to all classes of assets, or are available to all entities.

Directions of the Minister for Finance under the Financial Management Act 1994 Project Development and Construction Management Act 1994 Recognition and Reporting of Crown Land by Government Entities Public Sector Accounting Centre of Excellence, 1995 Recognition and Valuation of Non-current Physical Assets Department of Finance (Victoria), 1995 Supply Policies and Guidelines Victorian Government Purchasing Board, 1995 Accounting Department of Treasury and Finance, Accounting and Financial Reporting Division Telephone 61 3) 9651 2187 Construction of assets Department of Planning and Development, Office of Building Telephone 61 3) 9651 5800 Land Department of Conservation and Natural Resources, Crown Land and Asset Division Telephone 61 3) 9412 4406 Department of Treasury and Finance, Victorian Government Property Group Telephone 61 3) 9651 2496 Department of Planning and Development, Office of Building Telephone 61 3) 9651 5800 Other assets Victorian Government Purchasing Board Telephone 61 3) 9651 3008

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

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