The objective of the audit was to assess whether selected Australian Government entities were effectively supporting their business requirements through planning for, and management of, the acquisition, disposal and use of their IPE assets. The audit reviewed each entity's policies and practices against a series of audit criteria across the following components of asset management: control environment; planning; acquisitions; operations; and disposals.
Infrastructure, Plant and Equipment (IPE) assets are a key resource in meeting business objectives. The effective management of IPE assets involves the alignment of asset planning and decision-making with business priorities and strategies. Sound management across the asset life-cycle facilitates better decision-making about the acquisition, ongoing use or operation and ultimately the disposal of assets, at the right time and in a cost effective manner.
The Australian Government has a substantial investment in IPE assets. As at 30 June 2005, it reported IPE assets with a gross book value of $58 billion (net book value $32 billion). 1
The audit was conducted at the following entities:
- Australian Film, Television and Radio School;
- Australian Trade Commission;
- Department of Immigration and Multicultural Affairs (formerly Department of Immigration and Multicultural and Indigenous Affairs); and
- Department of Parliamentary Services.
Audit conclusions and key findings
The ANAO found that IPE assets were being generally well managed in the audited entities. In particular, the entities' practices reflected an increasing recognition of the role of, and commitment to, the management of IPE assets. The ANAO also found that the audited entities had, to a large extent addressed, or had action in train to address, the asset management criteria evaluated during the audit.
Each of the audited entities had well-designed and informative policy and procedural material in place covering their operational asset requirements. However, only one entity had adequately included, in its policy and procedural documentation, guidance and instructions on the more strategic issues associated with the management of assets. For example, details of the asset management principles relevant to the entity; including guidance to staff on the interpretation and application of these principles.
The audit found that the asset register in each of the audited entities contained information concerning the identity and ownership of, and the accounting for, IPE assets. Each of the audited entities had generally sound processes for maintaining the accuracy and completeness of their asset register, including having clearly established roles and responsibilities.
At the time of the audit, the development of formal asset strategies or plans was at an advanced stage in three of the entities. The extent of asset management planning will depend on the size and nature of an entity's asset holdings, including the criticality of those assets to the entity's business objectives. Overall, based on the proposed scope of these plans, and given the work already completed, the audit assessed that these plans had the potential, once finalised, to be useful tools in the management of each entity's IPE assets.
The audit also found that each of the audited entities had sound processes in place to identify, assess and approve their asset acquisition needs. In each entity these processes culminated in the development of asset acquisition or capital expenditure plans. Each of the audited entities also had effective arrangements for monitoring and reporting progress against the approved asset acquisition plans.
For the most part, the audited entities had sound arrangements for managing the operation of IPE assets, particularly those IPE assets critical to meeting their business requirements. The audit found that most of the entities had formal and well-managed preventative maintenance programs in place. In addition, sound processes were in place to manage the delivery of asset maintenance and related services under contract.
In each of the audited entities, managers were regularly provided with financial reports to assist their asset-related decision-making. Formal management reporting was largely focussed on details of actual capital expenditure, together with a comparison against planned or budgeted amounts.
None of the audited entities had structured and coordinated processes for monitoring the performance of their IPE assets on an entity-wide basis. In three of the entities, the audit found that individual operational areas regularly monitored performance-based information to assist in the management of selected IPE assets. This data was maintained within the operational areas responsible for the assets in question. The audit found that this performance information was focussed on non-financial measures. In addition, at the time of the audit, none of the entities had specified any standards relating to the financial performance of assets. The ANAO considers that access to timely and reliable information on the financial and non-financial performance of those IPE assets that are significant or critical to an entity is an important component of effective asset management, in particular, to support informed analysis and decision-making.
There was little evidence of structured or formal planning in relation to the disposal of IPE assets amongst the audited entities. Rather, disposal decisions were generally made on an ad-hoc basis relying on information obtained during other processes. This included, for example, observations made during the conduct of stocktakes, information gained from maintenance activities and assessments made during asset acquisition planning.
Each of the asset acquisition and disposal transactions reviewed were found to have been properly approved and recorded in the asset register in a timely manner. For most of these transactions, sufficient evidence existed to support or justify the decisions made. In particular, most of the audited entities demonstrated that alternatives to the disposal of assets were actively considered during the decision-making process. In some of the audited entities, the ANAO found a lack of consistency regarding the level and nature of documentation supporting asset acquisition and disposal transactions.
The ANAO has made five recommendations designed to strengthen the arrangements for the management of IPE assets in Australian Government entities.
Each of the audited entities responded positively to the report and agreed with the recommendations. Specific comments in relation to the recommendations have been included in the body of the report. Any general comments on the report have been included in Appendix 3.
Sound and better practices
A number of practices, considered to beneficial to improving the effectiveness of asset management practices, were observed in the audited entities. These are outlined in Table 1 in the audit report.
1 Excluding Specialist military equipment.