As councils grapple with infrastructure decay, optimising asset management through an interconnected approach is more important than ever. Julian Watts, Director, Engineering & Asset Management, KPMG, explores how councils can dramatically improve their reporting by transitioning to leading practice strategic asset management.
Local councils own ageing asset portfolios, with every failure under increased scrutiny from customers and state government.
New cloud-based technologies are emerging, bringing both solutions and threats, such as cyber security. Changing workforce culture, operating models and legacy business processes can leave councils slow to react, working in silos, duplicating efforts, with reluctance to change.
However, doing nothing to improve asset management practices will ultimately result in increased customer dissatisfaction, potentially followed by intervention from regulators.
In New South Wales alone, 10 high risk issues across NSW councils were identified in the April 2018 NSW Auditor General’s report (PDF 7.13MB) concerning the accuracy of asset registers, restricted assets and asset revaluations. Our broader experience working with local councils across Australia shows that most councils have multiple asset registers stored in disparate spreadsheets (and sometimes none at all). Solving the fundamental asset management challenge of balancing cost, risk and performance remains a people-intensive task.
The challenges facing councils are ‘interconnected’ and should be approached as such.
This represents a significant risk to a local council on many ‘interconnected’ fronts including difficulty in establishing a clear understanding of what assets are actually owned, across all asset classes of infrastructure, property, plant and equipment.
Accurate financial planning to ensure sufficient budget is allocated to current and future maintenance activities also remains a challenge.
This is complicated by the fact that clear governance and process for prioritising and allocating limited available funds to each asset is difficult to establish. Finally, the ability for a council to maintain its assets in a safe and effective working condition for the general public is compromised.
Good asset management relies on strong governance and controls for the operating model and supporting processes, strong financial performance and sustainability that allocates sufficient budget, all supported by a suitable technology solution that establishes a single source of truth and clear asset management strategies and plans.
Optimising management of a council’s physical asset portfolios, as well as new and existing infrastructure is a key influence on the quality of financial reporting. Therefore, transitioning to leading practice strategic asset management will dramatically improve the quality of a council’s financial reporting.
An integrated approach to managing assets across financial and non-financial asset lifecycle functions needs to be adopted for asset management to be optimised.
Transforming a council’s asset management to meet modern challenges requires a systematic re-think of organisational strategies based on four key behaviours.
A version of this article first appeared in Government News.