LGA ‘Infrastructure and Asset Management (Policy and Planning) Information Paper
For an update on which information papers have now been completed or information about other documents and activities, including briefing and training sessions, please visit our website at: www.lga.sa.gov.au/goto/fsp.
What is Asset Management?
Councils expend considerable funds on the acquisition and management of assets. They may be exposed to financial risk over the longer term if budget processes have little regard for ongoing costs associated with the maintenance of these assets beyond the current budget period. It is incumbent on Councils to carefully consider information about their stock of infrastructure and other assets and the contribution that current ratepayers are making to their consumption.
Simple but soundly based asset management and financial plans allow Councils to ascertain sustainable service levels, affordable asset acquisition strategies, cost-effective maintenance regimes and corresponding funding requirements. The Financial Sustainability Inquiry specifically highlighted the issue that unless Councils address current practices in asset management they will be leaving a considerable financial legacy to future Councils and their
communities. Coupled with the challenges of scarcity of resources and costs beyond CPI, Councils are facing new challenges in managing their infrastructure as a result of issues such as increasing community expectations, population drift
increasing and assets (especially
to coastal areas), replacement of ageing infrastructure, new legislative standards) and the growing demands of an ageing population.
Recent changes to the Local Government Act requiring Councils to adopt infrastructure and asset management plans were supported by the LGA (on behalf of Councils) and also highlighted in the Inquiry Report’s recommendations.
The term “asset management” is used to describe the process by which Councils manage physical assets to meet current and future levels of service. Contemporary definitions of asset management highlight its relationship to service delivery objectives as follows.
“Asset Management is a systematic, structured process covering the whole life of an asset. The underlying assumption is that assets exist to support program delivery.”1
“The goal of infrastructure asset management is to meet a required level of service, in the most cost effective manner, through the management of assets for present and future customers.”2
There are three key phases in the cycle of the management of Councils’ assets as outlined below:
identification of needs, including financial constraints;
costs and expected economic life;
assessment of requirements;
asset identification and recording.
1 Commonwealth of Australia (1996), Asset Management Handbook, Australian National Audit Office, http://www.anao.gov.au/bpgs.html
Association of Local Government Engineering NZ Inc, Institute of Public Works Engineering Australia (2006), International Infrastructure Management Manual - International Edition, New Zealand. 2
LGA Financial Sustainability Program – www.lga.sa.gov.au/goto/fsp