Asset management: are we on the right road?

Local government is facing a $1.9 billion roads infrastructure backlog, analysis shows.

Our data suggests a quarter of NSW councils are yet to develop asset management systems that would help them respond to the roads infrastructure backlog, says Annalisa Haskell.

Analysis of data from our association’s Australasian LG Performance Excellence Program details council performance in the context of peers and provides insight into the policies allowing local governments across Australia and New Zealand to excel.

In New South Wales, 80 per cent of the state’s roads are classified as local roads, which are funded and managed by local government.

In August last year the NRMA’s Funding local roads report put the road infrastructure backlog for local government at over $1.9 billion in 2015-16, of which 79 per cent sat in the hands of regional NSW councils.

Annalisa Haskell

Roads represent one of the most significant assets management challenges for local government, and data from our program suggests more work is needed for councils to develop asset management systems to respond to this backlog.

In our financial year 2017 survey of 136 councils, 74 per cent of NSW councils reported the presence of an asset management system in the category of road networks, compared to 91 per cent and 88 per cent of councils in Western Australia and South Australia respectively.

The picture for NSW is worse when compared to New Zealand where 100 per cent of councils have implemented an asset management system for their road networks.

New Zealand has also progressed with advanced infrastructure asset management strategies that have led to increased reporting, with 26 per cent of councils reporting at least quarterly, compared to 9 per cent in NSW.

What is New Zealand doing right?

The catalyst for New Zealand’s significantly greater performance in this area stems directly from amendments in 2014 to its Local Government Act. These require every council to create 30-year infrastructure and financial strategies, and to show that strategic assets are managed in an efficient and effective manner.

The benefits of this system have translated to improvements in other areas related to strategic asset management; 89 per cent of New Zealand’s councils strategically link their long-term financial plan to their strategic asset plan, with the remaining 11 per cent of councils moving to do so.

New Zealand’s regulatory requirement to triennially develop overarching 30-year linked infrastructure and financial strategies has seen significant improvements in strategic asset management far beyond what the special schedule component provides for. This is in contrast to NSW where only 55 per cent of councils link these two plans, despite the requirement for them to annually report on the condition of public assets in their annual financial reports.

Our survey also assessed the extent to which a council’s long-term financial plan aims to generate sufficient operating revenue to maintain its assets without the assistance of outside sources, including the volatile Financial Assistance Grants. It found that 54 per cent of NSW councils now have an approved long-term financial plan that delivers self-sustaining council asset renewal, including roads, up from 50 per cent in the prior year.

Positive signs on rural roads

Given the extensive road network that rural councils must maintain, and the higher reliance on grants as a source of revenue, it’s interesting to note that the gap between rural and metropolitan councils in self-sustaining asset renewal is narrowing.

Some 60 per cent of rural councils are in a position to provide long-term self ­sustaining asset renewal, significantly up from 47 per cent in the prior year and now just below metropolitan councils (64 per cent). This is a clear sign that regional and rural councils are taking strong steps to address the roads backlog and, for Fit for the Future councils, the recent announcement of the Low-Cost Loans program by Treasury Corporation will allow councils to further invest in roads.

While new regulation will not immediately solve the infrastructure backlog, it is important that when confronting the issues associated with the roads backlog that we look also at the planning frameworks required and how they encourage long-term strategic asset management. It is equally important for governments to address these issues by looking to the strategies of other jurisdictions and better engaging with the sector so we can all be on the right path.

Annalisa Haskell is CEO of LG Professionals Australia, NSW.
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One thought on “Asset management: are we on the right road?

  1. I hope none of these councils are confusing ‘asset management system’ with the repository software.
    So does this mean that the Leadership & Culture component of an effective ‘asset management system’ has been assessed as compliant in at least 75% of NSW Councils?
    I’d actually consider that a win.
    I am a little skeptical though.

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