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ASSET MANAGEMENT:
A critical element in ensuring service delivery
S F NomvaloNational Treasury: Republic of South Africa
24 – 25 November 2010
ASSET MANAGEMENT SEMINAR 2010
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Overview
• Purpose accountability reporting
• The business imperatives of accountability
• What can go wrong?
• What is needed to make it work?
• Factors impacting development
• Conclusion
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Financial reporting objective
Financial reporting should demonstrate the accountability of the government entity for the financial affairs and resources entrusted to it, and provide information useful for decision making purposes.
To achieve this objective the financial statements should be prepared in accordance with a suite of standards aimed at providing relevant, understandable, comparable and reliable information.
The information must therefore reflect the truth of all the activities that occur in the entity, it must be fairly presented.
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Copyright © RBA. 2009
The Short Definition of Advanced AM
Making theright decision / adopting the right solutions at the
right time for theright cost
for the right reasonsAcross our whole portfolio of assets as just part of the
business strategies
‘Making good investment decisions’
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The six “whats” of asset management
Asset Register
Condition Assessments
Prioritising & Scheduling
1. What do you own? 2. What is it worth? 3. What is its condition? 4. What is the backlog maintenance? 5. What is the remaining service life? 6. What do you fix first?
Vanier, D.J., NRCC, 2000
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ASSET MANAGEMENT PRINCIPLESSource: National Treasury – Asset Management Learner’s Guide
Informed Decision-making
Asset Management
Policy Framework
Accountability&
ResponsibilityIntegrated Planning &
Management Approach
Service Delivery
AM & Service delivery
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Where does the problem lie?
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12/11/20088
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12/11/20089
Very Good
Good
Fair
Bad
Very Bad
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12/11/200810
Very Good
Good
Fair
Bad
Very Bad
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12/11/200811
Very Good
Good
Fair
Bad
Very Bad
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12/11/200812
Very Good
Good
Fair
Bad
Very Bad
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12/11/200813
Very Good
Good
Fair
Bad
Very Bad
Preventative Maintenance
Condition-based Maintenance
Repairs
Rehabilitation
Replacement
R1
R5
+
R2
5 +
X 5
X 5
De Sitter’s “Law of Fives”
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The consequences of not managing assets properly....
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Source: Witbank Newswww.thoughtleader.co.za/.../02/dirty-water.jpg
Infrastructure
Do you know what is in the tap water you drink?
Is it any different from the water in our rivers?
Does it make a difference?
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Agh! we just had too much rain than normal or did we?
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Can we live with it???
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When is it time to act?
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Watch out!!!
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Oops – is sorry enough?
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What happens next...
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Best PracticesLocal Government
Best Practices EC FS GP KZN LP MP NC NW WC TOT
Audit Trail 24% 21% 75% 45% 26% 68% 25% 25% 50% 33%
Quality of AFS 27% 26% 50% 48% 4% 37% 29% 25% 4% 16%
Timeliness 54% 84% 100% 68% 91% 89% 92% 60% 79% 75%
Officials 35% 68% 83% 55% 39% 68% 38% 50% 75% 49%
Internal Control 16% 16% 67% 55% 17% 21% 13% 25% 50% 17%
Leadership 24% 21% 67% 60% 30% 47% 25% 25% 71% 31%
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AUDIT OUTCOMES 2007/08LOCAL GOVERNMENT
Audit
Opinion
EC FS GP KZN LP MP NC NW WC TOT
Adverse 13% - - 2% 3% - - 4% - 3%
Disclaimer 31% 56% 7% 15% 47% 14% 53% 44% 10% 30%
Qualified 29% 12% 29% 19% 13% 33% 22% 16% 10% 20%
Unqualified 9% 8% 43% 60% 13% 43% 3% 16% 77% 32%
Clean reports - - 7% 2% - - 3% - - 1%
% of Munics 82% 76% 86% 98% 76% 90% 81% 80% 97% 86%
Outstanding 18% 24% 14% 2% 24% 10% 19% 20% 3% 14%
Total Munics 45 25 14 61 30 21 32 25 30 283
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What is needed?
Appropriately skilled personnel
– Basic relevant qualification
– Appropriate experience
Sound control environment
– Existence and effectiveness of internal audit and audit committee
– Proper functioning risk management
– Correct tone at leadership level
Vigilant administrative & political leadership awa oversight
Increased and focused support from provincial and
national government.
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Factors impacting the Dev Role
1. Improve collection of outstanding revenue owed. – The combined debt owed to local government is in the region of R50.4
billion (excluding provisions for bad debt)
2 Prudent financial management – Avoid wasteful and unnecessary expenditure
3 Protect the health of your asset base. – Assets must be maintained
4 Municipalities present our country with a great platform for job creation.
– Accelerate programmes, like grass cutting, inner city and township regeneration, clearing of drains, filling of potholes
5 Zero tolerance to corruption, – Fraud and maladministration in your municipality.
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Applying accounting standards is not just about
compliance and balancing the numbers but
about ensuring accountability and enhancing
service delivery through informed planning and
decision-making.
The citizens are not a bunch of mushrooms to be
kept in the dark – transparency is key.
CONCLUSION
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DISCUSSION?