Department of the Environment,
Transport and the Regions

Local Government Finance
Modernising Local Government
Capital Finance Paper
Chapter 4 - Encouraging Best Practice in Asset Management

4.1 The Government wishes to see local authorities make better use of their assets and to dispose of surplus assets. The Government will seek to reward authorities that make progress in these areas through the development of its allocation mechanisms. This process has been described in Chapter 3.

4.2 Better asset management could be achieved in a number of ways:

Asset Registers and Capital Accounting

4.3 Local authorities already follow CIPFA guidelines on capital accounting - including the compilation of basic information for registers of capital assets. The guidelines are intended to ensure that proper account is taken of the costs of employing capital assets in the delivery of services.

4.4 Both CIPFA, in their paper "People+Pounds+Property=Services: A Guide to the Use of Capital Accounting to Improve Asset Management and Service Performance", and the Audit Commission in "Capital Gains" recommend that better use could be made of capital accounting information to make sure that individual service managers, as well as service committees, fully consider the opportunity cost of holding the assets they use.

4.5 Following the publication of the National Asset Register in November 1997, the Government is encouraging departments and other bodies to review their asset holdings and make better use of the assets they retain.

Asset Management Plans (AMPs)

4.6 Asset registers can be expanded to include a wide range of other factual information on assets, such as stock condition and service utilisation. Together with future service needs, this data can underlie the production of AMPs. Such plans broadly comprise strategies intended to achieve more effective use of assets. They can help managers to prioritise and set maintenance programmes, and to predict the pattern of future maintenance needs. They should let managers identify inefficient assets, and help them secure a better (not necessarily financial) return on investments.

4.7 The DfEE is currently consulting on the way in which AMPs can most usefully contribute to local decisions on capital assets employed in the education service, and on the information which can best inform local and national decisions on the deployment of capital resources. The process of compiling an AMP would involve an authority in gathering information on the existing stock and its use, setting out a statement of the assets ideally required to deliver the service efficiently and effectively, and preparing a prioritised capital programme to move towards the ideal from their present position. Initially the focus would be on improving the worst of the existing stock. This could in time provide increasing emphasis on sufficiency and suitability of assets. The aim would be to encourage all authorities to use the AMPs as local management tools, rather than imposing a rigid centrally dictated structure. This would provide a model for linkage of authorities' performance in asset management to capital allocations, in the event that the single pot' option were adopted ( paragraphs 3.13 - 3.30 above ).

Performance Indicators

4.8 Where possible the Government would like to see AMPs include local performance indicators and targets relating to assets. These could include direct measures of asset use as well as measures of service unit costs that include the costs of capital. Other indicators of the delivery of the capital programme were suggested in the Audit Commission's "Just Capital" report. These indicators should be developed further and coupled with benchmarking of performance with other comparable authorities.

4.9 The Government recognises that for the time being the information held by local authorities for asset management purposes may be relatively diverse and difficult to compare. In due course, the Government may wish to see capital accounting information included in the statistical information provided to central government, and to form part of nationally published performance indicators. As the quality and comparability of such information improves, there may be opportunities to use the data as part of the allocation of resources between authorities. Such information could also contribute to the framework needed to assess the achievement of best value.

Q5 The Government would welcome views on:

(i) the use of capital accounting information, asset management plans and performance indicators to achieve better management of capital assets; and

(ii) the central collection of such information and its potential for future use in resource allocation.
Chapter 5 - Better Planning and Use of Capital Allocations
Published on 30 March 1998
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