New Zealand’s Auditor General recently released a report reviewing the long term challenges facing Local Authorities with funding their assets. The report, Water and Roads: Funding and Management Challenges (November 2014) focuses on the four key asset classes managed by Local Authorities, namely roading, potable water, wastewater and stormwater services.

The report analyses the state of these assets, the investments required to meet level of service and growth targets and whether asset management practice is providing Local Authorities with the information and data they need to continue to provide services into the future.

The key messages and generalisations from the report were:

  • Local authorities consistently spent less than they intended on capital works, including asset renewals.
  • The ratio of forecast renewals expenditure to depreciation in local authorities’ 2012-22 long-term plans also shows a downward trend in asset reinvestment. It is estimated that, by 2022, the gap between asset renewals expenditure and depreciation for the local government sector could be up to $7 billion.
  • Although local authorities tend to have a lot of data, they do not necessarily use it well, or use the best data to support decision making.
  • There is little relationship between asset expenditure and service-level performance in public information.
  • It was the Auditor General’s view that the evidence base for good decision making and learning is not consistently available.
  • Wider economic and population changes mean that there are long term risks to local governments’ infrastructure and financial management. The financial implications of change can be material, intergenerational, sometimes unequal and, above all, difficult to control. In particular, nine regions face declining population forecasts.
  • It was observed that, except for bridges, asset management results were better for roading than for three waters assets. Simplistically, this could be attributed to roads being above ground, which makes it easier to assess their condition; it is likely that the arrangements for roading funding and management also play a part.

While New Zealand has a good reputation internationally for managing assets, because of the work of groups such as New Zealand Asset Management Support (NAMS), it would seem that we have fallen behind other countries (such as the USA, the UK, and Canada) in the use and quality of asset data and collection practices. New technology and management models offer ways to address these concerns by doing things efficiently, at the right time, and at the right price.

A full copy of the report can be downloaded here.