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Strategic Asset Management in Local Government: Room for Improvement

The Audit Commission has published their third national report on local government assets. The Report ‘Room for Improvement’ is a strategic review of asset management in local government published June 2009. The Report shows that Councils hold property valued in their accounts at a collective £250 billion, which has doubled in value in the last decade.

The Report reveals that since the last Report in 2000 only modest progress has been made by Councils in effectively managing their estates. At present Councils are faced with reduced expectation of securing significant receipts from asset disposals in the current poor economic climate and property market. Councils will thus find it harder to capitalise or invest into new or refurbished property. The recession does however enable Councils to review ways to improve their asset management capabilities, by taking stock of the assets they hold and assessing their needs. Councils should review whether their asset portfolio can be used as part of their economic development and regeneration strategy.

Below we highlight some of the key points from the Report.

Main Findings of the Report

	Modest progress in strategic asset management has been made, but more needs to be done by Councils to manage their property portfolios in order to realise capital receipts and efficiency savings.
	Central Government has not offered incentives for Councils to manage their asset portfolios better, nor set clear expectations for the standards to be reached.
	On average Councils across the UK realised an annual average of £4 billion from property sales between 2000/01 and 2007/08.
	Property transfers to Local Community organisations by Councils have yet to meet government aspirations.

Main Recommendations of the Report

Councils should:-

-	improve their knowledge of their estates.
-	identify areas for improvement and gain from the experience of other Councils
-	review and reduce their property portfolio where possible
-	motivate service managers using property to use it in an economic way.
-	develop capacity of personnel to bring about change.
-	collaborate with local partners.
-	exploit opportunities presented by the recession.

Central Government should:-

-	set out clearly its requirements of local Councils and their assets during the recession.
-	raise the profile of asset management.
-	make Councils accountable for the cost of the capital they have tied up in property.
-	give local Councils incentives to make better use of their money.
-	review rules on what can be capitalised and how capital receipts can be used to allow Councils more flexibility.

The Audit Commission will:-
-	publish detailed case studies of excellent asset management.
-	support councillors in scrutinising how Councils manage their assets.
-	continue to develop benchmarking services with other audit agencies.
-	publish guidance and practical examples on the Improvement Network website.

Council estate consumes capital and is expensive to maintain. Councils need to ensure they provide the best value for their residents, service users and taxpayers. To achieve this, Councils will need to seek savings from their estates as well as using them creatively and collaboratively to achieve local objectives.

Following the Quirk Review, some Councils have been more willing to transfer property to the community, but the Report reveals that Councils have adopted a cautious approach to transferring property to community organisations, as they prefer to keep ultimate ownership. The volume and value of buildings being transferred have been limited, and community asset transfer seems unlikely to affect the Council estate to any great extent.

The Report highlights what is being done by forward thinking Councils. Councils and Central government should take into account the Report’s findings to improve their asset portfolios and to gain the maximum receipts from the land and buildings they already own.

The full version of the Report can be found at:
www.auditcommission.gov.uk/assetmanagement

The Improvement Network website can be found at:
www.improvementnetwork.gov.uk/

For More Information Contact:
Anjli Bhatt
TPP Law Limited
53 Great Suffolk Street
London SE1 ODB

t 020 7620 0888
f 020 7620 0778
e info@tpplaw.co.uk

Email: Anjli

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