Asset management offers £250M savings, says CIPFA

18 June 2008
 
The Treasury has been advised that asset management could deliver value-for-money benefits of £250M a year for local highway authorities.

But the Chartered Institute of Public Finance and Accountancy warns that the full benefits of asset management will not be reaped without an early change to local authority accounting, scrapping the use of historic costs for assets.

CIPFA was asked by the Treasury to evaluate the issues involved in implementing an asset-management, plan-based approach to local authority roads and other infrastructure (Surveyor, 14 December 2006). The body found that information on asset valuation or depreciation, ‘does not generally exist’ in a robust and consistent form.

Not including depreciation in accounts ‘removes the incentives to maintain assets to an adequate standard’. The benefits of asset management – which the institute said were likely to be felt in reductions in ‘sizeable’ maintenance backlogs – would be realised quickly, and in full, by changing the accountancy guidance.

As such, it recommends that councils should, by 2011/12, produce their accounts using current value information about assets, factoring in depreciation. Even without depreciation affecting councils’ bottom lines, there would be ‘important benefits’ of having those figures. CIPFA encourages authorities to follow in the footsteps of those forming regional groups, such as in the Midlands, to pool information on unit cost rates, necessary for valuations.

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