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Part 1: Public assets are critical to delivering public services

Reflections from our audits: Investment and asset management.

1.1
New Zealanders contribute billions of dollars of taxes, rates, levies, and fees annually to both central and local government. In return they expect, and have the right to expect, that these funds are well managed and used wisely.

1.2
Over many years, some of the funds from taxes, rates, levies, and fees have been invested in public assets. The value of physical assets in the public sector was about $260 billion at 30 June 2016, which is relatively evenly split between central and local government. The value of financial assets at the same date was about $145 billion, and most financial assets are held by central government entities.

1.3
Often when we think of public assets, we picture physical assets that are owned and managed by public entities. That is, those assets that are used to deliver services essential to our everyday lives. We rely on roads and rail assets to travel, electricity networks to power our homes and businesses, wastewater and storm water networks to protect our environment and health, hospitals to treat those who are unwell, and school buildings where our children learn.

1.4
The public sector also has an increasing amount of financial assets, such as cash, deposits, shares, and derivatives. Financial assets are used to help fund various public services that New Zealanders expect to receive. For example:

  • The New Zealand Superannuation Fund has built up financial assets designed to contribute to the country's future superannuation costs.
  • The Accident Compensation Corporation uses financial assets to help pay the costs of providing accident cover to all New Zealanders and visitors to New Zealand.
  • The Earthquake Commission's financial assets were used to help pay for claims associated with the Canterbury earthquakes.

1.5
The effective running of the New Zealand economy, including the health, prosperity, and quality of life of its people, depends on many of our public assets. Public entities are stewards of those assets and need to manage the assets well to deliver the public services that New Zealanders expect.

1.6
Poor management of assets has real costs to New Zealanders. Poor investment decisions use resources that could have been available to fund other priorities, and can result in unnecessary additional expenditure.1 Further, managing financial assets well, including being clear about the risks of the financial strategy, is important to our resilience. It helps us to deal with shocks that arise, such as earthquakes, floods, droughts, and financial crises.

We rely on roads and rail assets to travel, electricity networks to power our homes and businesses, wastewater and storm water networks to protect our environment and health, hospitals to treat those who are unwell, and school buildings where our children learn.

1.7
To deliver high-quality public services in a cost-effective way, public entities need to:

  • be open and engage with people about the service levels they expect from public assets;
  • be alert to challenges and opportunities when investing in and managing public assets;
  • make sound investment decisions that take into account both the long term and the whole public sector; and
  • have the right information, systems, and people, and use information about assets to effectively manage the assets.

1.8
Investment and asset management was a particular area of focus for our work in 2015/16. It builds on a range of work on investment and asset management that we have carried out over many years. And, given the importance of assets to delivering services to New Zealanders, it is a topic that we will continue to focus on.

1.9
We see public entities that are investing in and managing assets well and those that need to make improvements. In this report, we share examples of both good and not so good practice, to help all public entities to improve how they invest in and manage the assets they are responsible for.


1: The Treasury, Investment Statement: Managing the Crown's Balance Sheet 26 March 2014, page B.8/4.

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CoverReflections from our audits: Investment and asset management

ISBN 978-0-478-44271-7