Asset Management and Maintenance by Councils

Tabled: 19 February 2014

2 Councils' asset management frameworks

At a glance


Better practice asset management requires councils to develop and apply a sound asset management framework that includes a policy, strategy, plans and governance arrangements for the effective management of all infrastructure assets.


Councils have improved their asset management frameworks. However, they do not yet meet better practice standards. Progress has been made with the guidance and support available to the sector, but it has been relatively slow. Local Government Victoria guidance and support needs to be reviewed and updated.


  • There is wide variation in the level of competency achieved by councils in developing effective governance arrangements, strategies and plans for asset management.
  • There are significant deficiencies in the asset management plans of most councils which inhibit their effective implementation. Many plans do not adequately link to councils' intended community service levels, and some are incomplete.


Local councils should:

  • accelerate efforts to review and update their asset management frameworks, policies and strategies to meet better practice standards
  • make sure they have comprehensive asset management plans for all major asset categories.

Local Government Victoria should:

  • update its asset management guidance material and review its support and guidance to ensure it targets common issues facing councils
  • in conjunction with councils and the Municipal Association of Victoria, review the use and application of the National Asset Management Assessment Framework and its appropriateness for driving improvement in asset management performance.

2.1 Introduction

To be able to manage their assets effectively and efficiently, councils should have a sound asset management framework that includes appropriate governance arrangements and asset management policies, strategies and plans that are well developed and integrated.

2.2 Conclusion

While improvements have been made in recent years, the audited councils remain below the 'core' level of maturity in the development of their asset management frameworks, as measured by national benchmarks. This is in keeping with the performance of most Victorian councils, the vast majority of which are below core competency.

Some areas have improved, such as the quality of asset management plans and the effectiveness of their implementation. However, intended service levels and standards need to be more clearly and urgently linked to asset management plans.

Local Government Victoria (LGV) needs to review and update its asset management guidance material. More assistance from LGV to councils with their asset management challenges could see quicker progress towards councils achieving best practice. LGV could provide more targeted support for councils to address common challenges such as developing appropriate asset management information systems, developing a set of asset management performance indicators to compare council performance, and providing advice on dealing with the growing renewal gap.

2.3 Elements of a sound asset management framework

Key components of a sound asset management framework include:

  • governance arrangements incorporating an accountability structure that identifies roles and responsibilities
  • an agreed policy that establishes the principles and requirements for asset management
  • a strategy that sets out the actions needed to implement the policy and links the asset portfolio to service delivery needs
  • asset management plans that link to the policy, strategy, long-term financial plans and intended levels of service
  • current and planned levels of service established in asset management plans, prepared in consultation with the community.

2.3.1 Governance arrangements

Better practice governance arrangements include:

  • identifying asset management roles and responsibilities
  • establishing mechanisms to provide high-level oversight by the council, chief executive officer and executive management
  • encouraging all relevant organisational areas to become involved in asset management processes.

All the audited councils have documented their governance structures and have established formal mechanisms to facilitate high-level oversight by the council, chief executive officer and executive management team. Their governance structures incorporate a hierarchy of responsibilities, accountabilities and reporting, and these are described in policy and strategy documents.

All five councils have established an asset management steering group, or equivalent, with specific responsibilities for promoting and monitoring the implementation of the asset management strategy and plans.

However, there is wide variation in the level of competency achieved by councils in developing effective governance arrangements for asset management:

  • Three councils have developed a policy that identifies the positions which have responsibilities for determining levels of service, and for managing assets to meet service delivery needs. The remaining councils have yet to define or develop asset management responsibilities.
  • One council noted that 'whole-of-life' costs are not considered when making capital investment decisions and that a formal assessment of asset management skills is yet to be done.
Photograph of a Rotunda.

Rotunda, photograph courtesy of Cardinia Shire Council.

Despite all councils having governance arrangements in place, each acknowledged it is a challenge to integrate asset management with other corporate functions. This requires, for example, more effective working relationships between the engineers responsible for asset performance, the staff responsible for service planning and delivery, and the finance staff. All councils advised that greater effort is required to involve all the relevant departments in asset management activities to achieve better outcomes.

Councils have traditionally located asset management functions within their technical or engineering areas, rather than within the broader corporate context. This inhibits the development of relationships between those who plan for future services, those who deliver the services, and those who maintain and develop infrastructure to support the delivery of those services. During this audit, Port Phillip adopted a new corporate structure that aims to address this organisational misalignment and promote better integration of asset management with financial management.

2.3.2 Asset management policies

A good asset management policy:

  • establishes clear goals and objectives for asset management
  • integrates asset management with other corporate and strategic planning processes
  • requires an asset management strategy and plans to be adopted for each category of assets
  • defines governance arrangements for asset management including roles and responsibilities, and communication and training, including monitoring the evaluation and reporting of asset performance
  • outlines an asset performance reporting process, including internal and community reporting
  • includes audit and review procedures.

All five councils had an asset management policy that is consistent with their Council Plan—a plan developed every four years outlining council's strategic objectives—and is formally approved by council. In most cases the policy provides clear directions for asset management and incorporates elements of best practice, including objectives for integration with other corporate and strategic planning processes. However, there were some exceptions:

  • One council's policy does not contain sufficient detail to guide progress towards better practice asset management. Other than stating the council goals and objectives for asset management and a requirement to develop an asset management strategy and plan for each asset category, it contains no additional information, such as the importance of integrating asset management with other corporate and strategic planning, defining governance arrangements or identifying an asset performance reporting process.
  • Another council's policy does not adequately demonstrate links with other corporate activities, for example, with the long-term financial plan and the annual planning processes. This makes it difficult for the council as a whole to work effectively towards achieving its objectives for asset management.

One council commented that its asset policy is due for review in early 2014 and believes the Department of Transport, Planning and Local Infrastructure (DTPLI) should provide guidance on a current, standardised approach to asset management policies for all councils.

2.3.3 Asset management strategies

Better practice asset management strategies:

  • provide current details of infrastructure assets and their management, including current and future forecast needs and the adequacy of funding
  • demonstrate how the asset portfolio can meet the service needs of the community in the short, medium and long term, with available resources
  • are linked to the asset management policy and integrated into strategic long-term financial planning and the annual budget process
  • incorporate actions required to implement the policy, including developing asset data information systems, identifying resource requirements and establishing time frames and performance measures for implementing the strategy.

All five councils had developed and formally adopted an asset management strategy. These vary in the quality and level of detail provided. One council provided only a brief overview of particular aspects of asset management, such as recognition of the renewal gap challenge, whereas other councils provided a more detailed analysis.

A good practice by all five councils is the inclusion of improvement plans documenting the actions needed to advance their management of assets. While these plans allocate responsibilities and set time frames to implement actions, it is too early to assess progress against them. Councils have indicated that the actions in these plans must compete with other council priorities for funding. Councils do not publicly report progress against their improvement plans.

Photograph of Carrum foreshore and Surf Life Saving Club

Carrum foreshore and Surf Life Saving Club,photograph courtesy of Kingston City Council.

2.3.4 Asset management plans

Best practice asset management plans include a description of assets and services and the current condition of assets, set agreed levels and standards of service, and incorporate risk management strategies.

All five councils had developed asset management plans for their major asset categories. We reviewed a sample of 15 plans within the five councils, focusing on the asset categories listed below:

  • Kingston—drainage, pavements, footpaths, community facilities, pavilions
  • Port Phillip—parks and open spaces, stormwater drainage, facilities such as buildings and recreational facilities
  • Cardinia—bridges, drainage
  • Wodonga—bridges, buildings
  • Ararat—buildings, drainage, parks and recreational facilities.

Figure 2A summarises the results of our assessment of councils' asset management plans against better practice criteria.

Figure 2A
Assessment of asset management plans against key criteria

VAGO assessment

Better practice criteria


Partially met

Not met

Is consistent with government policy objectives




Is adopted by the council




Describes the assets and services to be delivered




Is clearly linked to the council's asset management policy, strategy, strategic long-term financial plans, and capital works and maintenance programs




Provides clear linkages with current and future community service needs




Sets agreed levels and standards of service for each asset class and significant asset




Describes the current condition of assets




Contains demand forecasts and long-term cash flow projections for various types of costs, such as maintenance and operational, renewal, upgrade, replacement, disposal, etc.




Incorporates risk management strategies




Explains how the performance of the plan will be monitored




Contains evidence of engagement and consultation with the local community




Provides for periodic reviews of the plan document




Source: Victorian Auditor-General's Office.

The quality of the sample asset management plans was mixed. There were some good practices identified in our assessment of the plans, including:

  • consistency with government policy
  • clear descriptions of assets and services to be delivered
  • initiatives in plans to determine the condition of assets.

However, there were also deficiencies in the quality of plans, which inhibit their implementation:

  • Some plans were still incomplete after almost three years in development.
  • None of the sample plans included a comprehensive process to monitor and evaluate the progress of implementing the plans.
  • Eleven plans did not adequately connect current and future community service delivery needs to asset management plans.
  • Seven of the sample plans had not been formally adopted by the council but are considered to be working documents.
  • Seven plans did not adequately establish levels and standards of service for each asset class. Levels and standards of service were based primarily on historical experience and the results of general community surveys.

Among other things, these deficiencies indicate:

  • different levels of commitment by councils to the importance of having approved asset management plans
  • the development of plans may not adequately support current and future council services
  • a lack of monitoring and measurement mechanisms that can provide objective assurance that the plans are working.

The current asset management plans are considered by councils to be 'first generation' plans under the national framework. Our review identified significant scope for improving these plans, although Kingston's plans were closer to better practice.

Photograph of The Cube, Wodonga

The Cube, photograph courtesy of the Wodonga City Council.

In our review of asset management plans, we did not specifically assess the management of roads, although they account for a substantial portion of councils physical infrastructure assets. Previous VAGO audits such as Management of Road Bridges 2011, and Maintaining the States Regional Arterial Road Network 2008, focused on the road network and it was scoped out of the current audit.

It is worth noting that roads, bridges and paths form a substantial part of a council's asset management business. These assets are governed by the Road Management Act 2004 and supporting regulations which prescribe the way councils must manage these assets under a Road Management Plan. Some councils have suggested that a more rigorous approach to other asset categories along these lines would improve council asset management generally.

2.3.5 Levels of service

The primary purpose of a council's asset portfolio is to effectively support its community's current and future service needs. Councils should prepare service delivery plans that establish both current and desired levels of service and that identify the optimal mix and capability of assets needed to support these services.

While all five councils had prepared various strategies for the services they deliver to the community, none has well-developed plans for their major services that link to asset management plans or asset requirements. One council was more advanced in developing service delivery plans, although their current and desired service levels and standards are not yet fully developed. Another council advised it has no service plans and that it believes most councils are struggling in this area.

All five councils had established and documented service levels for their drainage assets in compliance with the requirements of the Road Management Act 2004. However, councils acknowledged in their plans that more work is required to develop service level matrices which address service levels and standards, that link to asset requirements.

All five councils' asset management plans indicated that service levels and standards of service are determined largely on the basis of results from the annual community satisfaction survey undertaken by DTPLI. However, these surveys are generally conducted over the phone and do not constitute robust consultation or engagement on service levels and standards, and the information is of limited relevance to asset management. To illustrate, two councils' asset management plans—for bridges and drainage—indicated there is no specific area in the DTPLI survey that is designed solely for these asset categories and that standards are inferred from the results of more general survey questions. The surveys should not be used as a substitute for councils' own local engagement activities on service levels and standards.

All five councils consulted with their communities on specific asset initiatives, such as the use of playgrounds and the future of an outdoor swimming pool.

All audited councils identified that establishing service standards, and linking service delivery to asset requirements, are priorities in the development of 'second generation' asset management plans.

2.4 Measuring the adequacy of asset management frameworks

In 2010, councils were directed to achieve a 'core' level of maturity under the National Asset Management Assessment Framework (NAMAF) by December 2012. Few Victorian councils achieved this, and none of the audited councils had achieved 'core' maturity in all elements. Most of the audited councils are at 'low' to 'intermediate' levels of maturity in the development and application of key elements.

However, the audited councils have shown some improvement since 2010. The five councils' improvement in their aggregate NAMAF scores over the period 2010 to 2012 ranged from 3 per cent to 37 per cent, averaging around 17 per cent. The average improvement of all Victorian councils over this period was around 30 per cent.

Because the majority of Victorian councils did not meet the original 2012 target—only 14 of 79 councils achieved 'core' maturity by December 2012—this target was extended to December 2013. Twenty-three councils had achieved this level by December 2013. In this context it is important to note that 'core' maturity is still not best practice. Under NAMAF, best practice is the highest level of competence, called 'advanced' maturity.

2.4.1 Issues with the National Asset Management Assessment Framework

NAMAF scores are based on councils' annual self-assessments, with some moderation by external consultants appointed by the Municipal Association of Victoria (MAV) who review the scores.

We undertook our own assessment of each of the five councils by reviewing key documents related to asset management. Although VAGO's assessment criteria were similar to those for NAMAF, they were not identical. We focused on a smaller set of sub-elements within each NAMAF element that we considered to be the most important for councils to achieve. We did not set out to replicate each council's full self-assessment process or the MAV STEP Asset Management Improvement Program consultant's review process.

Overall, VAGO's assessment results for councils were similar to the scores councils gave themselves, however, we found there is a slight bias in councils towards overestimating maturity levels. One example is where a council gave itself a high rating for defining asset management roles, responsibilities and a reporting framework, yet there was no detail in its policy document regarding these.

The audited councils advised us that their assessments were fair and accurate using the NAMAF rules and validation process. We agree that the councils' own assessments are consistent with the current rules and process. However, our assessment suggests there are weaknesses in the framework itself and in the assessment process. These affect the reliability of NAMAF scores as indicators of asset maturity, and raises concerns about their consistency and comparability over time and across councils.

Our assessment and advice from councils identified several issues with NAMAF:

  • Element and sub-element are often ambiguously defined. This increases the likelihood of subjectivity in self-assessments.
  • Methods for converting NAMAF scores into conclusions about asset management competency are inconsistent. MAV suggests that 'core' maturity is achieved when a council reaches a score of 95–100 for each asset management element. However, MAV also considers that 'core' maturity overall is achieved when the aggregate score across all elements is above 1 000, which requires an average element score of only 91.
  • Councils have pointed out the crudeness of the scoring system whereby councils with very close scores can end up in very different asset maturity groups.
  • Councils also emphasised that while their self-assessment scores were previously externally audited, they no longer are.
  • One council cautioned that a distinction should be made between 'strategic asset management' which has a corporate-centred approach and 'on-ground asset management', which has a traditional engineering department approach. Many councils are still in transition towards implementing a strategic approach to asset management which requires councils to apply more resources. However, high NAMAF scores do not register the difference and may not always indicate better 'on-ground asset management' practices.
  • Another council advised that while it submits NAMAF self-assessment reports annually, it doesn't see itself as part of the MAV STEP process and is planning to align itself with the new ISO-55000 Asset Management standard. This reflects the council's view that there are deficiencies in NAMAF in its current form.

Having an unbiased and accurate assessment of asset management maturity is important because it will inform councils of what is required to address deficiencies. Overestimating competencies and relying solely on NAMAF to reflect councils' asset maturity creates the risk that significant problems are not adequately addressed.

This all points to a need to review NAMAF to improve how its elements are defined and measured, and how scores should be interpreted by councils and independent auditors. Validation processes for councils' self-assessments should also be reviewed to ensure reliable and consistent methods are used across all councils. Improving these areas would likely lead to greater council confidence in NAMAF benchmarking, and greater transparency and accountability about councils' asset management performance. The results should be made publicly available through councils' annual reports, as well as via a central website to allow easy comparison between councils.

While it is timely to review the use of NAMAF, councils and MAV acknowledge that it has helped to put asset management more firmly on councils' agendas, provided useful guidance and direction for self-assessment of asset performance, and encouraged councils to improve against shared benchmarks.

2.5 Guidance and support provided to councils

There is an abundance of guidance available to assist councils but they are not making best use of this material. Figure 2B summarises selected asset management better practice guidance material available to councils.

Figure 2B
Better practice guidance material



Provided by

Sustaining Local Assets(2003)

Provides the overall policy framework to guide the strategic management of council infrastructure assets


Asset Management Policy, Strategy and Plan (2004)

Guidelines for developing an asset management policy, strategy and plan


National Asset Management Assessment Framework

A self-assessment tool to assist councils to identify progress in implementing best practice asset management

Institute of Public Works Engineering Australia (IPWEA)/Australian Centre of Excellence for Local Government (ACELG)

STEP asset management improvement program (since 2003)

A program for councils covering asset management and planning as essential for the effective delivery of services


Local Government Asset Investment Guidelines (2006)

Guidelines for planning and business case analysis through to asset investment and evaluation for significant capital investments


International Infrastructure Management Manual (2011)

Provides best practice guidance on asset and financial management practice for infrastructure assets

New Zealand National Asset Management Steering Group/ IPWEA

Australian Infrastructure Financial Management Guidelines (2012)

Provides guidance on developing best practice asset and financial management for infrastructure assets


Long-term Financial Planning (2012)

Developed to assist organisations that are involved in service delivery and long-term asset management in preparing a long-term financial plan


Source: Victorian Auditor-General's Office.

2.5.1 Local Government Victoria

LGV's role includes working in partnership with local councils to improve business and governance practices that maximise community value and accountability.

As part of this, LGV has developed and promoted asset management guidance materials. The guidelines, Asset Management Policy, Strategy and Plan, were developed around 10 years ago. Audited councils advised that many councils developed their asset management frameworks some time ago using these guidelines, and that updated guidance that provides a standardised approach for all councils would be helpful. LGV advised VAGO that its 2004 asset management guidelines will be reviewed and updated in 2014.

The audited councils advised that support from LGV, though appreciated, is limited, so they do not often seek guidance or assistance with developing their asset management frameworks and practices directly from LGV. Three councils advised they have used some of LGV's guidance material to develop sustainable asset management practices. There is scope for LGV to provide more targeted guidance and support to councils to address common problems, such as improving their asset management planning and practices, and dealing with the renewal gap challenge.

Councils advised that the State Library of Victoria previously provided open access to a website portal for sharing asset management information. This was extensively used and valued by councils and other organisations, but is no longer available. LGV, councils and MAV should collaborate to review the value of such a central asset management website. We understand MAV is already doing some work in this area.

LGV also coordinates annual surveys designed to identify improvements in asset management practices and assess progress by councils. Some councils have queried the usefulness of these surveys and suggested that LGV could engage councils on how the surveys could be of greater mutual benefit.

LGV is currently developing a Local Government Performance Reporting Framework to be applied by councils from July 2014. However, the asset management indicators proposed are not sufficiently detailed to support comprehensive monitoring and reporting of councils' asset management practices. LGV advises that the indicators proposed have been developed to provide a high level view of a council's asset management performance and strategies. In addition to these indicators, it would be desirable to consider further disaggregated or detailed indicators and information to support deeper analysis. Councils have also raised the issue of duplication of asset data requirements by LGV and MAV, and as part of this, the under-utilisation of Victorian Grants Commission data. LGV could work more closely with councils and MAV to discuss and resolve such data issues.

In Victoria, the Local Government Act 1989 is silent on how councils should manage their assets. In other states, legislation has been put in place to promote better asset management planning. In 2005, South Australia legislated that councils prepare a long-term financial plan and an infrastructure and asset management plan, both covering a period of at least 10 years. In 2009 New South Wales introduced the same requirements.

LGV should review the relative merits of different legislative approaches with a view to strengthening Victorian legislation to help achieve best practice asset management. Legislation recently has been passed by Parliament to strengthen performance reporting and accountability across a wide range of areas within councils. LGV expects this to result in greater alignment between asset management and financial planning, and better council benchmarking on asset management.

2.5.2 Municipal Association of Victoria

The MAV STEP program, which commenced in 2003, was designed to assist councils improve their asset management capabilities. It is built on a continuous improvement model and setting 'stretch' targets. Since 2010, the STEP program has incorporated NAMAF to assist councils in a practical way to meet national framework standards for asset management.

MAV has also collected data around asset management practices from Victorian councils, and benchmarked this data to gain an understanding of councils' asset management maturity. MAV was also provided $1.4 million from the federal government's Local Government Reform Program in 2010 for the Regional Asset Management Program.

Under NAMAF, and with MAV and LGV support, councils have improved their asset management practices. However, two audited councils questioned the ongoing usefulness of the STEP program for asset management, especially in terms of value for money. Another suggested it was timely for MAV to review the relevance of its current asset management support programs via a survey.

Photograph of a bridge

Bridge, photograph courtesy of Ararat Rural City Council.


Local councils should:

  1. accelerate efforts to review and update their asset management frameworks, policies and strategies to meet better practice standards
  2. make sure they have comprehensive asset management plans covering all major asset categories.

Local Government Victoria should:

  1. review and update its asset management guidance material for councils
  2. review the support it provides to councils and make sure it is targeted to address common issues
  3. consider, in conjunction with councils, developing a set of comprehensive asset management performance indicators that will enable comparability between councils on asset management performance
  4. in conjunction with councils and the Municipal Association of Victoria, review the use and application of the National Asset Management Assessment Framework and its appropriateness for driving improvement in asset management performance
  5. consider making aspects of asset management mandatory, such as the development of asset management policies, strategies and plans.

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