Effective and efficient management is vital to ensuring the safety of those who use a community’s assets. It also makes sound financial sense.
That is why finance managers need a thorough understanding of all aspects of asset management, says Chris Morrill, CEO of the US/Canada Government Finance Officers Association (GFOA).
“Community assets are not only a major item on the balance sheet, they are also critical to delivering services to constituents,” explains Morrill. “Asset management is also important for intergenerational equity. In other words, not passing down major liabilities to future generations.”
Morrill warns there are potentially dire consequences when finance managers fail to understand asset management.
“When public finance managers fail to understand asset management, they put their government and their constituents at risk,” he says. “We’ve seen the lives lost when critical assets like bridges have not been properly maintained.
“In less visible ways, poor asset management burdens future generations and makes it more difficult for communities to build financial resilience to survive natural and man-made crises.”
Finance managers leading the way
It’s not uncommon for government finance managers to have a lack of understanding of the importance of asset management, says Morrill. However, the good news is that finance managers in many parts of the world are leading the way.
“Countries like Australia and Canada have been encouraging asset management – and providing educational resources and certification – longer than in the US,” he says. “While nationally there are infrastructure scorecards – The American Society of Civil Engineers’ latest grade for US infrastructure was D+ – it’s not given as much attention at the local level.”
Morrill explains that this happens because finance teams don’t make asset management a priority. “I think there has been a lack of understanding because asset management was not perceived as an important skill for finance managers,” he says. “At GFOA, we have best practices on capital planning and budgeting but do not necessarily approach it holistically as in asset management.”
The gold standard starts with the IPWEA
When it comes to defining what the international gold standard looks like when it comes to asset management, Morrill singles out the IPWEA for praise.
“I’ve been impressed with the approach, resources and training developed by IPWEA for public asset management,” he says. “The work of the Canadian Network of Asset Managers is also very good.”
Morrill says it’s difficult to compare the average standard of asset management internationally but favourably contrasts Australia with its northern hemisphere cousin. “I do know US state and local governments could learn from Australia and Canada,” he says.
Moving towards a positive future
There are several steps that can be taken along the road to raising awareness – and therefore standards – of asset management, according to Morrill.
“I think we need to provide more case studies on the benefits of comprehensive asset management so public servants (in finance, engineering, planning and public works) will want to know more and bring the discipline to their communities,” he says. “At GFOA, we highlighted the work of the Washington DC government in successfully implementing asset management – and the difference it made to their citizens. We need to tell more of those stories.”
Morrill believes change is already underway within the industry. “There is a growing interest in asset management, which I think is getting even more attention with the focus on infrastructure in the US for economic growth and the need for resiliency in preparing for climate change,” he says.
His advice for finance officers when making effective asset decisions is focused on the universally important tools of maintaining open lines of communication and always having a willingness to cooperate.
“I believe finance officers can assist their elected bodies in making effective asset decisions if they can marry their strong government finance skills with the professional knowledge from their colleagues in engineering, planning and public works,” he says. “A more collaborative, cross-disciplinary approach will lead to better asset management programs – and gain wider support.”