Article
Does your institution have ‘lazy assets’?
Tertiary Talk - March 2018
Improving asset efficiency in our sector has long been a desirable performance improvement goal in TEIs; more so since Treasury introduced the Capital Asset Management framework some years ago. That framework seeks to ensure that Universities, ITPs and Wananga are effectively ‘looking after’ the Crowns investment in tertiary education facilities.
The Crown has more than $10b invested in TEI assets. To put that in perspective that is twice our investment in defense and doesn’t include the $15b of school assets.
So it is no surprise that TEI management and governors are increasingly looking at ways to better utilise the asset base to support educational success.
It starts by classifying assets into core and non-core. One definition of core is “those assets that are critical to the ongoing successful delivery of institutional goals”. The classification of core and non-core can change over time with changes in the business objectives so it’s appropriate to review the contribution that assets make to institutional success on a regular basis.
In 2017 our Christchurch Tertiary Centre of Excellence team assisted a TEI that was undergoing transformational change. It quickly became apparent that assets that may have been critical in the past, were less critical in a transformed institution. Similarly new assets and new investment were going to be necessary and access to capital to fund new investment was scarce.
These under-performing assets potentially provide a source of capital that might result in a more efficient overall use of TEI assets. It was not a question necessarily of selling the family silverware but more how these assets (or the value they hold) can be more effectively used within the organisation.
We looked at whether key strategies could be delivered without necessarily “owning” the assets. Could someone do this better and more efficiently without the TEI losing control of the service and maintaining control over the student experience? e.g. catering, student accommodation etc.
We challenged senior leadership about the effectiveness of governance and management structures to drive commercial returns in subsidiary activity. We challenged whether the TEI’s capital was prioritised to align with organisation goals. For example, how does an institution’s art collection contribute to educational outcomes?
The outcome of this exercise was a plan to release and re-allocate more than $18m of capital.
In recent years, TEC and Treasury have increased their focus on understanding how institutions use Crown funded assets to achieve wider government outcomes but specifically for TEIs, on educational outcomes. They have raised their expectations about effective asset management and mandated that TEIs provide better evidence of the measurement and monitoring of its asset base. Governors and management are expected to have that same focus.
For more information on optimising asset performance contact Brett Chambers bchambers@deloitte.co.nz
