Consequences of Inferior Fixed Asset Management

Best Practices

Prioritise Projects & Develop a Strategy to Secure Adequate Funding

Consequences of Not Managing Fixed Assets Effectively

Generally, a list of deferred maintenance projects and its accompanying financial analysis would not be enough information to make a case for funding. It is important to prioritize deferred maintenance projects since it is unlikely that enough funding will be provided to immediately erase the entire backlog in the first year. First priority is to develop a set of criteria to prioritize projects.

The following three categories could be used as a criteria to organize and priorities projects:

  1. Currently critical—projects that require immediate action to return the infrastructure asset to normal operation, stop accelerated deterioration or correct a cited safety hazard.
  2. Potentially critical—projects that will become critical within the first year if not corrected expeditiously.
  3. Necessary, but not yet critical—projects that require reasonably prompt attention to preclude predictable deterioration or potential downtime and the associated damage and higher costs if deferred further.

It is not uncommon for some of the least expensive repairs to rise to the top of the list. Projects with immediate health- and safety-related ramifications or business-continuity implications should be categorized as "currently critical". Additional criteria might include the following: protecting the building envelope, increasing energy efficiency, updating aesthetics and boosting employee productivity and tenant retention/attraction.

Any projects that reduce peak demand or increase energy efficiency may qualify for rebates offered by utility companies. National or provincial government agencies may also provide partial funding to have some of the systems upgraded.

Identification of Fixed Assets

This has to be done thoroughly to ensure that each and every asset is identified. If the correct processes are followed, it would not be necessary to repeat this afterwards.

Because of the expense involved, it is generally avoided, which means that any of the steps that follows is lacking subsistence, and, essentially, meaningless.

The Asset Register is a key to understanding in detail what assets are owned and controlled and, depending on the complexity of information entered, can be used to determine:

  • The likely current condition of assets;
  • When assets need to be replaced;
  • Information required in meeting accounting standards and other regulatory requirements;
  • Asset locations and asset custodians for stock-takes;
  • The level and frequency of asset maintenance programs; and
  • Life-cycle costs by asset, program and business activity.

Leave a Reply