Asset information

Asset management and long-term planning.

Good quality information about assets is essential for effective asset management planning. Knowledge of key data at component level should cover physical characteristics, installation date, useful life, asset value, current condition, and performance.

The reliability of asset data should be formally assessed and a confidence rating assigned. Data confidence should match the complexity and criticality of the asset network and the significance of the asset management decisions to be made. Strategically important decisions on complex networks supporting critical services need to be informed by reliable data.

In this chapter, we discuss the importance of having reliable asset information to enable effective decisionmaking to achieve planned levels of service for the community.

A local authority’s infrastructure network is made up of the following asset groups:

  • water supply;
  • wastewater;
  • stormwater;
  • roading/transportation; and
  • flood protection (regional/unitary councils).

In addition to core infrastructure, local authorities own and operate a wide range of other types of assets, including corporate properties, community facilities (such as community halls, libraries, museums), and recreation facilities (such as swimming pools, recreation centres, sports fields).

Local Government Act 2002

Section 101B of the Act sets out the requirements of a local authority’s infrastructure strategy. This includes subsection (4), which states:

(4) The infrastructure strategy must outline the most likely scenario for the management of the local authority’s infrastructure assets over the period of the strategy and, in that context, must

(a) show indicative estimates of the projected capital and operating expenditure associated with the management of those assets

  1. in each of the first 10 years covered by the strategy; and
  2. in each subsequent period of 5 years covered by the strategy; and

(b) identify

  1. the significant decisions about capital expenditure the local authority expects it will be required to make; and
  2. when the local authority expects those decisions will be required; and
  3. for each decision, the principal options the local authority expects to have to consider; and
  4. the approximate scale or extent of the costs associated with each decision; and

(c) include the following assumptions on which the scenario is based:

  1. the assumptions of the local authority about the life cycle of significant infrastructure assets:
  2. the assumptions of the local authority about growth or decline in the demand for relevant services:
  3. the assumptions of the local authority about increases or decreases in relevant levels of service; and

(d) if assumptions referred to in paragraph (c) involve a high level of uncertainty, —

  1. identify the nature of that uncertainty; and
  2. include an outline of the potential effects of that uncertainty.

To meet this requirement, local authorities need a thorough understanding of their assets. The importance of reliable asset information cannot be overstated.

What are auditors looking for?

The quality of asset information was one of the Auditor-General’s focus areas when we were auditing the 2021-31 LTPs. Limited good quality asset information can lead to underfunding, poor renewals forecasts, unplanned costs, increased risk of asset failures, and reduced levels of service – all of which could have a significant impact on local communities.

When auditors assess a local authority’s knowledge of asset condition and performance, and how it is used to support financial forecasts, we are considering how well informed the council is about its asset networks. We need to be sure there is an evidence-based approach to determining the need for asset renewals.

Auditors also consider whether the reliability of asset information to support local decision-making is being clearly communicated to the local community.

At a high level, auditors want to understand the following:

  • How reliable is the council’s asset data?
  • Have critical assets been identified?
  • What is the level of knowledge about the critical and non-critical assets? That is, is there a welldocumented record of each of the infrastructure networks covering value, age, materials, condition, and performance of assets?
  • Does available data allow evidence-based decisions about a local authority’s operation, maintenance, and renewal of its infrastructure networks?
  • Does the sophistication of forecasting match the complexity of the assets and the significance of the decisions being made?

Asset condition and planning for renewal

Plans to renew assets informed by monitoring actual condition and performance are likely to be more accurate than those based simply on asset age. Although all assets have a theoretical design life, in practice their actual life may be significantly longer or shorter. A range of factors, including quality of construction and installation, environmental conditions, level of usage, and effectiveness of maintenance programmes, can impact how quickly an asset deteriorates and when it will be unable to support the required level of service.

We reviewed whether the local authority had reasonable (that is, highly reliable or reliable) condition information about its critical assets. We also considered whether the local authority had a large portion of non-critical assets where asset condition information was reasonably reliable.

If the local authority had reliable information for both critical and non-critical assets, and was using it as a basis for forecasting, we were assured that the proposed renewals spend was reasonable.

If these factors were not in place, auditors considered what alternative information was available to the local authority to inform their renewals forecast and assessed whether this was sufficient. Alternative information and factors considered included:

  • the complexity of local authority’s asset portfolio;
  • the local authority’s undocumented knowledge of its assets’ condition and performance (for example, visual inspections not part of a structured programme and/or the cumulative knowledge and experience of engineers and those maintaining assets);
  • whether undocumented knowledge was consistent with the age profile of the assets or whether it indicated assets would likely last shorter or longer than their theoretical lives;
  • whether the local authority had used the undocumented knowledge of condition and performance issues to inform remaining useful life assessments and planning for renewals;
  • whether there were any known performance issues or a track record of asset failures (for example, unexpected pipe failures leading to water outages) – known performance issues potentially provide a basis for renewals planning (for example, unplanned asset failures might indicate that asset renewals were being planned too late unless the local authority had a clear “run to fail” strategy or would renew after a certain frequency of failures was reached);
  • whether the age profile of the assets meant that performance issues were likely (for example, if a network was of an age where significant renewals would theoretically fall within the 2021-31 period or where there were significant numbers of assets that were close to or beyond the end of their design life);
  • whether most maintenance was performed as planned or whether the local authority had historically needed to carry out a lot of reactive maintenance or renewals to address asset failures; and
  • whether the local authority had suitable reliable age and remaining useful life information (for example, whether the local authority had accurate information on asset installation dates and was using an appropriate methodology to calculate the age and remaining useful life of the assets, such as those outlined in the International Infrastructure Management Manual, 6th edition (IIMM)).

Once auditors had assessed each of these factors,we considered the consequence of asset failure. For example, if a critical asset with no redundancy, such as a main pipeline or a wastewater treatment plant, were to fail, there was likely to be a significant effect on the community. Furthermore, if a failure would take a long time to rectify, perhaps because of the scale of the required work or because spares were not held in stock, this added to our assessment of significance.

Conversely, failure of a connection to a few houses that could be reactively replaced within a few hours might be a tolerable consequence of failure. It might indicate that the risk of asset failure did not justify the investment in gathering better asset information.

Ultimately, auditors had to reach a judgement about:

  • the local authority’s approach to identifying and managing the risk of asset failure; and
  • the local authority’s accountability to its stakeholders about this.

Data reliability and audit opinions

These considerations helped auditors to decide whether an unmodified opinion, an emphasis of matter paragraph, or a modified opinion would be most appropriate for the local authority’s consultation document and LTP to ensure that stakeholders understood the local situation.

Setting out a clear, comprehensive schedule of data reliability is good asset management practice in line with the IIMM.10 Some local authorities were able to evidence independent assurance over their assessment of asset information reliability (for example, from independent asset valuation reports if the valuers had provided comment on the reliability of the information used to value asset classes).

When auditors assessed the reliability of a local authority’s asset information, they considered the confidence grades for asset information, condition, and performance, and the resulting financial forecasts. As part of this, auditors also considered the local authority’s methodology for assessing data reliability and the sensitivity of its forecasts if the data provided turned out to be inaccurate. Local authorities that had a completed a recent data confidence assessment in line with the grading system set out in section 4.2.7 of the IIMM were able to clearly demonstrate their assessment of data reliability.

If a local authority had not completed an assessment of reliability, it was difficult for auditors to conclude that the local authority had reliable underlying asset information because of the range of information concerned and the multiple ways in which it could be vulnerable to incompleteness and error. In determining the significance of this, auditors assessed whether the uncertainty could lead to a material difference in financial forecasts.

What are the characteristics of quality asset information?

We base our audits on recognised good practice. The IIMM provides lots of useful information and guidance, and section 2.4 of the IIMM is the key source of guidance on asset condition and performance information. We have referred below to the most relevant parts of section 2.4 for the audit of LTPs.

It is important to make a distinction between asset condition and asset performance. Asset condition is the physical state of the asset, and asset performance refers to whether the expected levels of service are being met.

An asset can be in poor condition but still generate the required level of service (for example, stormwater pipes that are damaged but are still able to discharge the water as required) and, conversely, an asset can be in good condition but not delivering the required level of service (for example, wastewater pipes that are in excellent condition but are too small to service the volume of waste from the local population).

Section 2.4.1 of the IIMM sets out the use of asset performance information:

Understanding the current and future performance of individual assets also provides key inputs into AM [asset management] decision making, enabling further benefits such as:

  • mitigation of risks associated with asset failure, for example by proactively maintaining or upgrading an asset to reduce the probability of failure;
  • avoiding unplanned outages; pre-emptive asset remediation can be more cost-effective than allowing the asset to deteriorate to failure;
  • accurate prediction of future expenditure requirements through understanding remaining asset life and capital investment needs;
  • enhanced sustainability of the asset base as service life can be optimised an, in some cases, extended through effective, proactive understanding of the asset deterioration processes;
  • identifying the most economic intervention (maintenance, rehabilitation, renewal) and when the interventions should be carried out, resulting in an understanding of long-term optimised lifecycle costs; and
  • assessing current and future demand against the available capacity to better plan for demand changes.

How much information is enough?

Asset information supporting the 2021-31 LTPs ranged from basic age and expected useful life to detailed asset age, location, condition, and performance information that was regularly surveyed and updated.

We recognise it would be prohibitively expensive to record and update information on all aspects of every asset. A significant proportion of assets are underground so are difficult and/or costly to inspect. Extrapolating a sample survey across a whole network can be a cost-effective way to increase data confidence. Asset managers should consider the significance of the decisions they need to make and how much and what data is needed to make sure those decisions are reliable.

The less complex an asset network is (in terms of size, scale, criticality, and number of users), the less sophisticated the information held by the local authority needs to be. Different renewals strategies can apply to non-critical networks.

For example, a local authority may have a simple network that services a limited number of people with few critical users. In this case, it might be appropriate for the local authority to use a “run to fail” renewals strategy, where assets are repaired or replaced as and when required. Detailed deterioration modelling might not be required to support this strategy on this particular asset class.

Different maintenance and renewals strategies will be required for more significant networks and those assets that have been identified as being critical to the ongoing operation of a system. Picking the optimal point in the asset life cycle to move from maintenance to renewal is likely to need more sophisticated information about the network, including its current condition and performance, and likely deterioration. Auditors considered it particularly important for local authorities to have reliable information about critical assets as those assets have a significant impact on the community if and when they fail.

For those assets that are hard to physically inspect, sampling data may be appropriate.11 For example, we saw local authorities adopting this approach to their reticulation networks for water, wastewater, and stormwater. The sample information was then extrapolated across those parts of the network with similar material, diameter, and age of pipe laid in a similar ground type.

Sampling could be used to understand asset condition across the portfolio and help model deterioration. However, auditors mainly saw physical inspections targeted to critical assets that were at highest risk of failure or those approaching the end of their useful lives. Confirming the condition of a sample of assets can be useful to validate the need for a planned renewals programme before it goes ahead.

What data to collect?

Section 2.4.3 of the IIMM lists the following as considerations when deciding what condition and performance data to collect:

  • Relevance: every data item must have a direct influence on the output that is required (be that a decision on when to renew the asset, or specific data input into a predictive condition model).
  • Appropriateness: the volume of data and the frequency of updating should align with the stage in the assets’ life and the criticality of the service being provided.
  • Reliability: the data should be sufficiently accurate, have sufficient spatial coverage and be appropriately complete and current.
  • Affordable: the data should be affordable to collect and maintain.

Sources of condition information that our audits found being used by local authorities to understand their assets and inform their 2021-31 LTP were:

  • planned inspection programmes;
  • reviews during planned maintenance of assets;
  • records of asset failures either from the public or from local authority staff and contractors; and
  • sample asset inspections by external valuers as part of the triennial valuation of local authority assets to update the asset register.

Sources of performance information that were used by local authorities to understand their assets and inform their 2021-31 LTP were:

  • complaints received from the public;
  • records of asset failures either from the public or from local authority staff and contractors;
  • monitoring data from telemetry; and
  • performance information in the local authority’s annual report – for example:
    • customer satisfaction surveys;
    • compliance with Parts 4 and 5 of the Drinking Water Standards for NZ 2005 (revised 2018);
    • water loss from networked reticulation system;
    • complaints received about drinking water clarity, taste, odour, and pressure or flow;
    • complaints received about continuity of supply;
    • dry weather wastewater overflows;
    • wastewater reticulation incidents;
    • complaints received about sewage odour, faults, and blockages;
    • number of flooding events;
    • stormwater pipeline blockages;
    • road roughness;
    • peak travel times between the CBD and surrounding suburbs; and
    • reduction in fatalities and serious injury crashes.

How widespread were issues with asset information in the consultation documents and long-term plans?

A lack of good quality asset condition and performance information was the reason for many of the emphasis of matter paragraphs in audit opinions issued on consultation documents and LTPs.12

An emphasis of matter is used by auditors to highlight the significance of specific disclosures to the public and to elected members. Emphasis of matter paragraphs were included our audit opinions where we concluded that limited understanding of asset condition and performance would likely impact the accuracy of renewals forecasts and the efficiency of planned investment and heighten the risk of service disruptions. In some cases, only age-based information was being used to forecast programmes of work. In some cases, we concluded this was reasonable, but in others, such as work on critical assets, we concluded it was not.

Upper Hutt City Council: An example of auditors issuing an emphasis of matter

Upper Hutt City Council received an emphasis of matter paragraph for its consultation document and LTP because the Council’s forecasting for three waters assets was based on their age.

Using age-based information instead of condition and performance information means there is a higher degree of uncertainty about the prioritisation of investment.

The Council provided a clear summary of its asset information maturity in its consultation document and explained that its renewals forecast was built on age-based information. The consultation document acknowledged that using aged-based asset information to support budgets increases the uncertainty of when and how much investment will actually be needed. The Council told readers of its planning that it intended to invest in better understanding the condition of its assets to help reduce the level of uncertainty in future.

The extract below is from pages 20 to 21 of Upper Hutt City Council’s consultation document:

Extract from pages 20 to 21 of Upper Hutt City Council's consultation document.

Wellington City Council: An example of auditors qualifying their opinion

Wellington City Council received a qualified opinion for its consultation document because the Council had experienced several high-profile pipe failures that had affected levels of service for local communities.

Many of the assets in the three water networks are old, and a significant percentage had already passed the end of their expected useful life. The Council did not use information about the condition of its three water assets to cost and direct its investment in its three waters networks. Rather, the renewal of assets was forecast based on a funding envelope informed by both the age of the assets and what the Council considered to be affordable.

Given the age of the three waters networks and recent asset failures, auditors considered it was unreasonable for the Council to use only age as the basis to support and direct the renewal of its three waters infrastructure. The risk of doing so could result in more asset failures during the 10-year period of the LTP, reduced levels of service, and greater costs than forecast.

In the consultation document for Wellington City Council, there was specific reference to the importance of asset information (see the extract below). The Council had identified that the Wellington region’s three waters network had historically suffered from low funding and that Wellington Water had recommended to its client councils that an increase in funding was needed over several years. The Council presented three options to the community. Integral to the options presented was the need to improve the Council’s knowledge of the condition of three water pipes to improve the timing of planned renewals.

Option 1. This is an extract from the Wellington City Council's consultation document.

Option 2. This is an extract from the Wellington City Council's consultation document.

Option 3. This is an extract from the Wellington City Council's consultation document.

Christchurch City Council: An example of an unmodified opinion

Christchurch City Council’s audit opinion contained no reference to its condition and performance information. This was because auditors felt that the Council had a thorough knowledge of its asset networks when considering a range of data sources.

The Council’s asset management plans (AMPs) provided a description of the assets, with a welldocumented record of each of the networks covering value, age, materials, and condition. Critical assets were identified in each AMP, and criticality was addressed in the risk section of each AMP. The renewals programme, which was a significant part of the total capital programme, was based on factors that included the condition and performance of the Council’s assets. Auditors found that the Council generally had good quality information on its assets and that the iterative nature of the planning process meant that critical assets were prioritised in forecasts.

In developing the capital programme for the LTP, both staff and councillors tried to minimise the impacts on levels of service and consequence of failure, by using an Asset Assessment Intervention Framework (AAIF) methodology to focus capital work on the areas of highest impact within three waters. The AAIF tool uses condition and criticality information to inform the programming of asset renewals within available budgets and to understand and reduce risks of asset failure. It considers expected theoretical useful life, actual condition, repair history, rate of deterioration, and consequences of failure to establish a renewal year.

The AMPs identified the Council’s approach to the operation, maintenance, and renewal of its networks and contained the data on which decisions would be made. The renewals strategy was made up of approaches appropriate to each asset group and was evidence based (for example, the AMPs set out the approach and included a rationale as to why it was appropriate). The sophistication of the approach appeared to match the complexity of the assets described.

10: International Infrastructure Management Manual, 6th edition.

11: Note that the data needs to be from a representative sample to be suitable for extrapolation. If focusing on assets approaching the end of their lives, the results are not able to be extrapolated across the whole asset class as this is not a representative sample of all assets in this asset class.

12: See the chapter of this report on audit opinions for more detail.