Agri Food and Biosciences Institute Asset Management Strategy Version Issue date 1 22 December 2014
Contents Page 1. Context 1 2. What are we aiming to achieve 2 3. What we have 3 4. Investment in assets 5 5. Asset maintenance 6 6. Asset disposal 7 7. Replacement Plan 8
1. Context The Agri Food and Biosciences Institute (AFBI) is multi disciplinary scientific organisation applying leading edge science and technology and working with global partners to deliver a wide range of scientific services e.g. research, testing and analysis to the Department of Agriculture and Rural Development for NI (DARD) and other public and private sector customers both locally and internationally. AFBI was established on 1 April 2006 as a Non Departmental Public Body (NDPB) under the Agriculture (Northern Ireland) Order 2004 and is sponsored by DARD. AFBI was created by the amalgamation of DARD Science Service Division and the Agricultural Research Institute for Northern Ireland which was a separate NDPB funded by DARD. AFBI has a staff complement of circa 800 people, a gross budget of over 59 million and is located at 7 specialised sites in Northern Ireland. The strategic direction of AFBI over the period 2014 2015 is focused on 6 goals: 1. Successfully deliver the assigned work programmes to DARD and in so doing support DARD in achieving its goals; 2. Provision of scientific support to DARD and other government departments and agencies in managing the impact of animal and plant health, food and environmental emergencies; 3. Actively manage and grow AFBI s commercial portfolio and in so doing build our reputation as a customer first organisation; 4. Sustain and develop AFBI s knowledge base and position AFBI as a leader in the delivery of innovation and scientific support to the agri food sector ; 5. Invest in our people and ensure that the best systems and processes are in place to manage our organisation efficiently and effectively; and 6. Ensure the long term financial sustainability of AFBI. Whatever the economic climate, publicly supported organisations face the challenge of getting the best from all their resources so as to sustain and improve the levels and quality of service that they are able to deliver. The current fiscal imperative to deliver better value, driven by the global economic climate, requires publicly supported organisations to explore and develop transformed ways of working that can deliver improved overall performance without reducing service levels or quality. One area which is coming under increasing scrutiny is asset management because all publicly supported organisations commit significant financial resources to meeting the costs associated with owning and operating assets. In order to ensure the continuing provision of quality, affordable services, particularly during a period of significant financial constraint, it is essential that AFBI has in place a sustainable strategy for the management of assets. This is also a requirement set out in Managing Public Money Northern Ireland (MPMNI) which states that each government organisation should develop and operate an asset management strategy and as a DARD NDPB, AFBI is included within this requirement. 1
2. What are we aiming to achieve 2.1 The principles governing asset management in AFBI AFBI s overarching aim for the Asset Management Strategy is to ensure that its assets contribute effectively to service delivery, are fit for purpose, are suitable and sustainable and provide value for money. The strategic objectives of the Asset Management Strategy are: i. to maintain and enhance a flexible portfolio of assets best equipped to meet changing service needs and evolving methods of service delivery during a period of significant financial constraint; ii. to continue to critically review and challenge the need to hold specific assets in each key asset class; and iii. to regularly review and rationalise assets to ensure they are used effectively and deliver value for money. Alongside these objectives, we will: i. ensure that new or replacement assets are identified for purchase on a timely basis to enable procurement to be completed just when the asset is required; ii. dispose of assets when they are no longer required; iii. ensure that adequate training is provided for those responsible for managing assets and that best practice is shared; iv. work to incorporate asset management as a key component within wider resource and business planning; v. look for opportunities to share assets between Divisions; and vi. ensure that Heads of Division regard the management of assets as an important priority, and that the Asset Management Strategy is regularly reviewed by the Board. 2
3. What we have 3.1 AFBI s Fixed Asset Register AFBI currently uses the Real Asset Management (RAM) software to record all its fixed assets. At present, AFBI holds circa 1,550 assets on its Fixed Asset Register (FAR). It does not own any land or buildings and does not capitalise any fixtures, fittings or office furniture. With the exception of software licences, for which there is no capitalisation threshold, all other assets with a cost greater than 5k (excluding VAT) are capitalised. A summary table reflecting the net book values of the major categories of Plant, Property and Equipment and Intangible Assets shown in AFBI s latest set of accounts, for the 2013/14 financial year, is shown below: Asset category NBV m Plant & Machinery 7,644 Boats & Motor Vehicles 1,459 Information Technology 192 Software Licences (Intangible) 213 Assets Under Construction 217 9,725 The table above clearly highlights that Plant & Machinery makes up the largest value of AFBI s assets which includes most science and lab equipment. Although AFBI occupies seven sites across Northern Ireland, the land and buildings are leased to us by our Sponsoring Department DARD and are not therefore subject to this Strategy. Any costs relating to the development of Assets Under Construction are tracked, recorded and capitalised. When construction is complete the assets are transferred to the appropriate asset category and depreciation/amortisation is charged as appropriate. Each year the Divisions are requested, by Finance, to carry out a review of all the assets within their Division (per the FAR) to ensure the assets are still held by AFBI and that their useful economic lives are still appropriate. For any asset where the useful economic life has expired or that is approaching expiration, Divisions are required to provide either a revised useful economic life to enable the assets to be re life on the FAR. Alternatively, Divisions should confirm the disposal of the asset by completing an asset disposal form. If an asset is identified during the review that is damaged beyond economic repair then the asset should be disposed of and a disposal form completed. 3.2 Condition of Assets Heads of Division are responsible for the effective control and utilisation of AFBI s assets, including ensuring assets are maintained in an operational state. Therefore, asset condition is assumed to be acceptable unless damage is reported or identified. 3
3.3 Non capital items As a result of the 5k capitalisation threshold, there exists a large number of items within AFBI that have not been capitalised but which collectively represent a significant value and could therefore be susceptible to misappropriation. Examples of such items include microscopes, ipads, digital cameras and other small pieces of computer and science equipment. Historically, these items have not been recorded on the FAR, but AFBI has now developed a Desirable Asset Register (DAR) to record and tag these items. Only those items considered desirable will be recorded on the register e.g. digital cameras, ipads, portable projectors. Items such as microscopes and centrifuges will not be recorded as there is not considered to be a ready market for these items. The market would be restricted to research organisations similar to AFBI and it is unlikely that they would be interested in buying second hand equipment of doubtful provenance and hence any potential financial gains are limited. 4
4. Investment in assets 4.1 Capital allocation Each year AFBI receives a capital allocation from DARD for the acquisition of new capital assets. The capital funding expected to be received from DARD for future financial years is as follows: Subject to new CSR FY 14/15 FY 15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 000 000 000 000 000 000 2,949 1,200* unknown unknown unknown unknown *estimate. The investment in capital assets each year is based upon the need for assets to facilitate the delivery of the Assigned Work Programme and DARD Evidence and Innovation projects. This will involve some of the funding being spent on capital replacement as well as investment in new assets. All investment in capital assets will be subject to the specified asset appraisal, approval and post project evaluation processes (PPE). In June each year DARD issues the budget request year for the next years or years depending on the respective Comprehensive Spending Review (CSR) period. DARD advises AFBI of its capital allocation for future year(s) in the November following. AFBI can bid in the in year Monitoring returns for additional funding from DARD. AFBI will issue a call for bids early in the first quarter of the financial year (informed by the Asset Replacement Plan See 7.1).Based on the expected allocation AFBI seeks from the DCEO s preliminary requests for capital based on anticipated requirements prioritised with outline business cases to support bids. The Executive Management Team reviews the prioritised list and allocates the available capital. The CEO issues the authorised allocation and full business cases are submitted to Finance to support any capital items that have been approved by the CEO for purchase during that year. Pro forma business cases are available on the intranet for capital items with a whole life cost of: i. Up to 50k; and ii. Between 50,001 and 250k. iii. Between 250k and 1.0m The Finance Business Partners will be available to provide assistance on the preparation of the business cases. AFBI has delegated authority to spend up to 500k on a single capital project. Beyond that delegated limit, DARD and where necessary DFP authority must be obtained before expenditure on an individual capital acquisition is incurred. The Finance Business partners will provide the appropriate form and any assistance required. In addition to the DARD provided capital allocation, AFBI may have the opportunity to submit bids to the various monitoring rounds for additional capital funding to purchase assets which will 5
used on projects included within the DARD work programme. Submitting a bid, no matter how compelling, does not guarantee additional funding. As a result it is important to prioritise capital expenditure and also to ensure that it is spent within the year of allocation. Any capital funding that is not spent in the year of allocation cannot be carried forward to the next financial year and is lost. In the situation when AFBI is required to purchase an asset specifically for the delivery of a non AWP project, then AFBI cannot use its DARD provided capital allocation to fund the purchase. Instead, AFBI would ask the customer to either provide capital funding ( if a Government body), provide the asset to AFBI for use in delivering the project or AFBI would consider converting part of the income to be provided by the customer for the project, into capital funding at the next available monitoring round with the agreement of ASB. 4.2 Procurement and timing of capital spend As an NDPB, AFBI must adhere to government procurement requirements. These requirements extend the procurement process and timeline. Depending on the value of the assets, the procurement process could take a number of months to be completed. Due to these time scales it is important that assets required to be purchased are identified on a timely basis. AFBI is required on an annual basis before the start of the year, to provide CPD with a list of assets to be procured through CPD. There is however an opportunity to amend the list midyear. 6
5. Asset maintenance 5.1 The maintenance of assets AFBI has in place a number of maintenance contracts to ensure its assets remain operational. The maintenance contracts are managed by the Division who manages the asset. In order to maintain accreditation, assets such as science and lab equipment are required to be serviced and maintained in accordance with the relevant manufacturer s recommendation. Well maintained equipment should also reduce the amount of downtime caused by breakdowns. All maintenance contracts must be let in accordance with AFBI Procurement guidelines. Contracts must not be let for an indefinite period. In circumstances where there is only one service provider, DAC (Direct Award Contract) approval must be sought. All maintenance contracts must be entered on to the AFBI Contracts database and the contract reference (generated by the database) will be entered by Finance onto the FAR. This will provide evidence that a contract exists. Although some of AFBI s IT assets are recorded on the FAR, most are managed and maintained by IT Assist, a shared ICT service within the NICS. Section 6.1 outlines the procedures that are in place for reporting items that are no longer in use or are damaged beyond economic repair and need to be written off. 7
6. Disposal Plan 6.1 Procedures in place to identify disposal opportunities The disposal of assets is a key function of asset management. Assets will be disposed of: i. when they reach the end of their useful life; ii. when they are no longer required for use within AFBI; iii. when they are damaged beyond economic repair; or iv. where it is decided by the asset manager that they are no longer cost effective to retain. An asset disposal form is available on the intranet and should be completed by Divisions when a disposal is identified and returned to Retained Finance. To ensure that Finance has been notified of all assets disposed of in a particular year, the annual review (see 3.1) includes the requirement for Divisions to identify any assets on the FAR which are no longer in use or which have been damaged beyond economic repair and need to be written off. The scope for disposal of surplus assets is also reviewed as part of this process i.e. assets which are in a usable condition but no longer required by the Division. As part of the exercise to develop an Asset Replacement Plan (see 7.1), an Asset Disposal Plan will be produced before 31 March which profiles the assets expected to be released in each financial year. 6.2 Table showing acquisitions and disposals since 2008/09 to date. 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 000 000 000 000 000 000 Acquisitions 1,542 2,662 2,380 1,304 757 1,491 Disposals 1,263 906 156 46 3,114 1,251 Net book 11,856 12,004 11,937 13,082 12,442 9,725 value 6.3 Sale of assets Typically all assets are used by AFBI for their entire useful life. When an asset reaches the end of its useful life or is no longer required, attempts should be made to sell the asset if the asset is considered to have a resale value. If the asset is damaged or not considered to have a resale value it should be scrapped. The Procurement Manager is available to provide advice on the sale of assets. There are also occasions where an asset has not reached the end of its useful life but it is no longer required by AFBI and is sold. In all instances assets must be sold through a public auction or by open tender. All sales proceeds should be lodged directly to AFBI s bank account 8
7. Replacement Plan 7.1 Asset replacement Decisions taken to replace assets are generally made because either they are no longer fit for purpose or because the assets have become uneconomical to retain. A review has been carried out by the Divisions to identify those assets that will need to be replaced up to 2032 33. Of the assets identified, some will have a higher priority than others. As not all bids for capital funding will be approved, a further exercise was undertaken to determine the priority rating of the replacement assets. The priority rating is determined by its impact on the Assigned Work Programme and is as follows: 1 Critical essential to the delivery of the AWP 2 3 4 5 Desirable Through the development of any Asset Replacement Plan, assets requiring replacement will be identified at an early stage which will allow funding to be obtained, approved and the asset replaced in a timely manner. The next Asset Replacement Plan will be developed in the first quarter of FY 15/16. 7.2 Process of Review As there are limited funds for replacement, each proposal will be subject to the same review as if it were for the creation of a new asset and will thus have to compete on its merits. See 4.1 for the process for bidding for capital funding. 7.3 Summary In the 2014 15 review of the FAR, circa 1,200 assets were identified by Divisions as needing replacement over the period to 2033. Of these assets, an estimated cost of replacement was provided for 1,050 assets. The table below compares the estimated cost of these circa 1,050 assets against the original allocations for capital funding expected to be received from DARD for the next number of years and any resulting funding gap. 9
FY15/16 FY 16/17 FY 17/18 FY 18/19 FY 19/20 FY 20/21 FY 25/26 FY 26/27 FY 32/33 000 000 000 000 000 000 000 Plant & 3,823 5,123 3,432 3,044 2,124 8,733 1,157 Machinery Boats & 1,054 521 562 11,241 151 652 36 Motor vehicles Information 49 20 1 29 8 15 0 technology Software 7 30 7 42 0 16 0 licences Value 4,933 5,694 4,002 14,356 2,283 8,764 1,193 Funding 1,200 unknown unknow Unknown unknown unknown unknown n Funding gap (3,733) Of the circa 1,550 assets currently on the FAR, Divisions have indicated that circa 350 assets do not require replacement over the period of the Asset Replacement Plan. As there is likely to be a shortfall in the funding required to enable all the replacement capital items identified to be purchased, Divisions will be required to prioritise the need for capital over the next 5 years. It is important to note that the current replacement profile does not include any new capital bids that may arise over the period, nor the next replacement of the assets identified in this replacement plan which would then be due for replacement from 2021/22 onwards. 10
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