| Description | The Cabinet Secretary for Finance and Sustainable Growth, John Swinney, commissioned a Review of public sector Asset Management which, in the first instance, should focus only on the Scottish Government estate. The aim was to consider the current status and quality of the management of our buildings and land. In doing so the Review has sought to establish the facts and identify the anomalies, weaknesses and opportunities to bring about the more efficient and effective use of of our estate. |
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| ISBN | (Web Only) |
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| Official Print Publication Date | |
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| Website Publication Date | January 28, 2008 |
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Key Findings
4. Extent of the Scottish Government Estate
4.1 The Scottish Government estate means the buildings and land, owned, leased, managed or occupied in the name of Scottish Ministers or in the name of individual bodies, including those of NDPBs, agencies and other associated bodies. This Review covers the administrative estate, but excludes assets owned or leased by organisations for the sole purpose of carrying out their business function, e.g. Historic Scotland's historic estate that is open to the public. However, buildings that have a mixed use and include an administrative function, e.g. National Galleries of Scotland, have been included. The exception to this is Scottish Enterprise and Highlands and Islands Enterprise, who each hold both a 'business' and a 'corporate' estate. For these, the details of their 'business' estate have also been collected but are not included in the analysis at this stage.
4.2 Key Facts about the Estate
As at 30 October 2007, the 71 responses provided the following key facts about the administrative estate:
· The Scottish Government currently occupies 709 buildings totalling a net internal area of some 723,054m 2;
· These buildings occupy a land area of 2,416 hectares;
· Rent is the single largest element of running costs - the average rent for office space is £159.50 per m 2 per annum (the range being from 1 penny per annum ('Peppercorn') - up to £927.54 excluding VAT). We lease 184 office properties;
· The average m 2 per person (Headcount) is 15.72m 2 (ranging from 8.51 - 61.98m 2);
· The Scottish Government owns approximately 66% by net internal area of its office accommodation which has a total capital value of £157.6m;
· The Scottish Government leases, sub-leases or holds under a Memorandum of Terms of Occupation (MOTO - an internal government licence arrangement), approximately 34% by net internal area of its accommodation.
4.3 A map showing the distribution of assets is attached at Annex B and a summary table of key data is shown at Annex C.
5. Range of Property Tenure Arrangements and Budget Holders - Observations
5.1 Scottish Government bodies hold their assets under a range of tenures: ownership of the feu (freehold), leases, sub-leases, MOTOs and some bodies occupy core estate without any formal documented arrangement or property rights and free of charge. Broadly speaking the larger properties tend to be owned, while the smaller ones are held under a lease arrangement.
5.2 This diversity reflects the bodies' set up arrangements and the arms length, semi-autonomous status they have held, as well as the inconsistent approach taken by central government to asset management decisions in recent years.
5.3 The part of the Scottish Government estate covered by this Review comprises 69 separate property budget holders encompassing a range of assets including buildings and adjacent land for general administrative use, buildings/land classified as for specialised use and undeveloped land.
5.4 Of those buildings that are owned, approximately one third are held in the name of Scottish Ministers or former Ministerial office, one third in the name of the organisation itself and one third of the owners did not respond to this question. Several of the larger bodies do not lease buildings in the name of Scottish Ministers but in their own name. This significantly restricts the flexibility with which the workspace can be re-allocated to, or shared between, other parts of government when this becomes desirable or necessary. Leases held in the name of an individual body require landlord's consent and payment of their legal fees incurred for the lease to be sublet to another organisation. If all leases were approved by Scottish Ministers this would afford greater flexibility, at no cost and promote a corporate approach to the estate.
5.5 The responses from some bodies contain anomalies and inconsistencies and are deficient in detail on a number of aspects such as budget holder, tenure type, specific occupation statistics and arrangements, management status and the role of Scottish Government's Property Advice Division. On the basis of these returns, it would appear that data held by the organisations themselves is not as accurate and comprehensive as Ministers might wish.
5.6 Three bodies did not complete the data spreadsheet issued, but submitted their own asset database which was then transferred onto the review format to allow comparative analysis of all responses. Although a data quality check was carried out, the estates of some bodies were too large to do this in detail in the time available.
6. Variety of Management Arrangements, Property Decision Making Processes, Status and Advice
6.1 Asset management and decision-making arrangements vary considerably across Scottish Government and appear to depend on the history, size, tenure and remit of each organisation.
6.2 It is worth bearing in mind that only one part of government has, as its primary remit, the management of an administrative property estate, namely Scottish Government's Facilities and Estates Services, which manages the 'core' estate. However several other bodies have as their primary objective the management of property for a specialist purpose, these include: the National Museums, Libraries and Galleries, the Royal Botanic Gardens, Historic Scotland, Caledonian Maritime Assets Ltd and the National Park Authorities. For all other parts of government the management of their estate is secondary to their main business objectives, which may explain its relatively low status.
6.3 Predictably, the larger organisations within Scottish Government tend to have an estates manager. For others, property decisions rest with a named individual in a different role, while two bodies had no named individual responsible for taking asset management decisions. Similarly, larger bodies tend to separate responsibility for taking, leading and developing estate management decisions from the implementation of estate management.
6.4 Three quarters of respondents have sought professional advice from Property Advice Division (PAD) in the past 3 years, and the same proportion have used external consultants during 2006-07. Not all who had sought PAD advice had taken it, usually due to change of circumstance, and at least one organisation was unaware of PAD's existence. PAD are a source of free, impartial and professional expertise, that may not usually be available within each organisation to allow that organisation to challenge knowledgeably and effectively.
6.5 Just over two-thirds of organisations say they directly include finance and/or sponsor teams in their decision making processes for assets or property costs. While there is currently no direct formal requirement for them to do this, framework documents, accounts directions and memos from the Principal Accounting Officer (PAO) to the accountable officer for each body all tie bodies in to the guidance issued by Ministers in the form of the Scottish Public Finance Manual. In addition the principles and procedures to be used for disposals and acquisitions are clearly covered within the SPFM. Ultimately the accountable officer is answerable to Parliament for the use of the resources of the body for which he is responsible, and the accounts can be qualified for non-compliance with the SPFM.
6.6 The degree of autonomy of the wider network of government bodies over their property is a potentially sensitive area. Some may regard with suspicion any involvement by 'the centre' to influence operational management decisions. However all asset costs, capital and revenue, are ultimately paid for from the Scottish Government budget and might therefore be regarded legitimately as the assets of the whole organisation. A more efficient, corporate use of assets also has the potential to release resources in the medium or longer term, for other areas of expenditure.
6.7 There is clearly a role that a central team could develop that would help to present all asset holders with a range of advice, monitoring and challenge or access to expertise. This level of rigour would better inform and improve the overall quality of asset management decision making, without shifting the ownership of existing asset portfolios. This would ensure for example, that when Scottish Ministers are asked to sign off a proposal for investment or disinvestment, they have before them a formal 'Green Book' option appraisal giving a range of options each with an associated Net Present Value and a numerical score from the weighting and scoring exercise to facilitate comparison.
7. Low level of Asset Management planning
7.1 Of the 73 Part One responses, only 20 (29%) reported that they have an asset management strategy or plan in place, and half of those forwarded a copy to the Review Team when requested.
7.2 Two thirds therefore do not have an asset management plan or strategy in place. This is significantly higher than the level across Scottish Local Authorities. It is reasonable to assume that some organisations occupying single small premises do not recognise that such a plan is necessary for that organisation. This lack of written strategy documents, while not necessarily meaning there are no estate management procedures in place, does mean that Ministers cannot be assured that future public expenditure on property will be as efficient and effective as it should be. Asset Management plans, particularly for the smaller parts of government, do not need to be overly detailed or impose any significant administrative burden on organisations.
8. Lack of Good Quality Property Management Information and Lack of a Centrally Held, Maintained and Shared Property Database
8.1 Good quality asset information underpins efficient and effective practice, and so, part of this Review considered the existence, extent and quality of the management information available and the systems used to collect that information.
Property Management Systems
8.2 In July 2005, HM Treasury issued a letter to all UK Government Departments (including the then Scottish Executive) setting out details of the requirement to use the Office of Government Commerce's (OGC) e-PIMS system (electronic Property Information Mapping Service). This database has been developed to record all central government civil estate information, enabling it to be viewed as a whole, using the Government Secure Internet. Although not mandatory for the Scottish Government estate, as it is for all other UK Government departments, we chose to adopt it as good practice. Currently, Property Advice Division update this system for the 'core' estate and take the lead role in supporting NDPBs, agencies and associated departments to record information on the database. Additionally, in October 2006, an exercise commenced to update the wider Scottish Government information held on e-PIMS and to promote its use.
8.3 The scope and function of the ePIMS system is quite different to the current Fixed Asset Register, which fulfils a separate financial accounting management need, and ePIMS is not intended to replace it or any other central system.
8.4 The e-PIMS system currently provides the most comprehensive property asset database available across the Scottish Government estate and most of this information has been entered by OGC staff since the system commenced. Sixteen organisations use or partially use IT asset data systems other than e-PIMS. However, the mixed nature of responses and comments within the survey, casts some doubt on the true extent of usage of e-PIMS. At the outset of the review the quality and coverage of the data held on the e-PIMS system was incomplete and out of date, largely due to its voluntary status.
The Asset Management Review Questionnaire - Part Two Data Findings
8.5 Part Two of the asset questionnaire collected standard factual information for each and every building and land asset. The Review team incorporated information already held on e-PIMS into the questionnaire before it was issued to the recipients. The survey highlighted a number of issues about property information and the systems available to manage that data, principally e-PIMS.
Quality of Data and Management Systems
8.6 Based on the survey results, it is clear that, across the estate, the availability of good quality management information varies significantly between organisations and is of insufficient quality and coverage at a strategic level to support asset management planning. However, all except one organisation were able to provide a response which listed all their assets.
8.7 The main findings on the management of property information are:
· The number of Scottish Government buildings currently listed on the e-PIMS system totals 543 while the survey returned a total of 709 buildings. This indicates that the data held on e-PIMS has not been regularly updated to reflect the true extent of the government estate. It will now be possible to transfer the data received by the Asset Management Review team onto e-PIMS as a basis for more accurate and comprehensive coverage in future;
· It is currently not mandatory in Scotland for organisations to update their property information on e-PIMS;
· Only 9 organisations in Scotland have trained staff who are registered to use e-PIMS. This has meant that most rely on the 'good will' of Property Advice Division to update any changes to their estate but there is no process in place to inform and record systematically any changes. Property Advice Division have not, to date, had formal responsibility for updating this information beyond that relating to the 'core' estate;
· There is no dedicated resource, nor clear management accountability, within Property Advice Division to update and maintain the e-PIMS system. The system is also vulnerable in that only one individual, at a junior grade, has responsibility for updating property management information for most of the government estate.
Memorandum of Terms of Occupation (MOTO) Agreements
8.8 The questionnaire requested property information from all organisations and as a result of this request it became apparent that some bodies do not have a formal MOTO agreement in place e.g. Scottish Fisheries Protection Agency do not have a MOTO for their occupation in Pentland House but do have for all other properties. This inconsistency generally seems to have occurred through the operation of historic agreements but results in inconsistencies in management information preventing accurate profiling of the estate.
9. Lack of Regular Consideration of Surplus/Vacant/Underused Property and Disposal Policy
9.1 Alongside the low level of asset management planning by organisations across the Scottish Government family, there is also a lack of attention given to what to do with surplus, vacant or underused space. Almost all bodies that do have an asset management plan in place do include their surplus property and any disposal plans for it within these plans. Therefore, by default, and, as identified at paragraph 7.2 , two thirds of respondents have no policy or strategy in place within an Asset Management strategy, to manage their vacant, surplus or underused space.
9.2 There may be some valid reasons for this. Some smaller organisations have limited resources to deal with this issue. Some space may only be underused or vacant temporarily. Some organisations may be about to, or are in the process of, altering their structure or status. Some organisations, for example Transport Scotland, have inherited poor quality management information about their surplus estate from previous bodies, and are in the process of clarifying what is held under what terms. It was also not clear that there was a common agreed understanding of definitions of the terms 'surplus' and 'underused'.
9.3 At the same time there also appears to be either very little surplus, vacant or unused space within buildings or, possibly a reluctance by some organisations to 'declare' or admit to it. The questionnaire returns indicate that:
· There is declared surplus and vacant building space totalling some 6202m 2 out of a total net internal area of 723,054m 2 : 0.85%.
Whereas
· There is surplus land totalling some 308.54Ha out of a total of land (i.e. adjacent to buildings and also 'bare' land) of 11,001Ha: 2.8%.
9.4 These small percentages may be an indication of a lack of capacity for smaller organisations to use or sublet space which would otherwise be declared vacant or surplus. However few of our public bodies have clear disposal or re-use policies in place to deal with any surplus or vacant space that arises. It is therefore not clear whether there is a lack of strategic thinking or simply a lack of flexibility due to the size and remit of some organisations in how to deal with surplus workspace. It should also be acknowledged that there will never be a 'perfect fit' of working space to business need, due to the diverse and ever-changing nature of our organisation and its estate.
9.5 The procedures for dealing with disposals and acquisitions are set out within the Scottish Public Finance Manual (SPFM) although the questionnaire revealed that a small number of bodies admit that they do not always adhere to SPFM principles. The grant offer procedures for public bodies include terms and conditions which could re-iterate adherence to SPFM principles and could require asset management procedures to be in place.
9.6 There is currently no central point for co-ordinating the re-use or co-sharing of vacant or underused space across the government estate - although some organisations do choose to consult Property Advice Division about these issues. The SPFM states that PAD should be consulted at the earliest opportunity in any acquisition or disposal so that it can meet it's responsibilities under the OGC co-ordination agreement. The ways in which workspace use changes is often arbitrary and does not necessarily lead to most efficient and effective outcomes. The lack of an up-to-date, single comprehensive database of management information must have, on occasion, also hindered opportunities to maximise the use of space.
9.7 The Scottish Government aims to see the wider social benefits accruing from disposals of surplus government property primarily through the planning system - through planning conditions and Section 75 (see Annex F - Glossary of Terms) planning agreements. The government's wider social policies on affordable housing, environmental provisions, roads and sewerage infrastructure and contributions to healthcare, should be set out by local planning authorities in local development plans so that valuers and the market can reflect that in the price and reduce their assessment of market value accordingly. If Scottish Ministers consider that particular social sectors require more support than has been achieved through the planning system, they can redistribute part of the receipts after the sale to meet those priorities.
10. Lack of Incentives for More Efficient Asset Management
10.1 Many organisations within the Scottish Government family cited budgetary constraints as a strong driver to improve the management of their assets however many, sometimes the same, organisations cited the lack of resources to invest in maintenance programmes as a hindrance to better asset management. While accommodation costs are usually the second highest revenue pressure after staff costs, it is not clear how the financial imperative works within many organisations. Typically, there appears to be little if any external or internal challenge to accommodation costs, which are, after all, met from the public purse.
10.2 Some (22) organisations cite the efficient government programme as an incentive, however few parts of the central government family have put forward asset management-derived efficiencies within identified efficiency projects. This could now be promoted more strongly and it made clear and explicit that, within the next EG programme for 2008-11, savings generated by reducing accommodation costs will be retained by the organisation that makes them, for re-investment in improved output.
11. Lack of Financial Challenge/ Scrutiny Role
11.1 Not all organisations within the Scottish Government say they adhere to Scottish Public Finance Manual principles for financial planning. Eight respondents stated they did not and 3 did not comment. This is clearly a weakness that could be remedied by ensuring that the principles of the SPFM are adhered to consistently across government. A Finance Guidance Note (FGN) could be issued to remind relevant parties, including accountable officers, of their responsibilities and point out that non-compliance could lead to qualification of accounts and an appearance before the Scottish Parliament Audit Committee.
Ongoing revenue costs
11.2 Scottish Government's central sponsor and finance teams for the wider network of bodies agree annual budgets for each organisation, but do not typically take issue with particular expenses. Individual bodies may, or may not, seek advice from Property Advice Division on, for example, the reasonable parameters for on-going or new accommodation costs. It is not currently seen as the explicit remit of any central function within Scottish Government to scrutinise or challenge such costs. The wider network of public bodies tend to see the management of their expenses, including those relating to their estate, as their own business, rather than that of a centralised government function. Neither do public bodies see that declaring un-used space or undertaking rent reviews as being part of a government team approach.
11.3 The accounts of all public bodies are subject to annual audit, either by Audit Scotland, by internal Scottish Government auditors or by external auditors. Property costs that are significantly above an expected range should be, and are, identified at this stage after the end of the financial year, but not necessarily challenged.
Capital investments
11.4 Where public bodies are seeking to invest in new accommodation, the SPFM requires that this should be subject to 'Green Book' economic appraisal to offer Ministers a range of options each with a Net Present Value, to facilitate a consistent comparison of the costs and benefits that accrue over the lifetime of the asset. There is anecdotal evidence that this has not happened in all recent cases. The economic appraisal of options should capture both the full economic costs and benefits over the whole life of the project and also, through methods such as weighting and scoring, the potential qualitative social costs and benefits which are impossible to quantify financially but are nevertheless real.
11.5 The Scottish Government Infrastructure Investment Group (IIG) have developed new guidance in the form of a 'route map' intended to support senior public managers in the processes for which they are responsible when facing a major new asset investment challenge. This covers both conventional and private finance options and should ensure that they are aware of relevant guidance and the right steps to take in establishing appropriate project management or partnership arrangements. This new guidance should be promulgated and made mandatory across the government/ agency arena.
12. Low level of Performance Monitoring/ Benchmarking Activities
12.1 It is broadly recognised that setting performance management benchmarks and improvement targets leads to significant property service improvements. A joint project by the UK public sector audit agencies resulted in the publication of a set of indicators to help organisations to improve performance. Two of the recommended estates indicators that help to provide important basic measures of the efficiency and effectiveness of buildings are:
· Cost per m 2; which examines the overall cost-effectiveness of the estate; and
· m 2 per person; which measures how efficiently the organisation uses its workspace.
12.2 Based solely on office accommodation, the estate occupancy average is 15.72m 2 per person, ranging from 8.51 - 61.98m 2 per person. A recent National Audit Office report noted that the British Council for Offices good practice guidelines suggested a range of 12m 2 to 17m 2 per person. The Scottish Government estate average is within the performance range, although 29 organisations fall outwith this range, 20 of which having more than 17m 2 per person. It is worth noting that the 2007 OGC-commissioned study to recommend a 'standard for space use' for the UK public sector suggested 12m 2 per person.
12.3 The estate average for rents paid for office accommodation is £159.50 per m 2 per annum, however the range across the estate - from peppercorn to £927.54 is very wide. (see map at Annex B for an area based profile).
12.4 Based on the survey results, very few organisations use performance indicators and none have objectives and targets focusing explicitly on costs and use of space. However, most do (5 did not) monitor the running costs of their estate.
12.5 The findings regarding energy use monitoring were better, where 55% use performance management benchmarks and set targets for environmental factors.