05 samf adp_082005

ASSET DISPOSAL POLICY

Department of Treasury and FinanceGovernment of Western Australia

August 2005

Table of Contents

Executive Summary ........................................................................1

Chapter 1: Introduction ................................................................2

1.1 Overview ..............................................................................2

1.2 Scope ....................................................................................3

Chapter 2: Asset Disposal Principles ............................................4

Chapter 3: Asset Disposal Incentive Scheme ................................6

3.1 Base Case for Retention of Sale Proceeds..........................6

3.2 Retention of Sale Proceeds Above the Base Case ............7

3.3 Simplification of Real Property Disposal Processes............8

3.4 Reduction of Agency Risk in Disposal of Real Property....9

Chapter 4: Asset Disposal Process ..............................................11

4.1 Summary of Asset Disposal Process ..................................11

4.2 Agency Evaluation ............................................................11

4.3 Implementation - Non Real Property Assets ....................14

4.4 Implementation – Real Property Assets ..........................14

4.5 Review ................................................................................18

Chapter 5: Reporting Requirements ..........................................19

5.1 Asset Disposal Plan ............................................................19

5.2 Disbursement Agreements ................................................19

Appendices

Appendix 1: Asset Disposal Plan ................................................20

Appendix 2: Roles and/or Responsibilities of Stakeholders ......21

Table of Figures

Figure 1: Asset Evaluation Process ..............................................13

Figure 2: Asset Disposal Process ..................................................18


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A key component of the Strategic Asset Management Framework is the identification and disposal ofsurplus assets. Through the completion of annual Strategic Asset Plans, agencies will be required toassess assets against strategic requirements and identify assets that are under-performing or surplus tooperating requirements.

The Strategic Asset Management Framework policy sets out that assets should only be held where theycontribute to the delivery of services undertaken by an agency to achieve the outcomes expected byGovernment, and where they are financially viable to retain. Where assets do not meet this requirement,they are to be identified as surplus and disposed. This will result in financial and resource savings for theagency, which may then be used to deliver services and programs to the community, on behalf ofGovernment.

This policy provides guidance to agencies to undertake the tasks necessary to identify and dispose ofsurplus assets. The document provides a set of guiding principles, setting benchmarks that will assist inthe identification of assets that no longer contribute to service delivery outcomes expected byGovernment.

In addition, it outlines a more streamlined approach to the processes involved in asset disposal, particularly in relation to real property, which offer significant benefits to agencies through reducedworkload and reduction of exposure to disposal risks. The revised disposal process also provides greaterwhole-of-government coordination of real property disposal.

This policy also sets out incentive arrangements aimed at providing agencies with increased and moresecure access to the proceeds of surplus asset disposal. It should be read in conjunction with otherguidance provided as part of the Strategic Asset Management Framework suite, to provide an overviewof asset management requirements throughout the life cycle of an asset.

Executive Summary

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1.1 OverviewThis policy replaces the previous guidance on asset disposal provided by the 1998 Guidelines forManaging Government Real Estate.

The policy forms a component of the overall Strategic Asset Management Framework, which hasbeen developed to address the need for a more rigorous approach to the management of WesternAustralia's considerable portfolio of public assets, by providing guidance on managing assetsthroughout the entire asset life cycle.

The Asset Disposal Policy sets out a comprehensive framework to guide agencies through thedisposal process. The policy provides the following information and guidance:

• a set of basic asset disposal principles that provide criteria to assess continued ownership ofassets. The principles are based on the concept that assets should only be held where theycontribute to the service delivery outcomes expected by Government from an agency, andwhere it is financially viable to retain;

• an asset disposal incentive scheme, including both financial and non-financial incentives, toprovide stimulus for agencies to implement the principles established in the policy, and identifyand dispose of surplus assets; and

• a revised process to streamline the disposal of assets, with the following key features:

- agencies responsible for identifying surplus assets, in accordance with the Strategic AssetManagement Framework requirements;

- the establishment of a Clearing House within the Land Asset Management Services Branchof the Department for Planning and Infrastructure, to coordinate real property sales from awhole-of-government perspective;

- The Department for Planning and Infrastructure’s Land Asset Management Services Branchcan also assist with the disposal of surplus property that is deemed allocated Crown land;

- LandCorp tasked to undertake the sale process for real property disposal where surplusland is not required by other government agencies, (except where specific reasons for anagency to undertake the sale process in-house are identified and agreed by the ExpenditureReview Committee); and

- agencies will continue to be responsible for disposal of assets other than real property.

Chapter 1: Introduction


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1.2 ScopeThis policy applies to all general government agencies, public financial corporations, and publicnon-financial corporations, with the following exceptions:

• where the disposal of assets is part of the core business of the agency (for example the landsales activities of Homeswest and Landstart);

• Department for Planning and Infrastructure activities in disposing of Unallocated Crown Land;and

• Public corporations that are bound by legislation to produce Statements of Corporate Intent(SCI) and Strategic Development Plans (SDP);

and covers the following type of assets:

• real property Crown land vested in the agency / responsible Minister;

• real property held in freehold by the agency / responsible Minister; and

• non real property assets, such as machinery and information and communications technologyassets.

Public corporations that are bound by legislation to produce Statements of Corporate Intent (SCI)and Strategic Development Plans (SDP) are not formally bound by this policy, in terms of assetsowned or held in freehold. However, a high level of compliance is expected, to ensure consistencyand coordination of asset disposal occurs across government (consistent with the scope of theStrategic Asset Management Framework). For such assets, it is expected that these agencies will:

• incorporate the principles of the Asset Disposal Policy in SCI and SDP (where applicable); and

• submit all surplus real property through the Clearing House administered by the Departmentfor Planning and Infrastructure, to ensure a whole-of-government approach is taken in surplusreal property disposal.

For real property held in freehold, public corporations are not required to seek Expenditure ReviewCommittee agreement to undertake the sale process, and may retain the full net proceeds of sale.

For vested Crown land, public corporations are required to comply with the full requirements ofthe policy, including the treatment of sale proceeds. Public corporations may apply to theDepartment of Treasury and Finance on a case-by-case basis, for the net proceeds of sale to beexempted from the calculation of the public corporation’s dividends. In order to assist agencies,the Department of Treasury and Finance will seek to expedite the assessment of requests forexemption from the calculation of public corporation dividends.

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General government agencies will be required to identify assets to be disposed through the AssetDisposal Plan (a copy is provided at Appendix 1), which forms an attachment to the annual Strategic AssetPlan required under the Strategic Asset Management Framework.

Supporting the high level planning principles contained in the Strategic Asset Management Frameworkare the asset disposal principles, set out below. These principles provide specific decision triggers whenassessing assets that have been identified as potentially surplus. It is also expected that the assetdisposal principles will assist in evaluating the continued ownership of all assets. In essence:

1. Only hold assets where they contribute directly to an agency’s core business.

a. ‘Core business’ is defined as activities that contribute to the achievement of the outcomes anagency is tasked to deliver on behalf of Government.

b. Assets are to be disposed where not meeting the above definition; for example, whereproperty is leased to third parties (government or private sector), or for other commercial-typeactivities unrelated to the outcomes expected by Government.

2. In addition to the above, ongoing ownership of assets must be dependent on meeting either orboth of the following principles:

a. Asset financial performance should meet, or exceed, industry measures such as the long-termyield on property investment (expected rate of return from the cash flow generated from theproperty over a specified time), compared with the benchmark rate. The benchmark rate usedshould be developed in consultation with the Department of Treasury and Finance, and bebased on:

- cost of funds (Western Australian Treasury Corporation long-term borrowing rate);

- plus a premium to allow for risk; and

- plus a further premium, that reflects the scarcity of capital funds and the availability ofother capital investment projects that demonstrate higher internal rates of return.

b. Public interest considerations for retention can be demonstrated (such as where a property hassignificance to the State, strategic significance for future infrastructure development, or wheremarket failure is likely).

Chapter 2: Asset Disposal Principles


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3. Disposal of assets is to be at market value, unless specific exemption has been provided by theExpenditure Review Committee.

4. Disposal should ensure maximum value is gained by the State, including undertaking value addingactivities prior to sale, if warranted. LandCorp will undertake value adding activities for realproperty disposals.

5. Disposal of assets should be fully accounted for in an agency’s financial statements on an accrualbasis.

6. Unless principles 1 and 2 can be met, assets should be disposed of in instances such as thefollowing:

a. where vacant land is held by an agency, unless specific strategic reasons for retention outweighthe long-term cost of holding vacant land;

b. where assets are not fully utilised, and retention of the asset is essential to core functions, sparecapacity should be considered for leasing;

c. where an improved property has land that is not fully utilised or required, excision and disposalof surplus land should be considered;

d. review arrangements where government assets are used by private organisations for public orcharitable purposes, and consider alternatives, such as providing assistance to suchorganisations by allocation of a grant, equivalent to the market rent or lease costs for the assetutilised, and the asset disposed;

e. where conflict exists between property use and the current or intended zoning, as determinedfrom structure plans or planning documents prepared or endorsed by the Department forPlanning and Infrastructure or local government authority;

f. where an asset is leased to the private sector, unless it can be clearly demonstrated thatongoing government ownership is required to provide services; and / or

g. where a property is used for purposes that are inconsistent with the core business of theagency. This would include any commercial activities.

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Agencies disposing of surplus assets now have access to a comprehensive suite of incentive arrangementsthrough the asset disposal incentive scheme. This affords a mixture of financial and non-financialincentives aimed at providing more secure and increased access to sale proceeds, as well as reducing anagency’s workload and risks of disposal.

It is expected that reduced workload and increased access to sale proceeds available under the assetdisposal incentive scheme will lead to an increase in the identification and disposal of surplus assets. Theproposed incentive arrangements are set out below.

3.1 Base Case for Retention of Sale ProceedsAs a standard base policy position, where an agency is disposing of surplus assets with a value ofless than $2 million, 50% of the net sale proceeds (total sale proceeds minus sale costs) can beretained to contribute towards an agency’s unfunded capital works program requests (such asfinancing asset acquisition, replacement and improvement), or to reduce debt over the forwardestimates period. This base case is subject to the normal budgetary rules and approval processes(for example the annual, mid year and capital investment processes). The net proceeds of saleunder the base case do not necessarily have to be redirected towards purchasing replacementassets of the same asset class, to deliver the same service, but should be directed towards fundingan approved capital works project.

The base policy position establishes the minimum return to agencies, and negates the current needfor agencies to undergo individual negotiations with the Department of Treasury and Finance todiscuss the retention of asset disposal proceeds. An agency needs only to alert the Departmentof Treasury and Finance regarding the asset sale, and to seek approval to the intended use ofproceeds in accordance with budgetary approval processes.

Proceeds would not be available to fund non-capital works requirements, such as ongoingoperating costs (e.g. salaries, wages, and utilities).

Chapter 3: Asset Disposal Incentive Scheme


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Example 1: Base case retention of sale proceeds

An agency has identified a future capital need to upgrade a pumping station, at a cost of$400,000. The agency has also identified a vacant land site for disposal with a value of $1 million, and expected proceeds net of sale costs of $900,000. Under the base case(subject to the normal budget and capital rules and processes), the agency would nominallyhave access to 50% of the net sale proceeds, being $450,000.

In this example, the agency would be able to retain $400,000 of the nominal amount of$450,000 to contribute towards unfunded capital works requests (subject to normal capitalagreement processes). The additional $500,000 would be returned to the ConsolidatedFund. If the capital works requirement was $450,000 or higher, 50% of the net salesproceeds ($450,000) would be available for retention.

3.2 Retention of Sale Proceeds Above the Base CaseWhere an agency considers that more than 50% of the net proceeds of sale should be retained,or where the asset to be disposed has a value higher than $2 million, the distribution of net saleproceeds must be specified in a disbursement agreement between the agency and theDepartment of Treasury and Finance.

This Department may support a request from the agency to retain more than 50% of the netproceeds of sale, in the following circumstances:

• Where an agency is replacing an asset with a like asset (i.e. within the same asset class) todeliver the same services, then the Department of Treasury and Finance may supportdisbursement of 100% of the net proceeds of sale to the agency.

• Where an agency is proposing to fund or part fund non-related assets (those in different assetclasses) within the capital works program, to deliver the same services, the Department ofTreasury and Finance may support disbursement of up to 100% of the net proceeds of sale tothe agency.

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Example 2: Sale proceeds retention for like-for-like asset replacement

An agency is planning to sell a regional office building (sale proceeds net of cost of sales is$450,000) at the end of its identified working life, and construct a new office building at acost of $1,000,000, in order to undertake the same services in the same location, as part ofits core business.

The agency may negotiate a disbursement agreement with the Department of Treasury andFinance to retain all of the net sale proceeds ($450,000), as opposed to the base policyposition, which would provide 50% of net sales proceeds ($225,000).

Example 3: Sale proceeds retention to fund or part-fund non-related assetpurchases

An agency has identified a need within its machinery services area to construct amaintenance workshop on existing premises, at a cost of $1,500,000, and has identifiedsurplus land for disposal (net sale proceeds $2,100,000).

The agency may negotiate a disbursement agreement with the Department of Treasury andFinance to retain up to the $1,500,000 required, as it falls between 50% and 100% of netsale proceeds ($1,050,000 to $2,100,000), and is related to the same service.

In this example, the additional $600,000 of net sale proceeds would be returned to theConsolidated Fund.

• Where an agency is intending to use the proceeds of surplus asset disposal to retire debt, theDepartment of Treasury and Finance may support disbursement of 100% of the net proceedsof sale to the agency.

In each of the examples above, agreement to the use of the net proceeds of sale would be subjectto the normal budgetary rules and approval processes (for example the annual, mid year andcapital investment processes). Variations to this policy will require explicit approval from theExpenditure Review Committee.

The above conditions would also apply where agencies had entered into value adding activitiesand joint ventures with LandCorp to achieve additional profits.

Further guidance on undertaking a disbursement agreement is provided in Chapter 4.

3.3 Simplification of Real Property Disposal ProcessesThe revised asset disposal processes for real property, outlined in Chapter 4, offers significantreductions in the workload required by agencies in disposing of surplus real property.

A Clearing House has been established to coordinate inter-agency sales. The Clearing House,within the Land Asset Management Services Branch of the Department for Planning andInfrastructure, provides access to a web-based listing of all surplus real property assets for generalgovernment agencies, and public financial and non-financial corporations, and coordinates agency bids to purchase assets listed. Where a sale between agencies is identified and agreed byboth parties, a direct transfer at full market value may occur.

Where an agency’s surplus real property is not required within government, LandCorp managesthe sale process on behalf of the agency, including undertaking the preparation work (landassembly) needed prior to sale. Agencies are only required to identify the surplus property andprovide access and assistance to LandCorp in the sale preparation process. LandCorp thenundertakes the physical processes of disposal, ensuring that resources within agencies are notdiverted to non-core business.

General government agencies should seek Expenditure Review Committee agreement toundertake the sale process in-house, if there is a specific need to do so.

Public financial or non-financial corporations are required to secure Expenditure ReviewCommittee agreement to undertake the sale process in-house for vested Crown land.


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Example 4: Sale proceeds to retire agency debt

An agency has identified surplus machinery, with net sale proceeds of $1,000,000. Theagency has debt of $10,000,000. The agency is seeking to retain 100% of the net saleproceeds to reduce its overall debt position to $9,000,000.

The agency may negotiate a disbursement agreement with the Department of Treasury andFinance to retain all of the net sale proceeds ($1,000,000), as opposed to the base policyposition, which would provide 50% ($500,000).

3.4 Reduction of Agency Risk in Disposal of Real PropertyThe financial risks of surplus asset disposal to agencies are expected to reduce substantially. Ininstances where another government agency (either a general government agency or a publicfinancial or non-financial corporation) purchases an entire property (i.e. an englobo purchase),risks will be reduced through the coordination role of the Clearing House. In this instance, normaldisposal costs such as agents’ fees and marketing would not be required, and financial risks wouldbe eliminated through sale at agreed market value between the agencies, which need to ensurethat normal ongoing costs of ownership, such as maintenance and management, are met untilsettlement occurs.

Where LandCorp manages the sale process on behalf of agencies, LandCorp meets the financialcosts of bringing the property to market (such as rezoning and servicing), which will be refundedto LandCorp from the gross sale proceeds. This removes the current requirement for agencies tomeet upfront costs, with no guarantee of returns. Agencies are required to meet ongoing costsof ownership, prior to settlement.

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Example 5: General government agency / public financial corporation /public non-financial corporation purchases a surplus property

An agency identifies a surplus parcel of land, and refers it to the Clearing House for disposal.A separate general government agency or a public financial or non-financial corporation,which may be LandCorp, agrees to purchase the entire property at market value (as agreedbetween the selling and purchasing agencies).

The disposing agency is not required to provide any upfront funding to bring the property tothe open market (beyond normal ongoing maintenance and management costs prior tosettlement), is exposed to no risk and sale proceeds are distributed according to the retentionof sale proceeds arrangements set out in this policy.

Example 6: LandCorp manages sale of a surplus property

An agency identifies a surplus parcel of land, and refers it to the Clearing House for disposal.The property is not purchased by another government agency (general government agencyor public financial or non-financial corporation). The Clearing House requests LandCorp toundertake the sale process on behalf of the agency. LandCorp manages the sale process,including meeting all upfront costs required to bring the property to market, includingrezoning, marketing and agent fees. Ongoing maintenance and management costscontinue to be the responsibility of the agency.

The disposing agency is not required to provide any upfront funding to bring the property tomarket (beyond normal ongoing maintenance and management costs prior to settlement).The agency is exposed to no risk (other than sale price being lower than anticipated), andsale proceeds are distributed according to the retention of sale proceeds arrangements setout in this policy.

Where the sale is not realised, or the cost of sales is higher than sale proceeds, these costs will beborne by LandCorp. Agencies are not required to reimburse LandCorp for any loss. Agencies,therefore, cannot be worse off financially for undertaking the disposal process. This significantlyreduces agency exposure from the current position, where all financial risks are met by the agency.In addition, the agency is able to dispose of an asset that it does not require, including itsoperating and maintenance costs.

As a result of the above, agency risk will, in effect, be reduced to instances where sale proceedsare less than anticipated by the agency, and result in an agency realising less than expectedproceeds of sale, as opposed to incurring any actual financial loss.


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Example 7: LandCorp manages sale of a surplus property, but the propertyis not sold

As with the example above, an agency identifies a surplus parcel of land, and LandCorp isrequested to undertake the disposal process on behalf of the agency. LandCorp meets allcosts of bringing the property to market. However, the sale process is unsuccessful.

The disposing agency is not required to provide any upfront funding to bring the property tomarket (beyond normal ongoing maintenance and management costs). In addition, theagency is not required to refund LandCorp for the expenses incurred in bringing the propertyto market. Therefore the agency is protected from the risks of the disposal process.

The property would remain in the control of the agency, which would continue to meet theongoing maintenance and management costs. LandCorp will be refunded for the lossincurred separately, offset from the overall sales proceeds returned to the Consolidated Fundunder this policy.

4.1 Summary of Asset Disposal ProcessSurplus asset disposal is a three step process whereby agencies evaluate asset holdings from astrategic perspective, implement the disposal process, where required, and review the disposalprocess. The emphasis is on ensuring that under-performing and non-essential assets are quicklyidentified and disposed.

A summary of the process, including the roles of the key agencies involved, is provided at the endof this chapter, in Figure 2.

4.2 Agency EvaluationThe disposal process begins with identifying surplus assets.

The agency should conduct regular strategic evaluations of its asset needs, including property.Agencies should refer to the Strategic Asset Plans policy for further guidance on undertaking thestrategic asset evaluation process.

During this process, assets are evaluated against the asset disposal principles outlined in Chapter 2. Assets are to be assessed as to whether they contribute directly to an agency’s corebusiness and to Government desired outcomes. Where it is identified that an asset does not meetthese criteria, it is to be identified as surplus and disposed.

Chapter 4: Asset Disposal Process

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Example 8: An asset that is used for core business

An agency has responsibility, through Government policy, to provide research and evaluationsupport to the mining and natural resources industry, and owns chemical analysisequipment. In this example, the asset has a clear linkage to the core business of the agency,and should be retained while financially viable.

Example 9: An asset that is not used for core business

An agency has an office property holding in the outer metropolitan area, that is fully leasedto a private tenant on commercial market terms. The core business of the agency is thedelivery of sports programs. In this example, the asset is clearly not linked to the corebusiness of the agency, and should be identified as surplus and disposed.

The overall financial performance of the asset should also be evaluated. Where it is identified thatthe financial performance of an asset does not meet, or exceed, targets established (such asrelevant industry standards, or a benchmark based on the Western Australian TreasuryCorporation long-term borrowing rate, plus an adjustment for risk) it should be identified asunder- performing. If the performance of the asset cannot be improved, the asset should beidentified as surplus and disposed.

The evaluation process should also take into account public interest considerations. Examples ofpublic interest considerations would be:

• where an under unutilised or under-performing asset has some form of significance to theState and there could be expected to be significant public resistance to disposal of the assetinto private ownership;

• where an under unutilised or under-performing asset has strategic significance for futureinfrastructure development. In such instances, a clear and demonstrated future planningrequirement is needed to support continued ownership. Speculation on future usage does notconstitute a clear and demonstrated future requirement;

• where the highly specialised nature of the asset significantly inhibits commercial interest orprovision;

• where there are significant heritage, environmental or public usage requirements that requireongoing government ownership and management; and

• where market failure indicates that there is an ongoing need for the government to retain anasset that is otherwise surplus to requirements. For example, small regional offices in isolatedlocations, where there would be no other tenants should the property become vacant, orwhere private investors demand excessive rates of return to recover their investment over thelife of a sale and lease-back arrangement.

The evaluation phase should also include an assessment of strategies to transition an asset that isapproaching the end of its useful life to disposal. For example, where residual service deliveryfunctions associated with the asset may lead to social expectations of continuing governmentownership, alternative service delivery mechanisms should be implemented prior to disposal.

Similarly, the long-term presence of a surplus property can result in public expectation of itspermanence. Widespread consultation may resolve such conflicts of expectation, and result in thesale of a property subject to certain conditions. Further guidance on community consultation canbe found in the Department of the Premier and Cabinet’s Partnerships Initiative.

The evaluation process is summarised in Figure 1.


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Figure 1: Asset Evaluation Process

Through the evaluation process, agencies should also identify any immediate issues that may needto be resolved before an asset can be disposed, as well as a preliminary assessment of risks, costsand time lines. Potential issues may include the following:

• native title/ disposal clearances, land management and title issues;

• land use zoning and planning;

• local government authority considerations;

• requirements of utility service providers;

• heritage issues; and

• environmental issues.

Identifying constraints on disposal of surplus property can be difficult. The Clearing House will beable to provide assistance to agencies in undertaking this task.

As part of the evaluation phase, agencies are required to ensure that the appropriate level ofinternal or Ministerial approval to dispose of the asset is secured. The level of approval requiredmay vary from agency to agency, and depend on the nature and value of the asset to be disposed.

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Asset

Does not contribute to agency business

Consider disposal

Retain

Under-performing

Contributes to agency business

Consider disposal

Improveperformance

Unable to improveperformance

Performing OK

4.3 Implementation - Non Real Property AssetsThe implementation process to dispose of non real property assets remains unchanged. Furtherguidance is provided in the Disposal of Goods policy statement on the State Supply Commissionwebsite.1

Access to net proceeds of sale from non real property assets is to be in accordance with net appropriation provisions set out in Section 23A of the Financial Administration and Audit Act 1985.

4.4 Implementation – Real Property AssetsThe implementation phase to dispose of real property has four main steps:

• referral to the Clearing House;

• whole-of-government assessment;

• disposal of the asset; and

• disbursement of net proceeds of sale.

Each is described in further detail below.

4.4.1 Referral to the Clearing House

Overview of the Clearing House

The Clearing House provides whole-of-government coordination for the disposal of real property.It establishes a central listing of all properties that are proposed for disposal, accessible by allgeneral government agencies and public financial or non-financial corporations. The ClearingHouse provides guidance and advice on disposal processes for agencies, as well as coordinatinginter-agency property sales to ensure that the best whole-of-government outcome is achieved insurplus property disposal.

To ensure that there is appropriate whole-of-government oversight of the activities of the ClearingHouse, it is overseen by the Property Asset Rationalisation Committee, which comprises seniorrepresentatives from a number of government agencies. Secretariat support to the ClearingHouse is provided by the Department for Planning and Infrastructure.

Contacting the Clearing House

The Clearing House may be contacted at the Land Asset Management Services Branch of theDepartment for Planning and Infrastructure.


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1 http://www.ssc.wa.gov.au/procurement02.asp

Clearing House process

Referral to the Clearing House may occur at any point during the year.

Once a property is identified as surplus by an agency, and a disbursement agreement entered into,where required, it should be referred to the Clearing House to coordinate and facilitate disposal.The agency continues to retain responsibility for the property, and the outcome of the disposalprocess. Each agency should ensure that all assets referred to the Clearing House for disposal areincluded on the agency’s Asset Disposal Plan.

The agency provides the Clearing House with all relevant information to assist disposal, such astitle details, zoning, immediate issues that may need to be resolved before an asset can bedisposed, as well as a preliminary assessment of risks, costs and timelines. Further guidance oninformation required can be obtained from the Clearing House.

The Clearing House then includes the property on a disposal list that is accessible by all generalgovernment agencies and public financial or non-financial corporations. This ensures that allgovernment agencies are aware of proposed disposals, and have the opportunity to expressinterest in the property if required for core business needs. This process is described in more detailin Section 4.4.2 below.

The Clearing House is also available to provide advice on real property disposal to agencies.

In instances where clear justification exists for transfer between agencies, without reference to theClearing House, this requires the written agreement of the Ministers responsible for each agency,as well as approval from the Expenditure Review Committee.

4.4.2 Whole-of-government assessment

Agencies that identify a business need to acquire a property on the proposed asset disposal list,may lodge an expression of interest to acquire that property. The expression of interest mustclearly indicate key information, such as the agency’s requirement for the property, fundingavailability and linkages to strategic objectives and core business. Further guidance on completingexpressions of interest, the information required and the timelines involved, is available from theClearing House.

The Clearing House assesses expressions of interest received from agencies. This includessituations where an expression of interest is received for a property from more than one agency.All expressions of interest are assessed against the principle of achieving the maximum benefit tothe State through disposal, including social, financial, economic and strategic factors.

The recommendations of the Clearing House will be considered by the Property AssetRationalisation Committee, to ensure an appropriate level of inter-departmental consideration.

In instances where the decision of the Clearing House process is not accepted by an agency (oragencies) seeking to purchase a property, it may be referred to the Property Asset RationalisationCommittee for review.

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4.4.3 Disposal of the asset

Following the Clearing House process, disposal of real property would be undertaken through oneof four options.

Sale to another government agency

Where the Clearing House process supports an expression of interest from an agency to acquire aproperty from the Clearing House listing, the property is offered to the requesting agency at fullmarket value, which would be based on a Valuer General’s Office valuation, and subject tonegotiation between the selling and purchasing agencies.

This process applies to general government agencies, as well as public financial and non-financialcorporations. In the majority of cases, particularly where LandCorp is involved, the entire propertywould be purchased.

Costs associated with sale to the open market would be avoided through this method. However,the selling agency would continue to be responsible for the ongoing costs of ownership, prior tosettlement.

Sale to the open market, of sale process managed by LandCorp

For real property not disposed to another government agency through the Clearing Houseprocess, the Clearing House will request LandCorp to manage the disposal process on behalf ofthe agency, including financing the preparation for sale processes. LandCorp will provide fundingto cover sale-related expenses such as works to maximise sale value, including rezoning,redevelopment and other de-risking opportunities, as well as marketing and agents fees requiredto bring the asset to market. Agencies will continue to be responsible for meeting ongoing costsof ownership until settlement has occurred.

In line with the asset disposal incentives scheme, agencies are not required to refund LandCorp forthe costs incurred in the sale process. In instances where the property is not sold, or sale proceedsare less than sale costs, agencies are not required to reimburse LandCorp.

LandCorp will be reimbursed for the cost of sales through a separate agreement with theDepartment of Treasury and Finance.

Sale to the open market through a partnership arrangement with LandCorp

For real property not disposed to another government agency through the Clearing House, anagency may enter into a partnership arrangement with LandCorp to develop the site to realise ahigher return, specified in a development agreement negotiated between LandCorp and theagency. The details of the development agreements reached will depend on the specific situationof each property, and will require a greater level of negotiation and involvement by the agency toensure success. In most cases, LandCorp will manage and finance the development works.

The disbursement of any additional profits, beyond the limits set in the base policy position in theasset disposal incentives scheme, such as those described in the example below, would need to benegotiated with the Department of Treasury and Finance through a disbursement agreement.


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Agency manages the sale to the open market

Where it is identified that there are specific conditions that would require the agency to undertakethe sale process in-house, as opposed to LandCorp managing the process, Expenditure ReviewCommittee agreement is required. In such cases, the agency will still undertake the ClearingHouse process, but be responsible for conducting and managing the sale process to the openmarket, as well as bearing all financial risks of disposal. This will require the agency to provide allnecessary resources to undertake the sale process, including personnel and financial costs. Inthese circumstances, LandCorp will not finance the disposal costs, or undertake any of the disposalrelated work on behalf of the agency.

Where net costs of sales are higher than the sale proceeds, or no sale is achieved, the agencywould not be refunded from the Consolidated Fund for these expenses.

Submissions to the Expenditure Review Committee from agencies, to sell to the open marketdirectly should be directed to the Clearing House through the Property Asset RationalisationCommittee. The agency must provide the Clearing House with a written request outliningjustification for undertaking the sale process in-house.

4.4.4 Disbursement of Net Proceeds of Sale

Following settlement, revenue is initially returned to the Consolidated Fund. Funds are thendisbursed according to the asset disposal incentives scheme arrangements set out in Chapter 3.Agencies are responsible for ensuring the accuracy of financial records relating to asset disposal,as well as maintaining the accuracy of information in the Treasury Information ManagementSystem (TIMS).

Questions relating to the process of accessing the funding to be retained by the agency should bedirected to the Department of Treasury and Finance.

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Example 10: Partnership Arrangement

An agency has a property holding in the metropolitan area that is already developed, andhas been used for many years; however, the improvements no longer meet requirements,and the site no longer supports core business. It has, therefore, been identified for disposal.Following clearance from the Clearing House, LandCorp and the agency agree thatLandCorp will purchase the site at market value and accept full responsibility for the assetimmediately.

The partnership agreement may also contain a provision whereby LandCorp will share withthe agency the net increase in the market value of the site after rezoning, remediation, andother development constraints have been removed. The agency would be entitled toadditional revenues as proceeds are realised from the sale of the developed site.

4.5 ReviewFollowing the disposal process, the agency should review outcomes and identify ways to improveperformance for future processes. This would include, at appropriate times, a review of internalprocesses and structures that deal with asset disposal.

Asset disposal performance can be monitored through the development of appropriate measures,such as

• disposals as a percentage of the portfolio;

• average time for disposal process; and / or

• impact of disposal on agency finances.

Following settlement, agencies should confirm the disposal details with the Department of LandInformation.

All details of analyses, investigations, advice, approvals and sales information should be fullydocumented and appropriately filed.

The asset disposal process is summarised in the figure below.

Figure 2: Asset Disposal Process


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Phase Agency Central Coordination Disposal Agencies

Evaluation

Implementation

Review

DisbursementAgreement

StrategicAsset Plan

DTF and Budget

LAMS & PARCSchedule

Clearing House

PARCReview

Review DTF & ERC

LandCorpEnglobo Disposal

UpfrontLandCorp

Acquisition &Value Add

DTFAdditionalCapital forInvestment

Review

Surplus

Assets

Referral

Negotiations

Problematic

Sites

Approval EOI & Disposals

Disposal

EOI Assessment

Site Details

Fund

Distribution

Acquisition

5.1 Asset Disposal PlanAgencies will be required to submit an Asset Disposal Plan to the Department of Treasury andFinance, as an attachment to the Strategic Asset Plan produced for each annual Budget cycle.

The Asset Disposal Plan provides an overview of the assets that an agency intends to dispose inthe current, next budget year and forward estimates period. It should include assets currentlylisted with the Clearing House, and assets identified for disposal across the forward estimatesperiod. The Asset Disposal Plan also outlines the disbursement of net sale proceeds for each asset,in accordance with Chapter 3.

A copy of the Asset Disposal Plan is provided at Appendix 1.

5.2 Disbursement AgreementsIn line with the asset disposal incentives scheme outlined above, agencies are required to negotiatea disbursement agreement with the Department of Treasury and Finance, where retention of netsale proceeds above 50% is sought, or the value of the asset is above $2 million.

In such instances, the agency is required to write to the Department of Treasury and Finance,providing the following information for the property to be disposed:

• description of the asset to be disposed;

• the expected sale proceeds;

• likely sale costs;

• proportion or amount of net sale proceeds sought to be retained; and

• linkage of net sale proceeds sought to the agency’s capital works program or debt reductionplans, and justification for retention.

The Department of Treasury and Finance will review requests, and undertake negotiations with theagency in relation to the proposed retention of sale proceeds. Final approval of disbursementagreements will occur through the normal Budget approval processes (i.e. the annual and mid yearBudget processes).

Chapter 5: Reporting Requirements

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App

endi

x 1:

Ass

et D

ispo

sal

Plan


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The following outlines the role and/or responsibility of stakeholders involved in this process.

• Expenditure Review Committee – Is a sub-committee of Cabinet responsible for providing financialand economic advice to Government, including formulation of the annual Budget.

• Department of Housing and Works - Has a responsibility for creating new building assets requiredby Government for agencies, and will perform all commercial interface roles in architecture andbuilding engineering, where appropriate.

The Department of Housing and Works is also able to provide Building Condition Assessments (BCA),portfolio maintenance analysis services, and other maintenance-related expertise on a fee-for-servicebasis.

• Department for Planning and Infrastructure – The Land Asset Management Services Branch isresponsible for achieving whatever form of land tenure is acceptable (e.g. seabed lease, freehold,reserve) to an agency's specific requirements, including the acquisition of land for those agencies that do not have the legislative authority to acquire and deal in land. Native Title clearances are alsopart of this process, where applicable. The Department is also responsible for administering theClearing House.

• Department of the Premier and Cabinet – The Office of e-Government is responsible for advisingGovernment on how to transform the operations of government, using technology as a tool toimprove internal efficiency, service delivery to citizens and community participation.

• Department of Treasury and Finance – The Agency Resources Business Unit is responsible foradvising the Expenditure Review Committee and Government on agency funding requirements. Italso co-ordinates the involvement of the private sector in the provision of Government infrastructure.

The Government Procurement Division provides procurement advice and services to governmentagencies to implement government procurement policy.

Appendix 2: Roles and/or Responsibilities of Stakeholders

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Contacts

Further information is available from the following sources:

Issue Contact

General Queries Assistant DirectorAsset Planning and ManagementDepartment of Treasury and Finance(08) 9222 9380

Budget Formulation and Monitoring Agency ResourcesDepartment of Treasury and FinanceReception - (08) 9222 9336

Building Procurement Evaluation and Risk Management BranchDepartment of Housing and Works(08) 9440 2256

Asset Disposal Land Asset Management ServicesDepartment for Planning and Infrastructure(08) 9216 8911

Department of Treasury and FinanceGovernment of Western Australia

ISBN 0 7307 4539 2

Documents

05 samf adp_082005