Asset management
Any item of economic value owned by an
individual or corporation, especially that which
could be converted to cash. Examples are cash,
securities, accounts receivable, inventory, office
equipment, real estate, a car, and other property.1
1. Dictionary of state
aset pada organisasi pemerintah (publik)
”Aset adalah sumber daya ekonomi yang dikuasai
dan/atau dimiliki oleh pemerintah sebagai akibat dari
peristiwa masa lalu dan dari mana manfaat ekonomi
dan/atau sosial di masa depan diharapkan dapat
diperoleh, baik oleh pemerintah maupun masyarakat,
serta dapat diukur dalam satuan uang, termasuk sumber
daya nonkeuangan yang diperlukan untuk penyediaan
jasa bagi masyarakat umum dan sumbersumber daya
yang dipelihara karena alasan sejarah dan budaya.”
Peraturan Pemerintah Republik Indonesia Nomor 24 Tahun 2005 tentang Standar
Akuntansi Pemerintahan, Kerangka Konseptual Akuntansi Pemerintahan (Jakarta:
Tunas Widya Press, 2005), paragraf 60 huruf a.
Assets in Public Sector
Assets are economic resources controlled and / or owned
by the government as a result of past events and from
which economic benefits and / or social future is expected
to be obtained, either by the government or the public, and
can be measured in terms of money, including nonfinancial resources required for the provision of services for
the public and the sources of power that are kept for
reasons of history and culture
 A physical asset, also known as a tangible asset, is an object which has
value. Physical assets are tangible things which are either valuable in
themselves, or which produce value for the owner. This is different from
intangible assets, which have value but do not have a physical presence. An
example of a physical asset is a car; it is a physical object which can be
touched and which has a clear value. An intangible asset is something like a
patent, which protects intellectual property and therefore helps to generate
profits, but cannot be physically handled.
 For accounting purposes, physical assets are considered as a part of the
value of a business. Over time, a physical asset declines in value, and this
may be counted as a tax deduction.
Asset management is a systematic process of maintaining,
upgrading, and operating physical assets cost-effectively. It
combines engineering principles with sound business
practices and economic theory, and it provides tools to
facilitate a more organized, logical approach to decisionmaking. Thus, asset management provides a framework for
handling both short- and long-range planning1.
1 Asset Management: Advancing the State of the Art Into the 21st
Century Through Public-Private Dialogue. Federal Highway
Administration and the American Association of State Highway and
Transportation Officials, 1996, page 3.
“…a methodology needed by those who are responsible
for efficiently allocating generally insufficient funds
amongst valid and competing needs.”
— The American Public Works Association Asset Management Task Force
“…a comprehensive and structured approach to the
long-term management of assets as tools for the efficient
and effective delivery of community benefits.”
— Strategy for Improving Asset Management Practice, AUSTROADS, 1997
Some Cases, The Assets Not Well Maintained
 The equipment of certain units is abundant while in other units, it is still
lack.
 Uncertainty state assets as a whole or as department or government
agencies assets.
 Inventory annual report / wealth of the country do not describe the
correct data from the relevant departments / agencies if they are
verified to the supporting data such a certificate.
 Thousands of acres of state-owned land do not have a proof of
ownership and they have not certified yet.
 Many buildings and office housess are neglected.
 Office houses inhabited by those who are not eligible.
 The ownership status of the land, the office houses, or the buildings has
been changed from public to private and foundations without any process of
change through legal procedures.
 Acres of state-owned lands are neglected by agencies because of the
changes of organizational structure or because of the mutation of
employees without giving the ownership documents of an agency to a new
employees or officers.
 Some inventory items are not given the code into private property.
 The profit of the use of state assets such as land and buildings by ministry /
agency cooperatives and some private companies for pure business
purposes such as stores, department stores, shops, banks, hotels,
restaurants, offices, convention rooms, reception rooms and so on is not
entered into state treasury.
 The Ruilslag which is not beneficial for the country.
The effective implementation of the principles of asset management will
direct costs of providing services to:
 The decline of demand for new assets by adopting a non-asset
solutions;
 Maximizing the potential benefits of the existing assets.
 The emphasis of the overall cost of the ownership of assets through
the use of techniques of life cycle costing, and
 Ensuring the focus sharply on the results by compiling preparation
of clear responsibility and accountability of assets.
Asset management is a systematic and structured process that covers the
entire life of the asset. The underlying assumption is that the assets exist
to support the provision of services.
WHAT DOES ASSET MANAGEMENT MEAN FOR the UTILITY?
The answering of this question by saying what asset management is
not :
 Asset management is not a computer system. To confuse
asset management with a computerized system is like confusing a
paycheck with a payroll program. Electronic data processing is a
key enabling technology for asset management, but in the final
analysis, asset management is a way of doing business that is
reflected in the day-today practices of a utility.
 Asset management is not a maintenance management
system or a GIS. Maintenance management systems may be
valuable supporting tools of asset management, but they deal with
only a portion of the asset management cycle. Similarly, GISbased tools may help manage distributed networks such as
distribution or collection systems, but they remain only pieces of
the larger puzzle.
 An effective asset management implementation is more
comprehensive. It may involve integrating all these tools
along with other existing systems (accounting, financial
reporting, purchasing and stores, payroll, etc.) to create
a comprehensive information system that will support
an integrated asset management program.
 So asset management should not be confused with the tools that
enable it. Asset management is and will always be a set
of procedures to manage assets through their life
cycles, based on principles of life cycle costing. These
procedures, to be effective, must be implemented in a
programmatic way.
what is the purpose of asset management
The main objective of asset management is to help an
entity (organization) to meet service delivery objectives
effectively and efficiently. This guide covers the
acquisition, the use, and the disposal of assets, and the
setting of the associated risks and costs during the life
cycle of an asset.
To be effective, the principles and the techniques of state asset
management as comprehensive and multidisciplinary activities need to
be linked to several factors related to the following:
 The needs of the asset users.
 Policy and legislation.
 Organizational planning and management framework.
 Technical feasibility and commercial viability.
 The influence of external / market such as the commerce,
technology, environment, and industries.
 The demand competition from stakeholders and the need to
rationalize operations to improve service delivery or to improve the
cost-effectiveness.
Key Elements of Asset Management (AM)
The following as key elements of Asset Management
1. A policy framework to support AM decisions
2. Knowing what assets are controlled / owned
3. An understanding asset condition & expected life
4. Knowing where money is spent – maintenance, renewal & operations
5. Knowing what ‘levels of service’ the community needs
6. A process to establish priorities & allocate funds
7. Knowing long-term funding requirements
8. Having documented Service Plans & Asset Management Plans.
Responsibility for asset management
Responsibility for asset management is very important in
case to achieve the aims and the objectives of asset
management. Actually, there are entities/ organizations
that have no definite and clear standards of asset
management responsibilities. As the result, in some
organizations / institutions, there are assets that have not
been well managed and have not been used optimally.
A. Entity / Organization
Assets must be controlled by the entity. Divisions that handle assets
are expected to use the financial entity reporting and the assets to
assist them in evaluating and making decisions regarding the
allocation of the existing and the necessary resources.
B. Control
An entity is considered to control the asset if the entity has the
capacity to get the potential service or future economic benefits from
those assets, and it may eliminate or regulate the access of other
entities of the benefits. However, an entity in charge of the
supervision (control) of public assets should not be the entity that
owns the asset. In other words, the organization that manages public
assets does not mean organization that has public assets itself;
managing here is in the context of controlling those assets.
C. Accountability
 Accountability includes mechanisms / procedures (rewards and
sanctions). It ensures that the person or organization have been working
in accordance with the standards set. For example, financial
accountabilities such as an obligation which explain that the
expenditures are efficient, effective, ethical, and they are meet to the
laws / regulations.
 The entity that controls the asset management responsible for what they
do. Government accountancy standards contain guidelines to determine
whether an entity has controlled the assets and whether the assets should
be reported in the annual financial statements of the entity.
 Divisions that are specifically assigned to deal with the assets have to
responsible for the planning, management, and performance of the
assets they control.
The Asset Management Process defines:
 What we own? (Inventory)
 What is it worth? (Valuation)
 Where is it? (Geographical Information
System)
 How we operate? (Service Level)
 What is its condition? (Risk of Failure /
Consequence of Failure)
 What do we need to do? (Construct, Maintain
or Replace)
 How much will it cost and how will it be
funded? (Financial Plan)
WHAT’S THE MANAGEMENT IN ASSET MANAGEMENT?
There are three important concepts in understanding asset
management:
1. Asset management is not a “general” approach to things. Each
and every asset is managed on an asset-by-asset basis.
2. Each asset is managed against a plan—which means that there is
a plan for each asset.
3. Management of each asset follows a management cycle.
The “classical“ management cycle
plan
control
DIRECT
MEASURE
Asset management activities in terms of each step in the cycle
are:
1. Plan — A life-cycle plan is created for each asset. This plan includes all the
activities associated with acquisition, maintenance, periodic refurbishments,
disposal, and replacement of the asset. The plan is ultimately expressed in
financial terms, since (after all) the intent is to manage the asset to
minimize life-cycle costs.
2. Direct — Resources are allocated and asset-related activities are
managed in accord with the life-cycle asset plan.
3. Measure — Costs of the activities directed in the previous step are
measured, also on an asset-by-asset basis. The impacts of these activities
are also measured, primarily through a condition assessment program.
4. Control — Based on the results of our measurements, the asset plans
are updated, which may involve re-allocating resources toward or away
from each asset.
Asset Management Activities
Asset management activities include:
 Life cycle costing
 Assessment of asset acquisition, replacement and
rehabilitation
 Development of maintenance policies and procedures
 Assist with requirements analysis for the aquisition of
asset management information systems
 Develop asset condition assessment policies and
procedures
 Analyse asset condtion data to determine and schedule
asset replacement and rehabiliation
First Step of Asset Management
The scope of asset management responsibility in asset
management/state asset should be clearly understood in
principle and technically. In this case, we can use the
information to consider the following three points.
1. Do they use the services of assets optimally.
2. The Characteristics of the organizations that covering
them.
3. What Assets which they use under the supervision of the
entity control.
 These considerations will help the divisions that handle
to list assets which they responsible for.
 As the first step in fulfilling their responsibilities, they
need to make a list of assets that are adequate.
 Assets must be identified, classified, assessed, then
subsequently included in the list of assets.
 The above steps will help to meet the reporting of the
obligations of assets.