Background

For the purposes of this audit, property management has been defined as those functions necessary for the effective conduct and coordination of an organisation's workplace and infrastructure with its business/services, employees and other people involved in the delivery of its services. The range of property management services in each organisation will depend on its individual circumstances and policies, but will generally encompass some or all of the following; lease management, energy management, cleaning, and repairs and maintenance tasks.

All organisations require access to physical property for the purposes of carrying out business or delivering services and most, if not all, organisations require office space for the purposes of undertaking general administrative and related activities. Office accommodation should be appropriate to the size, and be designed to suit the nature, of the organisation's business and its staff.
As well as ensuring that office accommodation has the functionality to meet its business objectives, organisations should consider a range of more contemporary issues, when designing their office accommodation, including; safety and health issues, security and catering for the needs of people with disabilities.

Audit objectives and scope

The objective of the audit was to assess whether the property management function, including the management of leases, was being performed efficiently and was providing an effective level of support for the delivery of the organisation's services (outputs). The audit evaluated property management policies and practices across the following dimensions:

• planning and control;
• business processes and practices; and
• information and performance management.

Within each of these areas, a series of desirable processes and controls (described as the evaluation criteria) were developed.

The audit assessed the delivery of property management functions in a selection of organisations that occupy, or reside in, properties (whether they are the owner or the lessee), or part of properties used primarily as office accommodation. For the purposes of the audit, office accommodation was taken to include offices used for general administrative activities and customer/client service functions but excluded specialised operational accommodation.

Audit conclusion

Overall, ANAO found that the property management services in the organisations audited were operating efficiently and were generally providing an adequate level of support for the delivery of the organisation's business or services. The audit did observe, however, a number of shortcomings in management and service-delivery practices that detracted from the capacity of the organisations to provide high-quality, and fully effective, property management services.

The audit identified a number of opportunities to ensure property-related activity continues to meet user requirements and demands, and in some cases, to further enhance the efficiency of related processes. Principally, these opportunities relate to the need to:

• enhance the level of planning to better identify longer-term property requirements and to better manage the identified priorities  and available resources;
• improve the application of risk management principles and approaches to the delivery of property management activities, including the identification, assessment, treatment and mitigation of the risks inherent in the functions performed;
• adopt more formal processes for measuring and reporting on a range of both financial and non-financial property management performance issues; including the establishment of appropriate targets and performance indicators;
• adopt more formal and structured processes to monitor and manage the performance of contracted property-related services in order to ensure the required services are delivered to an acceptable standard with any problems being identified in a timely manner;
• improve the form and content of property-related service contracts by, for example, including a comprehensive description of the services to be delivered; establishing a performance management process; and providing details of acceptable standards of performance;
• improve the management of the property-related information, including record-keeping practices; and
• periodically assess the ongoing appropriateness of property management services, particularly those specified in contracts, to ensure they continue to be relevant and sufficient and meet current circumstances and user requirements.

Property management activities generally represent a significant component of an organisation's operating budget. Based on the relative proportions identified in the organisations covered by the audit, property-operating costs, including the cost of the staff and contractors with property management responsibilities for the whole of the General Government Sector, are estimated to be in the order of $4.5 billion per annum.¹ Given the potential quantum of property management expenditure in the Commonwealth, the differences identified in the report, between the average data metrics for the organisations in the audit and a series of best practice industry benchmarks indicate there are considerable opportunities for savings through improved management of property-related costs and building space.

Audit findings

The main findings discussed in this report are as follows.

Planning and control

Most of the organisations covered by the audit had formal planning processes to assist with the identification and management of the delivery of the key elements of their property management functions, including:

• identification of key activities or result areas;
• allocation of resources; and
• establishment of performance measures.

In most organisations, these planning processes were considered to be useful in guiding the delivery of the property management function over shorter time periods (for example, a year). However, they were considered to be insufficient to identify longer-term property-related requirements, and the broader and longer-term property-related activities objectives, issues and priorities.

The audit observed the need for improvement in the application of risk management principles in the delivery of property management activities. For example, only two of the organisationst had formally identified the risks involved in the delivery of their property management functions and identified strategies to address these risks.

Amongst the organisations there was a lack of formal policy and procedural documentation covering property management functions. Although at the time of the audit, two of the organisations were developing guidelines to assist with the planning and management of their accommodation. Policy and procedural documentation can play an important role in the communication of the organisation's critical property-related objectives, strategies and key activities. It can support staff in the performance of their duties and reduce the need for reliance on the skills, knowledge and experience of other staff.

Each of the organisations had a range of strategies for raising the awareness of property-related issues and ensuring proper clarity and understanding of property management roles and responsibilities. Among the most common processes were: regular staff meetings to confirm progress against roles and responsibilities; describing key tasks in individual staff performance agreements; and the inclusion of property-related business planning and service delivery documentation on the organisation's intranet.

Business processes and practices

Each of the organisations in the audit had some part of their property management function provided under contract. Most commonly, organisations had contracts for the delivery of cleaning services, repairs and maintenance work, and financial administration services, including the processing of property-related payments. Two of the organisations had contracted external property management organisations to provide a suite of property-related (often described as real estate) services.

Most of the organisations in the audit did not actively manage their contracted service providers and lacked processes to monitor and measure/assess contractor's performance regularly. Rather, they relied on a series of informal and unstructured processes, including exception-based reporting. These findings were consistent with the results of Audit Report No.12, 1999–2000, Management of Contracted Business Support Processes and highlights that managing the performance of contracted service providers remains a significant challenge.

Among the better practices observed in the assessment of the performance levels were:

• regular communication with contactors, including monthly meetings;
• regular inspections of the work performed;
• monitoring feedback through the fault reporting system; and
• monitoring issues identified by Occupational Health and Safety (OHS) inspections.

The three organisations that leased their office accommodation, demonstrated generally sound and effective lease management practices. However, record-keeping was generally poor. The most significant area of concern was the lack of ready access to accurate documentation on critical lease issues and records detailing the organisation's rights and responsibilities.

Only two of the organisations had recently assessed their repairs and maintenance (R&M) approach in light of their current circumstances and requirements, and developed formal plans or programs to assist in the efficient management of the delivery of work. By regularly assessing R&M requirements, organisations are better placed to:

• identify the optimal balance between planned or programmed R&M work and ad-hoc maintenance activities; that is, work driven by users' complaints;
• overcome reliance on other functions, including OHS inspections, to identify and report R&M issues;
• more effectively target R&M activity towards areas of greatest risk and need; and
• clarify instances of uncertainty concerning the responsibility for maintenance works.

Most of the organisations needed to improve the management of cleaning services. For example, only one was able to demonstrate to ANAO that its schedule of cleaning specifications was sufficient and appropriate in light of its current requirements and circumstances. Another organisation was in the process of compiling an updated specification schedule at the time of the audit.

The property management function played an important part in the promotion (and maintenance) of health and safety issues in each of the organisations audited. There were sound processes to ensure that the property management function was well informed of relevant property-related health and safety issues.

Information and performance management

Processes for the management of property-related information were, in the main, sound and effective. Some organisations needed to improve record-keeping and data-storage practices in order to reduce inefficiencies in the management of information. In particular, scope for the following improvements was identified:

• adopting more-formal and structured filing systems for recording hard-copy propertyrelated information; and
• as far as possible, maintaining electronic property-related information in one system.

Each of the organisations had sound processes for managing the financial performance of their property-related activities, including the identification, analysis and reporting of variations from financial targets. However, most did not have ready access to non-financial information. Further, there were few formal processes to regularly measure and assess broader (non-financial performance issues.

None of the organisations had established or regularly used, key performance indicators to assist in the measurement of the performance of their property management services. Only two organisations had identified performance indicators in their property management business plans. However, in neither case were actual results against these indicators being measured and/or assessed.

Most of the organisations needed to adopt more formal processes for comparing the relative performance, including the costs, of their property-related functions against that of other organisations or accepted relevant external standards. As an example, none of the organisations in the audit had market-tested the delivery of their property management services recently, as required by the Commonwealth Property Principles.

Responses from organisations

Each of the organisations participating in the audit was provided with a management report detailing the conclusions, audit findings and recommendations for improvement (where necessary) arising from the fieldwork specific to them. Each agency has responded to these individual reports and advised of remedial action taken, or proposed, to address identified weaknesses.

In addition, the organisations covered by the audit provided comments on the proposed audit report. Overall, the organisations have indicated that they support, or agree with, the recommendations in the report. The Department of Finance and Administration also provided comments on certain parts of the report.

These responses are included in Appendix 3 of the report.

Recommendations

The audit made four recommendations to improve the effectiveness of property management arrangements in the Commonwealth Public Sector. These recommendations relate to:

• developing robust planning and control procedures to support property management functions;
•  critically assessing property-related business processes to identify whether they are, and are likely to remain, effective;
• developing formal processes over the management of the performance of all contractors providing property-related services; and
• regularly reviewing the performance of property-related activities across a range of performance measures.

Footnotes

1 Based on the amount of ‘expenses from ordinary activities' disclosed in the Consolidated Financial Statements of the Australian Government for the year ended 30 June 2003.