Property Asset Utilisation

Overview

Property NSW’s effectiveness in managing NSW Government owned and leased commercial office property is limited in three areas according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.

Executive summary

At 30 June 2018, the NSW Government owned $160 billion worth of land and buildings. The NSW Treasury predicts this figure will rise over the coming years. Property NSW manages more than 900 leased office properties across the state. Approximately 250 of these are owned by Property NSW. Other NSW Government agencies maintain ownership and control of properties considered essential for service provision, such as schools, prisons and hospitals. Between 2012–13 and 2017–18 sales of property assets across the whole of the NSW Government have raised $10 billion, of which Property NSW has sold property assets of approximately $2 billion.

In September 2012, the Property Asset Utilisation Taskforce (the Taskforce) released its report on ‘real property asset management across government’ and concluded that the government has accumulated, over time, ‘a real property asset portfolio it cannot afford to maintain or protect’. The Taskforce noted that ‘a lack of centralised information seriously inhibits any whole-of-government strategic asset planning’ and that maintaining under-utilised or unnecessary properties diverted funds from areas where they might be better used. The Taskforce’s key findings included:

  • the NSW Government should own property only as a means to deliver or enhance services
  • many government properties were under-utilised, poorly maintained and inappropriate to support service delivery.

The Taskforce recommended the creation of Property NSW, as a replacement for the State Property Authority, to improve property asset utilisation and to drive efficiencies in the government’s owned and leased property portfolio. Property NSW was to achieve these goals by:

  • collating property information across the whole-of-government
  • working with agencies on longer-term strategic real property asset planning to:
    • provide services to agencies as customers
    • bring a whole-of-government perspective to real property asset planning.

In response to the Taskforce report, in December 2012, the Premier's Memorandum M2012-20 (the Memorandum) established Property NSW to improve the management of the NSW Government's owned and leased real property portfolio.

Under the Memorandum, Property NSW is responsible for:

  • management of all leased and owned commercial office accommodation
  • acting as the central acquisition and disposal agency 
  • providing advice to the government on property matters and developing property policy 
  • conducting regular and ongoing reviews of agencies portfolios, working with agencies to identify efficiencies to improve service delivery, in relation to the review of capital planning1
  • maintaining the register of all government owned property.

The Memorandum states that ownership of all commercial office property should be vested in Property NSW. 

This audit assessed whether Property NSW is effective in the management of NSW Government owned and leased commercial office property. To do this we assessed whether NSW Government leased commercial office space is being effectively utilised and whether the Government Property Register, a register of all government owned property, is accurate and up-to-date.

Conclusion
Property NSW’s effectiveness in managing NSW Government owned and leased commercial office property is limited in three areas.
First, Property NSW has not comprehensively reviewed many agency property portfolios to help agencies identify assets, including commercial office properties, that could be better utilised or recycled. Second, the Government Property Register is not being actively maintained and contains incomplete and inaccurate information, limiting Property NSW’s ability to use it to support strategic decisions about the use of government property assets. Third, Property NSW's decisions are not well documented and its processes to reach decisions are not transparent to stakeholders. That said, property utilisation has improved by about 14 per cent since 2012, and Property NSW is actively moving properties out of the Sydney CBD in line with the ‘Decade of Decentralisation’ policy.
Property NSW’s role is to provide a strategic approach to property asset management. Under the 2012 Premier’s Memorandum, this includes a requirement that Property NSW undertake regular reviews of agency property portfolios to identify efficiencies to improve service delivery. Property NSW completed one comprehensive review of an agency, limited reviews of four other agencies, and some reviews of government property in regional towns, prior to 2017.

In December 2017, Property NSW started working across the NSW Government to help agencies identify real property assets, including commercial office properties, that are under-utilised or surplus and that could be recycled, repurposed, or vested to Property NSW.
Following the Memorandum, agencies were directed to vest their commercial office properties to Property NSW. However, without more comprehensive reviews, Property NSW does not know how many commercial properties are yet to be vested. Agencies can approach Property NSW for assistance in managing their property portfolios, and Property NSW arranges the recycling of under utilised and surplus properties that are brought to its attention. Property NSW is improving utilisation of government office space, according to agency self-reported information which Property NSW uses to calculate utilisation rates. 
The Property Asset Utilisation Taskforce report (2012) recommended that the NSW Government needed a ‘single source of truth’ to inform asset retention and disposal decisions, leasing decisions and ongoing strategic property decisions. It concluded that the Government Property Register (GPR) could perform this function ‘if populated appropriately’. However, the GPR is not comprehensively performing this function because it is still incomplete and out of date. Property NSW manages the GPR and NSW Government agencies are required to supply ‘accurate, relevant and useful information’ to populate it. Agencies are not always doing so in a timely manner, limiting its usefulness to support strategic decision making. Property NSW supplements the GPR with information from multiple other sources to assist its decisions, however, there is still no single, complete and accurate picture of the NSW Government property portfolio. 
The work Property NSW does to identify, shortlist and propose new lease and agency relocation options is not well documented. Property NSW records the outcome of the process without detailing how and why decisions were made. There is limited transparency in this process for stakeholders. Record keeping is also inconsistent and many of Property NSW’s divisions do not have procedures or guidelines.

1 Capital Planning was previously referred to as Total Asset Management (TAM).

1. Key findings

According to agency self-reported data, property utilisation is improving

Property NSW asks agencies to report their floorspace and staff numbers for the calculation of full time employee (FTE) utilisation annually, and when a lease is due for renewal.2  A property is considered under-utilised if it fails to meet the NSW Government's target number of square meters per FTE. This target was previously 13m2/FTE for all new leases and was reduced to 10m2/FTE for all new leases in 2018. Where a property that exceeds the target is brought to attention, Property NSW improves utilisation by reducing leased floor space at the current premises or moving the occupant to a smaller location. 

Between 2012–13 and 2017–18, overall utilisation has improved from 16.5m2/FTE to 14.26m2/FTE across the NSW Government, calculated using the self-reported information provided by agencies to Property NSW. 

Property NSW is actively relocating government agencies for the Decade of Decentralisation, but could be more transparent with agencies about the process

Property NSW works with clusters to arrange agency relocations outside the Sydney CBD, in line with the NSW Government Decade of Decentralisation policy. During the Decade of Decentralisation, the NSW Government intends to reduce CBD office space by 100,000m2 by moving public service jobs out of the Sydney CBD and into Parramatta, Liverpool and Penrith, with the intention of stimulating growth in these areas and generating long-term employment opportunities. Between 2011 and 2017, Property NSW arranged 144 agency relocations to 26 different locations.

When relocating agencies outside the Sydney CBD, in line with government policy, agencies are offered the opportunity to provide a business case to stay in the Sydney CBD. Property NSW does not document how it assesses these business cases. 

Property NSW conducted limited property portfolio reviews between 2013 and 2017

Between 2013 and 2017, Property NSW completed one full property portfolio review of an agency. Four other agency property portfolios were also reviewed, but based on the evidence provided, these were limited in scope and depth. Property NSW has also provided evidence that it conducted 13 reviews of regional towns which identified government owned and leased properties. Given the 2012 Memorandum required Property NSW to undertake regular and ongoing reviews of all agency property portfolios, this represents a small sample. Outside of this process, Property NSW has relied on NSW Government agencies to advise it of assets that need to be better utilised or recycled. 

The government introduced a new policy in 2017 reinforcing Property NSW's role to review NSW Government agencies' property portfolios

In 2017, the NSW Government introduced the Property Infrastructure Policy to create a more collaborative approach between Property NSW and NSW Government agencies to identify efficiencies in their property portfolios. At the time, Property NSW announced that it would ‘shortly commence detailed reviews of governments property portfolio to identify surplus and under-utilised assets’.

Property NSW has since conducted three reviews across agencies in the Education, Health, and Industry clusters. Any office accommodation and generic (non-operational) properties identified during the portfolio reviews must be vested to Property NSW. Until these portfolio reviews are completed, Property NSW does not know how many office properties have not yet been vested in accordance with requirements set out in the Memorandum. In addition, it does not have a complete picture of how many under-utilised assets exist, limiting its ability to manage the government’s commercial office property portfolio effectively. 

Portfolio reviews are designed to assist agencies to identify under-utilised, surplus assets, or properties to be vested to Property NSW.3  Reviews are performed at the agency level as Property NSW advises it would be impractical to attempt a whole-of-government portfolio review across all premises. That said, Property NSW could draw together the findings of agency reviews to form a whole-of-government view. This would be consistent with the intent of the Property Infrastructure Policy to ‘encourage a whole-of-government approach to the allocation of the state’s real property capital and ensure better use of the state’s asset base'.

Agencies are not updating the GPR, and Property NSW could more be more proactive in its follow-up

The GPR is incomplete and some of the information in it is out of date. This limits Property NSW's ability to use it as a complete and accurate picture of the NSW Government Property portfolio. According to the Property Asset Utilisation Taskforce report (2012), the Government Property Register (GPR) was intended to be the single source of truth on NSW Government owned property to assist with asset retention and disposal decisions, leasing decisions and ongoing state-wide strategic planning. 

At the time of this audit, total property valuations were missing for more than half of the properties in the GPR, while other items such as property size, class and lot numbers were also incomplete. The quantity and type of missing data differed from agency to agency. Seventeen per cent of government entity names were incorrect or could not be identified. Without complete and accurate data, the NSW Government still does not have a single, complete and accurate picture of the NSW Government property portfolio. 

NSW Government agencies are required, under the Memorandum, to supply ‘accurate, relevant and useful information’ to populate the GPR, but many agencies are not doing so in a timely manner, and are not keeping their entries in the GPR complete. Agencies are also required to check and correct their property data, but this is not easy to do as agencies are required to manually update the GPR. This is impractical for many agencies, especially agencies with a large number of properties. Property NSW does encourage agencies to update and correct their entries in the GPR, but this is not done regularly. Property NSW could do more to improve the update process and assist agencies to improve the quality of their data.

Property NSW’s processes to identify, shortlist and propose new lease and agency relocation options are not well documented and not transparent to stakeholders

There are issues with transparency and documentation of decision-making when assessing renewals, new leases and agency relocations. Property NSW advised that ‘standard procedures to assess and approve lease applications have been programmed’ in their leasing system. However, Property NSW only records the outcome of decisions related to identifying, shortlisting and proposing renewals or new leases but does not explain how it reached these decisions.

The lease decision is made in consultation with agencies and the lease must be signed by both the client agency and Property NSW. However, four out of eight client agencies we spoke to reported that they have had little choice but to sign leases, as they need office accommodation to continue to operate.

Property NSW advised us that their response to under-utilisation of properties is determined using multiple criteria as are the assessments of new leases and lease renewals, but was unable to provide evidence to show how these criteria have informed each of its decisions. The reasons for a particular decision being made are not well communicated to client agencies, who also raised concerns with us about the lack of transparency in the decision-making process. 

Property NSW's record keeping and guidance to staff is also inconsistent. Some areas of the business that we reviewed do not have policy documents, procedures or guidelines. The lack of guidance and documentation raises risks that Property NSW has made inconsistent decisions.


2 FTE utilisation is also referred to as space efficiency, and is calculated as the net lettable area, less operational space, divided by the number of full time equivalent employees (FTE). It is one of several utilisation measures used to monitor the efficiency and cost effectiveness of the NSW Government property portfolio.

3 All office and other generic property should be vested to Property NSW but this may not happen in the case of 
non-operational property assets which are required for service delivery.

2. Recommendations

By December 2019, Property NSW should:

  1. combine the results of property portfolio reviews to produce a whole-of-government picture of the NSW Government property portfolio
     
  2. devise a strategy and plan to recycle or repurpose under-utilised properties using a whole-of-government picture of the NSW Government property portfolio
     
  3. develop and report on indicators for progress in reducing the number and value of under utilised properties at the whole-of-government level, referencing progress against an accurate baseline stocktake
     
  4. improve the data held on government owned and leased properties by combining and automating data feeds to construct a single, consolidated and accurate whole-of-government property data set
     
  5. document and communicate to stakeholders how its assessment criteria inform key decisions including agency relocations, lease renewals and rectifying under-utilisation
     
  6. include customer satisfaction measures in its annual reports and reviews, in accordance with the requirements set out in the Premier's Memorandum M2012-20
     
  7. improve record-keeping and compliance with the State Records Act 1998 and the Department of Finance, Services and Innovation Records Management Policy.

1. Introduction

1.1 Background

Property Asset Utilisation Taskforce

In February 2012, the Property Asset Utilisation Taskforce (the Taskforce) was established to identify and implement efficiencies in the ownership, utilisation and management of the NSW Government's portfolio of owned and leased property.

The Taskforce's report concluded that the NSW Government had accumulated a property portfolio that it could not afford to maintain and which included properties that were under-utilised and not needed for the delivery of services. The Taskforce's report advocated identifying and recycling these property assets. The Taskforce's report also concluded that a single register of detailed information on NSW Government properties is necessary for effective whole-of-government strategic asset planning. The Taskforce concluded that this information is required for:

  • decisions about asset retention and disposal
  • leasing decisions
  • ongoing state-wide strategic planning.

The Taskforce's report described the structure and contents of eight of the existing property databases held by NSW Government agencies, and concluded that the Government Property Register (GPR) was the best choice for building a single comprehensive register of all NSW Government property. The Taskforce's report also recommended that the GPR should become the ‘single source of truth’ on NSW Government property holdings within two years.

Property NSW was formed as a result of the Property Asset Utilisation Taskforce report

In December 2012, the Taskforce's report was followed by Premier's Memorandum M2012-20 (the Memorandum) which replaced the State Property Authority with Property NSW.4  Under the Memorandum, Property NSW has the mandate to improve the management of the NSW Government owned and leased real property portfolio.

The Memorandum states that real property assets are to be held by government only when those assets are essential for the provision of core government services. Any property that is not considered essential should be relinquished or sold, and the funds generated by the sale put to better use. Under the Memorandum, Property NSW is responsible for managing the GPR and all NSW Government agencies are responsible for providing ‘accurate, relevant and useful information’ to populate the register.

Property NSW is responsible for managing leases for commercial office property

Property NSW is responsible for managing commercial office property leases and has contracted the day-to-day management (including maintenance) of leased office property to an external provider. Property NSW directly manages planning and negotiating new and renewed leases, rental reviews, and make good.


4 Property NSW was originally called Government Property NSW. It was rebranded and adopted the current name in October 2016.

2. Property asset recycling

In December 2017, the NSW Government announced the Property Infrastructure Policy to create a more collaborative approach between Property NSW and NSW Government agencies to review and identify efficiencies in their property portfolios. Before this, Property NSW did not have a plan to assist agencies to identify under-utilised properties for recycling or repurposing. It still does not know how many under-utilised properties exist and will not know until it has completed all of the portfolio reviews it is currently carrying out under the Property Infrastructure Policy.
Between 2013 and 2017, Property NSW had only completed one comprehensive review of an agency, limited reviews of four other agencies, and some regional towns. Outside this process Property NSW chose to rely on other agencies to identify surplus property for recycling, repurposing or vesting ownership to Property NSW.
Property NSW has a role to provide a strategic approach to property asset management and is required to undertake regular reviews of agency property portfolios under the Premier's Memorandum. Property NSW only recently started working to assist agencies to identify under-utilised and surplus properties, or properties to be vested. These reviews should improve the identification of surplus and under-utilised real property assets and assist whole-of-government decisions on the recycling, repurposing of under-utilised assets and vesting of owned office accommodation to Property NSW.
Recommendations
By December 2019, Property NSW should:
  1. combine the results of property portfolio reviews to produce a whole-of-government picture of the NSW Government property portfolio 
  2. devise a strategy and plan to recycle or repurpose under-utilised properties using a whole-of-government picture of the NSW Government property portfolio
  3. develop and report on indicators for progress in reducing the number and value of under-utilised properties at the whole-of-government level, referencing progress against an accurate baseline stocktake.

2.1 Recycling and repurposing of property assets

Property NSW conducted a small number of property portfolio reviews between 2013 and 2017 including one full review of the properties owned by the Department of Education and limited reviews of four others, namely:

  • Crown Lands
  • Place Management (now part of Property NSW)
  • Property NSW
  • TAFE NSW.

Property NSW also claims it has conducted a portfolio review on NSW Health, but was not able to provide evidence to support this.

Given the Memorandum required Property NSW to undertake regular and ongoing reviews of agency property portfolios, the reviews between 2013 and 2017 represent a small sample. Outside this process, Property NSW was reliant on agencies to identify surplus property in their portfolios for recycling and repurposing. Agencies would advise Property NSW of properties that were no longer required, and these properties would then be sold, transferred or vested to Property NSW. Property NSW has also provided evidence of 13 reviews of government property in specific towns, mostly in rural NSW.

The government introduced a new policy in 2017 reinforcing Property NSW's role to review NSW Government agencies' property portfolios

In December 2017, the NSW Government announced the Property Infrastructure Policy to create a more collaborative approach between Property NSW and NSW Government agencies to review and identify efficiencies in their property portfolios.

Under this policy, Property NSW has commenced portfolio reviews of individual agencies, as it believes it would be impractical to attempt a whole-of-government portfolio review across all premises at the same time. Property NSW could draw together the findings of these agency reviews to form a whole-of-government view and provide a strategic baseline stocktake of the NSW Government’s property portfolio. This would be consistent with the intent of the Property Infrastructure Policy to ‘encourage a whole-of-government approach to the allocation of the state’s real property capital and ensure better use of the state’s asset base’.

Property portfolio reviews are intended to assist agencies to improve the identification of surplus and under-utilised real property assets, and facilitate whole-of-government decisions on recycling and repurposing property assets. Office accommodation and generic (non-operational) properties identified during portfolio reviews should be vested to Property NSW. Between 2012 and 2016, 114 properties were vested to Property NSW. However, until more comprehensive portfolio reviews are completed, Property NSW does not know how many office properties have not yet been vested.

The NSW Government recently formed the Property Asset Allocation Committee to ‘facilitate the relocation of real property assets between government agencies, or the sale of surplus real property assets no longer required by government to support whole-of-government priorities and objectives’. The permanent membership of this committee consists of:

  • Chief Executive Officer, Property NSW (Chairperson)
  • Deputy Secretary, Department of Premier and Cabinet
  • Deputy Secretary, NSW Treasury
  • Chief Financial and Operating Officer, Department of Planning and Environment
  • Deputy Secretary, Transport for NSW
  • Chief Executive Officer, Greater Sydney Commission.

This change is intended to embed a more collaborative approach to decision-making about property assets introduced by the NSW Government in the 2017 Property Infrastructure Policy. 

The GPR, although incomplete, remains an important resource to inform portfolio reviews. The GPR data is supplemented by information from other sources. To be effective, Property NSW will need to ensure that the data it uses to make whole-of-government property portfolio decisions is complete and accurate.

Based on agency self-reported data, property utilisation is improving

Property NSW calculates FTE utilisation as the net lettable area, less operational space, divided by full time equivalent (FTE) staff numbers.5  In other words, this is the floorspace used for desks and offices divided by the number of staff who occupy it. In 2011, the NSW Government set a utilisation target of 13m2 per FTE for all new leases across the NSW Government. This was reduced to 10m2/FTE for all new leases in 2018.

From 2012–13 to 2017–18, whole-of-government utilisation has reduced from 16.5m2/FTE to 14.3m2/FTE – a decrease of 13.6 per cent. In presenting this information we note that Property NSW relies on agencies to self-report FTE via an annual survey, and does not directly verify its accuracy. During this period, an average of 86 per cent of surveys were completed and returned each year. In cases where the agency does not respond, Property NSW reports that it reuses the previous year’s data. These utilisation figures also do not include vacant properties.

In addition to the annual survey, Property NSW also calculates utilisation when a lease is due for renewal. A property is considered under-utilised if it fails to meet the NSW Government's target.

Property NSW then attempts to improve the utilisation by reducing floor space in the current premises or moving the agency to a smaller location. However, this may not always be possible to do if:

  • the property has been specifically constructed for the agency
  • there are no suitable alternative properties available
  • relocating the agency is too expensive.

Property NSW also advise that they would not break a lease to improve utilisation, unless:

  • another agency could be found to backfill the space with efficient utilisation
  • a cost benefit analysis justifies the decision to break the lease.

5 Operational space is all areas required for specialised functions as part of an agency’s operational role. This includes locker space, kitchens and toilet facilities.

3. The Government Property Register

Property NSW needs to be more proactive in its management of the GPR and in encouraging agencies to provide the information needed to improve this register. In 2012, the Property Asset Utilisation Taskforce report recommended there be a single source of truth on property assets owned by the NSW Government. The GPR is intended to fulfil this role but it is out of date and incomplete.
Without a complete and accurate central register of property, Property NSW cannot provide the NSW Government with a comprehensive picture of its property portfolio, or make whole-of-government decisions about the property portfolio. Property NSW currently supplements the GPR with information from other systems in order to make decisions about leasing, relocations, and property recycling and repurposing. Agencies are required to provide ‘accurate, relevant and useful information’ but are not consistently doing so.
Recommendations
By December 2019, Property NSW should:

4. improve the data held on government owned and leased properties by combining and automating data feeds to construct a single, consolidated and accurate whole-of-government property data set.

3.1 The Government Property Register is incomplete and includes out of date information

Property NSW is responsible for managing the GPR

Under the Memorandum, Property NSW is responsible for managing the GPR. However, Property NSW asserts it is not directly responsible for keeping the GPR up-to-date or accurate, as neither the Property NSW Act 2006 (the Act) nor the Memorandum explicitly instructs it to do so. They further assert that it is the responsibility of other agencies to maintain the accuracy and completeness of their listings in the GPR. It is true that the GPR cannot be kept up-to-date if it is not populated with information directly by agencies, as Property NSW is not in a position to do this itself.

Property NSW advises the GPR is accurate insofar as it reflects the NSW register of land titles, from which it receives a direct feed. Property NSW notes that the NSW register of land titles does not contain any information on unregistered properties, and concedes that both this information and property values are incomplete in the GPR.

The Act states that Property NSW must ‘establish and maintain a register’ and the Memorandum states that Property NSW must ‘assume responsibility’ for the GPR. Property NSW note that neither document specifies that the GPR must be accurate or up-to-date. The only document that specifically states that the register should be complete, up-to-date and a ‘single source of truth’ is the Property Asset Utilisation Taskforce report (2012). 

Agencies are not supplying the information needed to update the GPR

Property NSW uses multiple information sources when making decisions on asset recycling and repurposing, and in property purchases and sales, as the GPR cannot be relied upon alone.

The Memorandum requires NSW Government agencies to provide ‘accurate, relevant and useful information’ to populate the GPR, but they are not always supplying the required information to Property NSW. There is no disadvantage to agencies if they do not comply. 

Many agencies have not recently updated their relevant property details in the GPR, and only one cluster of agencies has provided complete valuation data for all of its properties. Valuation data is one of the items specifically mentioned in the Memorandum. It is important to note that where an asset is identified for disposal, an independent valuation is sought to determine the property’s current value. NSW Treasury paper TPP14-01 requires land and buildings to be valued at least every three years with the exception of land and buildings under infrastructure. Property NSW reports that most of the property assets registered in the GPR are land assets. Exhibit 1 shows the year of the most recent update to the valuation data in the GPR by cluster.

Exhibit 1 – Dates of agency up dates to valuation data in the GPR by cluster
Cluster Date of the most recent property valuation in the GPR
Education 2014
Family and Community Services 2015
Finance, Services and Innovation 2016
Health 2016
Industry 2016
Justice 2015
Planning and Environment 2016
Premier and Cabinet 2013
Transport and Infrastructure 2017
Treasury 2014

Source: Property NSW, Audit Office analysis as at 9 May 2018.

Total property valuations are missing for more than half of the properties listed in the GPR and many other items are also incomplete. The quantity and type of missing data differs from agency to agency. For example, 19 out of 168 government entities in the GPR are incorrectly named, and 10 cannot be clearly identified. Property NSW reports that it is currently investigating a solution to this issue by updating agency names in the GPR using an automatic feed.

In June 2018, the Audit Office compared property listings for three agencies’ asset registers to the entries on the GPR and found that:

  • one agency was missing ten property assets, worth less than $1 million
  • another agency had 2,400 properties on its asset register which are missing from the GPR
  • the third agency has 675 properties listed in the GPR, but only two are mentioned in the agency’s financial statements.

These findings suggest that the data sources that Property NSW is using to supplement the GPR are insufficient to create a complete picture of the NSW Government’s property portfolio.

According to the Taskforce's report, detailed property information is essential for effective whole-of-government strategic asset planning and for the maintenance of property assets within the government portfolio.

Information for the GPR is provided by agencies and supplemented with data from other NSW Government systems. Property NSW reports the data sources are:

  • Crown Land Information Database
  • Integrated Property Warehouse
  • Information Titling System
  • Spatial Data Warehouse.

Direct feeds from these data sources are used to populate the GPR. Relevant data items are added automatically where possible but, where an item cannot be added automatically to the GPR, it must be manually verified and included. From 2013 to April 2018, 32 per cent (105,424 items) of the relevant data available in these systems needed to be manually added into the GPR. Property NSW has been actively working to improve the automatic addition of data into the GPR since 2016. In addition, Property NSW acknowledges that the functionality of the GPR would be improved if it were expanded to include unregistered property interests.

Property NSW could more proactively follow-up with agencies to update the register

When a property is purchased or sold, agencies are sent an automatically generated email reminding them to check that the information has been updated accurately in the GPR and to correct it if necessary. Property NSW does not follow up on whether this is done and argues that it is not necessary for it to do so.

Property NSW does not reconcile the GPR with agency property asset records and argues that it is the responsibility of agencies to maintain the accuracy and completeness of their entries in the Government Property Register. Property NSW advises that it has provided assistance with reconciliation to a small number of agencies that had large amounts of data to be up dated.

Starting in 2014, Property NSW has issued an annual report to each agency notifying it of any discrepancies between the GPR and the agency's own records. Agencies are expected to correct these inconsistencies and ensure that both the GPR and their titling records are correct. The GPR sometimes requires manual updating, which would be time consuming and resource intensive for many agencies, especially agencies with a large number of properties.

The collection of accurate data may be further compromised if agencies are not sure what data to provide. Between 2013 and 2016 Property NSW sent letters to agencies specifying different data items required in each year. Property NSW stopped sending these letters in 2016, but reports that it intends to issue letters again in the future and acknowledges that these letters could be improved with a more prescriptive explanation of the information required from agencies.

The Taskforce’s report proposed incentives for agencies to provide updated information but these are rarely used

The Taskforce's report established an 18-month moratorium period (ending 30 June 2014) during which all NSW Government agencies were required to work with Property NSW to ensure that their property asset ownership data was complete in the central database. In addition, the report detailed five incentives that Property NSW could employ to encourage agencies to work collaboratively with Property NSW. These include:

  • assisting agencies with their capital planning and step-in rights with respect to office and generic properties in situations where Property NSW deems the property specific elements of agency capital plans to be inadequate
  • allowing agencies to retain net proceeds after a sale if the property value is listed in the GPR
  • step-in rights, subject to government approval, where utilisation or value is not being maximised, after 30 June 2014.

Property NSW has provided some limited evidence of the use of these incentives in some situations. For example, Property NSW:

  • reports that it has assisted agencies with their capital planning, but its involvement in the creation of these plans is not clear
  • until 2016, sent annual letters to agencies detailing the data items that agencies were expected to provide each year
  • sends automatically generated emails reminding agencies to check the information has been updated accurately in the GPR and to correct it if necessary when a property is either purchased or sold, but does not follow up on these messages
  • reports that it would not keep the difference between the original valuation and the actual sale price when a property is sold
  • reports it has employed step-in rights, but could not provide any evidence of this.

Property NSW is developing another information system

Property NSW advises that it is developing a new system to work alongside the GPR which will contain information from other parts of Property NSW that are currently kept separately. The Government Property Performance System (GPPS) is intended to function as a whole-of-government information system, although Property NSW report that it is not an asset management system or a register of government property. This system is intended to facilitate reporting on whole-of-government property KPIs and enable the analysis of the NSW Government's property portfolio, but Property NSW reports that it will not replace the GPR.

Property NSW states that this system will have an expanded set of data sources compared to the GPR and it is expected that it will have improved automated matching capabilities which should reduce the amount of manual updating required. The GPPS is intended to include data from other parts of Property NSW and is also intended to access data directly from other agencies’ electronic property records, although agencies will have to agree to Property NSW having access to their systems. In June 2018, Property NSW launched a pilot version of this system, using a reduced number of KPIs and data from a small number of clusters. The KPIs are:

  • increased capital recycling
  • management of maintenance expenditure and condition of the portfolio
  • descriptive metrics.

Property NSW reports that it expects to have the GPPS functioning by June 2019.

4. Transparency in decisions

Property NSW documents the outcome of decisions about relocations, lease renewals, and utilisation but is unable to provide evidence of how these decisions are reached. Property NSW is also unable to provide evidence of documented guidance for its staff on how decisions should be made. Whilst some level of subjectivity will play a part in such decisions, the lack of documentation and guidance raises issues of consistency, accountability and transparency in decision-making. Property NSW states that it makes decisions based on whole-of-government outcomes rather than equitable and consistent outcomes for client agencies, which is inconsistent with the criteria it reports that it uses when making decisions about leases and relocations.
Recommendations
By December 2019, Property NSW should:

5. document and communicate to stakeholders how its assessment criteria inform key decisions including agency relocations, lease renewals and rectifying under-utilisation
6. include customer satisfaction measures in its annual reports and reviews, in accordance with the requirements set out in the Premier's Memorandum M2012-20
7. improve record-keeping and compliance with the State Records Act 1998 and the Department of Finance, Services and Innovation Records Management Policy.

4.1 Documentation and transparency of decision-making could be improved

The process used by Property NSW to reach decisions is not transparent to all stakeholders

Property NSW records the outcome of decision-making processes for renewing or establishing new leases for commercial office property, and lists the criteria it employs as:

  • overall financial outcomes for government
  • utilisation
  • rent
  • incentives
  • relocation costs
  • lease tails including make-good obligations
  • future accommodation strategies
  • service delivery requirements.

However, Property NSW does not document how it applies these criteria when making decisions. This information is entered into a template in the Leased Accommodation Request system and the outcome is recorded, but their evaluation against the criteria is not communicated to agencies. 

While some level of pragmatism is necessary – taking into account the agencies' requirements, cost and benefits of differing lease options, and service delivery requirements – the lack of documentation and guidance for Property NSW staff raises risks around the consistency and transparency in decision-making. Property NSW states that it makes decisions based on
whole-of-government considerations, unless directed to do otherwise at the Ministerial level, rather than prioritising equitable and consistent outcomes for client agencies.

Property NSW reports that improvements in asset utilisation can be made by:

  • backfilling existing leased properties
  • reducing the amount of leased floorspace
  • relocating agencies.

Again, the choice of response is recorded but Property NSW is unable to provide any guidelines or documentation detailing how this choice is made. Property NSW acknowledges that it does not have structured documentation or an explicit methodology for the assessment of lease proposals.

Property NSW's record keeping is poor

Property NSW's record keeping is inconsistent and many divisions do not have policy documents, procedures or guidelines. Property NSW acknowledges this is an ongoing issue and reports that it has started a policy harmonisation project to review all policies and to make them available on their intranet. Property NSW stated that the use of automated processes, such as the Leased Accommodation Request system, reduces the amount of documented procedures as they are directly programmed into the system. This does not, however, provide transparency or clarity to stakeholders.

The lease decision is made in consultation with agencies and the lease must be signed by both the client agency and Property NSW. However, four out of eight client agencies we spoke to reported that they have had little choice but to sign leases, as they need office accommodation to continue to operate.

Property NSW is actively relocating government agencies for the Decade of Decentralisation

Property NSW works to arrange agency relocations outside the Sydney CBD, in line with the NSW Government Decade of Decentralisation policy. During the Decade of Decentralisation, the NSW Government intends to reduce CBD office space by 100,000m2 by moving public service jobs out of the Sydney CBD and into Parramatta, Liverpool and Penrith, with the intention of stimulating growth in these areas and generating long-term employment opportunities. 

Property NSW reports that it has been focussed on Parramatta as the primary site for relocations to reflect its importance as the second CBD under the Decade of Decentralisation policy, and as a high growth area under the Greater Sydney Region plan. Between 2011 and 2017, Property NSW arranged 144 agency relocations to 26 different locations, including 14 moves to Parramatta. The relocations to Parramatta involved moving 1,200 individuals out of the CBD and reduced the amount of floor space occupied by these agencies by 18,861m2, more than any other location outside the City of Sydney.

Agencies identified for relocation under the government’s Decade of Decentralisation policy are offered the opportunity to provide a business case to stay in the Sydney CBD. Property NSW advise that cost savings and the impact on agency service delivery are taken into consideration when moving agencies out of the Sydney CBD. The outcome of this process is recorded but we are unable to assess the effectiveness of this decision-making process as the assessment of these criteria is not documented.

Property NSW would be better able to demonstrate its efficiency if it reported its transaction fees publicly

In order to cover its costs, Property NSW agrees transaction fees with client agencies before commencing work on property transactions. Property NSW revised its fee schedule in September 2017 to increase the accuracy of fees charged to client agencies following a review. Property NSW could be more transparent in reporting its costs of service to clients, as well as benchmarking this and reporting it publicly in its annual report. In addition, some client agencies report that Property NSW does not recognise there may be further costs arising from delays in completing projects, or lease negotiations which the client agencies must pay.

Property NSW does not report on all its target KPIs

Under the Memorandum, Property NSW is accountable for achieving:

  • strong customer satisfaction
  • benchmarked financial returns on its property portfolio and investments
  • effective real property asset utilisation and service quality
  • competitive cost of service
  • added value in client real property asset repositioning developments. 

In its annual reviews, Property NSW reports achievements with respect to asset utilisation, property repositioning and returns on its property portfolio. Property NSW also reports key metrics to the Minister for Finance, Services and Property on a monthly basis including utilisation, rental outcomes, properties sold, and CBD office space reduction.

The Memorandum requires both strong customer satisfaction and competitive costs of service but neither of these items have been reported publicly by Property NSW. During this audit, we spoke to client agencies regarding their experience with Property NSW. Seven out of eight client agencies said they had experienced delays in completing transactions which impacted on their business while six out of eight client agencies said Property NSW did not understand, or did not attempt to understand their business. In July 2016, Property NSW conducted a customer satisfaction survey which rated their service as 5.2 out of 10. Property NSW has recently been working to improve customer service and this is reflected in improved survey results for customer satisfaction in mid-2018.

Property NSW advise that their operational costs are included in their financial reports but we note that these figures do not include any information on how these costs are competitive, as required by the Memorandum, or reference any benchmark that could be used to make a comparison.