Addis Thesis Final

INSTITUTE OF TAX AND CUSTOMS ADMINISTRATION
DEPARTMENT OF PUBLIC PROCUREMENT AND ASSET

MANAGEMENT
Challenges and Practices of Public Fixed Asset

Management: The Case wolkite Zone
By:
bini
id number
A Thesis Submitted to the Institute of Tax and Customs Administration

Ethiopian Civil Service University in Partial Fulfillment for the Requirements Master’s
Degree of Art in Public Procurement and Asset Management
Advisor:
June, 2014
Addis Ababa, Ethiopia
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Declarations
I, Addis Erjabo, Registration Number/I.D. Number PPMMR-0005/05, do hereby
declare that this Thesis is my original work and that it has not been submitted partially;
or in full, by any other person for an award of a degree in any other university/institution.
Name of Participant…………………….. Signature…………………. Date………….
This thesis has been submitted for examination with my approval as thesis supervisor.
Name of Advisor……………………… Signature…………………. Date…………
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Approval
The undersigned certify that they have read and hereby recommend to the Ethiopian Civil
Service University to accept the Thesis submitted Addis Erjabo and entitled
“Challenges and Practices of Public Fixed Asset Management: The Case of Hadiya
Zone”, in partial fulfillment of the requirements for the award of a Masters Degree in
Public Procurement and Asset Management.
Name of Supervisor ……………….………………… Signature………………….
Date………………………
Name of Internal Examiner ………………………… Signature…………. ……..
Date……………………...
Name of External Examiner ………………………….. Signature…………. ……..
Date……………………....
Name of Head of Department ………………………. Signature………………….
Date…………….
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Acknowledgements
First and for most, I would like to thank the almighty God for His wisdom and patience
that gave me during my work. Without the support of God, it was difficult to come to an
end.
Then, I am very much indebted to my advisor Ato Awake Ashkenazi (MPA) who has
unreservedly devoted his time in guiding and writing of this thesis. I am also grateful to
him for giving me relevant comments which became very useful to write the thesis.
Third, I would like to extend grateful acknowledgement to my family members and

friends for their imperative support and encouragement to pursue this degree.
Fourth, my gratitude also goes to the Ethiopian Civil Service University and SNNPR
State Office of Auditor General which sponsored my studies and provided necessary
financial and material support that enabled me to complete the Masters Degree
successfully.
Finally, I express my gratitude to the people and organizations that spent their lovely time
to provide me with all the necessary data required to carry out the study.
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Table of Content
Title Page
Declarations..........................................................................................................................i
Approval .............................................................................................................................ii
Acknowledgements............................................................................................................iii
Table of Content.................................................................................................................iv
List of Tables.....................................................................................................................vii
List of Figures..................................................................................................................viii
List of Acronyms................................................................................................................ix
Abstract .............................................................................................................................x
CHAPTER ONE
INTRODUCTION.............................................................................................................1
1. Introduction......................................................................................................................1
1.1. Background and Rationale of the Study...................................................................1
1.2. Statement of the Problem..........................................................................................4
1.3. Objectives of the Study.............................................................................................5
1.3.1. General Objective...............................................................................................5
1.3.2. Specific Objectives.............................................................................................5
1.4. Research Questions...................................................................................................5
1.5. Significance of the Study..........................................................................................6
1.6. Scope and Limitation of the Study............................................................................6
1.6.1. Scope of the Study..............................................................................................6
1.6.2. Limitation of the Study.......................................................................................6
1.7. Outline of Chapters..................................................................................................6
CHAPTER TWO
LITERATURE REVIEW.................................................................................................8
2.1. Introduction...............................................................................................................8
2.2. Definition of Public Fixed Asset...............................................................................8
2.3. Characteristics and Categories of Fixed Asset..........................................................8
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2.4. Concept of Public Fixed Asset Management............................................................9
2.5. Public Asset Management Objectives.....................................................................10
2.6. Organizational Structure of Fixed Asset Management...........................................11
2.7. Challenges of Fixed Asset Management in Public Sectors.....................................12
2.8. Fixed Asset Life-Cycle Management.....................................................................13
2.8.1. Planning of Fixed Asset...................................................................................14
2.8.2. Acquisition of Fixed Asset...............................................................................15
2.8.3. Usage or Operation and Maintenance..............................................................15
2.8.4. Disposal of Fixed Asset....................................................................................17
2.9. The Elements of Public Asset Management...........................................................19
2.9.1. Public Asset Identification...............................................................................19
2.9.2. Asset Needs Analysis.......................................................................................20
2.9.3. Asset Life Cycle Guidance...............................................................................20
2.9.4. Asset Performance Management and Measurement........................................20
2.10. Fixed Asset Control..............................................................................................21
2.11. Principles of Asset Management...........................................................................23
2.12. Public Sector Asset Information System..............................................................24
CHAPTER THREE
RESEARCH METHODOLOGY...................................................................................25
3.1. Introduction.............................................................................................................25
3.2. Research Design......................................................................................................25
3.3. Sample Size and Sampling Techniques..................................................................26
3.4. Data Collection Methods........................................................................................26
3.5. Data Analysis Methods...........................................................................................27
3.6. Operational Definitions of Key Terms....................................................................28
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION..........................29
4.1. Introduction.............................................................................................................29
4.2. Response Rate.........................................................................................................29
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4.3. Demographic data of respondents...........................................................................30
4.4. Public Fixed Asset Utilization Practices (Plan, Use and Maintenance, and
Disposal)..................................................................................................................31
4.4.1. Legal Framework, Organizational Structure and Human Capacity for Fixed
Asset Management............................................................................................31
4.4.2. Fixed Asset Management Planning and Asset Performance Plan....................36
4.4.3. Accounting System for Fixed Asset.................................................................38
4.4.3.1. Criteria to Determine Fixed Asset.................................................................38
4.4.3.2. Record Keeping and Cost Consideration......................................................38
4.4.4. Fixed Asset Usage............................................................................................39
4.4.5. Fixed Asset Maintenance.................................................................................49
4.4.6. Fixed Asset Disposal........................................................................................52
4.5. Factors that Affect Effective Fixed Asset Management of Public Sectors.............56
4.6. Consequences of Mismanagement of Public Fixed Assets.....................................58
CHAPTER FIVE
MAJOR FINDINGS, CONCLUSION AND RECOMMENDATIONS.....................59
5.1. Introduction.............................................................................................................59
5.2. Summary of Major Findings...................................................................................59
5.3. Conclusions.............................................................................................................62
5.4. Recommendations...................................................................................................64
Bibliography
Annexes
vi
List of Tables Page
Table 4.1: Response Rate.................................................................................................. 30

Table 4.2: Respondents’ Sex Composition........................................................................30
Table 4.3: Respondents’ Level of Education.....................................................................30
Table 4.4: Respondents’ working Experience...................................................................31
Table 4.5: Available Document to Manage Public Fixed Asset........................................32
Table 4.6: Available Document Supportiveness for Asset Management..........................33
Table 4.7: Human and Financial Resources......................................................................34
Table 4.8: Suitability of Organizational Structure for Fixed Asset Management.............35
Table 4.9: Strategic, Operational and Performance Plans for Fixed Asset management. .37
Table 4.10: Does your organization plan includes Acquisition, Usage, Maintenance and
Disposal of Fixed Asset....................................................................................38
Table 4.11: Does PIN Code is Given for Fixed Asset......................................................40
Table 4.12: Existence of Insurance Coverage for Fixed Asset..........................................44
Table 4.13: Internal Audit Team Contribution in Fixed Asset Management....................47
Table 4.14: Effectiveness of Service Delivery Using Fixed Asset....................................47
Table 4.15: Do Public Assets used for only Public Purposes?..........................................48
Table 4.16: Provision of Protection for Property from Loses.......................................... 48
Table 4.17: Do Organizations Apply Timely Maintenance for Fixed Asset?...................50
Table 4.18: Ranking Asset Maintenance Strategy.............................................................52
Table 4.19: Surplus Fixed Asset at Warehouse.................................................................54
Table 4.20: Surplus Fixed Asset at Office Space..............................................................55
Table 4.21: Ranking the Implementation of Fixed Asset Disposal...................................55
Table 4.22: Ranking the Challenging Factors or Problems in Managing Fixed Assets....57
Table 4.23: Consequences of Mismanagement of Public Fixed Assets............................58
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List of Figures Page
Figure 2.1: Fixed Asset Life-Cycle...................................................................................13
Figure 4.1: Respondents Training on Fixed Asset Management.......................................33
Figure 4.2: Existence of Clear Accountability and Responsibility....................................42
Figure 4.3: Condition of Fixed Asset Service Delivery....................................................43
Figure 4.4: Existence of of Monitoring and Controlling System For Fixed Asset from
Misuse ..............................................................................................................45
Figure 4.5: Ranking Internal Control System for Public Fixed asset................................46
Figure 4.6: Existence of Planed Fixed Asset Maintenance System...................................49
Figure 4.7: Existence of Planed Fixed Asset Maintenance System...................................51
Figure 4.8: Availability of Surplus or Unserviceable Fixed Asset....................................53
Plates 4.1: Photos Indicating Fixed Asset Mismanagement..............................................56
viii
List of Acronyms
BoFED: Bureau of Finance & Economic Development
BSC: Balanced Score Card
FAMU: Fixed Assets Management Unit of public sectors
FGE: Federal Government of Ethiopia
GOFAMM: Government Owned Fixed Asset Management Manual
KPIs: Key Performance Indicators
MoFED: Ministry of Finance & Economic Development
NPM: New Public Management
PIN: Property Identification Number
PPP: Public Private Partnership
SNNPR: South Nation Nationalities and Peoples Region
TLAM: Total Life-Cycle Asset Management
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Abstract
This study was conducted on assessment of fixed asset management practices in selected
public sector working in Bahir Dar City Administration Finance and Economic
Development Office. Fixed asset management is the area in which public sectors are not
giving much emphasis. However, the practices and/or factors that impede public sectors
to effective and efficient management of fixed asset are not assessed in depth in Bahir
Dar city Administration Finance and Economic Development Office. Based on the
problem statement and objectives of the study, four research questions were developed.
These are: what is the procedure for acquiring new fixed assets? (In term of plan, usage
and maintenance, and disposal). How do fixed asset management activities undertaken?
Are fixed assets utilized and controlled? Is the existing organizational structure favorable
for fixed asset management? To address these questions the quantitative and qualitative
research methodologies are employed. The two known sources of data, namely primary
and secondary, are used. Descriptive statistics is employed for data analysis. Based on
the analysis of data, the researcher found that the fixed asset management practice of
Bahir Dar City Administration Finance and Economic Development Office Deemed to be
and recognized as poor due to many reasons. Among these reasons, the organization has
no adequate plan for fixed asset operation, maintenance and disposal; there is weak
monitoring and controlling system to protect fixed asset from misuse through private
consumption, loss and wastage in the organizations. Besides, lack of skilled human
power, management emphasis, accountability, responsibility, transparency and adequate
legal framework; the budget limitation; and existence of unfavorable organizational
structure are some of the problems in managing fixed assets in Bahir Dar city
Administration finance office. As a consequence, it results in increasing maintenance
cost, financial loss, need for new asset and risk of the asset, and decrease service delivery
level. Therefore, the researcher suggests that the organizations management should
strengthen fixed asset management system through promoting management emphasis,
skilled human power, accountability, responsibility, transparency and controlling system.
Key words: Public Sector, Public Fixed Asset, Public Fixed Asset Management Practice
and Challenge.
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CHAPTER ONE
INTRODUCTION
1. Introduction
Public sectors either owns or uses, and thus manages, substantial amounts of property.
The nature of demand for public services is changing with clients increasingly expecting
local government services to be provided in different ways, at different times and in
different locations. According to Phelps (2009, p. 43) asset management has emerged
as a result of a public sector operating environment where funding is scarce
relative to investment needs for new and existing fixed asset. According to Grubišić
et al., (2009, p. 333) even though public asset management is usually not articulated as a
direct task of public representatives, it indirectly relates to the pursuit of many
government functions, such as public goods and services provision, heritage preservation,
strategic goal achievement and the daily operational tasks of public representatives.
The asset base therefore needs to be managed effectively to support this evolution. And
also fixed asset management strategy should be included on the overall organizational
strategies and objectives of the public sector. So this study was conducted to assess the
challenges and practices of public fixed asset management in Hadiya Zonal
administration offices.
This chapter provides background information of the study, which includes introduction,
background and rationale, problem statement, research questions, and objectives of the
study, significances, limitations and scope of the study and outline of the chapters.
1.1. Background and Rationale of the Study
Any government is accountable to provide quality public services to their citizen at the
most favorable terms. They are also responsible for managing a diversified public asset
portfolio in order to achieve their objectives. Besides, acquire, maintain, safeguard,
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distribute and administer fixed assets needed to support the entity's mission, goals and
objectives has also immense importance.
Capital threshold and economic useful life criteria is used to define fixed asset in
different literatures as well as in legal frameworks. For instance, the Ethiopian Federal
Government Procurement and Property Administration Proclamation No. 649/2009 has
clearly gives the definition of fixed asset as “Fixed asset means tangible asset the value
of which is determined by a directive to be issued by the ministry that is in operational
use and has a useful economic life of more than one year” (Ethiopian Federal
Government Procurement and Property Administration Proclamation No. 649/2009,
Article 2/23, P. 4862). The Ethiopian Federal Government Property Administration
Directive No. 9/2003 (Amharic version) has also defined fixed asset as tangible asset
costing Birr 1000 or more and that is in operational use and has a useful economic life of
more than one year. According to this directive, the fixed asset includes furniture,
computer, heavy equipment, vehicles, ships and aircrafts, buildings, roads, sewers,
bridges and the like. Fixed assets are many things to the many public sector entities that
can be any items costing over a certain dollar amount to an item that has a certain useful
life (Brady, 2001, p.4).
According to Kaganova (2008, p.1) Governments own an impressive range of property

[such as] real estate ([eg.] land, public housing, water distribution systems, roads, office
buildings, etc.); movable property (vehicles, equipment), and whole enterprises. Due to
its higher monetary value and economic useful life of the fixed asset, its management is
very important to achieve the objective of the organization.
Asset management of public property is understood as the process of making and

implementing decisions about property acquisition, use / management, and disposition
(Kaganova, 2008, p.1). While, GOFAMM (2007, P.15) defines management of
government property is the process of decision-making and implementation relating to
the acquisition, use, and disposition of real property. In the Government Property
Guideline No 6/1991, government property is defined as fixed assets and stock owned by
the FGE excluding money and land. Management of government owned fixed assets is
2
mainly concerned about the duties of care, control and effective use of the fixed asset.
The acquisition and disposition of fixed assets is part of the Stock Management System.
According to South Nation, Nationality and People Regional (SNNPR) State
Procurement and Property Administration Proclamation No. 146/2012 (2012) public
property means any property of the regional state other than public fund and land. The
head of each public body shall ensure that property handled, used and disposed of in
accordance with the directive to be issued by the bureau.
Some literatures indicate that managing public fixed asset is challengeable due to many
factors unlike private asset management. Among others, Hasbi, Bambang and Connie
(2011, p.1) determine public asset management challenges are absence of an institutional
and legal framework to support the asset management application; non-profit principle of
public assets; multiple jurisdictions involved in the public asset management processes;
the complexity of local government objectives; unavailability of data for managing public
property; and limited human resources. In public property management, the major
problems are honest incompetence, lack of proper incentives for public sector agencies
and staff, inadequate legal and regulatory environment, influence of politics, legitimized
conflicts of interest and corruption and favoritism Kaganova (2008, p.4-5).
Government Owned Fixed Asset Management Manual (GOFAMM, 2007) states the
existing fixed asset system is incomplete in Ethiopia. Again Federal Public Procurement
and Property Administration Agency indicates that public bodies/sectors do not give
much emphasis for public fixed asset management and asset management is not
implemented as per proclamation, directive and manual (Public Procurement and
Property Administration Agency newsletter, published on May, 2012). Therefore, the
historical background of public fixed asset management is poor and problematic in
Ethiopia. Moreover, as per the researcher public fixed asset management inefficiency
may be more in zonal level that its property administration is undertaken by only one
core process for the whole zonal public sectors. Hadiya Zonal administration is selected
as a study area because such research has not been done so far in this level and area. This
lack of research, especially under the Zonal administrative context, has been a major
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motivation to carry out this study. In light of this information, the study tries to
investigate how the public fixed asset is managed and controlled by Hadiya zone offices
as elaborated in the next problem statements.
1.2. Statement of the Problem
According to Kaganova (2008, p.1), until very recently, public property asset
management had been very non-transparent, inefficient, and not sufficiently integrated in
public financial management even in the most developed countries. The situation seems
similar in Ethiopia. Because, public fixed asset management has been inefficient and
incomplete due to modified cash based accounting system of government that do not
provide financial statement for fixed asset accounts (GOFAMM, 2007, p. 5-6). The
existing fixed asset registers maintained by the public bodies [or sectors] are incomplete
and not similar in form and content that and hence, it is not possible to obtain information
that enable the determination of the total asset owned by the government (Government
Owned Fixed Asset Management Manual, 2007, p. 5). Lack of accountability,
responsibility, performance measurement and record keeping are the problems [observed]
in fixed asset management of public sectors in Ethiopian Federal Government (Tadewes,
2009, p. 82-83).
In this connection, Public Procurement and Property Administration Agency indicates

that public bodies/sectors do not give much emphasis for public fixed asset management;
and asset management is not implemented as per the proclamation, directives and
manuals (Public Procurement and Property Administration Agency newsletter, published
on May 2012).
Likewise, in SNNPR State, public property management is inefficient and public fixed
asset management is the area in which public sectors are not giving much emphasis.
Incomplete record maintenance for fixed asset, warehouse problem and lack of physical
verification of asset was indicated as major limitations of public sectors working in
Hadiya Zone (SNNPR Government Office of Auditor General annual report, 2013, p. 3).
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However, the major challenges and/or factors that impede public sectors to effective and
efficient management of public fixed asset is not investigated in depth. Thus, this study
focuses on investigating the challenges and practices of public fixed asset management
by public sectors in Hadiya Zone.
1.3. Objectives of the Study

1.3.1. General Objective
The general objective of this study is to assess the challenges and practices of public
fixed asset management by public sectors in Hadiya Zone.
1.3.2. Specific Objectives

To achieve the general objective of the study, the targeted specific objectives are:
1. To examine fixed asset utilization practices (plan, use and maintenance, and
disposal) in public sectors of Hadiya Zone.
2. To assess factors that affect effective fixed asset management of public sectors in
the study area.
3. To identify the consequences of mismanagement of public fixed asset observed in

public sectors that are working in Hadiya Zone.
1.4. Research Questions
To assess the public fixed asset management practice and its challenges in Hadiya Zone,
the researcher focused on the following basic research questions:
1. How public fixed asset utilization (plan, use and maintenance, and disposal) is
practiced or implemented within the public sectors of Hadiya Zone?
2. What are the factors that affect effective fixed asset management of public sectors
in study area Zone?
3. What are the consequences of mismanagement of public fixed assets observed in

public sectors that are working in Hadiya Zone?
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1.5. Significance of the Study
The findings of this study can be valuable in indicating the extent of public fixed asset
management in public sectors in the study area. Besides, it may provide possible options
on how to control and manage public fixed asset effectively and efficiently so as to
minimize mismanagement and safeguard public resources. And also the research possibly
may indicate various opportunities which improve the fixed asset management. Finally,
the study may be used as reference for future research on the topic.
1.6. Scope and Limitation of the Study
1.6.1. Scope of the Study
All government organizations need effective public fixed management and control
mechanisms. However, this study focused on selective public organizations in Hadiya
Zone. Although, public fixed asset management comprises asset planning, acquisition,
use and maintenance, and disposal phases, this study gives emphasis only on the practices
of fixed asset utilization (fixed asset planning, use and maintenance, and disposal phases)
phase. Furthermore, only public sectors working at zonal level were covered in this study
(Woreda and town administration sector offices are not included).
1.6.2. Limitation of the Study
Due to the basic fact that the subjects of the study only account for a limited proportion
of the total public sectors in Hadiya Zone, the generalization of the results obtained from
this study may be limited.
1.7. Outline of Chapters
This research has five chapters. The first chapter provides background information of the
study, which includes introduction, problem statement, research questions, and objectives
of the study, significances, limitations and scope of the study. The literature written by
different scholars mainly on public fixed asset management; different proclamations and
6
directives of property administration of Ethiopia and other relevant documents are
reviewed in chapter two. A detail description about the research methodology of the
study which includes the research design, sample size and sampling techniques, data
collection methods and data analysis methods are presented in chapter three. Chapter four
comprises of the data presentation, analysis and interpretation part of the paper. Finally,
the major findings of the study, conclusion and recommendations are presented in chapter
five.
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CHAPTER TWO
LITERATURE REVIEW
2.1. Introduction
The literature written by different scholars mainly on public fixed asset management;
different proclamations and directives of property administration of Ethiopia and other
relevant documents are reviewed and incorporated in this chapter.
2.2. Definition of Public Fixed Asset
Capital threshold and economic useful life criteria is used to define fixed asset in
different literatures as well as in legal frameworks. For instance, William Brady (2001,
p.4) define fixed assets as they are many things to the many public sector entities that can
be any items costing over a certain dollar amount to an item that has a certain useful life.
According to Brady (2001, p.4) fixed asset has a use full life of at least one year and a
minimum acquisition cost of dollar 5,000 in USA. Similarly the Ethiopian federal
government property administration directive no. 9/2003(Amharic version) defines fixed
asset as tangible asset costing Br. 1,000 or more and that is in operational use and has a
useful economic life of more than one year. These are furniture, computer, heavy
equipment, vehicles, ships & aircrafts, buildings, roads, sewers, bridges and etc.
According to Alfred King (2011) fixed assets sometimes referred to as property, plant,
and equipment represent the largest single asset category on the balance sheet.
2.3. Characteristics and Categories of Fixed Asset
According to William and Brady (2001, p.9) the major characteristics of fixed assets are:
they are acquired for use in operation and not for resale; they are long-term in nature; and
they poses physical substance or existence and thus are differentiated from intangible
asset such as goodwill and patents. Moreover, property assets have three features such as
they are expensive; they need to be carefully managed over their lives to ensure best
value; and It takes time to determine carefully new property needs and to procure and
provide them (Jones and White, 2008, p. 5).
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The categories of the government assets that are considered for maintenance of the
records are those given by the FGE Chart of Account. These property and equipment are
vehicle and other vehicular transport; aircraft, boats, and like; plant and machinery;
military equipment; buildings–residential; buildings–non residential; infrastructure;
military purpose buildings; furnishings and fixtures; livestock and transport animals;
office equipments; books; and construction in progress that are construction of buildings–
residential; construction of buildings – non residential; construction of infrastructure; and
construction of military purpose buildings (GOFAMM, 2007, P. 10-12).
2.4. Concept of Public Fixed Asset Management
The reform processes in the public sector urge the definition of the use of public assets
and measurement of the outcomes. If the experiences of developed countries are to be
followed, we support the introduction and improvement of modern public asset
management, which should be guided by market efficiency principles, good governance
and business-style financial reporting in general governments. Public asset management
should be conducted in line with the development goals and should be used to achieve
welfare for all the citizens in a country (Grubišić et al., 2008, p.106).
According to Jones and White (2008, p. 5) asset management is a structured process that
seeks to ensure best value for money from property assets in serving the strategic needs
of local authorities. Asset management of public property is understood as the process of
making and implementing decisions about property acquisition, use / management, and
disposition (Kaganova, 2008, p.1). Similarly Christ Lloyd (2010, p.3) defines asset
management as the systematic and coordinated activities and practices through which an
organization optimally and sustainably manages its assets and asset systems, their
associated performance, risk and expenditures over their life cycles for the purpose of
achieving its organizational strategic plan.
While, GOFAMM (2007, P.15) defines as the management of government property is the
process of decision-making and implementation relating to the acquisition, use, and
disposition of real property. In the Government Property Guideline No 6/1991,
government property is defined as fixed assets and stock owned by the FGE excluding
9
money and land. The definition covers those assets obtained by borrowing or any other
reason and is under the custodianship of the public organizations. Management of
government owned fixed assets is mainly concerned about the duties of care, control and
effective use of the fixed asset. The acquisition and disposition of fixed assets is part of
the Stock management system.
2.5. Public Asset Management Objectives
Public sectors encompass all of the government agencies that provide the common goods
and services that the taxpaying public needs. This segment includes federal, state,
country, city and municipality that carry out the mission of government (Brady, 2001,
p.9).
According to Grubišić et al., (2009, p. 338) each country has its own public management
objectives and public asset management practice. Despite these differences, there are
some common preconditions that are considered necessary for conducting public asset
management activities efficiently. These are: a public asset registry, classification,
recognition and measurement, public asset portfolio construction, institutionalization and
professionalism in public asset management, and cost and outcomes measurement.
According to Jones and White (2008, p.2) and Brady (2001, p.1-2) the benefits of
property asset management are improving accountability, service management, risk
management and financial efficiency. Therefore, Christ Lloyd (2010, p.74) successful
asset management requires the integration of effective processes across all aspects of a
business to ensure that bottom-up plans and top-down business objectives are aligned
over the long-term. Brady (2001, p.1-2) also agrees good fixed asset management
establishes accountability and responsibility. Additionally according to Christ Lloyd
(2010, p.74) a good fixed asset management program will facilitate the physical
inventory of fixed assets, advance the establishment of insurance conditions, and comply
with federal, state, or local policy. Conversely, poor asset management practices can
leave organizations exposed to significant risks, loss of reputation and failure of the
business. Similarly, according to Kaganova (2011, p. 39) argue that the absence of
necessary improvement to asset management practices, one would foresee a loss for
10
taxpayers of a substantial part of the public wealth accumulated in government property
or, worse, creation of new liabilities for the future. Therefore, she suggested that good
management of government property assets is a highly technical area and requires
professional real estate expertise, along with knowledge of specific tools such as PPPs.
Finally, effective asset management aims to maximize uptime/productive capacity,

maximize accuracy/quality levels, minimize costs per unit produced, minimize the risk,
prevent safety hazards to employees and the public, and conform to national and
international regulations on due diligence (Campbell, Jardine, and McGlynn, 2011, p.24).
Therefore, public asset management should be conducted in line with the development
goals and should be used to achieve welfare for all the citizens in a country (Grubišić et
al., 2008, p.105).
2.6. Organizational Structure of Fixed Asset Management
According to Jones and White (2008, p. 51-53) good organization arrangements, culture
and structure are a prerequisite to successful asset management. Although the
organizational structure for asset management within any organization may vary greatly,
it is worth highlighting a number of key recommended roles and responsibilities. The
structure must place a senior manager to be responsible for asset management across the
organization and an asset champion must exist at board level to whom the senior manager
responsible for asset management reports.
Similarly in Ethiopia, different public bodies and units or committees have been given
different responsibilities in managing public properties. According to GOFAMM (2007,
p. 19-27) MoFED is the public sector that is responsible for issuing directives for the
custody and control of property and for consolidating financial reports. Regardless of the
different organization structures that public sectors have, there should be FAMUs
responsible for the management of fixed assets. The major task is to plan and perform
count of all fixed assets in the custody of the public organizations. Valuation of fixed
asset by the valuation committees of public organizations is carried out at two points for
two significantly different purposes. The first point is to include the value of the fixed
asset in the fixed assets register. The second is when the asset is to be disposed off.
11
Therefore, the simple structure identifies the key roles and responsibilities that need to be
present to facilitate a successful corporate approach to asset management. Clearly there
are also many other mechanisms […] such as consultation methodologies and decision-
making structures in the wider organization (Jones and White, 2008, p. 54).
2.7. Challenges of Fixed Asset Management in Public Sectors
Developing countries, especially transition countries, have faced obstacles in public

sector functioning. They have not yet achieved a satisfying level of efficiency in public
sector management in general and in public asset management in particular (Grubišić et
al., 2008, p.105).
Some literatures indicate that managing public fixed asset is challengeable due to many
factors unlike private asset management. Among others, Kaganova (2008, p.1)
determines that until very recently, public property asset management had been very non-
transparent, inefficient, and not sufficiently integrated in public financial management
even in the most developed countries. Hasbi et al., (2011, p.17-18) to apply a public asset
management framework local governments are confronted by a number of challenges.
Those challenges are: absence of an institutional and legal framework; non-profit
principle of public assets; the complexity of local government objectives; unavailability
of data for managing public property; and limited human resources.
Mardiasmo, Sampford and Barnes (2010, p.18) concluded that infancy of reform, lack of
human resource, lack of incentive, incomplete rating program and lack of government
attention are challenging factor in fixed asset management. According to Kaganova
(2008, p.3) a common systemic problem is that principles of good financial management
are not applied to public property assets, except in a few most advanced countries
(Australia, New Zealand). As a result, the typical property asset management weaknesses
are property related expenses are not monitored in systematic way, the revenue potential
of public properties is underused and market value of assets is not recognized. Likewise,
the research study indicates lack of accountability, responsibility, performance
measurement and record keeping are the problems [observed] in fixed asset management
of public sectors in Ethiopian Federal Government (Tadewes, 2009, p. 82-83). According
12
to GOFAMM (2007) the cost data were not seriously kept. In addition fixed assets under
the custody of one public organization might not be obtained for cash. Finding
documentations to arrive at the cost of such assets is unthinkable.
Therefore, in implementing a public asset management framework, it is important for

local government to understand the challenges that they will face and an understanding of
the challenges will assist in developing effective strategies (Hasbi et al., 2011, p.17-18).
2.8. Fixed Asset Life-Cycle Management
The asset life-cycle is a key concept underpinning asset management. An asset life-cycle
covers all phases of an asset’s life starting with planning, through its acquisition,
operation, maintenance and eventual disposal.
Planning
Acquisition
Disposal
Operation and
Maintenance
Figure 2.1: Fixed Asset Life-Cycle

Source: Municipal Finance Management Act of South Africa (2004)
According to Kirkpatrick (2007, p. 51) ideally, a local government should have asset
policies and procedures that cover all aspects of asset management which includes
general accounting procedures; planning; acquisition; operation and disposal.
2.8.1. Planning of Fixed Asset
The benefits of good asset management plan is it aligns asset objectives with
organizational objectives, it ensures overall efficient and effective use of assets, it
13
provides communication and future decision- making, and it brings clarity to the way
assets are managed (Jones and White, 2008, p. 9). And it spells out a sequence of steps
that makes good policy sense thus a detailed understanding of the nature, extent, and use
of all assets controlled by a government agency is the first step to properly manage the
assets (Hasbi et al., 2010, p.5). In accordance with Kirkpatrick (2007, p. 51), in the
absence of an asset management plan, different problems can occur [such as] poor use of
assets; failure to rationalize surplus assets; significant variation in operating costs
between locations; inadequate management information; deteriorating physical condition
of stock; and/or continuing maintenance of uneconomic assets.
According to Kooymans and Abbott (2006, p. 198-199) possession of usable information

is an integral part of the organization’s strategic planning. This information includes:
physical lives of assets; expected amount and timing of major capital and maintenance
expenditures; asset replacement values; and market value. Having that information
enables asset managers to influence organizational decisions that affect their operations
with access to financial information.
A. Strategic Plan of Fixed Asset
According to Australian National Audit Office Better Practice Guide on the Strategic and
Operational Management of Assets (2010, p. 13) a strategic asset management frame-
work brings together the inter-relationships between key corporate planning activities and
asset management, allowing the entity’s strategic goals to be integrated with the asset
portfolio to meet the organization’s program delivery requirements.
B. Operations Plan of Fixed Asset
An operations plan complements the acquisition, maintenance and disposal plans and it
details the operational aspects of an asset on the basis of its life-cycle. It will set out roles
and responsibilities for program and asset managers and assign responsibility for asset
performance and accounting for life-cycle costs including: asset performance measures;
asset condition; physical security and safeguarding; depreciation; finance costs; operating
costs such as energy and cleaning costs; employee costs where specialist staff are
14
required to operate an asset; maintenance costs; and significant disposal costs such as
make-good, demolition or restoration (Australian National Audit Office Better Practice
Guide on the Strategic and Operational Management of Assets, 2010, p. 40-41).
2.8.2. Acquisition of Fixed Asset
Operational Management of Assets (2010, p. 37-38) the program delivery requirements
may be best met by the outright acquisition of new assets that will also meet the efficient,
effective and value-for-money considerations. Asset acquisition options will have been
considered and a decision on asset acquisition will have been determined though the
strategic capital management process, and business plans will have been developed to
assess alternatives, including non-asset solutions.
2.8.3. Usage or Operation and Maintenance
Since the asset placed for use after acquisition or constriction it needs proper
safeguarding handing and maintenance. Heads of public bodies shall ensure that all
public property is used as productively, shall establish a proper maintenance system, shall
adopt a lifetime approach to the management of public property. The heads and all
employees of public bodies are responsible for the protection and preservation of public
property (Ethiopian federal government procurement and property administration
proclamation no. 649/2009). Government must be able to hold asset managers
accountable for the assets in their custody and be assured that these assets are serving
their intended purposes and achieving targeted results (Kaganova, 2008, p. 7). Likewise,
Brady (2001, p10-11) argues that public sector managers, administrators and employees
have a duty and responsibilities to provide protection for the assets under their control.
This protection is for losses from natural disasters, thefts, fire and an abundance of other
ills that can befall a public sector organization.
Fixed assets in use comprise those assets that are found with the users and that they are
under the custodianship of one of the employees of the public sector. A department or a
division should be the custodian for those assets that are not identifiable with an
15
individual user (GOFAMM, 2007, P. 29). According to Campbell et al., (2011, p.17), the
operation of assets is where performance is most affected [thus] the new practices in this
area include formal information technology asset management (ITAM), asset
performance management strategies, and total asset visibility solutions. As said by
Kirkpatrick (2007, p. 51) operating procedures for assets could include: establishing
performance indicators (for example, levels of under-used space); developing operation
and maintenance plans (including maintenance priorities highlighting essential and urgent
work); procedures for monitoring the condition and use of assets; developing
maintenance plans; tracking assets that are off-site, for example, transfers, loans and off-
site repairs; and safeguarding and protection of assets.
Operational Management of Assets (2010, p. 44-45) maintenance is a critical activity in
the life-cycle of an asset. It may be through planned maintenance (such as preventative,
cyclic and deferred/backlog) or unplanned maintenance (such as repair and
breakdown/corrective). Poor maintenance often leads to a shorter useful life than that
envisaged from design specifications and may lead to loss of functionality, a decrease in
utilization, pose a threat to human safety or result in a legislative breach.
Maintain the assets in support of the strategy and targets using the standards, policies, and
procedures in place with feedback into the TLAM. Maintenance costs and resources can
wildly alter the total cost of ownership, from repair costs to downtime. Modification can
also be critical to the life extension of assets, as machines are retooled, facilities
repurposed, and technology adapted to facilitate newer processes (Campbell et al., 2011,
p.17-18). Long-term strategic plans must be developed not only to address the current
issues of deferred maintenance and renewal, but also to plan for the ongoing maintenance
and replacement needs of the existing stock of tangible capital assets and for future
growth (Kent Kirkpatrick, 2007, p. 51). According to Campbell et al., (2011, p. 31)
continuous improvement involves a range of well-known methods and maintenance
tactics. According to GOFAMM (2007, p. 13-14) the cost of major overhauls/
maintenance to machinery or vehicles should be capitalized (added to the current cost of
16
the asset) provided that the overhaul amounts to virtually a complete rebuilding of the
asset with replacement of all worn-out parts, the effect of which being to significantly
extend the useful life of the asset. Likewise, similar overhaul that enable the asset to
serve for a longer life than the original estimate are capitalized. [But] maintenance paid
on a fully depreciated asset is not capitalized. It is considered as expense in the year in
which the amount is paid.
2.8.4. Disposal of Fixed Asset
According to Grubišić et al., (2008, p.106) public assets are managed by professionals,
carefully valued and their disposal is estimated according to the functions they have in
providing public services in some developed countries (for example, Norway and
Alaska). Disposal of tangible capital assets that are moveable personal property is the
responsibility of the manager of purchasing services unless delegated to operating
departments. Department heads should notify the manager when assets become surplus to
operations (Kirkpatrick, 2007, p. 51).
Nonessential government assets on the other hand should not be carried unless they
contribute ongoing benefits or cash. If they do not make positive contributions, decision
makers should consider their sale or disposal to divert capital to more productive uses
that can help achieve the government’s objectives (Hasbi et al., 2010, p.5). A disposal
plan should be an integrated part of an asset management strategy in that it leads into the
planning process for new or replacement assets and is a powerful management tool in
assessing why the performance of certain assets may not have worked as intended. Assets
may be disposed of for a number of reasons including end of useful life, surplus to
requirements, under-utilized, not fit for purpose, unserviceable, or does not meet
legislative requirements. Significant revenues may arise from asset sales and these may
either be returned to government or used to fund future asset acquisitions (Australian
National Audit Office Better Practice Guide on the Strategic and Operational
Management of Assets, 2010, p. 47). According to Campbell et al., (2011, p.18) disposal
phase involves disposal, retirement, or liquidation of assets in accordance with the
strategy, policies, and procedures. According to Grubišić et al.,( 2009, p. 334) some
17
public institutions and local authorities have managed and disposed of certain public
assets in an irresponsible manner, because there were no centralized or complete records
on those public assets and the probability of public scrutiny was very low. In that sense,
public managers have to employ the best private sector management practices, having in
mind the interests of their beneficiaries – the citizens.
The practice of total life-cycle asset management (TLAM) takes an expanded view of
how assets are planned for, used, maintained, and ultimately disposed of (Campbell et al.,
2011, p.16). Similarly Christ Lloyd (2010, p.3) asset management is optimal life cycle
management of physical assets to sustainably achieve the stated business objectives. It
allows asset intensive businesses to use limited resources to achieve their stated business
objectives in the most cost effective ways.
According to GOFAMM (2007, p.15-17) management of government property is the

process of decision-making and implementation relating to the acquisition, use, and
disposition of real property. While management of government owned fixed assets is
mainly concerned about the duties of care, control and effective use of the fixed asset
which starts when fixed asset is issued from store. The acquisition and disposition of
fixed assets is part of the Stock management system. So fixed asset cost include total cost
life cycle of asset, according to Campbell and Jardine (2011, p.313) life-cycle costing
analysis considers all costs associated with an asset’s life cycle, which may include
research and development; manufacturing and installation; operation and maintenance;
and system retirement and phase-out.
There for, to mange whole asset life-cycle, there are two principal ways in which asset
management capacity can be provided, either by the formation of a separate specialist
asset management team or the allocation of the responsibility for asset management
within an existing property management team (Jones and White, 2008, p. 54).
2.9. The Elements of Public Asset Management
As sited in Gerardo W. Flintsch, and J. W. Bryant (2009, P. 15) asset management is a

generic framework of tools and methodologies that incorporates elements of various
18
diverse disciplines such as accounting, value engineering, life-cycle cost analysis,
economics, risk management, and user satisfaction (Danylo 1998). While, according to
Hasbi et al., (2010, p.4) the important elements that should be included in the proper asset
management framework are asset identification, asset needs analysis, asset life cycle
guidance and performance measurement as controlling element.
2.9.1. Public Asset Identification
Asset identification helps asset managers through providing the organization asset
information like what and where is this asset and who does it serve. For example,
according to South African Local Government Capital Asset Management Guideline
(2004, p. 69) asset identification comprises asset class, parent asset or standalone asset,
asset number, asset description, and location.
The primary purpose of asset identification and its accompanying

components (programs, tasks, or activities) is to help asset managers to: 1)
know exactly what assets they have for the purpose of operating, monitoring,
and/or maintaining the assets; 2) know precisely where the assets are
located; 3) know the condition of the assets at any given time; 4) understand
the design criteria of the assets and how they are properly operated and
under what conditions; 5) develop asset maintenance program; and 6)
perform all of these activities to optimize the costs of operating the assets and
extend their useful life (Hasbi et al., 2010, p.4).
According to GOFAMM (2007, p. 39) a logical and systematic number is assigned to

assets for ease of reference and for summarizing and analyzing information on fixed
assets. In property identification number (PIN) development, alphabets, numbers and
other characters are used which should be easy to recognize, understand and logical.
2.9.2. Asset Needs Analysis
Countries in transition have been going through a rapid process of redistribution of public
asset through decentralization of government. In many countries, public asset transfers to
19
local governments have outpaced further privatization and restitution, which leads to an
increase property ownership by local governments. In selection of asset ownership, local
governments should be aware of the type of assets they need to deliver the public
services. Then, they can categories, which assets are needed and which assets are surplus,
and should be alienated (Hasbi et al., 2010, p.5).
2.9.3. Asset Life Cycle Guidance
Experts have stressed that asset management is not a single event but rather a process
designed to produce knowledgeable decisions about purchasing, operating, and disposing
of assets which known as asset life cycle. Asset life cycle starts from planning, design,
procurement, maintain, manage, utilize, and dispose (Olga Kaganova & Nayyar-Stone,
2000 sited in Hasbi, et al., 2010, p.5).
A well-designed asset management plan spells out a sequence of steps that makes good
policy sense. A detailed understanding of the nature, extent, and use of all assets
controlled by a government agency is the first step to properly manage the assets. Once
an asset is identified and classified as essential or nonessential to an organization’s
mission, its performance can be continuously measured while its contribution to that
mission is periodically assessed. If they do not make positive contributions, decision
(Hasbi, et al., 2010, p.5).
2.9.4. Asset Performance Management and Measurement
According to Hasbi et al., (2010, p.5) the measurement of performance has become an
essential element of the strategic thinking of assets owners and managers. Without having
a formal measurement system for performance, it is difficult to plan, control and improve
the asset management process.
Assessing the performance of the entire asset management system in an organization is

often a prerequisite to more technical performance improvement. Metrics are a key
feature in effective performance management of the asset base. Measurement through the
20
balanced scorecard, key performance indicators (KPIs), business ratios and
benchmarking enable positive action to be taken to improve delivery, financial efficiency
and the quality of service to customers (Jones and White, 2008, p.33).
2.10. Fixed Asset Control
According to Campbell et al., (2011, p.30-31) control comprises planning, scheduling,

and execution practices to manage work and delivery of the service; maintenance tactics
for all scenarios; and systems that help manage the flow of control and feedback
information through these processes. To keep control over public spending and influence
their own well-being, the citizens require good governance procedures to be applied in
public asset usage activities (Grubišić et al., 2008, p.105).
According to the Ministry of Local Government of Palestine Revised Fixed Assets Policy
and Procedures Manual (2008, p.11) the purpose of the fixed asset system is to: gather
and maintain information needed for the preparation of financial statements; provide
control and accountability over fixed assets. The system permits loss, theft, or damage to
property to be identified by a comparison of the assets on hand and their present
condition to the information found in the fixed asset records [such as] information
regarding the location, responsible party, and condition of public property.
As per GOFAMM (2007, P. 29) fixed assets owned by the government were so far
controlled mainly physically [but] the cost data were not seriously kept. The effort of
improving the fixed assets management system is to enhance the effectiveness of the
existing control, to introduce new methods and records and to lay the ground for
incorporating the value of fixed assets in the financial accounts system.
Brady (2001, p10-11) argues that the fixed asset management program is important for a
number of reasons such are control of loses (due to pilferage, theft and neglects),
maximization of the use of assets (by facilitating sharing between and within department
and divisions), to meet the growing demands from federal and state-funding and to ensure
accurate documentation. According to King (2011, p. 122) a basic principle of internal
control is protection of the firm’s assets by those responsible. In as much as accidents do
21
happen, it is incumbent on management to have sufficient insurance to try to make the
company ‘‘whole’’ in case of loss. This is accomplished by purchase of insurance, in
which the insurance company, in exchange for a premium, promises to reimburse the
company in case of loss.
According to Jones and White (2008, p.2) the benefits of property asset management are
improving accountability, service management, risk management and financial
efficiency. Therefore, public sector managers, administrators and employees have a duty
and responsibilities to provide protection for the assets under their control (Brady, 2001,
p. 10-11).
As cited by Yusuf Ali Khalaf Al-Hroot (2013, p.75) the globalization of economy,
technological advancements, and complexity of business and allegations of fraudulent
financial reporting have recently sharpened the ever-increasing attention to internal
controls and internal auditing (Karagiorgos, et al., 2009). ‘‘Internal auditing is an
independent, objective assurance and consulting activity designed to add value and
improve a organization’s operations. It helps an organization accomplish its objectives by
bringing a systematic, disciplined approach to evaluate and improve the effectiveness of
risk management, control and governance processes” (Savcuk, 2007 cited in Khalaf Al-
Hroot, 2013, p.52). According to Australian National Audit Office Better Practice Guide
on the Strategic and Operational Management of Assets (2010, p. 9) asset condition
audits and formal monitoring of asset performance indicators will assist entities to
optimize their asset base and make asset decisions on a consistent and reliable basis.
Khalaf Al-Hroot (2013, p.75) and Sterck and Bouckaert (2006) mentioned that the
implementation of internal audit function in the public sector is most effective when there
is (1) legal requirement for the establishment of internal audit function, (2) strategy for
the development of competency of internal audit function staff, (3) support from top
management and existence of audit committee, and (4) central unit for the advancement
of the internal audit function.
A fixed asset accounting system is a system of policies, procedures, and methods for
recording and reporting monetary amounts associated with fixed asset transactions. A
fixed asset management system is a system of methods, policies, and procedures which
22
address the acquisition, use, control, protection, maintenance, and disposal of assets
(Ministry of Local Government of Palestine Revised Fixed Assets Policy & Procedures
Manual, 2008, p.6).
According to Alfred King (2011, p. 9) there really is only one answer to the question in
the heading as to who is responsible. The true answer has to be senior management. But
because the absence of good internal control does not show up immediately, in effect
PP&E is an ‘‘out of sight, out of mind’’ issue. Things will continue to go downhill until
management becomes convinced that this is a corporate issue, sets forth individual
responsibilities, and then provides sufficient resources to maintain the overall system.
2.11. Principles of Asset Management
Operational Management of Assets (2010, p. 9) assets usually only exist within entities in
order to either directly or indirectly support program delivery and this underpin the five
broad ‘principles’ of asset management. These principles are:
1. Asset acquisition, disposal and life-cycle management decisions are
integrated into an entity’s strategic and organizational planning;
2. Asset planning decisions are based on an evaluation of alternatives,
which assesses risks and benefits, and applies the Government’s core
procurement principle of value for money across the asset’s life-cycle;
3. An effective control structure is established for asset management;
4. Accountability is established for asset condition, use and performance;
and
5. Disposal decisions are based on analysis of the methods which achieve
the best available net return (Australian National Audit Office Better
Practice Guide on the Strategic and Operational Management of Assets
(2010, p. 9).
2.12. Public Sector Asset Information System
23
The improvement of the public sector asset information system is a fundamental part of
the NPM approach. The need for public asset recognition and efficient public asset
utilization in many countries has been mainly driven by the idea that the government and
the public need to have a complete picture of the country’s assets for managing public
resources. Therefore, for rational decision-making and assurance of better control over
public sector activities, a promptly updated information database on all public assets is
needed (Grubišić et al., 2009, p. 334). Again, in order to support asset management
agencies must collect, store, manage, and analyze large amounts of data in an effective
and efficient manner (Flintsch and Bryant, 2009, p. 9).
According to M. Grubišić et al., (2009, p. 334), many advanced countries have used asset
registers as the first step in gaining an insight into the assets that should be included in
the records. Applying transparency principles, also known as good governance, in
centralized and complete public asset registry maintenance, and in the entire public asset
management process, would be a much better solution than having multiple databases on
public assets scattered around numerous local government units.
Accrual accounting implementation is considered paramount for managing qualitative

and transparent data registry on public assets, which is a precondition for managing,
planning and performance measurement of public assets and governmental control over
public revenues and expenses. Accrual records on public assets and the consolidation of
all public assets in the asset register is the only way to manage and control public asset
management activities, and preserve the national wealth (Grubišić, Nušinović and Roje,
2009, p.345). According to Kaganova, Nayyar-Stone and Peterson (2000, p.4) an
accounting system that uses book value of the property may be satisfactory for reporting
financial results. However, this is not sufficient for rational decision making regarding
assets which should be based on market value of the asset.
CHAPTER THREE
24
RESEARCH METHODOLOGY
3.1. Introduction
A detail description about the research methodology of the study which includes the
research design, sample size and sampling techniques, data collection methods and data
analysis methods are presented sequentially in this chapter.
3.2. Research Design
According to Punch (2006, p. 33-34) research can be descriptive, or explanatory, or both.

A descriptive study sets out to collect, organize and summarize information about the
matter being studied. To describe is to draw a picture of what happened, or of how things
are proceeding, or of what a situation or person or event is (or was) like, or means, or of
how things are related to each other. In social science, it often involves summarizing
specific factual information into empirical generalizations, or summarizing details of
events, characteristics, cases or processes. A descriptive study asks, basically, 'what is the
case or situation here?’ In his opinion, both descriptive and explanatory studies have their
place in research, and one is not necessarily better than the other. Thus, for a relatively
new research area it makes sense for research to have a descriptive emphasis.
As a result, this research was conducted by using descriptive research design. Using this
type of research design the researcher enable to assess and describe the present situation
of public fixed asset management practices are proceeding over assets’ whole life-cycle
in Hadiya Zone sectors as it is without having any control over other variable. It can help
to understand a topic and lead to causal analysis.
Based on the objective of this study, the research had been designed to include
questionnaires, interview and observation. The questionnaires consist of both close and
open-ended questions. In addition, interview questions were used to expand clear data
which could not be explained in the structured questionnaires.
3.3. Sample Size and Sampling Techniques

25
Hadiya zonal administration is one of 13 zonal administrations of South Nation
Nationalities and People Regional State. The study population is all the 20 departments
that are currently working in Hadiya Zone. Among these, six zonal administration
departments were selected by purposive technique. These are: zone finance and economic
development department; agriculture and rural development department; health
department; water resource development department; zone administration department;
and zone urban development department. The selection of these public bodies is by
considering among economic, social and service sectors. Moreover, most of the fixed
assets users are homogeneous in nature and they are user departments except finance and
economic development department. Financial, expenditure, procurement and property
administration of various departments are controlled and managed centrally by Zone
Finance and Economic Development Department. Public property administration
officer’s tasks are structured only in this department under the public procurement and
property administration core process at zonal level. Accordingly, the sample has been
selected purposely which enable to include more concerned body and administrator of
fixed asset.
The selected respondents from finance and economic development department were all
property administration officers, all internal auditors, all process owners and head of
department. While, the selected respondents from the remaining five sectors were all
work process owners and heads of departments. Therefore, the total respondents were 81
as a sample from the total of 318 populations.
3.4. Data Collection Methods
This study was used both primary and secondary data. The Primary data sources are
respondents from selected public organizations. It was collected by distributing
questionnaire; interviewing key informants and through personal observation. The main
secondary data sources include available documents that help to understand the concepts
of fixed asset management functions and its challenges. Books, reviewed articles, official
annual reports, government proclamations and regulations are included in this category.
26
Questionnaire: The questioners were both open ended and closed ended. Self-
administered questionnaire were distributed to all property administration officers at zone
finance and economic development department and sampled custodians from other
processes and department. Seventy-five booklets of questioners were distributed to all
property administration officers, all internal auditors and all work process owners for all
objectives of the research and seventy of them were collected.
Key Informant Interview: Semi structured interview with the head of selected public
body was conducted. It allows the investigator some degree of flexibility at the time of
interviewing for the pursuit of unexpected line of enquiry that developed as the study
progresses. Questions in the interview checklist will be constructed based on the review
of literature. The interview was collected from heads of each selected public bodies
which is mainly for second and third objectives.
Observation: Observational study that simply describes the distribution of a

characteristic of fixed asset situations. Data obtained under this method relates to what
are currently happenings on fixed asset condition which may give additional
understanding for first research objective. Moreover, this method is in dependent of
respondents’ willingness to respond and as such is relatively less demanding of active
cooperation on the part of respondents as happen to be the case in the interview or the
questioner method conduct to collect the data. As a result, it helped the researcher to
collect data that represent unbiased and independent of respondents.
3.5. Data Analysis Methods
The type of data collection method is of great value to interpret them properly. The data
gathered through primary and secondary methods was analyzed using both mixed data
analysis methods. The data collected in the course of questionnaire was analyzed and
presented using descriptive statistics such as tables, graphs, mean, frequency and
percentages by using MS-Excel and Statistical Package for Social Science (SPSS).
Qualitative method of data analysis was also employed using open-ended questionnaires,
interviews, observation and literature by in-depth literature review or qualitative analysis.
27
3.6. Operational Definitions of Key Terms
Defining the following key terms is important to use them consistently in this study.
Therefore according to the researcher point of view the key terms are defined as
following.
Capitalization Threshold: is the value above which assets are treated as capital assets
and entered into an asset register.
Depreciation: is the systematic allocation of the depreciable amount of an asset over its
useful life.
Disposal: means dispose of surplus fixed asset using different any disposal method.
Fixed Asset Custodian: is a person in any position or level in the organization entrusted
with the safeguarding and use of fixed asset.
Fixed asset: is capital asset costing minimum monitory value of Birr 1000 which has at
least one year useful life for a given public sector.
Fixed Asset Life-Cycle: is the cycle of activities that an asset goes through which
includes planning, acquisition and/or construction, cycles of operation and maintenance
and disposal.
Fixed Asset Management: is a structured process of decision-making, planning and
control over the use, safeguarding and disposal of assets.
Fixed Asset Register: is a record of information on each asset that supports the effective
financial and technical management of the assets, and meets statutory requirements.
Fixed Asset Useful Life: is the period over which an asset is expected to be available for
use by an entity.
Hadiya Zone: is one of the 13 zonal administrations of SNNPR State that is situated at
Hossana town which is located to South Western of Addis Ababa in a distance of 230kms
and 160kms from the capital of Regional state Hawassa.
Hadiya Zone Public Sectors: is zonal level administration offices called departments.
Maintenance: to an asset will restore or maintain the originally assessed future economic
benefits or service potential that an entity can expect from an asset and is necessary for
the planned life to be achieved.
28
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1. Introduction
This chapter focuses on the finding of an opinion survey made from selected government
organizations related with public fixed asset management. The survey employed
structured questionnaires with both open ended and close-ended questions. The
distributed questionnaire booklets were filled by property officers, auditors and process
owners. Interviews with each of the six selected government organizations heads (6
interviewees) were successfully conducted. Moreover, the researcher’s personal
observation was also employed to take some lessons from the practice of public
organizations. The analysis is also supported by secondary data collected from different
institutions and literatures.
4.2. Response Rate
The questionnaires were distrusted to two categories of respondents, that the first
category is all property owners and internal auditors and the second category is all the
work processes owners. Accordingly, 75 booklets of questioners were distributed to
property administration officers, internal auditors and process owners. Among the total of
11 booklets of questioners that were distributed to property officers and internal auditors,
10 booklets were collected. While among the total of 64 booklets of questioners that were
distributed to work processes owners, 60 booklets were collected. All the 70 respondents
filled the questionnaire satisfactorily. Therefore, the analysis was made based on 10
respondents of property officers and internal auditors, 60 respondents of work process
owners and 70 respondents of both property officers and internal auditors, and work
process owners as depicted in the table 4.1 below.
29
Table 4.1: Response Rate
Questionnaire Questionnaire
No. Respondents Category Distributed Collected Response Rate
1 All property administration
officers and all internal auditors 11 10 91%
2 All work process owners 64 60 94%
Total 75 70 93%
4.3. Demographic data of respondents

The gender, experience and educational status of the respondents are shown in the
following tables (4.2, 4.3 and 4.4) consequentially.
Table 4.2: Respondents’ Sex Composition
Frequency Percent Valid Cumulative Percent

Percent
Male 54 77.1 77.1 77.1
Valid Female 16 22.9 22.9 100.0
Total 70 100.0 100.0
Source: Filed Survey, 2014
When we see the sex composition of the survey questioners’ respondents, the percentage
of respondents those who are male accounts 77.1 percent of the total. The remaining 22.9
percent of the respondents are females as the detail has shown in the above table 4.2.
Table 4.3: Respondents’ Level of Education
Frequency Percent Valid Cumulative Percent

Percent
Certificate 1 1.4 1.4 1.4
Diploma 15 21.4 21.4 22.9
Valid Bachelor degree 37 52.9 52.9 75.7
Masters degree 17 24.3 24.3 100.0
Total 70 100.0 100.0
30
Table 4.4: Respondents’ working Experience
Item Frequency Percent Valid Percent Cumulative Percent

0-5 year 6 8.6 8.6 8.6
6-10 year 14 20.0 20.0 28.6
11-20 year 27 38.6 38.6 67.1
Valid
above 20
23 32.9 32.9 100.0
year
Total 70 100.0 100.0
Education and experience does have profound influence on respondents’ response in

identifying challenges and practice of public fixed asset. As to educational background of
the respondents, 1(1.4 percent), 15(21.4 percent), 37(52.9 percent) and 17(24.3 percent)
of them had certificate, diploma, bachelor degree and master’s degree respectively. When
we see the work experience of respondents only 6 or 8.6 percent of them have below 5
years experience, while 14 or 20 percent of them have between 6 and 10 years of
experience, 27 or 38.6 percent of them have between 11 and 20 years of experience and
23 or 32.9 percent of them have above 20 years of experience. Hence, majority of the
respondents have good number of years of experience and are well educated; and thus,
their responses can be relied upon.
4.4. Public Fixed Asset Utilization Practices (Plan, Use and Maintenance, and
Disposal)
In this study the public fixed asset utilization practices in Hadiya zone public sectors is
analyzed through the main concept of legal framework, organizational structure and
human capacity for fixed asset management; fixed asset management planning; fixed
asset usage; fixed asset maintenance; and fixed asset disposal.
4.4.1. Legal Framework, Organizational Structure and Human Capacity for Fixed
Asset Management
A) Legal Framework:
With regard to the availability of documents to manage fixed asset in the organization
from the total respondents of 10 property officers and internal auditors all respondent
responses show that there is proclamation and directive while the organization has no
31
fixed asset management manual. But 40 percent and 60 percent of response indicates that
the organization has and has no other guideline to manage the asset respectively as it has
shown in the table 4.5 below. These currently utilized documents are South Nation
Nationality and People Regional State Procurement and Property Administration
Proclamation No. 146/2012 (2012); SNNPR State Property Administration Directive No.
14/2012 (December 2012, Amharic version); and BPR document. The researcher
observed that Government Owned Fixed Asset Management Manual (GOFAMM) is not
still prepared by the South Nation Nationality and People Regional State BoFED even
though MoFED prepared this document in 2007.
Table 4.5: Available Document to Manage Public Fixed Asset

Ser. Frequency Percent
no Documents Yes No I don’t total Yes No I don’t Total
Know know
1 Proclamation 10 0 10 100 0 100
2 Directive 10 0 10 100 0 100
3 Manual 10 0 10 100 0 100
4 Other guidelines 4 6 0 10 40 60 0 100
When available documents supportiveness was assessed in terms of giving adequate

know-how for fixed asset planning, usage, maintenance and disposal functions, usage and
maintenance had mean responses of less than 3.00 as indicated table 4.6 below. This
indicates that in the view of respondents, the documents can give adequate know-how for
usage and maintenance functions. Planning and disposal had mean responses of greater
than 3.00. This indicates that in the view of respondents, the documents can’t give adequate
know-how for Planning and disposal functions. Due to this reason, the organizations cannot
sufficiently manage all phases of fixed asset management even though effective asset
management should consider its whole life-cycle. Because, Kirkpatrick (2007, p. 51) stated
that ideally, a local government should have asset policies and procedures that cover all
aspects of asset management which includes general accounting procedures; planning;
acquisition; operation and disposal. From this we can understand that fixed asset
management manual and other additional guideline is very significant to manage the whole
live cycle of assets effectively and efficiently.
32
Table 4.6: Available Document Supportiveness for Asset Management
Document supportiveness
to give know-how for: N Minimu Maximu Mean Std.
m m Deviation
Fixed asset planning 10 3 4 3.80 .422
Fixed asset use 10 2 3 2.10 .316
Fixed asset maintenance 10 2 3 2.70 .483
Fixed asset disposal 10 2 4 3.70 .675
Valid N (listwise) 10
Notes: 1– strongly agree; 2-agree; 3 – neutral; 4 – disagree; and 5 – strongly disagree
B) Human Capacity:
Kaganova (2011, p. 39) suggested that good management of government property assets
is a highly technical area and requires professional expertise, along with knowledge of
specific tools such as public private partnerships.
According to the respondents, among the total of 10 respondents 80 percent and 20

percent of them confirm that they never attended and rarely attended training respectively
on fixed asset management aspects. This shows that property administration officers and
internal auditors who have great role in managing public fixed assets are not trained and
they are not capacitated to manage public property. The detail is shown in figure 4.1
below.
Figure 4.1: Respondents Training on Fixed Asset Management

33
Capacity building is creating what individuals and organizations can be, before they will
be. It is securing the future by addressing current development needs and opportunities.
Capacity simply is the ability to perform appropriate tasks. However, according to the
respondents, all respondents (10 respondents) responded that the organization has no
capacity building program for fixed asset management. Likewise, the response from
interview shows that the organization has no capacity building program for fixed asset
management.
The responses from open ended questions and interview clearly reveal that the
organizations have no adequate and competent human and financial resources to manage
public properties. And there is shortage of human power to manage fixed assets of all the
zonal public organizations. One of the main reasons is property administration officers
are structured in zone finance and economic development department at procurement and
property administration core work process. The responses by property administration
officers and internal auditors through closed end question /which asks do you think that
the organization has adequate and competent human and financial resources to manage
fixed assets?/ indicate that there is shortage of adequate and competent human and
financial resources as shown in the table 4.7 below.
Table 4.7: Human and Financial Resources
Item N Minimum Maximum Mean Std. Deviation

Do you think that the organization
has adequate and competent human 10 3 5 4.10 .738
and financial resource?
The result had mean responses of greater than 3.00. This indicates that in the view of
respondents, the organization has no adequate and competent human and financial
resources.
34
C) Organizational Structure:
According to Jones and White (2008, p. 51-53) good organization arrangements, culture
and structure are a prerequisite to successful asset management. Although the
organizational structure for asset management within any organization may vary greatly,
it must place a senior manager to be responsible for asset management across the
organization and an asset champion.
Regardless of the different organization structures that public sectors have, there should
be fixed asset management units responsible for the management of fixed assets. The
major task is to plan and perform count of all fixed assets in the custody of the public
organizations.
The response given by respondents about the suitability of organizational structure for
fixed asset management is negative. The result had mean responses of greater than 3.00
as shown in the table table 4.8. This indicates that in the view of respondents, the
organization structure is not suitable.
Table 4.8: Suitability of Organizational Structure for Fixed Asset Management
Std.
Item N Minimum Maximum Mean Deviation
Suitability of organizational
structure for fixed asset 70 1 5 3.84 1.099
management
Valid N 70
Similarly the response from interviewees clearly indicates that the organizational
structure is not suitable for fixed asset management for the reason property administration
officers are not structured at each organization and that placed at only Zone Finance and
Economic Development Department under the public procurement and property
administration work process for the whole zonal sectors. The interview respondents
35
reflect as it is one of the main challenges in fixed asset management and property
administration which hinder to provide timely implementation for asset decisions.
Therefore, there is no suitable organizational structure to manage asset effectively and
efficiently in Hadiya zonal sectors.
4.4.2. Fixed Asset Management Planning and Asset Performance Plan
The benefits of good asset management plan is, it aligns asset objectives with
organizational objectives, it ensures overall efficient and effective use of assets, it
provides communication and future decision- making, and it brings clarity to the way
assets are managed (Jones and White, 2008, p. 9). And it spells out a sequence of steps
that makes good policy sense thus a detailed understanding of the nature, extent, and use
of all assets controlled by a government agency is the first step to properly manage the
assets (Hasbi et al., 2010, p.5). According to Kooymans & Abbott (2006, p. 198-199) the
organization’s strategic planning includes: physical lives of assets; expected amount and
timing of major capital and maintenance expenditures; asset replacement values; and
market value which enables asset managers to influence organizational decisions that
affect their operations.
According to Hasbi et al., (2010, p.5) the measurement of performance has become an
essential element of the strategic thinking of assets owners and managers. Without having
a formal measurement system for performance, it is difficult to plan, control and improve
the asset management process.
According to respondents, 21.4 percent, 34.3 percent and 8.6 percent responded that the
organization has strategic, operational, and asset performance plan respectively. And the
majorities of the respondents, that means 68.6 percent, 57.1 percent and 77.1 percent
responded that the organization has no strategic, operational, and asset performance plan
respectively. While 10 percent, 8.6 percent and 14.3 percent responded that they have no
awareness whether the organization has or has no strategic, operational, and asset
performance plan respectively as shown in the table 4.9 blow. The responses from the
interviewees show that all organizations have no such plans to manage fixed asset. And
there is no practice of measuring service delivery performance for fixed asset.
36
Therefore the organizations mange asset without fixed asset management plans and there
is no performance measurement thus indicates decision making for fixed assets is not
efficient, effective and economical. In accordance with Kirkpatrick (2007, p. 51) in the
absence of an asset management plan, different problems can occur [such as] poor use of
assets; failure to rationalize surplus assets; significant variation in operating costs
between locations; inadequate management information; deteriorating physical condition
of stock; and/or continuing maintenance of uneconomic assets.
Table 4.9: Strategic, Operational and Performance Plans for Fixed Asset management
Does your Strategic plan Operational plan Asset performance

organization have plan
fixed assets
management plans? Frequency Percent Frequency Percent Frequency Percent
Yes 15 21.4 24 34.3 6 8.6
No 48 68.6 40 57.1 54 77.1
Valid I don't
7 10.0 6 8.6 10 14.3
know
Total 70 100.0 70 100.0 70 100.0
Regarding to the organizational plan, 78.6 percent, 20 percent, 32.9 percent and 11.4
percent of the respondents responded as the organization plan includes acquisition,
usage, maintenance and disposal respectively. While, 18.6 percent, 72.9 percent, 60
percent and 75.7 percent of the respondents responded as the organization plan does not
includes acquisition, usage, maintenance and disposal respectively as shown in the table
4.10 below. According to the majority of respondents the organization plan include only
acquisition for fixed assets while it does not includes usage, maintenance and disposal
functions of fixed asset.
Table 4.10: Does your organization plan includes Acquisition, Usage,

Maintenance and Disposal of Fixed Asset
Acquisition Usage Maintenance Disposal
37
Does your organization plan
Frequency
Frequenc
Frequenc
Frequenc
Percent
Percent
Percent
Percent
include acquisition, usage,
y
maintenance and disposal of
fixed asset?
Yes 55 78.6 14 20.0 23 32.9 8 11.4
No 13 18.6 51 72.9 42 60.0 53 75.7
Valid
I don't know 2 2.9 5 7.1 5 7.1 9 12.9
Total 70 100.0 70 100.0 70 100.0 70 100.0
4.4.3. Accounting System for Fixed Asset

Accrual records on public assets and the consolidation of all public assets in the asset
register is the only way to manage and control public asset management activities, and
preserve the national wealth (Grubišić et al., 2009, p.345). According to Kaganova O.,
Nayyar-Stone R., Peterson G., (2000, p.4) an accounting system that uses book value of
the property may be satisfactory for reporting financial results.
4.4.3.1. Criteria to Determine Fixed Asset
From total of 10 respondents, all responses indicate that cost and useful life is used to
determine fixed asset and all responses show as cost greater or equal to Birr 1,000.00 and
useful life greater than a year is currently used to determine fixed asset for the
organization. This is also clearly indicated in the legal documents of SNNPR State
Procurement and Property Administration Proclamation No. 146/2012 (2012) and
SNNPR State Property Administration Directive No. 14/2012 (December 2012, Amharic
version).
4.4.3.2. Record Keeping and Cost Consideration
As GOFAMM (2007, P. 29) fixed assets owned by the government were so far controlled
mainly physically [but] the cost data were not seriously kept. The effort of improving the
fixed assets management system is to enhance the effectiveness of the existing control, to
introduce new methods and records and to lay the ground for incorporating the value of
fixed assets in the financial accounts system.
38
For question asked to understand the practice of maintaining records for all fixed asset
cost and what account they used for fixed asset, all the 10 responses reveal that there is
maintenance of records using expenditure account. The records keeping is using
expenditure account and not recorded as an asset because government accounting system
is modified cash basis of accounting and not accrual base of accounting in Ethiopia.
According to different literatures this method is not suitable to manage fixed asset
effectively, for example Grubišić et al., (2009, p.345) suggest that accrual records on
public assets and the consolidation of all public assets in the asset register is the only way
to manage and control public asset management activities. As a result, depreciation and
valuation of the fixed asset is not practiced and assets accounts are not disclosed in the
financial statement of the zone. This indicates that organizations can’t have a complete
picture of their assets for managing public resources to make rational decision and
assurance of better control over their activities.
According to questionnaire respondents all the 10 respondents’ responses show that the
organization does not consider whole life cost for fixed asset.
4.4.4. Fixed Asset Usage
A) Fixed Asset Physical Count:
According to Christ Lloyd (2010, p.74) a good fixed asset management program will
facilitate the physical inventory of fixed assets, advance the establishment of insurance
conditions, and comply with federal, state, or local policy.
Regarding to application of physical count practice for fixed asset, all the 10 respondents
of public property officers and internal auditors reply that the organization applies
physical count for fixed asset annually. Some of the respondents also reflect physical
count of asset as the strength of fixed asset management system on the open ended
question. The respond from interviewees also show physical count of fixed asset is
practiced annually to control the assets. SNNPR State Property Administration Directive
No. 14/2012 (December 2012, Amharic version) article 17/2 clearly state that the
39
physical count should be apply at least once a year. There for, physical verification of
asset is practiced as the directive.
B) Property Identification:
The primary purpose of asset identification is to help asset managers to: 1) know exactly
what assets they have for the purpose of operating, monitoring, and/or maintaining the
assets; 2) know precisely where the assets are located; 3) know the condition of the
assets; 4) develop asset maintenance program; and 5) perform all of these activities to
optimize the costs of operating the assets and extend their useful life (Hasbi, et al., 2010,
p.4).
Likewise GOFAMM (2007, p. 39) explain that a logical and systematic number is
assigned to assets for ease of reference and for summarizing and analyzing information
on fixed assets. In property identification number (PIN) development, alphabets, numbers
and other characters are used which should be easy to recognize and understand.
Blow table 4.11 reveal that majority of the response (54.3 percent) indicates property
administration (PIN) code is given but it is not for all assets. While, 22.9 percent, 12.9 percent
and 10 percent responses shows that PIN code is given, not give and not sure respectively.
According to the researcher observation some properties have not given the PIN codes and even
there is no systematically designed code. For example, it can’t show precisely where the assets
are specifically located. Although, the fixed asset coding system is not fully implemented, the
PIN coding system is practiced to manage the organizations’ asset.
Table 4.11: Does PIN Code is Given for Fixed Asset
Does the PIN code is given for fixed Cumulative

assets? Frequency Percent Valid Percent Percent
Yes 16 22.9 22.9 22.9
No 9 12.9 12.9 35.7
Valid yes but not for all 38 54.3 54.3 90.0
I don't know 7 10.0 10.0 100.0
Total 70 100.0 100.0
40
C) Accountability and Responsibility:
According to Jones and White (2008, p.2) one of the benefits of property asset
management is improving accountability. Therefore, public sector managers,
administrators and employees have a duty and responsibilities to provide protection for
the assets under their control (Brady, 2001, p. 10-11). According to SNNPR State
procurement and property administration proclamation no. 146/2012 (2012).the heads
and all employees of public bodies are responsible for the protection and preservation of
public property. Government must be able to hold asset managers accountable for the
assets in their custody and be assured that these assets are serving their intended purposes
and achieving targeted results (Kaganova, 2008, p. 7). Likewise, Brady (2001, p10-11)
argues that public sector managers, administrators and employees have a duty and
responsibilities to provide protection for the assets under their control. This protection is
for losses from natural disasters, thefts, fire and an abundance of other ills that can befall
a public sector organization.
One of the purposes of the fixed asset system is to provide control and accountability
over fixed assets. The system permits loss, theft, or damage to property to be identified
by a comparison of the assets on hand and their present condition to the information
found in the fixed asset records [such as] information regarding the location, responsible
party, and condition of public property (Ministry of Local Government of Palestine
Revised Fixed Assets Policy & Procedures Manual, 2008, p.11).
As depicted in the blow figure, 82.4 percent of the respondents (majority of respondents)
replied that the organizations have no clear accountability and responsibility in fixed
asset utilization. While 11.4 percent of the respondents replied that there is clear
accountability and responsibility and 5.7 percent were no sure. This show that the
organizations may utilize fixed assets without accountable and responsible manner even
though procurement and property administration proclamation clearly states that the
heads and all employees of public bodies are responsible for the protection and
preservation of public property. This in return results in poor control, protection and
utilization of available public asset.
41
Figure 4.2: Existence of Clear Accountability and Responsibility
D) Fixed Asset Service Delivery:
Fixed assets in use comprise those assets that are found with the users and that they are
under the custodianship of one of the employees of the public sector. A department or a
division should be the custodian for those assets that are not identifiable with an
individual user (GOFAMM, 2007, P. 29). According to Campbell, Jardine, and McGlynn
(2011, p.17), the operation of assets is where performance is most affected [thus] the new
practices in this area include formal information technology asset management (ITAM),
asset performance management strategies, and total asset visibility solutions.
Government must be able to hold asset managers accountable for the assets in their
custody and be assured that these assets are serving their intended purposes and achieving
targeted results (Kaganova, 2008, p. 7). Correspondingly, Alfred M. King, (2011, p. 9)
there is only one answer to the question in the heading as to who is responsible for PP&E.
The true answer has to be senior management. But because the absence of good internal
control does not show up immediately, in effect PP&E is an ‘‘out of sight, out of mind’’
issue. Things will continue to go downhill until management becomes convinced that this
is a corporate issue, sets forth individual responsibilities, and then provides sufficient
resources to maintain the overall system.
42
Brady (2001, p10-11) argues that the fixed asset management program is important for a
number of reasons such are control of loses (due to pilferage, theft and neglects),
maximization of the use of assets (by facilitating sharing between and within department
and divisions), to meet the growing demands from federal and state-funding and to ensure
accurate documentation. According to Jones and White (2008, p. 5) asset management is
a structured process that seeks to ensure best value for money from property assets in
serving the strategic needs of local authorities.
The survey result in figure 4.3 below depicts that majority (50 percent) of the respondents
replied that the fixed asset utilization is poor in rendering services, while 10 percent, 30
percent and 10 percent of the respondents responded that the fixed asset utilization is very
poor, neutral and good in rendering intended service respectively. Open ended question
and interview responses show that lack of plan, lack of timely maintenance, lack of
accountability and responsibility, lack of internal audit work, lack of adequate budget to
repair the assets and also unsuitable organizational structure of fixed assets are challenges
to use asset as intended manner and effectively. This signifies that the organizations are
not able to utilize their asset efficiently and effectively in service delivery. Thus they are
not able to ensure best value for money from such assets.
Figure 4.3: Condition of Fixed Asset Service Delivery
43
E) Insurance Coverage for Fixed Asset:
Insurance coverage helps to minimize the risk of fixed asset. According to King (2011, p.
122) inasmuch as accidents do happen, it is incumbent on management to have sufficient
insurance to try to make the company ‘‘whole’’ in case of loss. This is accomplished by
purchase of insurance, in which the insurance company, in exchange for a premium,
promises to reimburse the company in case of loss.
The survey result in table 4.12 below reveals that 74.3 percent responded as there is no
insurance coverage for fixed assets, whilst 17.1 percent and 8.6 percent responded there is
insurance and no understanding whether there is or not respectively. Whereas, according to
interview and open ended responses there is insurance coverage for vehicle or car from near
past. There for, the majority of organizations’ assets have no insurance coverage to minimize
the risk of the assets.
Table 4.12: Existence of Insurance Coverage for Fixed Asset
Does your organization

have fixed asset insurance? Frequency Percent Valid Percent Cumulative
Percent
Yes 12 17.1 17.1 17.1
No 52 74.3 74.3 91.4
Valid
I don't know 6 8.6 8.6 100.0
Total 70 100.0 100.0
F) Monitoring and Controlling System for Fixed Asset from Misuse:
According to Campbell et al., (2011, p.30-31) control comprises planning, scheduling,

and execution practices to manage work and delivery of the service; maintenance tactics
for all scenarios; and systems that help manage the flow of control and feedback
information through these processes. For rational decision-making and assurance of
better control over public sector activities, a promptly updated information database on
all public assets is needed (Grubišić et al., 2009, p. 334). Similarly Grubišić et al., (2009,
p.345) suggest that accrual records on public assets and the consolidation of all public
44
assets in the asset register is the only way to manage and control public asset
management activities.
Concerning to check existence of appropriate monitoring and controlling system to

protect fixed asset from misuse through private consumption, loss and wastage; 78.6
percent (i.e. majority) of the respondents replied that there is no appropriate controlling
mechanism in their organizations, whereas 18.6 percent of the respondents responded as
there is appropriate controlling system and 2.9 percent of the respondents replied as they
don’t know as depicted in figure 4.4 below. In the same way, the responds from open
ended question shows lack of control is mentioned as the weakness of fixed asset
management system in the organizations. There for, without the existence of appropriate
monitoring and controlling system the organizations can’t able to utilize the fixed assets
for effectively and also unable to use for only public purpose.
Figure 4.4: Existence of Monitoring and Controlling System for Fixed Asset from
Misuse
45
G) Internal Control for Public Fixed Asset:
A basic principle of internal control is protection of the firm’s assets by those responsible
(King, 2011, p. 122).
As observed from figure 4.5 below response chart, 45.7 percent, 14.3 percent rank that
the organizations’ internal control system for public property is poor and very poor
respectively. While, 17.1 percent, 2.9 percent rank that the organizations’ internal control
system for public property is good and very good respectively. The remaining 20 percent
have neutral idea. As a result, this shows that there is poor internal control over their
available scarce fixed assets.
Figure 4.5: Ranking Internal Control System for Public Fixed asset
H) Internal Audit:
‘‘Internal auditing is an independent, objective assurance and consulting activity

designed to add value and improve an organization’s operations. It helps an organization
accomplish its objectives by bringing a systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, control and governance processes”
(Savcuk, 2007 cited in Yusuf Ali Khalaf Al-Hroot, 2013, p.75). According to Australian
National Audit Office Better Practice Guide on the Strategic and Operational
Management of Assets (2010, p. 9) asset condition audits and formal monitoring of asset
performance indicators will assist entities to optimize their asset base and make asset
decisions on a consistent and reliable basis.
46
The survey result in table 4.13 below disclose that the mean response is greater than 3.0
which indicates that in the view of respondents the role of internal audit team in managing fixed
asset is poor. This is also supported on the open ended responses that fixed asset management
is not monitored by audit work. As a result, asset decisions may lack a consistent and reliable
basis and the organizations missing audit consulting activity that add value and increases asset
utilization and controlling efficiency.
Table 4.13: Internal Audit Team Contribution in Fixed Asset Management
Item N Minimu Maximu Mean Std.

m m Deviation
Ranking the internal audit
team contribution for fixed 10 2 4 3.10 .738
asset management
Valid N (list wise) 10
Notes: 1– very good; 2–good; 3 – neutral; 4 – poor; and 5 – very poor

I) Service Delivery Effectiveness Using Fixed Asset under User Responsibility and
Common Asset:
The response from work process owners as shown in the table 4.14 below disclose that
the mean response is greater than 3.0 which indicates that in the view of respondents,
they cannot delivery service effectiveness using both fixed asset under their
responsibility and common asset.
Table 4.14: Effectiveness of Service Delivery Using Fixed Asset
Effectiveness service delivery N Minimum Maximum Mean Std. Deviation

using:
Individual fixed asset 60 1 5 3.25 1.202
Common fixed asset 60 1 5 3.63 1.073
Notes: 1– strongly agree; 2–agree; 3 – neutral; 4 – disagree; and 5 – strongly disagree

47
J) Do public assets used for only public purposes?
The response from work process owners as shown in the table 4.15 below disclose that
the mean response is greater than 3.0 which indicates that in the view of respondents,
public properties and assets are not utilized only for public service delivery and exposed
for private or individual consumptions.
Table 4.15: Do Public Assets used for only Public Purposes?

agreement level on
utilization of asset only 60 1 5 3.75 1.129
for public purpose

K) Provision of Protection for Property from Loses:
The response from work process owners as shown table 4.16 below disclose that the
mean response is greater than 3.0 for natural disaster and other ills which indicates that
in the view of respondents, there is weak protection for public properties and assets from
natural disasters and other ills. While, the mean response is less than 3.0 for theft, fire and
accident which indicates that in the view of respondents, there is strong protection for
public properties and assets from theft, fire and accident.
Table 4.16: Provision of Protection for Property from Loses
Protection of asset from: N Minimum Maximum Mean Std. Deviation

Theft 60 1 5 2.43 1.170
Fire 60 1 5 2.77 1.064
Accident 60 1 5 2.85 .936
Natural disaster 60 1 5 3.33 .816
Other ills 60 1 5 3.62 1.010

48
4.4.5. Fixed Asset Maintenance
Maintenance is a critical activity in the life-cycle of an asset (Australian National Audit
Office Better Practice Guide on the Strategic and Operational Management of Assets,
2010, p. 44-45). Continuous improvement involves a range of well-known methods and
maintenance tactics. Modification can also be critical to the life extension of assets, as
machines are retooled, facilities repurposed, and technology adapted to facilitate newer
processes (Campbell et al., 2011, p.17-18).
A) Maintenance plan
Long-term strategic plans must be developed not only to address the current issues of
deferred maintenance and renewal, but also to plan for the ongoing maintenance and
replacement needs of the existing stock of tangible capital assets and for future growth
(Kirkpatrick, 2007, p. 51).
As depicted in the below figure 4.6, the majority 48(68.6 percent) of the respondents
replied that the organizations have no planned fixed asset maintenance system, while
10(14.3 percent) of the respondents responded as the organizations have planned asset
maintenance. The remaining 12(17.1 percent) of them had not know. Also according to
the responses from interview the organizations have no formal and documented plan to
maintain fixed asset thus they maintain the asset after the damage occurred and when the
asset already discontinued the services delivery.
Figure 4.6: Existence of Planed Fixed Asset Maintenance System

49
B) Do Organizations Apply Timely Maintenance for Fixed Asset?
The survey result in table 4.17 disclose that 54(77.1 percent, majority) of the respondents
responded as the assets are not maintained on time, while 10 percent of them believe that
assets maintained on time. The remaining 12.9 percent are not sure that weather asset
maintenance applied on time or not. Similar to this result, majority of the respondents
indicated that damaged fixed assets that need maintenance are not maintained on time
and situated for log time without service provision. The researcher also saw that there is
maintenance problem in the organizations for different fixed asset for example, vehicles,
warehouse, office equipment and like through observation as shown below photographs.
According to interviewees some of the reasons for lack of timely maintenance are due to
lack of sufficient budget, plan for maintenance and lack of timely service rendering from
the Zone finance and economic development department to facilitate maintenance.
According to the interview and open ended question responses, the consequences due to
failure on timely maintenance of fixed assets are decreases service delivery (which is
most frequently responded), increase need of another new asset, increases depreciation
and obsolescence, decreases effective and efficient utilization of the budget, and
decreases appropriate utilization of office or warehouse. Moreover, according to
Australian National Audit Office Better Practice Guide on the Strategic and Operational
Management of Assets (2010, p. 44-45) poor maintenance often leads to a shorter useful
life than that envisaged from design specifications and may lead to loss of functionality, a
decrease in utilization, pose a threat to human safety or result in a legislative breach.
Table 4.17: Do Organizations Apply Timely Maintenance for Fixed Asset?
Does your organization apply

timely maintenance for fixed Frequency Percent Valid Percent Cumulative Percent
asset?
Yes 7 10.0 10.0 10.0
No 54 77.1 77.1 87.1
Valid
I don't know 9 12.9 12.9 100.0
Total 70 100.0 100.0
50
B) Which Major Type of Maintenance Strategy is Used?
As observed from below response figure, 57(81.4 percent, i.e. the majority) of the
respondents responded as the organizations uses repair or corrective maintenance, while
5.7 percent of them responded as the organizations uses preventive maintenance. The
remaining 12.9 percent are not sure that weather asset maintenance strategy is corrective
or preventive. This indicates that the organizations use unplanned maintenance strategy
for fixed asset.
Figure 4.7: Existence of Planed Fixed Asset Maintenance System

The respondents were asked to rank their organizations fixed asset maintenance
effectiveness and the respond shows that the mean response is greater than 3.0 (as shown
in the table 4.18 below) which indicates that in the view of respondents the maintenance
strategy of fixed asset is weak. As a result, even though maintenance is a critical activity
in the life-cycle of an asset, the organization neglects it and thus leads to misuse and
wastage of public asset. So, this weak maintenance directs to a shorter useful life of an
asset, enhance loss of functionality, a decrease in service delivery level, and pose a threat
to human safety.
51
Table 4.18: Ranking Asset Maintenance Strategy
Item N Minimum Maximum Mean Std.

Deviation
How do you rank asset
70 1 5 3.81 .786
maintenance strategy?
4.4.6. Fixed Asset Disposal
Disposal of tangible capital assets that are moveable personal property is the
responsibility of the manager of purchasing services unless delegated to operating
departments. Department heads should notify the manager when assets become surplus to
operations (Kirkpatrick, 2007, p. 51). As of Australian National Audit Office Better
Practice Guide on the Strategic and Operational Management of Assets (2010, p. 47) a
disposal plan should be an integrated part of an asset management strategy in that it leads
into the planning process for new or replacement assets and is a powerful management
tool in assessing why the performance of certain assets may not have worked as intended.
Nonessential government assets on the other hand should not be carried unless they
contribute ongoing benefits or cash. If they do not make positive contributions, decision
that can help achieve the government’s objectives (Hasbi et al., 2010, p.5).
A) Availability of surplus or unserviceable fixed asset:
Assets may be disposed of for a number of reasons including end of useful life, surplus to
requirements, under-utilized, not fit for purpose, unserviceable, or does not meet
legislative requirements (Australian National Audit Office Better Practice Guide on the
Strategic and Operational Management of Assets, 2010, p. 47).
The respondents were asked as, is there fixed assets for long period in your organizations
without any use that should be disposed of? And thus the result in figure 4.8 below
reveals that 52(74.3 percent, majority) of the respondents answered that there is fixed
52
asset without any use for their organizations, while 12(17.1 percent) responded no fixed
asset without use. The remaining 6(8.6 percent) responded as they don’t know. Again the
researcher observed that the existence of many surplus assets like car, typewriters,
photocopy machines and office equipments that stored in warehouse, at different offices,
at office corners and at compound of the organizations. According to interview some of
these assets are situated for a long period and some are relatively short period. South
Nation Nationalities and People Regional State Office of Audit General audit report
disclosed that enormous amount of un-functional fixed assets which should be disposed
are available in the Hadiya zone public offices. In this audit report, the auditors opinion
also showed that both functional and nonfunctional fixed asset were situated
unmanageably at warehouses. There for, the organizations lack significant revenues that
could arise from asset sales and they can’t to keep government’s core procurement
principle of value for money across the asset’s life-cycle.
According to Hasbi et al., (2010, p.5) if assets do not make positive contributions,
decision makers should consider their sale or disposal to divert capital to more productive
uses that can help achieve the government’s objectives. In contrary of this reality, Hadiya
Zonal sectors or public bodies could not dispose of the assets to divert capital to more
productive uses.
Figure 4.8: Availability of Surplus or Unserviceable Fixed Asset

53
B) Do Your Organization Warehouse Occupied With Surplus or Obsolete Fixed
Assets?
As observed from below response table, all of the respondents of property administration
and auditors replied that warehouses space is occupied with surplus asset. Also when the
researcher observed warehouses space are unmanageably occupied with both functional
and un-functional property. There for this among others increases carrying cost, damage
and risk of assets.
Table 4.19: Surplus Fixed Asset at Warehouse
Does your organization warehouse Frequency Percent Valid Percent Cumulative

occupied with surplus fixed asset? Percent
100.0
Valid Yes 10 100.0 100.0
No 0 0 0 0
I don’t know 0 0 0 0
Total 10 100.0 100.0 100.0
C) Do Your Organization Office Space Occupied With Surplus or Obsolete Fixed

Assets?
The result in table 4.20 below reveals that 36(51.4 percent, majority) of the respondents
answered that there is fixed asset without any use for their organizations, while 30(42.9
percent) responded no fixed asset without use. The remaining 4(5.7 percent) responded as
they don’t know. Also when the researcher observed some offices spaces are
unmanageably occupied with both functional and un-functional property as it seen from
plates 4.1 under. There for, this among others decrease office space, may cause
employees health problem, increases damage and risk of assets. This implies no existence
principle of accountability that should established for asset condition, use and
performance.
54
Table 4.20: Surplus Fixed Asset at Office Space
Does your organization Frequency Percent Valid Percent Cumulative Percent

warehouse occupied with
surplus fixed asset?
Yes 36 51.4 51.4 51.4
No 30 42.9 42.9 94.3
Valid
I don't know 4 5.7 5.7 100.0
Total 70 100.0 100.0
D) Ranking the Implementation of Fixed Asset Disposal
The survey result in table 4.21 below discloses that the mean response is greater than 3.0
which indicate that in the view of respondents the implementation of fixed asset disposal
is poor.
Table 4.21: Ranking the Implementation of Fixed Asset Disposal

How do you rank the
implementation of asset 70 2 5 3.73 .900
disposal in your organization?
Notes: 1– very good; 2–good; 3 – neutral; 4 – poor; and 5 – very poor

In addition to above responses, Hadiya zone finance and economic development

department’s BSC document (2010/2011-2014/2015 BSC Plan) clearly reveals that as
there is weakness of the property handling, usage and disposal system and
implementation. Moreover, the researcher observed that the weakness of fixed asset
management practices and misuse of asset at the selected Hadiya zonal sectors and some
photographic pictures are shown in Plates 4.1 below. These photographic pictures show
the problems of usage, maintenance and disposal of fixed asset.
55
Plates 4.1: Photos Indicating Fixed Asset
Mismanagement
4.5. Factors that Affect Effective Fixed Asset Management of Public Sectors
Developing countries have not yet achieved a satisfying level of efficiency in public
sector management in general and in public asset management in particular (Grubišić et
al., 2008, p.105). In implementing a public asset management framework, it is important
for local government to understand the challenges that they will face and an
understanding of the challenges will assist in developing effective strategies (Hasbi et al.,
2011, p.17-18).
Inline to this logic, the respondents were asked in order to rate the challenging factors in
managing fixed assets and they responded as indicated in the following table 4.22.
56
Table 4.22: Ranking the Challenging Factors or Problems in Managing Fixed Assets
Challenging factors N Minimu Maximu Mean Std.

m m Deviation
Budget limitation 70 1 5 2.23 .981
Lack of skilled human power 70 1 5 2.24 1.013
Lack of management emphasis 70 1 5 2.09 1.176
Lack of accountability 70 1 5 2.09 .974
Lack of responsibility 70 1 4 2.57 .972
Lack of transparency 70 1 5 2.19 1.067
Lack of users ethical behavior 70 1 5 3.23 1.206
Political factor challenge 70 1 5 3.50 1.100
Lack of plan 70 1 5 1.99 1.136
Lack of incentive for staff 70 1 5 3.31 1.234
Lack of legal framework 70 1 5 2.76 1.109
Notes: 1– very high; 2–high; 3 – neutral; 4 – low; and 5 – very low

The survey result in table 4.22 above discloses that the mean response is less than 3.0 for
challenging factors of budget limitation, lack of skilled human power, management
emphasis, accountability, responsibility, transparency and adequate legal framework
which indicate that in the view of respondents these factors are problems in managing
fixed assets of the selected public organizations in Hadiya Zone. While, the mean
response is greater than 3.0 for challenging factors of lack of user’s ethical behavior, lack
of incentive for staff and political factor challenge which indicate that in the view of
respondents these factors are not challenging problems in managing fixed assets of the
Hadiya Zonal administrative public organizations in the sample.
Even though, this respond shows user’s ethical behavior is no considered as a challenge
of fixed asset management of public sector, the respond result indicates that public assets
are not used for only public purposes. And interview response also be evidence for as the
users sometime illegally uses fixed assets individual consumption especially like
57
vehicles, computers for their purposes, thus reveals lack of ethical behavior is a challenge
for asset management.
The interview and questionnaire informants responded that the organizational structure is
not suitable for managing fixed asset so that this indicates the existing structure is
challenging factor for fixed asset management in Hadiya Zonal public sectors.
4.6. Consequences of Mismanagement of Public Fixed Assets
According to Kaganova (2008, p.3) a common systemic problem is that principles of

good financial management are not applied to public property assets, except in a few
most advanced countries (Australia, New Zealand). As a result, the typical property asset
management weaknesses are property related expenses are not monitored in systematic
way, the revenue potential of public properties is underused and market value of assets is
not recognized.
The survey result in table 4.23 below discloses that the mean response is less than 3.0
which indicate that the consequences due to the mismanagement of fixed asset results to
increase maintenance cost, need for new asset and risk of the asset, and decrease service
level. Addition to this effect of mismanagement, interviewees responds also reveals that it
significantly affects economic utilization of warehouse and office spaces.
Table 4.23: Consequences of Mismanagement of Public Fixed Assets

How do you rate the following
consequence of fixed asset N Minimu Maximu Mean Std. Deviation
misuse? m m
Increase maintenance cost 70 1 4 1.77 .745
Increase need for new asset 70 1 5 1.97 .963
Decrease service delivery level 70 1 4 1.59 .807
Increases the risk of asset 70 1 5 1.97 .868
Notes: 1– very high; 2–high; 3 – neutral; 4 – low; and 5 – very low

CHAPTER FIVE
58
MAJOR FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1. Introduction
This chapter presents major findings, conclusion and possible recommendations of the results. It
has three parts; the first part presents major findings, the second part presents conclusions of the
study and the third part presents the recommendations.
5.2. Summary of Major Findings
In this portion the major findings on public fixed asset utilization practices, factors that
affect fixed asset management and the consequence of mismanagement of fixed asset in
Hadiya zone public sectors are presented based on the analysis in chapter four.
I. Public Fixed Asset Utilization Practices (Plan, Use, Maintenance, and Disposal)
The framework or documents that currently utilized to manage fixed assets or property
are South Nation Nationality and People Regional (SNNPR) State Procurement and
Property Administration Proclamation No. 146/2012 (2012) and SNNPR State Property
Administration Directive No. 14/2012 (December 2012, Amharic version). But there is
no government owned fixed asset management manual like GOFAMM of MoFED to
mange fixed asset effectively and efficiently for the organization and even for the
SNNPR state level. Thus, the available documents are not adequate enough to manage
whole life-cycle of asset management.
Property administration officers and internal auditors who have great role in managing
public fixed assets are not trained on fixed asset management aspects. The organization
arrangements and structure is not also suitable to manage asset successful. Inline to this,
there is shortage of adequate and competent human resource.
The organizations manage asset without fixed asset management plans especially for
operation, maintenance and disposal function of asset management and there is no
59
performance measurement thus indicates decision making for fixed assets is not efficient,
effective and economical.
The cost and useful life is practiced to determine fixed asset which its cost is greater or
equal to Birr 1,000.00 and useful life is greater than a year is currently used to determine
fixed asset for the organization. The records keeping is using expenditure account and not
recorded as an asset because government accounting system is modified cash basis of
accounting and not accrual base of accounting in Ethiopia. As a result depreciation and
valuation of the fixed asset is not practiced and fixed assets accounts are not disclosed in
the financial statement of the zone.
Physical count of fixed asset is practiced annually to control the assets according to
article 17/2 of SNNPR State Property Administration Directive No. 14/2012 (2012).
Although, the fixed asset coding system is not fully implemented, the PIN coding system
is practiced to manage the organizations’ asset.
Fixed asset utilization in rendering public services is poor due to lack of plan, good
maintenance system, accountability, internal audit work, and adequate budget and like in
the organizations included in the sample. Inanition to that, unsuitable organizational
structure of fixed assets is challenges to use asset as intended manner and effectively.
Thus they are not able to ensure best value for money from such assets.
There is no appropriate monitoring and controlling system to protect fixed asset from
misuse through private consumption, loss and wastage in the organizations. Because
controlling system should includes planning, maintenance tactics, updated information
database, and accrual records and like, whereas this components are not exists in the
organizations that were selected in the sample. Therefore, without the existence of
appropriate monitoring and controlling system the organizations can’t able to effectively
utilize the fixed assets and also unable to use for only public purpose. But, there is strong
protection for public properties and assets from theft, fire and accident even though; there
are weak protection from natural disasters and other ills.
60
Internal control system for public property is poor in the organizations that included in
the sample. For this reason, there is weak protection for public assets. For instance,
according to king (2011, p. 122) a basic principle of internal control is protection of the
firm’s assets by those responsible. Also the role of internal audit team in managing fixed
asset is poor. According to Australian National Audit Office Better Practice Guide on the
Strategic and Operational Management of Assets (2010, p. 9) asset condition audits and
formal monitoring of asset performance indicators will assist entities to optimize their
asset base and make asset decisions on a consistent and reliable basis. As a result, asset
decisions may lack a consistent and reliable basis and the organizations missing audit
consulting activity that add value and increases asset utilization and controlling
efficiency.
Maintenance is a critical activity in the life-cycle of an asset; which can be critical to the
life extension of assets. The maintenance strategy of fixed asset is weak due to lack of
proper maintenance plan and timely maintenance in the Hadiya zone public sectors that
included in the sample of this study. As a result, even though maintenance is a critical
activity in the life-cycle of an asset, the organization neglects it and thus leads to misuse
and wastage of public asset. According to Australian National Audit Office Better
Practice Guide on the Strategic and Operational Management of Assets (2010, p. 44-45)
poor maintenance often leads to a shorter useful life than that envisaged from design
specifications and may lead to loss of functionality, a decrease in utilization, pose a threat
to human safety or result in a legislative breach.
In the study area there is significant amount of surplus or un-functional fixed assets that
should be disposed of like car, typewriters, photocopy machines and office equipments
that stored in warehouse, at different offices, at office corners and at compound of the
organizations without any use for the organizations selected at the sample. There for, the
organizations lack significant revenues that could arise from asset sales and they can’t to
keep government’s core procurement principle of value for money across the asset’s life-
cycle. Also warehouses spaces and office spaces are unmanageably occupied with surplus
asset. There for this among others increases carrying cost, damage and risk of assets.
61
Surplus assets at office results in decrease office space that may cause employees health
problem, increases damage and risk of assets. This implies no existence of principle of
accountability that should established for asset condition, use and performance.
II. Factors that Affect Effective Fixed Asset Management of Public Sectors
The budget limitation, lack of skilled human power, management emphasis,

accountability, responsibility, transparency and adequate legal framework factors are
problems in managing fixed assets in Hadiya Zonal public organizations in the sample.
The existing organizational structure is also challenging factor for fixed asset
management in Hadiya Zonal public sectors.
III. Consequences of Mismanagement of Public Fixed Assets
The consequences or effects of fixed asset mismanagement and weaknesses in Hadiya

zonal organizations that included in the sample results to increase maintenance cost, need
for new asset and risk of the asset, and decrease service delivery level. In addition to
these, it significantly affects economic utilization of warehouse and office spaces. Again
revenue potential of public properties is underused.
5.3. Conclusions
The objective of this research paper was to assess the challenges and practices of public
fixed asset management in selected public sectors of Hadiya Zone. Based on the problem
statement and objectives of the study, three research questions were developed. These
are: How public fixed asset utilization (in term of plan, usage and maintenance, and
disposal) is practiced or implemented within the public sectors? What are the factors that
affect effective fixed asset management of public sector? What are the consequences of
mismanagement of public fixed assets observed in public sectors working in Hadiya
Zone? The study used document analysis, interview with heads of organizations and self
administered questionnaire to all property administration officers, auditors and work
processes owners in the organizations. Questionnaire data were analyzed using
descriptive statics through SPSS and Excel Software while data from interview and
62
document reviews were interpreted qualitatively. Based on the analysis and findings
presented on the preceding chapter the overall conclusions are presented below.
A) Public Fixed Asset Utilization Practices (Plan, Use, Maintenance, and Disposal)
South Nation Nationality and People Regional State Procurement and Property
Administration Proclamation No. 146/2012 (2012) and SNNPR State Property
Administration Directive No. 14/2012 (2012) are currently utilized frameworks or
documents to manage fixed assets or property in Hadiya zone public sectors. There is
shortage of adequate and competent human resource and also property administration
officers and internal auditors who have great role in managing public fixed assets are not
trained and they are not capacitated to manage public property. The organization
arrangements and structure is not also suitable to manage asset successful. Fixed asset
management practice of public organizations that selected in the sample from Hadiya
zone sectors is general recognized as poor due to many reasons. Among others the
organization has no adequate plan for fixed asset operation, maintenance and disposal;
there is weak monitoring and controlling system to protect fixed asset from misuse
through private consumption, loss and wastage in the organizations. But, there is strong
protection for public properties and assets from theft, fire and accident even though; there
are weak protection from natural disasters and other ills. The maintenance strategy of
fixed asset is weak due to lack of proper maintenance plan and timely maintenance in the
Hadiya zone public sectors that included in the sample of this study. Thus poor
maintenance often leads to a shorter useful life than that envisaged from design
specifications and may lead to loss of functionality, a decrease in utilization, pose a threat
to human safety or result in a legislative breach. In the study are there is significant
amount of surplus or un-functional fixed assets that should be disposed of like car,
typewriters, photocopy machines and office equipments that stored in warehouse, at
different offices, at office corners and at compound of the organizations without any use
for the organizations selected at the sample.
Physical count of fixed asset is practiced annually to control the assets according to
article 17/2 of SNNPR State Property Administration Directive No. 14/2012 (2012).
63
Although, the fixed asset coding system is not fully implemented, the PIN coding system
is practiced to manage the organizations’ asset.
B) Factors that Affect Effective Fixed Asset Management of Public Sectors
The budget limitation, lack of skilled human power, management emphasis, plan,
accountability, responsibility, transparency and adequate legal framework factors are
problems in managing fixed assets in Hadiya Zonal public organizations in the sample.
The existing organizational structure is also challenging factor for fixed asset
management in Hadiya Zonal public sectors. Lack of government owned fixed asset
management manual is another problem for managing public assets.
C) Consequences of Mismanagement of Public Fixed Assets
The consequences or effects of fixed asset mismanagement and weaknesses in Hadiya

zonal organizations that included in the sample are increase maintenance cost, need for
new asset and risk of the asset, and decrease service delivery level. Addition to this it
significantly affects economic utilization of warehouse and office spaces. Again revenue
potential of public properties is underused and market value of assets is not recognized.
5.4. Recommendations
In this portion, based upon the response what the researcher obtained from analyzing the
data, the researcher present various comments and ideas directed toward findings as the
solutions.
Property administration officers and internal auditors should get adequate training on
fixed asset management and also the organization should establish capacity building
program for asset management. Therefore, the Hadiya zone finance and economic
development department should facilitate the training and capacity building programs for
property officers and internal auditors.
The organizations should prepare fixed asset management plans especially for operation;
maintenance and disposal function of asset management and should set up performance
measurement plan.
64
The organizations managements should improve fixed asset utilization in rendering
public services through eliminating lack of plan, creating good maintenance system,
accountability and internal audit work and like.
The organizations should establish an appropriate monitoring and controlling system to

protect fixed asset from misuse through private consumption, loss and wastage. And there
should be strong internal control system for public property and also the zone finance and
economic department’s management should enhance the role of internal audit team in
managing fixed asset.
The Hadiya zonal public sectors should establish strong maintenance strategy for fixed
assets through creating proper maintenance plan and timely maintenance. The zone
finance and economic development department through collaboration with others users
departments/sectors should implement disposal for any un-functional or surplus or
unserviceable fixed asset to divert capital to more productive uses that can help achieve
the government’s objectives and to increases revenues that could arise from asset sales
and to utilize warehouses spaces and office spaces effectively.
The Hadiya zone finance and economic development department and all other zonal
departments should work together to strengthen fixed asset management system through
reducing factors that hinders asset management such as the budget limitation, lack of
skilled human power, lack of management emphasis, lack of accountability, lack of
responsibility, lack of transparency and like.
Finally, the South Nation Nationalities and People Regional State BoFED should prepare
additional fixed asset management guidelines like government owned fixed asset
management manual in order to strengthen fixed asset management system. Also the
Ethiopian government should adopt and introduce accrual basis of accounting system in
order to disclose fixed asset account in financial statement and report.
65
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Annex I: Questionnaire to be filled by Property Administration Officers and
Auditors
Ethiopian Civil Service University
Institute of Tax and Customs Administration
Department of Public Procurement and Asset Management
Dear respondent,
This Questionnaire is designed by Addis Erjabo, who is a candidate for Masters Degree
at Ethiopian Civil Service University, to conduct a study in partial fulfillment of a
master’s degree program in public procurement and asset management.
The purpose of this questionnaire is to collect primary data for conducting a study on the
“Challenges and Practices of Public Fixed Asset Management in Case of Hadiya Zone”.
The researcher strongly believes that the findings of this study will have significant
importance for Hadiya Zone public organizations that are managing public property in
improving fixed asset management, property utilization, minimizing cost, and reducing
public property waste. It helps for heads of the public body to make decision on fixed
asset utilization. Thus, your genuine and timely response is highly appreciated.
The data to be collected from individual respondent will be kept confidential and it will
be used only for academic purpose.
General Directions to Respondents
1. No need of writing your name.

2. Please indicate your level of agreement /disagreement to each questionnaire.
3. Please fill the questionnaire using tick (√) or circle your choice where applicable
and describe your opinion for open-ended questionnaire on the space provided.
4. Thank you in advance for the available information you are sharing and the
precious time you are going to spend for this purpose
Researcher Address: Mob. No. 0916882055; e-mail: addiserjo2006@Gmail.com
I
Section I: Respondent Personal Information
1) Your occupation ……………………………….

2) Gender a) Male b) Female
3) Age: - a) 20 - 25 b) 26 - 35 c) 36 - 45 d) 46 - 55
4) Educational level: a) Certificate b) Diploma c) Bachelor degree d) Masters degree
5) Working experience: - a) 0 - 5 years b) 6 - 10 years c) 11 – 20 years d) More than 20
years
Section II. Question Related to human capacity and legal framework

6) Does your organization have proper documents to mange fixed asset?
Documents Yes No I don’t know Remark
a) Proclamation
b) Directives
c) Manual
d) Other guidelines
7) If your answer is ‘‘Yes’’ for Q no. 6 do you agree the documents can give adequate know-how
to manage the public property effectively and efficiently?
Asset management Strongly Agree Neutral Disagree Strongly Remark
agree disagree
a) Planning
b) Use
c) Maintenance
d) Disposal
8) How often do you get training on fixed asset management?

a) Frequently b) sometimes c) rarely d) never
9) Does your organization have a proper capacity building program for fixed asset
management especially for concerned bodies?
a) Yes b) No c) I do not know
II
10) Do you think that the organization have adequate and competent human resources,
and financial resources to manage fixed assets?
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
Section III. Question Related to Planning of Fixed Asset

11) Does your organization have the following fixed asset management plans?
I don’t
Fixed asset management plan Yes No know Remark
a) Strategic plan
b) Operational plan
c) Asset performance plan
12) Does your organization plan include the following fixed asset management aspects?
Fixed asset management Yes No I don’t know Remark
function
d) Acquisition
e) Usage
f) Maintenance
g) Disposal
13) Does your organization measure service delivery performance for fixed asset?
a) Yes b) No c) I don’t know
14) Do you think the organizational structure is suitable for fixed asset management?
Section IV. Question Related to Accounting of Fixed Asset
15) Is the cost and useful life criteria used to determine fixed asset in your organization?
16) If your answer is “Yes” for Q. No. 15, which one is used currently?
a) cost ≥ 1000 birr and useful life ≥ 1 year
b) cost ≥ 200 birr and useful life ≥ 1 year
III
17) Does your organization plan consider the whole life cost of fixed asset?
18) Does your organization maintain records for all fixed asset costs?
19) If your answer is “Yes” for Q. No. 18, at what account it recorded?
a) expenditure account b) fixed asset account
20) Does your organization apply physical count for fixed asset?

21) If your answer is “Yes” for Q. No. 20, how often at each physical year?
a) Monthly b) Quarterly c) semi-annually d) annually e) not at all
22) Does the PIN (property identification number) code is given for all fixed asset in your
organization? a) Yes b) No c) yes but not for all d) I do not know
Part V. Question Related to Use of Fixed Asset
23) Does your organization have clear accountability and responsibility in fixed asset
utilization? a) Yes b) No c) I don’t know
24) Who is the responsible body for fixed asset under custody or user?
------------------------------------------------------------------------------------------------------------
----------------------
25) How do you rank fixed asset use and operation in line with service delivery?
a) Very good b) good c) neutral d) poor e) Very poor
26) If your choice is “poor” and “very poor” for Q. No. 25, explain the
challenges-----------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
----------------------
IV
27) What are the strengths and weaknesses of fixed asset management system in your
organization?
Strengths:
------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Weaknesses:
------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
28) Does your organization have proper insurance coverage to minimize risk of fixed
asset?
29) If your answer is “Yes” for Q. No. 28, which category of fixed asset?
------------------------------------------------------------------------------------------------------------
-------------------
30) Is there appropriate monitoring and controlling system in your organization to protect
fixed asset from misuse through private consumption, loss and wastage?
31) How do you rank the internal control system for property in your organization?
32) How do you rank your internal audit team’s contribution for fixed asset management?
a) Very good b) good c) medium d) poor e) Very poor
Section VI. Question Related to Maintenance of Fixed Asset
V
33) Does your organization have planned fixed asset maintenance system?
34) Does your organization apply a timely maintenance of fixed asset?

35) If your answer is “No” for Q. No. 34, what are the consequences due to failure on
timely
maintenance?-------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
-------------------------------------
36) Which major type of maintenance system mostly used in your organization?
a) Repair or corrective (break down) b) preventive c) I don’t know
37) How do you rank fixed asset maintenance strategy of your organization?
a) Very strong b) strong c) neutral d) weak e) very weak
Section VII. Question Related to Disposal of Fixed Asset
38) How do you rank the implementation of fixed asset disposal in your organization?
a) Very good b) good c) moderate d) poor e) very poor
39) Is there fixed asset for long-period in your organization without any use that should
be disposed of?
40) Does your organization warehouse occupied with surplus or obsolete or un-functional
fixed assets? a) Yes b) No c) I do not know
41) Does your organization office space occupied with surplus or obsolete or un-
functional fixed assets? a) Yes b) No c) I do not know
VI
Section VIII. Question Related to Challenges of Fixed Asset and Its Consequences
42) How do you rate the following factors as a challenges or problems in managing fixed
asset?
Factors Very High Neutral Low Very Remark

high low
1. Budget limitation
2. Lack of skilled human power
3. Lack of management
emphasis
4. Lack of accountability
5. Lack of responsibility
6. Lack of transparency
7. Lack of ethical behavior for
users
8. Influence of Politics
9. Lack of plan
10. Lack of proper incentive for
staff
11. Lack of adequate legal
framework
43) How do you rate the following consequences due to misuse of fixed asset in your
organization?
Consequences Very High Neutral Low Very Remark
high low
1) Increase maintenance cost
2) Increase need for new asset
3)Decrease service delivery level
4) Increase the risk of assets
VII
Annex II: Questionnaire to be filled by process owners
Dear respondent,
This Questionnaire is designed by Addis Erjabo, who is a candidate for Masters Degree
at Ethiopian Civil Service University, to conduct a study in partial fulfillment of a
The purpose of this questionnaire is to collect primary data for conducting a study on the
“Challenges and Practices of Public Fixed Asset Management in Case of Hadiya Zone”.
The researcher strongly believes that the findings of this study will have significant
importance for Hadiya Zone public organizations that are managing public property in
improving fixed asset management, property utilization, minimizing cost, and reducing
public property waste. It helps for heads of the public body to make decision on fixed
asset utilization. Thus, your genuine and timely response is highly appreciated.

1. No need of writing your name.
2. Please indicate your level of agreement /disagreement to each questionnaire.
3. Please fill the questionnaire using tick (√) or circle your choice where applicable
and describe your opinion for open-ended questionnaire on the space provided.
VIII
precious time you are going to spend for this purpose.
Section I. Respondents Personal Information

1) Your occupation ……………………………….
2) Gender a) Male b) Female
3) Age: - a) 20 - 25 b) 26 - 35 c) 36 - 45 d) 46 - 55
4) Educational level: a) Certificate b) Diploma c) Bachelor degree d) Masters degree
5) Working experience: - a) 0 - 5 years b) 6 - 10 years c) 11 – 20 years d) More than 20
years
Section II. Question Related to Fixed Asset Planning

6) Does your organization have the following fixed asset management plans?
Fixed asset management plan Yes No I don’t know Remark
h) Strategic plan
i) Operational plan
j) Asset performance plan
7) Does your organization plan include the following fixed asset management aspects?
Fixed asset management Yes No I don’t know Remark
function
k) Acquisition
l) Usage
m) Maintenance
n) Disposal
8) Does your organization measure service delivery performance for fixed asset?
IX
9) Do you think the organizational structure is suitable for fixed asset management?
Section III. Question Related to Use of Fixed Asset

10) Do you think that your organization has given emphasis in managing fixed asset?
11) Does the PIN (property identification number) code is given for all fixed asset in your
organization? a) Yes b) No c) yes but not for all d) I do not know
12) Who is the responsible body for fixed asset under custody or user?
-------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
13) Does your organization have clear accountability and responsibility in utilizing fixed
assets effectively, efficiently, economically and transparently?
14) Do you believe that you are able to perform your service delivery effectively using
fixed Asset under your responsibility?
a) Strongly agree b) agree c) moderate d) disagree e) strongly disagree
15) Do you believe that you are able to perform your service delivery effectively using
common fixed Asset like vehicle, photocopy machine of your organization?
16) Do you think that public property or asset is utilized for only for the public service
delivery and not for personal consumption?

X
17) How do you rank your organization in providing protection for property from losses due to
the following factors?
Factors Very Strong Neutral Weak Very Remark
strong weak
1. Theft
2. Fire
3. Accident
4. Natural disaster
5. Other ills
18) Does your organization have effective and efficient monitoring and controlling
mechanisms to protect fixed asset from misuse through private consumption, loss
and wastage?
19) How do you rank the internal control system for property in your organization?
20) Does your organization have proper insurance coverage to minimize risk fixed asset?

21) If your answer is “Yes” for Q. No. 20, which category of fixed asset?
-------------------------------------------------------------------------------------------------------
--------------------------------------------------------
22) How do you rank fixed asset management (in terms of usage, care, control,
maintenance and disposal) in your organization?
a) Very good b) Good c) Neutral d) Poor e) very poor
XI
23) What are the strengths and weaknesses of fixed asset management system in your
organization?
Strengths:
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
----------------------
Weaknesses:
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
--------------------
Section IV. Question Related to Maintenance of Fixed Asset
24) Does your organization have planned fixed asset maintenance system?
25) Does your organization apply a timely maintenance of fixed asset?

26) If your answer is “No” for Q. No. 25, what are the consequences due to failure on
timely
maintenance?-------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
27) Which major type of maintenance system mostly used in your organization?
a) Repair or corrective (break down) b) preventive c) I don’t know
28) How do you rank fixed asset maintenance strategy of your organization?
a) Very strong b) strong c) neutral d) weak e) very weak
XII
Section V. Question Related to Fixed Asset Disposal
29) How do you rank the implementation of fixed asset disposal in your organization?
a) Very good b) good c) moderate d) poor e) very poor
30) Is there fixed asset for long-period in your organization without any use that should
be disposed of? a) Yes b) No c) I do not know
31) Does your organization office space occupied with surplus or obsolete or un-
functional fixed assets? a) Yes b) No c) I do not know
Section VI. Question Related to Challenges of Fixed Asset and Its Consequences
32) How do you rate the following factors as a challenges or problems in managing fixed asset?
Factors Very High Neutral low Very Remark
high low
1. Budget limitation
2. Lack of skilled human power
3. Lack of management emphasis
4. Lack of accountability
5. Lack of responsibility
6. Lack of transparency
7. Lack of ethical behavior
8. political factors challenges
9. Lack of strategic plan
10. Lack of proper incentives for staff
11. Lack of adequate legal framework
33) How do you rate the consequences due to misuse of fixed asset in your organization?
Consequences Very High Neutral Low Very Remark
high low
Increase maintenance cost
Increase need for new asset
XIII
Decrease service delivery
level
Increase the risk of assets
Annex III: Interview Question for Head of Public organization
Dear respondent,
This Interview Question is designed by Addis Erjabo, who is a candidate for Masters
Degree at Ethiopian Civil Service University, to conduct a study in partial fulfillment of a
The purpose of this Interview question is to collect primary data for conducting a study
on the “Challenges and Practices of Public Fixed Asset Management in Case of Hadiya
Zone”. The researcher strongly believes that the findings of this study will have
significant importance for Hadiya Zone public organizations that are managing public
property in improving fixed asset management, property utilization, minimizing cost, and
reducing public property waste. It helps for heads of the public body to make decision on
fixed asset utilization. Thus, your genuine and timely response is highly appreciated.
1. Please indicate your level of agreement /disagreement to each interview question.

precious time you are going to spend for this purpose.
XIV
1. Do you believe that your organization management gives attention on fixed asset
management?
2. Do you think that your organizational structure is favorable to mange fixed asset
effectively and efficiently?
3. Is there adequate plan to manage fixed asset in your organization?
4. Do you think that the fixed asset users are ethical?
5. Does the fixed asset performance measurement is practiced in your organization?
6. Are all fixed assets that owned by your organization clearly known?
7. What are the main challenges or constraints that your organization face in fixed
asset use, protect, maintenance and disposal aspects?
8. What are the consequence of misuse and wastage of the fixed asset?
XV

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Addis Thesis Final

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INSTITUTE OF TAX AND CUSTOMS ADMINISTRATION

DEPARTMENT OF PUBLIC PROCUREMENT AND ASSET

Challenges and Practices of Public Fixed Asset

A Thesis Submitted to the Institute of Tax and Customs Administration

I, Addis Erjabo, Registration Number/I.D. Number PPMMR-0005/05, do hereby

Name of Participant…………………….. Signature…………………. Date………….

Name of Advisor……………………… Signature…………………. Date…………

Name of Supervisor ……………….………………… Signature………………….

Name of Internal Examiner ………………………… Signature…………. ……..

Name of External Examiner ………………………….. Signature…………. ……..

Name of Head of Department ………………………. Signature………………….

Third, I would like to extend grateful acknowledgement to my family members and

Table 4.1: Response Rate.................................................................................................. 30

Figure 2.1: Fixed Asset Life-Cycle...................................................................................13

Figure 4.1: Respondents Training on Fixed Asset Management.......................................33

Figure 4.2: Existence of Clear Accountability and Responsibility....................................42

Figure 4.3: Condition of Fixed Asset Service Delivery....................................................43

Figure 4.6: Existence of Planed Fixed Asset Maintenance System...................................49

Figure 4.7: Existence of Planed Fixed Asset Maintenance System...................................51

Figure 4.8: Availability of Surplus or Unserviceable Fixed Asset....................................53

Plates 4.1: Photos Indicating Fixed Asset Mismanagement..............................................56

BoFED: Bureau of Finance & Economic Development

BSC: Balanced Score Card

FAMU: Fixed Assets Management Unit of public sectors

FGE: Federal Government of Ethiopia

GOFAMM: Government Owned Fixed Asset Management Manual

KPIs: Key Performance Indicators

MoFED: Ministry of Finance & Economic Development

NPM: New Public Management

PIN: Property Identification Number

PPP: Public Private Partnership

SNNPR: South Nation Nationalities and Peoples Region

TLAM: Total Life-Cycle Asset Management

1.1. Background and Rationale of the Study

According to Kaganova (2008, p.1) Governments own an impressive range of property

Asset management of public property is understood as the process of making and

1.2. Statement of the Problem

In this connection, Public Procurement and Property Administration Agency indicates

1.3. Objectives of the Study

1.3.2. Specific Objectives

3. To identify the consequences of mismanagement of public fixed asset observed in

1.4. Research Questions

3. What are the consequences of mismanagement of public fixed assets observed in

1.6. Scope and Limitation of the Study

1.6.1. Scope of the Study

1.6.2. Limitation of the Study

1.7. Outline of Chapters

2.2. Definition of Public Fixed Asset

2.3. Characteristics and Categories of Fixed Asset

2.4. Concept of Public Fixed Asset Management

2.5. Public Asset Management Objectives

Finally, effective asset management aims to maximize uptime/productive capacity,

2.6. Organizational Structure of Fixed Asset Management

2.7. Challenges of Fixed Asset Management in Public Sectors

Developing countries, especially transition countries, have faced obstacles in public

Therefore, in implementing a public asset management framework, it is important for

2.8. Fixed Asset Life-Cycle Management

Figure 2.1: Fixed Asset Life-Cycle

2.8.1. Planning of Fixed Asset

According to Kooymans and Abbott (2006, p. 198-199) possession of usable information

A. Strategic Plan of Fixed Asset

B. Operations Plan of Fixed Asset

2.8.2. Acquisition of Fixed Asset