The Objectives of this study are to study the benefits obtained from public property disposal services, to assess the impact of disposal service in the complement of asset management process, to examine the challenges encountered in public property disposal services and to identify the accumulation of disposable public fixed assets.
The government of Ethiopia is committed for the strategic management of physical assets. This is to substantiate considerable economic and administrative benefits from strategic management of assets to create favorable environment for a better public service delivery. Even though lately waked up on the committed public property administration; its concern could be verified from the establishment of Public Property Administration (PPA) by 2009 and Public Procurement and Property Disposal Service (PPPDS) by 2010.
Pertained to the study area coverage, this paper is therefore limited to the federal government of Ethiopia budgetary institutions. This part of the paper comprises an indication of the major and sub-contents of the research paper. These are under chapter one, background of the study, statement of the problem, objectives, research questions, significance of the study and scope and limitations of the study. Chapter two, under general concepts, principles of asset management, disposal of Assets and reasons for disposal of Assets; employee turnover, sources of employee turnover and impact of employee turnover are supported by related literatures. As parts of independent variable, fixed asset management information system(asset register), concern for public property, awareness, disposal of ICT materials, disposal of car batteries and tyres, revenue generation, auctions, efficient and effective asset management, environmental protection and conceptual framework of the Study are explained based on certain literatures and concepts of the paper. Chapter three; encompasses description of the study area, justification of the selected study area, sample design, sampling frame; sampling size, data types and Source and data analysis tools. Chapter four covers results and discussion; chapter five covers conclusions and recommendation. The references and appendices have been also attached.
TABLE OF CONTENTS
ACKNOWLEDGEMENT
ACRONYMS
LIST OF TABLES
LIST OF FIGURES
ABSTRACT
1 INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Questions
1.5 Significance of the study
1.6 Scope and Limitation of the Study
1.7 Organization of the Paper
2. REVIEW OF LITERATURE
2.1 General Concepts
2.2.1 Principles of Asset Management
2.2.2 Disposal of Assets
2.2.3 Reasons for disposal of Assets
2.2 Employee Turnover
2.2.1 Sources of Employee Turnover
2.2.2 Impact of Employee Turnover
2.3 Fixed Asset Management Information System (FAMIS)
2.4 Concern for Public Property
2.5 Conceptual Framework of the Study
3 RESEARCH METHODOLOGY
3.1 Description of the Study Area
3.3.1 An Overview of Public Procurement and Property Disposal Service of Ethiopia
3.3.2 Justification of the Selected Study Area
3.2 Research Method
3.2.1 Sampling Frame
3.2.2 Sampling Size
3.3 Data Types and Sources
3.3.1 Primary Data Sources and Collection Methods
3.3.2 Sources of Secondary Data
3.4 Data Analysis Tools
4 RESULTS AND DISCUSSIONS
4.1 General Information
4.2 Descriptive Analysis
4.2.1 Benefits obtained from public property disposal auctions
4.2.2 Impact of disposal service in the complement of asset management process
4.2.3 Examining the challenges encountered in public property disposal services
4.2.3 Accumulation of disposable public fixed assets
5 CONCLUSIONS AND RECOMMENDATIONS
5.1 Conclusions
5.1.1 Benefits obtained from public property disposal services
5.1.2 Impact of disposal service in the complement of asset management process
5.1.3 Challenges encountered in relation to public property disposal services
5.1.4 Accumulation indicators of disposable public properties
5.2 Recommendations
REFERENCES
APPENDICES
ACKNOWLEDGEMENT
I am highly grateful to PPPDS for arranging the appropriate time, providing me Laptop computer and with the necessary stationeries for the successful completion of the study.
I would like to express my deep whole-hearted gratitude to my Advisor Mr. Yigezu Daba, the Director General of PPPDS, for his unreserved assistance, guidance and very constructive supervision from the inception to the completion of this research work. His constructive suggestions for perfect organization, logical flow and attention to details were very decisive in bringing this working research paper to its present form.
Last, but not least, I am also grateful to PPPDS Directors and Staffs for their greater comments and direct and indirect contributions and encouragement for the fruitful accomplishment of my study.
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LIST OF TABLES
Table-4.1 Economic benefits of Public fixed Assets Disposal through Auction
Table-4.2 Disposal of fixed assets through public sales as revenue generation (Auction):
Table-4.3 Administrative Benefits obtained from public fixed asset disposal:
Table-4.4 Contribution of Proper fixed Asset Disposal to Environmental protection:
Table-4.5 Experience of annual disposal plan in the work plan by public sectors:
Table-4.6 Practices of maintaining fixed assets prior to disposal:
Table-4.7 Practices of Asset Management Information System (AMIS):
Table-4.8 Maintaining Fixed Asset Register (FAR):
Table 4.9 -Reasons for not maintain FAR
Table-4.10 Practices of annual depreciation valuation for public fixed assets
Table-4.11 Shortcomings of not maintaining FAR:
Table-4.12 Chance of training related with property administration:
Table-4.13 Awareness Problems on Property administration directive, No. 9/2010.
Table-4.14 Drawbacks of effective and efficient centralized public property disposal:
Table-4.15 Problems Identified in ICT materials, Tyres and Battery disposal
Table-4.16 Significance of centralized property disposal service
Table-4.17 Indicators of government’s Concern for Public Property Administration
Table-4.18 Indicators of poor Concern of Public Sectors in Property Disposal:
Table-4.19 Employ turnover in Property Administration Units:
Table-4.20 Major employee turnover driving forces identified:
Table-4.21 Impact of Employee turnover on Public Property Disposals:
Table-4.22:- Indicator of Accumulated Disposable Fixed Assets at Public Sectors
LIST OF FIGURES
Fig. 2.1 Asset Management Cycle
Fig. 2.2 :- Conceptual Framework
Fig. 4.1 Fixed asset Disposal and sales
ABSTRACT
The government of Ethiopia is committed for the strategic management of physical assets. This is to substantiate considerable economic and administrative benefits from strategic management of assets to create favorable environment for a better public service delivery. Even though lately waked up on the committed public property administration; its concern could be verified from the establishment of Public Property Administration (PPA) by 2009 and Public Procurement and Property Disposal Service (PPPDS) by 2010. At the federal level Ethiopia spends up to 34% in average of the country’s annual budget for the procurement of fixed assets each year (MoFED). Among these properties some need to be disposed. Disposal as a part of property management cycle has been defined as the transfer of public property to another person by the sale or other means or the act of getting rid of public property by burning or burying”, ( FDRE Public Procurement and Property Administration Proclamation No.649/2009 p.5). As per the federal government property administration directive No. 9/2010; the four commonly known reasons for fixed assets disposal are when the asset is unserviceable, obsolete, surplus and abandoned and lost owners. The six major different ways of public property disposal includes disposal through sales, transferring to other institutions as gifts, burying or burning, dismantling and selling as spare parts, dismantling and using as spares and disposing as scraps. However, currently PPPDS is providing disposal service only through sales. Pertained to the title of this study,” benefits and challenges in Public Property Disposal Practices”, there is no study conducted to identify the challenges encountered and efforts exerted in public fixed property disposal service by PPPDS. The Management of PPPDS also prepared TOR an interested problem area to identify the accumulated disposable public fixed assets. This is what initiated the researcher. The Objectives of this study are to study the benefits obtained from public property disposal services, to assess the impact of disposal service in the complement of asset management process, to examine the challenges encountered in public property disposal services and to identify the accumulation of disposable public fixed assets. These paper is organized in to five chapters namely introduction, literature review, research methodology, results and discussion and conclusion and recommendations. Even though there is no enough reference materials for public property disposal, related literatures have been used. As a research method, descriptive survey has been employed for the research. The sample frame of the study covers 151 major budgetary federal government intuitions of which 53 (35%) of them sampled randomly. Primary and secondary data sources have been used and an interview schedule employed for the collection of primary data from the respondents, FGDs and KIS. Finally, the date collected has been analyzed descriptively. As research findings, economic benefits and administrative benefits also drained from the disposal of public fixed properties. Consequently the efforts exerted by PPPDS for the five years (2010-2015) brought an impact on disposable properties in reducing 844 vehicles and 69,840 lots of other fixed properties and generated 197.6 mill ETB. A wareness in public property disposal procedures, fixed asset management information system, effective and efficient disposal service delivery, disposal of ICT materials, car batteries and tyres, concern for public property and employee turnover have been identified as the challenges in public property disposal. Indicator of accumulated disposable fixed assets also traced out. Finally the researcher arrived at recommendations for the spotted out public fixed properties’ disposal challenges.
Key words:- challenges , disposal, fixed assets, public property.
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1 INTRODUCTION
1.1 Background of the Study
Regardless of immature age in establishment of Public property Administration Institution, the government of Ethiopia is committed for strategic management of physical assets. This is to substantiate considerable economic and administrative benefits from strategic management of assets to create favorable environment for a better public service delivery. The above committed concern of the government of Ethiopia for public service delivery can be verified from the establishment of Public Property Administration (PPA) and Public Procurement and Property Disposal Service (PPPDS) by 2010.
Each year, the Government of Ethiopia spends up to 34% in average of the country’s annual budget for the procurement of fixed assets or capital budget to the public service delivery. A significant proportion of this expenditure is made on goods, many of which need to be disposed when they become surplus to needs. The expectation is therefore that procurement entities dispose of these goods in an efficient, consistent, equitable manner, in order to achieve value for money in harmony with the principles of the public financial administration and public procurement acts. This can be conceivable if there is a proper asset management practices.
Asset management has been defined as the process of creating value within the owner’s objectives through the acquisition, use and disposal of real property assets. On the other way, it has also been defined as the practice of maximizing the value of a portfolio of properties, within the objectives of the owner ( Article by Gordon E. Macranair, Vol. 54 P. APP). As per the definition given by the Council of Ministries of Ethiopia; FR.No 17/199, fixed Assets means tangible asset costing Birr 1000 or more than in an operational use with more than one year of an economic life. Such as furniture, computers, heavy equipment, vehicles, ships and aircrafts, buildings, roads, sewers, bridges, irrigation systems and dams.
In asset management, Properties need to be disposed of if they are surplus or excess, or if they have aged to retirement. This is because property disposal has the decisive contribution for the comprehensive achievement of asset management cycle. So that disposal as a part of property management cycle has been defined as the transfer of public property to another person by sale or other means or the act of getting rid of public property by burning or burying”, ( FDRE Public Procurement and Property Administration Proclamation No.649/2009 p.5).
Moreover, disposition of the disposal of property includes the following transactions:- sell of property for cash or other property, exchange of property for other property, receive of money as a tenant for the cancellation of a lease, transfer of property to satisfy a debt, discard of property, receipt of property or money for damaged, destroyed, or stolen property, (IRS Publication V.334 p.1).
Furthermore as of GOFAM, the Government Owned Fixed Assets Management cycle is complete only if disposal of assets is possible. A public body acquires fixed assets, uses it and when it is no more needed or when it is no more functional, the public body must be able to dispose it in an economic, legal and transparent manner. Otherwise, the management of assets becomes complicated, uneconomic and inefficient ( GOFAM P.121).
In Ethiopian context, there are four commonly known reasons for fixed assets disposal. These are when the asset is Unserviceable because of old age or accident, obsolete due to technological change that might not be economical in terms of cost and time, surplus and abandoned, assets the owners of which are not known or are unable to satisfy some legal requirements to become the final owner. This includes assets kept by customs and police.
Based on the Federal Government property administration directive No. 9/2010, properties can be disposed in six major different ways. These ways include property disposal through sales as it is, transferring to other institutions as gifts, burying or burning, dismantling and selling as spare parts, dismantling and using as spares and disposing as scraps. However, among these PPPDS has been given disposal service only through sales.
Even though the PPPDS has been performed property disposal service since 2010, only annual plan performance reports have been set as a service delivery performance. On the contrary, there is no more written documents illustrate the efforts exerted, benefits obtained and challenges encountered in service provision processes by PPPDS. On the other hand the economic and property administration impact of the property disposal undertaken for the last four years in order to make complement property administration practices not yet materialized and documented rather than in report form. This is what initiated the researcher to conduct the study in order to fill the gaps by identifying the challenges and benefits obtained from property disposal services. Additionally the management bodies of PPPDS identified another title and prepared and approved TOR in order to identify the accumulation of disposable public fixed assets to design new disposal system. This became the fourth objective this study.
Generally this working research paper classified in to five major chapters, namely introduction, review of the related literature, research methodology, results and discussion and conclusion and recommendations.
1.2 Statement of the Problem
Regarding the problems of fixed asset Management in developing countries, Emma stated that, Fixed assets are-highly susceptible to depreciation it is one thing to obtain an asset and another to utilize and maintain it meaningfully. It is usually disheartening to find properties of organizations and government carelessly kept, abandoned or improperly utilized. (Emma O. 2009).
Public property disposal in a centralized system is a new concept in property administration in Ethiopia. This began with the establishment of Public Procurement and property Disposal Service (PPPDS) by the council of ministers of FDRE order No. 184/2010. The reason for the establishment of this service institute was due to less emphasis has been given to the public property disposal.
The government owned fixed asset management manual of Ethiopia dictates that fixed assets management cycle is complete only if the disposal of assets is possible. Otherwise, the management of assets becomes complicated, uneconomic and inefficient (GOFAM, P.121). This indicates that the decisiveness of asset disposal in property administration.
The survey study conducted by Disposable Assets Documentation of the PPPDS in 2013 depicts that, there was a large accumulation of public properties without functions. But there is no quantified indicator of disposable public property. This indicates that there is a less proper property administration practices within the public organizations.
Based on the result of the survey and annual practical performance reports of the service delivery in 2012, 2013 and 2014 indicate that there were challenges in property disposal practices. The challenges identified by the paper were only related with directives circulated by the MoFED. On the other hand, still now there is no study conducted in relation to property disposal practices to depict the efforts exerted and challenges identified in property disposal service. The Management of PPPDS also prepared TOR for additional interest area of research in order to identify indicators of accumulated disposable public fixed assets. The above mentioned points are the initiative factors to conduct the study in order to identify the challenges and to disclose the efforts exerted by the PPPDS for the achievement of its goal.
1.3 Objectives of the Study
General Objective
To assess the benefits and challenges of public property disposal at the federal level.
Specific objectives
1. To study benefits obtained from public property disposal services
2. To assess the impact of disposal service in asset management process.
3. To examine the challenges encountered in public property disposal services
4. To identify the accumulation of disposable public fixed assets
1.4 Research Questions
In order to achieve the objectives of the study, the research questions prepared are as follows:-
1- What are the benefits obtained from the disposal of public property?
2- Have the property disposal service practices property administrative impacts?
3- What are the challenges encountered in the public property disposal practices?
4- What are the indicators for the accumulation fixed assets to be disposed?
1.5 Significance of the study
The global economic crisis has concentrated on the attention of public authorities on creating efficiencies in public services. By giving special consideration of generating savings in the current public property Portfolio through legalization programs, sales of surplus public-owned assets and making efficient property management as essential cost reduction strategies. In order to realize the above mentioned idea, the researcher has been considered that this study is significant to publicize the efforts exerted in property disposal by the PPPDS in terms of economic and administrative benefits. In addition, the study is vital for policy makers to maintain proper public property management policies. Finally, the output of the study will be useful as an input for academic purposes and for further related studies.
1.6 Scope and Limitation of the Study
The study focuses on the assessment of the challenges encountered PPPDS in property asset disposal and the benefits obtained from the service provided since its establishment.
Pertained to the study area coverage, it is limited to the federal government of Ethiopia budgetary institutions. This includes the public procurement and property disposal service as well as the Federal Government Institutions those have been disposed their properties as per the property administration directive No.9/2010.
In relation to the restraints of the study, obtaining satisfactory direct references to property disposal have not been available. Transparency and poor documentation practices in government organizations have been other limitation areas of the study. Finally, problems of facilitating the study process from relevant government bodies have been seen weak that contributed for the delay to finalize the paper.
1.7 Organization of the Paper
This part of the paper comprises an indication of the major and sub-contents of the research paper. These are under chapter one, background of the study, statement of the problem, objectives, research questions, significance of the study and scope and limitations of the study. Chapter two, under general concepts, principles of asset management, disposal of Assets and reasons for disposal of Assets; employee turnover, sources of employee turnover and impact of employee turnover are supported by related literatures. As parts of independent variable, fixed asset management information system(asset register), concern for public property, awareness, disposal of ICT materials, disposal of car batteries and tyres, revenue generation, auctions, efficient and effective asset management, environmental protection and conceptual framework of the Study are explained based on certain literatures and concepts of the paper. Chapter three; encompasses description of the study area, justification of the selected study area, sample design, sampling frame; sampling size, data types and Source and data analysis tools. Chapter four covers results and discussion; chapter five covers conclusions and recommendation. The references and appendices have been also attached.
2. REVIEW OF LITERATURE
The relevant literature pertaining to the concepts related with property management and property disposal practices along with the independent variables presented. The related empirical studies and conceptual framework of the study are among the major contents of this chapter.
2.1 General Concepts
2.2.1 Principles of Asset Management
Assets usually exist only 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: Asset acquisition, disposal and life‑cycle management decisions are integrated into an entity’s strategic and organizational planning; 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; an effective control structure is established for asset management; accountability is established for asset condition, use and performance; and disposal decisions are based on analysis of the methods which achieve the best available net return. The principles of asset management derive from practical experience and reasoning, and inform both strategic asset management and its practical application to the asset life‑cycle, Australian National Audit Office (2010, p.9).
In asset management life cycle, planning stage mainly comprises; need assessment, capital budgeting, strategic planning, service planning and workforce planning. The Acquisition stage includes risk assessment, capital programming and identification for alternatives acquisition such as lease. The operation& maintenance stage helps in management of suitability assessment, structural maintenance, routine maintenance, asset valuation and asset usage. The disposal stage includes valuation of assets, sale of assets and replacement.
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Fig. 2.1 Asset Management Cycle
Source: Audit Scotland, adapted from Sustaining our assets: Government Asset Management Policy Statement, Department of Treasury and Finance, State Government Victoria, Australia, 2000.
2.2.2 Disposal of Assets
In asset management process, property disposal has the decisive position in the cycle whether to reuse the property or getting rid of from the normal stock. So that disposal as a part of property management cycle defined as the transfer of public property to another person by sale or other means or the act of getting rid of public property by burning or burying”, ( FDRE Public Procurement and Property Administration Proclamation No.649/2009 p.5).
2.2.3 Reasons for disposal of Assets
The current GOFAM manual states that government owned fixed assets can be disposed due some reasons. These can be required to be disposed of under a particular policy; no longer required due to changed procedures, functions or usage patterns; occupying storage space and not being needed in the foreseeable future; reaching their optimum selling time to maximize returns; no longer complying with occupational health and safety standards; found to contain hazardous materials; and/or beyond repair but able to be sold for scrap.
2.2 Employee Turnover
Turnover refers to an employee’s leaving an organization. Employee turnover has potentially harmful consequences, such as poor customer service and poor company -wide performance. When employees leave, their jobs still need to be performed by someone, so companies spend time recruiting, hiring, and training new employees, all the while suffering from lower productivity,( Mason Carpenter, Talya Bauer, and Berrin Erdogan, 2014).
Employees’ turnover is a much studied phenomenon Shaw et al. (1998).But there is no standard reason why people leave organization. Employee turnover is the rotation of workers around the labour market; between firms, jobs and occupations; and between the states of employment and unemployment Abassi and Hollman (2000). Additionally, Woods (1995), stated that employ turnover as “Frequently, managers refer to turnover as the entire process associated with filling a vacancy: Each time a position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained. This replacement cycle is known as turnover”. This consequence has its own sources. For the purpose of understanding two sources of employee turnover are mentioned hereunder.
2.2.1 Sources of Employee Turnover
The rate of employee turnover within the organizations could be affected by different controllable and uncontrollable factors. Broadly, this can be seen from job related factors and organization related factors. In relation with job related sources of employee turnover, most researchers (Bluedorn, 1982; Kramer et al., 1995; and Saks, 1996) have attempted to answer the question of what determines people's intent to quit their current jobs. According to the mentioned researchers, there are numerous reasons why people quit from one institute to another or why people leave their former institutes. The experience of job related stress, the range factors that lead to job related stress, lack of commitment in the organization; and job dissatisfaction make employees to quit Firth et al. (2004). This clearly indicates that these are individual decisions which make one to quit. Manu et al. (2004) argue that employees quit from Organization due economic reasons. Using economic model they showed that people quit from organization due to economic reasons and these can be used to predict the labor turnover in the market. Good local labor market conditions improve organizational stability Schervish (1983). Pay-related factors have a modest effect on turnover in that when high performers are insufficiently rewarded, they quit. If jobs provide adequate financial incentives the more likely employees remain within the organizations, Griffeth and Hom, (2000).
Pertained to organizations as sources of employee turnover, high employee turnover can be one of the indicators of organizational instability. In circumstances where organizations are unstable, employees tend to quit their jobs and look for stable organizations because with stable organizations employees might be to expect their career progression. In relation with Organizational instability, Zuber, ( 2001), stated that employees are more likely to stay when there is a predictable work environment. There are also other factors which make employees to quit from organizations and these are poor hiring practices, managerial style, lack of recognition, lack of competitive compensation system in the organization and toxic workplace environment Abassi et al. (2000).
2.2.2 Impact of Employee Turnover
Employee turnover is expensive from the view of the organization. Voluntary quits which represents an exodus of human capital investment from organizations and the subsequent replacement process entails manifold costs to the organizations Fair (1992). Addition to the replacement costs, output would be affected to some extend or output would be maintained at the cost of overtime payment, John (2000). Many researchers argue that high turnover rates might have negative effects on the profitability of organizations if not managed properly ( Barrows, 1990; Hogan, 1992; Wasmuth and Davis, 1993).
Research estimates indicate that hiring and training a replacement worker for a lost employee costs approximately 50 percent of the worker’s annual salary (Johnson et al., 2000) – but the costs do not stop there. Workforce optimization, the organization’s success in optimizing the performance of the employees by establishing essential processes for getting work done, providing good working conditions, establishing accountability and making good hiring choices would retain employees in their organization, (Henry Ongori , 2007 p.4).
Gustafson (2002) argues that turnover include other costs, such as lost productivity, lost sales and management’s time. Consequently, if employee turnover is not controlled properly, it has a negative impact on the organization in terms of personnel costs and its sustainability. Generally organizations are better accepting the ideal turn over calculation proposed by Helen Luketic (2009), that is if the benefits of turnover is greater than the costs of turnover it is ideal functional turnover whereas if the costs of turnover greater than the benefits of turnover the consequence is dysfunctional turnover.
2.3 Fixed Asset Management Information System (FAMIS)
For the purpose of this study, “Management information system” refers to a well-established MIS in relation with fixed asset portfolio, which is proposed by the researcher as a challenge area in public property asset management. Management information system (MIS) is designed to assist managerial and professional workers by processing and disseminating vast amounts of information to managers’ organization-wide (Alavi & Leidner, 1999.P17). Management information system is any system that provides information for management activities carried out within an organization. Yasemin Bal, Serdar Bozkurt and Esin Ertemsir (2012, P.54).
Asset Register
The asset register is a cornerstone of an asset management framework for entities, in that it keeps asset information as well as an historical record of both financial and non‑financial information over each asset’s life‑cycle for the purposes of asset planning, meeting accounting standards and legislative compliance; monitoring performance; accountability, asset locations and asset custodians for stock takes, Australian National Audit, Better Practice Guide (2010 p.60-61).PPA materials (FAR) have to be referred.
The functional requirements of an asset register will depend on the size and nature of activities and asset portfolio of the public organizations. Hence, fixed assets should have proper records from the point of acquire to the point of disposal in order to keep proper asset management cycle.
2.4 Concern for Public Property
For the purpose of this study, “Concern for public Asset Management” refers to accountability for stewardship and transparency in public asset management process. This is proposed as a lack of accountability for public Asset Management.
Awareness
For the purpose of this study, “awareness” refers to the knowhow of respondents in relation with legal framework of public property administration and Procedures of disposing public property for public service benefits.
Disposal of IT Materials
For the purpose of this study, “Disposal of IT Materials” refers to the disposal of computer and computer related information technology materials.
Disposal of Tyres
For the purpose of this study, “Disposal of tyres” refers to the disposal of used vehicles’ tyres of which end point of disposal is not known.
Economic Indicators
The impact of the property disposal will be seen in relation with economic impact and administrative impact in order to make complement property administration practices.
Revenue Generation
For the consumption of this study, the term “Revenue generation” refers to the economic advantages from the disposal of public property assets through public sales.
Auctions
For the purpose of this study, the term “auction” is related to benefits of property disposal on public sales from the viewpoint of economic advantages for the general public as well as the governmental as public representative.
Efficient and Effective Asset Disposal
Refers to the well-organized and successful public property disposal services delivery brought.
Environmental Protection: -
For the purpose of this study, “Environmental protection” refers to the contribution of property disposal services to protect environmental pollution emanate from public property maladministration.
2.5 Conceptual Framework of the Study
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Fig. 2.2 :- Conceptual Framework
Source:- Own Sketch
3 RESEARCH METHODOLOGY
3.1 Description of the Study Area
This section comprises information about study area, the research method, sampling design, method of data collection and methods of data analysis.
3.3.1 An Overview of Public Procurement and Property Disposal Service of Ethiopia
This study is conducted in Addis Ababa, the capital city of Ethiopia for the case of almost all the federal public sectors are located in. Public Procurement and Property Disposal Service(PPPDS) is also one of the public service institutions accountable to the Ministry of Finance and Economic Development (MoFED). Public Procurement and Property Disposal Service as a service institution established by the council of ministers Regulation No. 184/2010. Public Procurement and Property Disposal Service(PPPDS), established for the accomplishment of two major objectives, namely public procurement and disposal of public owned assets at the federal level. Institutionally, PPPDS is located at sadist Kilo, the top right of patriots square. The PPPDS is currently providing the property disposal service through sales and procure goods and services by legal framework agreement with the suppliers. PPPDS is providing the service for 151 major budgetary governmental organizations accountable to the federal government in consisting of 142 employees.
3.3.2 Justification of the Selected Study Area
The study titled “Assessment of the challenges and Benefits of Public Property Disposal Practices” conducted in Addis Ababa at the federal level. The study covers 30% of public institutions accountable to the federal government. The Selection of the study area for this research was purposive due to most of the government organizations at the federal level are located in the City, i.e. Addis Ababa. The wider operational area covered by the PPPDS, and availability of documents for the study can also considered sufficient. Since most public institutions seeking property disposal service from the PPPDS which is found in Addis Ababa. Research cost minimization also considered feasible. As a country, no researcher conducted a study in relation to property disposal challenges and benefits at the federal level.
3.2 Research Method
Kunar Y. (2006), survey method is concerned with the present and attempts to determine the status of the phenomena under investigation. Among the four categories of survey method, the researcher employed interview survey method, the sub category of descriptive survey.
The three types of information can be collected by survey methods of survey studies are: (i) of what exists, (ii) of what we want, and (iii) of how to get there. The information of what exists is gathered by studying and analyzing important aspects of present situation. The information of what we want is obtained by clarifying goods, goals, and objectives possibly through a study of the conditions existing elsewhere or what experts consider to be desirable. The Information of how to get these are collected through discovering the possible means of achieving the goals on the basis of the experiences of others or of opinions of experts (Kumar Yoseph 2006 P.101).This is the reason why the researcher has been designed and employed this method.
3.2.1 Sampling Frame
The sampling design that has been employed for scheduled interview of the respondents has been simple random technique, with purposive location in Addis Ababa. The sample frame of the study covers 151 major budgetary federal government Organizations. In addition to the representatives of the institutions those have been covered by the sample for primary data collection, focus group discussion and key informant interview also held with the employees of PPPDS and PPA.
3.2.2 Sampling Size
The respondents for the study have been one from each government institutions in the sample frame as per determined by using sampling design formula (Kothari, 2004).
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Where, n= sample size=53 respondents
N= Total population =151 (Federal Public Institutions).
Z= 95% confidence level (interval) under the normal curve (1.96)
E= Acceptable error term (0.05)
P and q are estimates of proportions sampled and not sampled that are 5.5% and 94.5% respectively.
According to the formula, the number of respondents was 53 representatives of the government institutions. The selection process has been in simple random sampling from government organizations obtained or seeking services from the PPPDS.
3.3 Data Types and Sources
Both qualitative and quantitative data types have been utilized for the study. Primary and secondary data have been collected from relevant data sources.
3.3.1 Primary Data Sources and Collection Methods
Interview Schedule
Semi-structured interview schedule has been used to collect data from the sample respondents to assess the challenges and benefits of public property disposal service practices. A total of 50 respondents will be interviewed.
Likert rating scales which includes as “high”, low” has been used to assess the level of efficiency and effectiveness for the service delivery performance exerted by PPPDS and other aspects. An interview schedule has been translated to Amharic for an easy and participatory way of data collection.
Focus Group Discussion (FGD)
Focus group discussion (FGD) has been conducted as one instrument for primary data collection by employing interview guide checklist. There were three FGDs; each group has been contained five participants, with the total of 15 group respondents. For the triangulation purpose one group has been selected from PPA and two groups from PPPDS.
Key Informant Interviews (KIIs)
Key informants has been used as one source of information for primary data collection by employing interview guide check-list purposively by selecting 5 (five) respondents from higher officials of PPA and PPPDS for data triangulation.
3.3.2 Sources of Secondary Data
Secondary data like annual reports, audit reports, and other relevant data to the research objectives also collected from the relevant governmental organizations. Journals, books, past research papers, and different web sites were also other sources of secondary data.
3.4 Data Analysis Tools
Descriptive Analysis
Descriptive statistics such as tabulations, percentages, and frequency distribution have been used to address the objectives of the study. The data collected and statistically categorized thereby explained descriptively.
4 RESULTS AND DISCUSSIONS
4.1 General Information
This chapter presents the findings of the study. Tables, percentages, frequencies and charts were used to present the response rates from the interview schedules responded by the respondents and from the secondary data.
The data for this study has been collected from 53 public sectors obtained service from PPPDS. Focus group discussion with three groups, each contained 5 members and key informant interviews contained relevant 5 key experts and directors from PPPDS and PPA has been conducted for the purpose of data triangulation.
Finally the analysis of the data collected is presented based on the specific objectives of the research in a binary response rating system for each independent variable.
4.2 Descriptive Analysis
4.2.1 Benefits obtained from public property disposal auctions
Table-4.1 Economic benefits of Public fixed Assets Disposal through Auction:-
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Pertained to the economic benefits of public fixed assets disposal through public sales for the country as well as for the buyers of the assets, for the variable “Reduces foreign currency required for import” (92%) and 8% of the respondents have been responded as “Yes” and “No” respectively, for the variable “Used as inputs for local manufactures” 98% and 2% of the respondents have been responded as “Yes” and “No” respectively, for the variable “Serves as a source of revenue for the country” 96% and 4% of the respondents have been responded as “Yes” and “No” respectively, for the variable “Avoids property wastage and misuse” 98% and 2% of the respondents have been responded as “Yes” and “No respectively” and for the variable “Advertizing cost advantages ” 98% and 2% of the respondents have been responded as “Yes” and “No” respectively (table-4.8).
Table-4.2 Disposal of fixed assets through public sales as revenue generation (Auction):-
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Source:-PPPDS, June, 2007 E.C
In relation with economic benefits gained from the disposal of public properties, fixed assets dumped without use have been changed to cash through action. The benefits obtained were in incremental bases of valued fixed assets year to year as can be perceived from table-4.9 and fig. 4.1. The revenue generated from the sales for the consecutive five years demonstrates that 13.4 mill., 21.0 mill., 35.8 mill., 35.0 mill., and 92.4 mill for the years 2003, 2004, 2005, 2006 and 2007 E.C respectively. The revenue generated from the sales of public property that sold by PPPDS for the five years was 197.7 mill ETB. Graphically,(Fig.4.1), the physical fixed properties disposed and revenue generated year after year in incremental path.
Graphical representation for the disposal of fixed assets (2011-2015)
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Fig. 4.1. Fixed assets disposal and sales level
Efficient and Effective Disposal
Table-4.3 Administrative Benefits obtained from public fixed asset disposal:-
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In relation with administrative benefits obtained from public property disposal service provided by PPPDS for the last five years, “Reduces accumulated disposable fixed assets” 60% and 40% of the respondents have been responded as “Yes” and “No” respectively, “Creates initiation for disposal of used and idle assets” 60% and 40% of the respondents have been replied as “Yes” and “No” respectively, “Employees’ health risk minimization” 58% and 42% of the respondents have been replied as “Yes” and “No” respectively and “Environmental protection advantages” 94% and 6% of the respondents responded as “Yes” and “No” respectively (table-4.10).
Effective contributions of PPA in grounding the property administration practices also discussed by FGDs and KII. This includes the establishment of property administration units in most public sectors, audit services with scarcely addressing all public sectors and provision of property administration related trainings for public sectors. But still the training obtained is shallow rooted which has not brought effective awareness in property disposal. On the other hand poor technical expertise support for property administration units of the sectors, amendments of directives related with property administration and operational manuals such as property administration directive No.9/2010 and GOFAM and poor property administration monitoring and evaluation are identified as what PPA has to perform.
Environmental Protection
Table-4.4 Contribution of Proper fixed Asset Disposal to Environmental protection:-
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Table-4.4, In relation with the contribution of fixed asset disposal service provided to environmental protection, “reduces hazardous corrosives released from metals” 94% and 6% of the respondents have been responded as “Yes” and “No” respectively, “reduces chemicals released from vehicles and IT materials” 94% and 6% of the respondents have been responded as “Yes” and “No” respectively, “minimizes unwanted odder from closed stores” 94% and 6% of the respondents have been responded as “Yes” and “No” respectively and “scattered properties affect environment has been managed” 86% and 14% of the respondents have been responded as “Yes” and “No” respectively.
Corresponding to the administrative benefits identified by the respondents (table-4.3), proper public property administration practices in some public organizations, reduced accumulation of disposable fixed assets, store utilization or space advantages and value for money obtained from idle public fixed assets are administrative benefits obtained identified by the respondents, FGDs and KIs. Administrative benefits obtained from the environmental protection advantages of property disposal also seen from the viewpoints of reduced hazardous corrosives released from metals, reduced chemicals released from vehicles and IT materials, minimizes unwanted odder from closed stores, and scattered properties affect environment has been handled.
4.2.2 Impact of disposal service in the complement of asset management process
Principles of Asset Management
Table-4.5 Experience of annual disposal plan in the work plan by public sectors:-
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Regarding the experiences of the public sectors in incorporating property disposal plan in their annual plan (Table 4.5), 8% and 92% of the respondents have been responded as b efore establishment of PPPDS “disposing once per year” and “disposing without plan” respectively. Similarly 32% and 68% of the respondents have been responded as after establishment of PPPDS “disposing once per year” and disposing without plan” respectively. The planning part of asset management comprises plan to acquire and plan to dispose, but this is not accomplished in public sectors.
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Regarding the maintenance of fixed assets prior to disposal, ”Have practices of maintaining fixed assets” 72% and 28% of the respondents (Table 4.6) have been responded as “Yes” and “No” respectively. Here, one of the principles of fixed asset management process has been accomplished in most public sectors.
Asset Management Information System:-
Table-4.7 Practices of Asset Management Information System (AMIS):-
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Regarding the practices of Asset Management Information System(AMIS), in FAR keeping whether computerized or manual, 34% and 66% of the respondents have been responded as “Yes” and “No” respectively. In bin card /stock card keeping for fixed assets, 91% and 9% of the respondents’ have been responded as “Yes” and “No” respectively. In depreciation computation practices for fixed assets kept by them, 19% and 81% of the respondents have been responded as “Yes” and “No” respectively. Annual inventory tasks and reporting has also been responded as “Yes” and ‘No” by 85% and 15% of the respondents respectively. Finally access of inventory report to the relevant governmental bodies also responded as “Yes” and “No” by 62% and 38% of the respondents respectively, (table-4.11).
Asset register
Table-4.8 Maintaining Fixed Asset Register (FAR):-
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Concerning the practices of FAR keeping in public organizations, 34% and 66% of the respondents have been responded as “Yes” and “No” respectively (Table-4.8). The data collected here indicates that there is poor practice of keeping fixed asset registers in public sectors.
Table 4.9 -Reasons for not maintain FAR
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Regarding the reasons for poor FAR keeping practices in public sectors (Table-4.9), Respondents have been responded as “Weak asset management practices” (68%), “Employ turnover” (74%) and “It is a new practice” (85%).
Table-4.10 Practices of annual depreciation valuation for public fixed assets
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Pertained to the practices of depreciation computation for the fixed assets, 19% and 81% of the respondents have been responded as “Yes” and “No”. The major reasons for the poor practices of depreciation computation in public organizations identified as lack of proper fixed asset register keeping. (Table-4.9).
Table-4.11 Shortcomings of not maintaining FAR:-
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In relation to impact of not maintaining FAR, 68% of the respondents responded as “Creates poor disposal plan and process”, 70% of the respondents have responded as “Results to improper fixed asset valuation”, 70% of the respondents have been responded as “Results to improper information delivery for disposal”, 72% of the respondents responded as “Yes” and “No” to “Creates public property mishandling” and 66% of the respondents have been responded as “Creates property ownership problem”, as to indicated by table-4.11.
Based on the first objective of the study, the impact brought by the disposal service in making the asset management process complement has been identified. The impact brought began from the initiation for the disposal plan of PPPDS. This initiation is request letter for disposal demand expression twice a year. The demand letter wrote provoked some sampled public sectors for to have awareness on the last step of property asset management process, disposal.
At the federal level, there is no identified initial accumulation of disposable public fixed assets documented. From the disposal point of view, the efforts exerted by PPPDS for the last consecutive five years (2010-2015) signify the change in property administration, specially reducing the accumulated fixed assets by the quantity disposed. But could not expresses the impact brought.
Lack of relevant documentation based information exchange between the public sectors and the relevant bodies (PPPDS, PPA and MoFED), become another problem that hurts smooth FAMIS. The efforts have been exerted by PPPDs within five years signifies the change brought in public property disposal. This brought reduction of 844 vehicles and 69,840 lots of other fixed properties from the unknown accumulation of disposable public fixed assets. But the impact brought is not measurable due to poor fixed asset documentation experiences at the federal level.
4.2.3 Examining the challenges encountered in public property disposal services -
Awareness of Disposal Legal Procedures:-
Table-4.12 Chance of training related with property administration:-
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Regarding the chance of training related with property administration for the experts under property administration units, 72% and 28% the respondents have been responded as “Yes” and “No” respectively. Here 72% of the respondents have got on job training (table-4.12).
Table-4.13 Awareness Problems on Property administration directive, No. 9/2010:-
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In relation to have an awareness of disposal procedures by the respondents, specially focuses on public property administration directive No.9/2010, awareness for the reasons why public properties disposed , 66% and 34% of the respondents have responded as “aware” and “not aware” respectively. As per the directive, the level of threshold that allows the disposal of fixed assets at the central level and at sectoral level, 45% and 55% of the respondents have been responded as “aware” and “not aware” respectively. Also in relation with the ways of public property disposal, 49% and 51% of the respondents have been responded as “aware” and not “aware” respectively. Finally, in relation with the number of committee has to be established at the public sectors, 47% and 53% of the respondents have been responded as “aware” and “not aware’ respectively (Table-4.13).
Table-4.14 Drawbacks of effective and efficient centralized public property disposal:-
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Regarding drawbacks for effectiveness and efficiency for the centralized public property disposal services currently provided by PPPDS (Table-4.14) for the “dalliance in disposal process” 66% and 34% of the respondents have been responded as “Yes” and “No” respectively; for the “Poor property disposal awareness creation” 53% and 47% of the respondents have been responded as “Yes” and “No” respectively; for the “Poor expertise support services” 53% and 47% of the respondents have been responded as “Yes” and “No” respectively and for the “ Decision making problems of managers/committee” 54% and 46% of the respondent have been replied as “Yes” and “No” respectively.
In addition to the above drawbacks in centralized disposal service delivery the problems; inefficient disposal service resulted from improper documentation and employee turnover, the centralized disposal process is demand based for there is no authorized body that compels public sectors to dispose idle fixed assets, disposal of properties dependent on the willingness and decision of committee at the sectoral level, similar routine tasks performed by different directorates at PPPDS level, lack of accurate accumulation documentation of disposable fixed assets in public sectors that might be resulted to difficulty in measuring an accurate impact brought by the disposal services delivered by PPPDS, poor monitoring and evaluation for proper property administration; poor employee handling system that is one of the reasons for high employee turnover, practices of dumping/accumulating disposable fixed assets and awaiting for the limited threshold level as per the property administration directive No. 9/2010, poor store management practices in most public sectors, lack of technical expertise specially to identify the damaged parts of vehicles in order to set the initial price for disposal, mismatched workload and required man power at PPPDS that contributed for the delay in disposal service provision, PPPDS is currently not initiating public property disposal related trainings, PPPDS disposal service is more focused on vehicles disposal, there is no coordinating organ to administrate the demand and supply of disposable assets planned to be disposed through transfers and gifts and lack of threshold to dispose tyres and car batteries through auction which created more workload to PPPDS are the current disposal problems identified by the FGDs and KI.
Table-4.15 Problems Identified in ICT materials, Tyres and Battery disposal:-
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Regarding the problems identified in relation to ICT materials disposal, “Poor concern for public property” identified as problem by 96% of the respondents, “Storage problem to collect ICT materials” identified by 86% of the respondents as a problem, and “delay in handover” identified by 76% of the respondents and as a problem and Centralized disposal of tyres and car batteries identified by 87% the respondent (table-4.15).
In relation with the disposal of ICT and related materials, the disposal system of ICT and related materials is not fully operational; this also identified that there is a storage problem to hand over and disposing centrally as designed by the Ministry of Communication and Information Technology, centralized disposal of tyres and car batteries that without any reason centralized are problems have been identified the respondents and FGDs and KIs.
Table-4.16 Significance of centralized property disposal service:-
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As shown by table-4.16, the significance of the centralized property disposal service from the view point of the disposal service provided by the PPPDS, in relation with its importance, 64%, 24% and 12% of the respondents have been replied as “High”, “Not mentioned” and “Low respectively”. Regarding the effectiveness of the service provided 36%, 32% and 32% of the respondents replied as “High”, “Not mentioned” and “Low respectively” and in relation with the efficiency of the service provision, 34%, 34% and 32% of the respondents have been responded as High”, “Not mentioned” and “Low respectively.
Based on the threshold of disposable fixed assets (directive No.9/2010); in relation with the current disposal system, the focus group discussion and data collected from key informants is presented as follows:-
Regarding the advantages obtained and might be obtained from centralized disposal System:- a ssigns responsibility for effective disposal, participation of more bidders for more optional price of the sales, advertizing cost advantages, makes other public bodies to focus on their major operations, creates easy public property disposal control system, minimizes the property mishandling, access of skilled man power for better fixed assets’ disposal performance, storage requirement is not mandatory and expertise focus/based operations are among the benefits of the system. The shortcomings of the system also discussed.
Among the shortcomings of centralized disposal service, decision making problems on the fixed assets located in different public Intuitions, creates work load on a single institute (that is PPPDS), it is time consuming process due to the dispersed documentation lack of threshold set for the disposal of Tyres and car batteries, requires continues involvement in every disposal process from documentation organization to handover point are the key shortcomings of centralized disposal system distinguished by the FGDs and KIs.
Contrary to the centralized public property disposal system, the focus group and KIs sampled generated expertise experience to the advantages and disadvantages of decentralized disposal System. The benefits of decentralized to centralized system identified are minimizes work overload centralized at PPPDS, more efficient or quick disposal performance possibility and if properly functional it avoids over accumulation of disposable properties that practically awaited the threshold level of properties to be disposed at the centralized level. Conversely the disadvantages of decentralized property disposal system identified are increase the fate of property mishandling due to no sound controlling organ is assigned, slacked responsibility because of every operation of disposal is committee based, most committee members have no property administration related background and difficulty of controlling the disposal process by a relevant body.
Concern for public property Management
Table-4.17 Indicators of government’s Concern for Public Property Administration:-
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Pertained to the government’s committed concern for the public property administration, indicators identified as roles played by the Federal Government have been responded as “ c entralized bidding for the disposal through sales” 85%, “initiation of planning for disposal service provision” 92%, “awareness creation for disposal procedures” 87% and “establishment of PPPDS and PPA” 53%, (table-4.17).
Table-4.18 Indicators of poor Concern of Public Sectors in Property Disposal:-
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As shown in Table-4.18, pertained to indicators of poor concern for public asset management in public Sectors, over statement or devaluation of asset to avoid responsibility and due to marketing knowledge gap, 94% and 6% of the respondents have been responded as “Yes” and “No” respectively. In the case of lack of asset register maintenance 62% and 38% of the respondents have been responded as “Yes” and “No” respectively. Unplanned request for disposal responded by 70% and 30 of the respondents as “Yes” and “No” respectively. Loose property disposal committee formation also responded as “Yes” and ‘No” by 64% and 36% of the respondents respectively.
Employee Turnover
Table-4.19 Employ turnover in Property Administration Units:-
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In the case of employee turnover in property administration units at the federal level institutions sampled, 60% and 40% of the respondents have been responded as “Yes” and “No” respectively. This indicates the existence of high employee turnover,(table-4.19).
Table-4.20 Major employee turnover driving forces identified:-
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In relation with the major driving forces of employee turnover in the sampled governmental sectors, look for better payment has been responded as “Yes” and “No” by 62% and 38% of the respondents respectively and Poor concern of top management for the unit responded as “Yes” and “No’ by 70% and 30% of the respondents respectively (table-4.20). The discussion and interview output from the focus group discussions and key informant interviews correspondingly also ended with the same inspiration.
Table-4.21 Impact of Employee turnover on Public Property Disposals:-
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Pertained to the impact of employee turnover on public property disposals; “creates poor disposal service” identified by 72% of the respondents, “creates frequent property disposal committee formation” identified by 68% of the respondents, “creates poor asset registration practices” recognized by 70% of the respondents, “creates shortage of property administration professionals” identified by 72% of the respondents and “Continuous hiring and training of new entrants” identified by 70% of the respondents (table-4.21). The data obtained from the discussion of FGDs and KIs reveals the same result.
4.2.3 Accumulation of disposable public fixed assets
Having proper documentation for an accumulated disposable asset has the benefit of measuring an impact brought from the disposal service delivery. This might be suspended to have proper annual disposal plan. For the purpose of indication for the necessity of strategic disposal plan the case of Tikur Anbessa hospital, Addis Ababa University and Ministry of Agriculture discussed bellow:-
Pertained to the accumulated disposable fixed assets in Tikur Anbessa Hospital; poor documentation, scattered medication equipments that located in every corridors in large accumulation, office equipments and furniture mixed up and stored in four stores observed. The disposable fixed assets accumulated in the hospital became difficult to identify because of poor property administration. Addis Ababa University (Sidist Kilo) has been disposed large amount of fixed assets. But still there is a large amount of scraps, office furniture, tyres, computers and printers which require strategic disposal arrangement of PPPDS. In the Ministry of Agriculture, there is huge amount of disposable and accumulated fixed assets; especially office furniture organized and currently on the pipe of disposal process. Even though such disposal process has been begun, still there is a huge amount of spare parts of vehicles, tyres, and office furniture accumulated without proper documentation. The case in other Universities assessed also the same, for instance Arbaminch University and Hawasa University (table-4.22).
In relation with the reasons for the accumulation of disposable fixed assets, the respondents have been responded to the problems as follows:-
- Poor concern of the top management and disposal committee
- Conflict among disposal committee in decision making
- Awareness problems of the committee and experts in property administration units
- Employee turnover and shortage of man power to identify disposable assets
- Poor public property administration control, documentation and storage handling
- Coordination problem for disposition of fixed asset by transfer
- Awaiting the disposal of assets for PPPDS (expectation)
- Work load on a number of employees in some public sectors
- Delay of PPPDS in providing disposal service as demanded by the sectors
- Refusal of CRTC for immediate handover of ICT related materials
Pertained to the accumulation of disposable fixed assets in public sectors (table-4.22) the data collected uses only as an indicator for the presence of accumulated disposable assets. This is because of the collected quantity indicators are less accurate from the documentation and transparency problems of the sampled public institutions. But as the physical observation taken by the researcher there is an accumulated disposable fixed assets that require strategic disposal plan.
Table-4.22:- Indicator of Accumulated Disposable Fixed Assets at Public Sectors
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Source:- Compiled by the researcher
5 CONCLUSIONS AND RECOMMENDATIONS
5.1 Conclusions
Asset management has been defined as the process of creating value within the owner’s objectives through the acquisition, use and disposal of real property assets. It also has been defined as the practice of maximizing the value of a portfolio of properties, within the objectives of the owner ( Article by Gordon E. Macranair, Vol. 54 P. APP).
Property disposal as a part of property management cycle has been defined as the transfer of public property to another person by sale or other means or the act of getting rid of public property by burning or burying”, ( FDRE Public Procurement and Property Administration Proclamation No.649/2009 p.5).
Pertained to the title of this study, ”Assessment of challenges and benefits of public property disposal”, there is no study conducted in relation to property disposal practices to depict the efforts exerted and challenges identified in property disposal service delivered by PPPDS. This is why the researcher initiated to study to identify the challenges encountered in the disposal process and benefits obtained from the public properties disposed by PPPDS at the federal level.
The objectives of the study were:
- To study the benefits obtained from public property disposal services
- To assess the impact of disposal service in the complement of asset management process
- To examine the challenges encountered in public property disposal services
- To assess the accumulation of disposable public fixed assets
The researcher has been employed descriptive method of study. The primary and secondary data have been collected from the respondents and the relevant public institutions for the study. The collected data have been analyzed descriptively and triangulated to address the above four objectives of the research.
In this working paper research, the economic and administrative benefits obtained from public property disposal and challenges encountered during the disposal process have been identified. The variables, from the administrative points of view of “environmental protection” , “efficient and effective property disposal” and from economic benefits point of view “revenue generation” and “auction” and from the challenges point of view “principles of asset management”, “concern for public property”, “asset management information system”, “awareness of disposal legal procedures”, “disposal of ICT materials, tyres and car batteries” and “employ turnover” have been identified as indicators of administrative and economic benefits obtained and challenges encountered in the course of disposal service fixed properties. Accumulation of disposable public properties also identified and taken as indicator of accumulation. The data collected has been classified and analyzed based on the objectives of the research.
5.1.1 Benefits obtained from public property disposal services
Benchmarking the efforts exerted by the PPPDS, the benefits obtained from public property disposal services identified from economic and administrative benefits points of view.
Public fixed assets disposal through public sales has been identified as it has economic advantages for the country as well as for the end users. The major economic advantages are reduces foreign currency required import new fixed assets, used as inputs for local manufactures such as scraps, advertizing cost advantages when bidding centrally and serves as a source of revenue for the country. For the consecutive five years 197.7 mil birr collected from the disposal through public sales. Precisely, the dual purposes of disposal of fixed assets through sales identified are disposition of properties and it has brought value for money, which means it is generating revenue for the country. These are indicators of economic benefits drained from the disposal of fixed assets through public sales.
In relation with administrative benefits, reduced accumulated disposable fixed assets, store Utilization or space advantages, creates value for money from idle public fixed assets, contributes to environmental protection in that disposition of accumulated properties reduces pollutant releases to an environment such as disposal of vehicles and car batteries; and employees’ health risk minimization are the major administrative benefits obtained from public property disposal.
5.1.2 Impact of disposal service in the complement of asset management process
Principles of asset management process in not exercised by most public sectors from the view point of unplanned disposal performance, demand based disposal service and poor documentation of disposable properties. But the practice of repairing fixed assets, especially vehicles, before allowing it to disposal identified indicates the accomplishment of one of the principles of asset management process.
Fixed asset management information system (FAMIS) begins with asset record keeping and ends in proper reporting. In relation to FAMIS, the practices of keeping fixed asset records by most sampled public sectors are identified almost nil. As a result, poor disposal plan and process, improper fixed asset valuation, improper information delivery for disposal, property ownership problems specially in disposing vehicles of public sectors and failure in computation of depreciation, poor asset management and employee turnover are identified as the key reasons for none maintenance asset records ended in poor FAMIS.
The impact brought by PPPDS to make asset management process complete begins from the initiation for the disposal plan of PPPDS. This initiation is request letter for disposal demand expression twice a year. From the disposal point of view, the efforts exerted by PPPDS for the last consecutive five years (2010-2015) signify impact brought in disposable property quantity and increased revenue. This brought a reduction of 844 vehicles and 69,840 lots of other fixed properties from the unknown accumulation of disposable fixed properties. The income generated from fixed property disposal has been increased the revenue of the country by 197.7 mill ETB.
5.1.3 Challenges encountered in relation to public property disposal services
Data presented by table-4.12 indicates that 72% of the respondents have got on job training. But data presented by table-4.13 indicates that in average about 53% of the respondents have no awareness in public property disposal requirements and procedures as per the public property administration directive No. 9/2010.
Fixed asset management information system begins with asset record keeping and ends in proper reporting. The practices of keeping fixed asset records by most sampled public sectors also identified as a challenge in the disposal of fixed assets. This resulted to poor fixed assets documentation.
Regarding the importance of centralized property disposal system 64% of the respondents, FGD participants and KIs have been concluded for its significance in comparison with decentralized disposal system. But discouraged from its delayed process. In the case of decentralized disposal system the respondents appreciated it from its efficiency and reducing work overloads to the centralized one if operated properly.
Pertained to the centralized disposal service delivery inefficient disposal service has been spotted out as a challenge area. The reasons for inefficient service were poor property disposal awareness, improper documentation, employee turnover, the demand based centralized disposal process, PPPDS disposal service is more focused on disposal of vehicles, disposal of properties dependent on the willingness and decision of committee at the sectoral level, similar routine tasks performed by different directorates at PPPDS level, lack of accurate accumulation documentation of disposable fixed assets, poor monitoring and evaluation for proper property administration lack of technical expertise specially to identify the damaged parts of vehicles in order to set the initial price for disposal, PPPDS is currently not initiating public property disposal related trainings, lack of coordinating the demand and supply of transferable assets and lack of threshold to dispose tyres and car batteries are the major dalliance problems currently resulted to inefficient ineffective disposal practices.
Concerning to the challenges in disposing ICT materials, poor concern of the officials for the public property, storage problem to collect ICT materials encountered the computer repair and training centre and delay in handover of ICT materials are the major computer and related materials disposal problems currently challenging public sectors. Disposal of tyres through public sales also categorized as a disposal challenge area its disposal is centralized at the federal level that created workload on PPPDS.
Concern of the officials (public sectors) for proper administration of public properties concluded poor. This is from the drawbacks identified as over statement of disposable fixed public properties to avoid responsibility in disposing properties, unplanned disposal request and poor committee formation and motivation to discharge their responsibility. The data obtained from FGDs and KII also reveals the same.
Coordination for the demand and supply of disposable public fixed properties through transfer marked out as a problem area in disposal process. Lack of coordinating unit at the relevant institution made public sectors those planned to transfer fixed assets to accumulate the assets for a long time.
In most sampled organizations, employee turnover has been identified as an issue in property administration Units. The major driving forces identified for employee turnover in government organizations are look for better payment and poor concern of top management for the public property administration units.
The data presented in relation to impact of employee turnover on public Property disposals, poor property administration problems and continuous hiring and training of newly employed employees have been the identified problems on proper disposal performance resulted from employee turnover in most sampled public sectors. The participant groups of FGDs also suggested that the impact of employee turnover in government operating units requires not only in a limited sectors but also requires a country wise solution.
Generally, the variables; awareness in public property disposal procedures, fixed asset management information system (documentation), effective and efficient disposal service delivery, disposal of ICT materials, car batteries and tyres, concern for public property and employee turnover have been identified as the challenges in public property disposal.
5.1.4 Accumulation indicators of disposable public properties
The data collected to identify the accumulation of disposable fixed assets indicates persistent fixed asset handling and disposal plan problems in public sectors. In a sampled 28 public sectors there is a large amount and mishandled disposable fixed assets accumulated. The cases in Tikur Anbessa Hospital, Ministry of Agriculture, Addis Ababa University, Arbaminch University, Hawasa University and others indicates still there is an untouched disposable public fixed assets. This is because of poor property documentation, poor concern of the officials and awareness gap on public property administration. Pertained to this, even though the collected data is enough to indicate the accumulation of disposable fixed assets (table-4.22), it is not an enough data to measure the accurate impact brought on the quantity of disposable public fixed assets.
5.2 Recommendations
Based on the conclusion of the study results, the following recommendations are arrived at improving the relevant public property disposal services whether optional centrally or decentralized.
- Principles of asset management process from the view point of unplanned disposal performance, demand based disposal service and poor documentation of fixed asset handling practices sorted out as a disposal problem. Practices of fixed asset management information system (FAMIS) also spotted out as a fixed asset disposal challenge in public institutions. Awareness in property disposal process is another challenging area in disposal of public properties. Similarly technical based disposal services, especially disposing vehicles also identified as a challenge area in public fixed property disposal. Therefore, in order to maximize the benefits to be obtained from public fixed assets disposal, the PPA should provide detailed principles of fixed asset management process, FAMIS and technical based trainings for the relevant experts and middle level managers.
- Employee turnover, compelled by the driving forces that are “look for better payment and poor concern of the top management”, has been identified as a problem of property administration units of public sectors. In order to retain and attract potential professionals to the property administration units an applicable employee benefit schemes should be proposed by PPPDS and should be supported by the government.
- Concern of the officials (public sectors) for proper public properties’ administration concluded poor. The disposal practice of the country is currently demand based, it is not plan based. This originates from the lack of proper monitoring and evaluation mechanisms in public property administration. So that, awareness creation in building sense of ownership in public sectors should be strengthened. PPA should be fully empowered to monitor and taking action for improper public property administration.
- Inefficiency and ineffectiveness in public property disposal process have been identified as the challenge area. To solve such challenges of inefficiency and ineffectiveness of disposal, PPPDS and PPA should jointly initiate plan based disposal, promote expert based disposal process at sectoral level, planned monitoring and evaluation in property administration, merging routine and similar tasks at PPPDS to accomplish the disposal process by an assigned expert from inception to completion. Finally market price survey for disposal service and bid processing should be technological supported. For instance software development for bid processing.
- Disposal of ICT materials has been identified as a core disposal challenge area in the case of handover between the sectors and CMTC. This has been caused by storage problem encountered for proper asset management. So that the ministry of information and communication technology is required to build additional stores and planting recycling factory to minimize the risk may arise from mishandling of ICT materials and to maximize the benefits to be obtained.
- Disposal of tyres and car battery that centered at PPPDS level, recognized as a workload maximizing factor. This has been supported by the directive No. ገ / ኢ /11/1/9 dated sept.14/2006 E.C written by MoFED. Tyre and car battery disposal should be treated as any other fixed assets and should be disposed centrally or at sectoral level. To do so, directive amendment for the disposable of tyres and car batteries should be made.
- Technical based disposal service of PPPDS, for instance identification of information on the parts of vehicles and valuation practices are not knowledge based. In order to keep the benefits to be obtained from disposal through sales, technical related short term training for employees should be given by PPPDS.
- Accumulation indicators of disposable public fixed assets have been identified. In order to delegate the workload pulled at PPPDS level, the threshold set by property administration directive No.9/2010 should be amended. This also solves the problems of delayed service delivery of PPPDS.
- Reference documentation problem f or accumulation of disposable fixed assets has been traced out in public sectors. In order to measure quantity based impacts brought by the efforts exerted, PPPDS should have time series based disposable public properties’ accumulation documents.
- Disposition of fixed asset by transfer has no coordination unit that identifies the demand and supply of disposable fixed assets. Hence, PPPDS should expand its service delivery and should be empowered for the task.
5.1 Implication for further research:-
- Public fixed asset disposal is a new experience for the countries like Ethiopia from the view point of centralized disposal system. In order to bring a progress in public property administration, the government should initiate and support further research with different independent variables. This requires concerned budget allocation for the research.
- Identification for accumulation of disposable fixed assets that requires annual based assessment for quantity impact measurement is also an open title for effective disposal. So that the government is required to allocate resource and a strategies to identify a year after year accumulation of disposable fixed public properties.
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APPENDICES
Interview Schedules
Interview Schedule for Respondents
An interview schedule prepared to collect data for the study of “challenges and benefits of public fixed asset disposal service” at the federal level of Ethiopia, which is undertaking by PPPDS. The data going to be collected will serve only for the consumption PPPDS service delivery improvement and magnification of the efforts exerted in public service delivery.
Awareness of Legal Procedures
1. Have you an awareness of public property disposal procedures?
If “Yes”, Based on the Property administration directive, No. 9/2003 E.C:-
Abbildung in dieser Leseprobe nicht enthalten
2. Have you ever been got the chance of training related with property administration?
, if “No”, what the reasons do you think for?
1. Lack of training opportunities for my institution.
2. Biased opportunity allocation from the leaders .
3. Poor concern of the leaders for property administration ….
4. No need of training in property administration…
5. Others :-
Disposal
3 Have your organization disposed fixed assets prior to the establishment of PPPDS?, If “Yes”, how was the efficiency and effectiveness of the performance?
Abbildung in dieser Leseprobe nicht enthalten
4 Have your organization got the property disposal service from PPPDS?, If “Yes”, how would you mention the centralized property disposal service importance, effectiveness and efficiency when compared to the decentralized one?
Abbildung in dieser Leseprobe nicht enthalten
5 If there are drawbacks for effectiveness/efficiency for the centralized property disposal services, please mention the areas of drawbacks:-
6 If your organization has been disposed public assets accountable to it, what administrative benefits you perceived?
Principles of asset management
7 In your organization, is there the practice of property disposal planning in annual plan?
If, “yes” how often the properties are being disposed before and after the establishment of PPPDS, as shown by the following table?
Abbildung in dieser Leseprobe nicht enthalten
8 In relation with the principles of asset management, do the maintenance of fixed assets exhaustively exercised prior to allow for disposal in your organization? If “No”, why not?
Abbildung in dieser Leseprobe nicht enthalten
1 Interest of the officials to handover new fixed assets.
2 Low concern for public property
3 Shortage of maintenance budget
4 Poor asset management practices
5 If others:
Asset register
9 Have your organization maintained Fixed Asset Registers (FAR) for fixed assets control?, If not, what the reasons you consider for?:- (Reasons for not maintaining FAR)
Abbildung in dieser Leseprobe nicht enthalten
10 Is there an annual depreciation valuation practice for fixed assets?, if not why?
Abbildung in dieser Leseprobe nicht enthalten
11 Do you think that not maintaining asset registers/ cards have shortcomings on public property disposal? If “yes” how?
1 Lack of disposal plan and process,
2 Improper fixed asset valuation
3 Improper information delivery for disposal plan
4 Creates public property misuse
5 If others,
12 Mark (x) under your response related with fixed asset management information system (MIS) practices of your Organization
Abbildung in dieser Leseprobe nicht enthalten
Concern for public property Management
13 Which feature/s public asset management is common in your organization/ sector?
(Wrong features in public asset management)
Abbildung in dieser Leseprobe nicht enthalten
14 Do you think that the establishment/ performance of PPPDS maximize concern for public property administration? If yes, in which attributes do you think?
(Attributes government’s concern for public property Administration)
Abbildung in dieser Leseprobe nicht enthalten
Employ turnover
15 Is there employ turnover in property administration Unit/department?, If yes, what are the (main driving forces) you think for the turnover?
Abbildung in dieser Leseprobe nicht enthalten
16 Do you think that employee turnover has an impact on public property disposals?. If yes, how?: (Impacts of employee turnover on public property disposal)
Abbildung in dieser Leseprobe nicht enthalten
17 Professionalism property administration indicators of employees of the public sectors comprised by the sample:-
Abbildung in dieser Leseprobe nicht enthalten
18 Do you think that the current disposal practice of IT materials is in the right disposal routine?,
-If “Yes” how:
_If “No”, why:-
19 Has your organization ever been disposed IT related materials, if “Yes”, what problems have been encountered during the disposal?:-
20 How do you map out the impact of used IT materials, car batteries and tyres disposition through public sales?:-
Auctions
21 Revenue: generated from the disposal through public sales (Auction)
Abbildung in dieser Leseprobe nicht enthalten
22 Do you think that Public sales of assets for disposal have economic benefits for the general public or country? if “Yes” how?
1 Reduces foreign currency required for import
2 Used as inputs for local manufactures
3 Minimizes property import duty for the users
4 Serves as a source of revenue for the country
5 Avoids property wastage and misuse
6 Advertizing cost advantages
7 If others:
Advertizing Expenditure:
23 Do you think that the centralized property disposal service provided by PPPDS minimizes the advertizing expenses of the country for the disposal of property through public sales?, If “Yes”, how?:-
Warehouse Expenditure:- (Secondary data is required)
24 Condition of warehouse acquirement:-
Abbildung in dieser Leseprobe nicht enthalten
25 How do you trace the contribution of property disposal service being provided by PPDS in relation with warehouse management?
A-Regarding warehouse conditioning:-
B-Regarding annual warehouse expenses management:
C- Regarding employees’ health risk minimization:
Efficient and Effective Disposal for proper asset Management
28 Do you think that the disposal service you have got from PPPDS brought efficient and effective public asset management practices? If “YES”, how?
1 Reduced fixed asset handling expense
2 Reduced the amount of used fixed assets
3 Helped Us to have a disposal plan
4 Made us to handle small and can be reused fixed assets
5 If others:-
Environmental protection
29 Do think that proper fixed asset disposal can contribute to environmental protection?, If “YES”, how?
1 Hazardous Corrosives released from metals will be disappeared
2 Chemicals released from vehicles and IT materials will be managed
3 Unwanted odder from closed stores will be avoided
4 Tyres affect soil decomposition will be consumed by producers/users
5 5-If others:-
30 In what areas the Public property Administration Agency supporting your Institution?
1- Training on public property administration.
2- Public property administration workshop.
3- On job expertise support on warehouse management
4- Others:-
Interview Guide check-list for FGDs/KIs
An interview schedule prepared to collect data for the study of “challenges and benefits of public fixed asset disposal service” at the federal level of Ethiopia, which is undertaking by PPPDS. The data going to be collected will serve only for the consumption PPPDS service delivery improvement and disclosure of the efforts exerted for public service delivery.
1. Comparison of efficiency and effectiveness in a centralized and decentralized public property Asset disposal service;-
a- Centralized:
b- Decentralized:-
c- More importance and reasons:-
2 If there are drawbacks for effectiveness/efficiency for the current public property disposal service, what drawbacks you have perceived?
3 How you trace out administrative benefits of current partially decentralized public assets disposal service exercised by the public sectors?
4 Trace the benefits of the maintenance of Fixed Asset Registers (FAR) and drawbacks of not maintaining FAR in proper asset disposal?
6 Do you think that employ turnover has an impact on property disposals?. If “yes”, how?
7 How do you trace the revenue generated from the disposal of public asset through sales?
8 Do think that fixed asset disposal can contribute to environmental protection?, If “Yes” how?
9 How do you mark out the current contributions of PPA towards the complete public fixed asset management at the federal level?
a- Effective contributions:-
b- What should have to be contributed (from other countries experience, if any)?
10 How do you map out the problems of the current disposal practice of IT materials
11 If you thought that there are the problems in the disposal IT related materials, what problems you have perceived in the process?
12 Do you consider that the disposal of car batteries and tyres through public sales is the right option of disposition from the view point of environmental protection?
Abbildung in dieser Leseprobe nicht enthalten
Source: PPPDS, Feb. 2015
Consolidated Annual Fixed Assets Procurement Expenditure at Federal Level (in mil.):
Abbildung in dieser Leseprobe nicht enthalten
Source: MoFED, Feb, 2015
[...]
- Quote paper
- Teshome Yilma (Author), 2015, Benefits and Challenges in Public Property Disposal Practices on a Federal Level. The Case of Addis Ababa, Ethiopia, Munich, GRIN Verlag, https://www.grin.com/document/538727
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