Property disposals, transfers and leases of TEI owned assets
The powers in relation to assets owned by tertiary education institutions (TEIs) are specified under section 192(4) of the Education Act 1989.
The power to sell or otherwise dispose of assets or interests in assets.
The power to grant leases of land or buildings or parts of buildings.
TEIs should contact their investment managers for advice before considering any asset demolitions, sales, leases, or any material asset sales of plant or equipment (see section at bottom of page regarding the Asset Disposal Limit.
Sale or other disposal of assets or interests in assets
Section 192(4)(a) of the Education Act 1989 requires all TEIs to obtain approval before demolishing any assets. The Secretary for Education is responsible for protecting the Crown's interest in those assets as reflected by the applicable statutory provisions (refer sections 192 and 206 of the Education Act 1989).
In order for the Secretary for Education to fulfill the statutory responsibility, the Ministry for Tertiary Education, Skills and Employment will need to know the potential market value of the assets, based on an independent valuation. Once this is known, the Tertiary Education Commission will be in a position to determine whether attempts should be made to recover that value (eg by removal and sale) taking into account the cost of removal and disposal, or whether in the circumstances, the buildings ought to be demolished.
Institutions require approval from the Secretary for Education to dispose of any TEI-owned land or buildings (for information on Crown owned land and buildings, see the Crown asset transfer and disposal policy). This is because all TEIs (both universities and non-university institutions) are included under the definition of a "public work" for the purposes of the Public Works Act 1981.
If the property (land and building[s] or just building[s]) is TEI-owned then the TEI itself is responsible for the disposal process and retains the proceeds as owner. TEIs considering disposing of land and/or buildings should contact their investment managers for advice.
Asset disposal limit
The asset disposal limit formula provides a limit up to which TEIs may dispose of plant and equipment without seeking the consent of the Secretary for Education. The formula does not apply to land and buildings, meaning that TEIs wishing to dispose of land or buildings must apply to the Secretary for Education for consent.
The asset disposal limit takes into account an institution’s size (based on income) and its financial management (based on working capital).
Asset disposal limit for plant and equipment = $50,000 + (Total Income Term x Modified Current Ratio Factor)
The Total Income Term is determined as follows:
|Total Income (TI) |
|Total Income Term|
|TI <= 5 ||20|
|5 < TI <= 10 ||22|
|10 < TI <= 20 ||25|
|20 < TI <= 40 ||35|
|40 < TI <= 60 ||55|
|60 < TI <= 80 ||80|
|80 < TI <= 100 ||115|
|100 < TI ||150|
The total income is defined as the total income of the institution for the most recent academic year for which the institution has a set of audited financial statements.
The Modified Current Ratio Factor, which modifies the size of the Total Income Term, is determined by the Current Ratio [(Current assets + Long-term Cash Investments) / Current liabilities] as follows:
|Current Ratio (CR) || |
|CR < 1.0 ||0%|
|1.0 < CR <= 1.1 ||5%|
|1.1 < CR <= 1.2 ||15%|
|1.2 < CR <= 1.3 ||25%|
|1.3 < CR <= 1.4 ||35%|
|1.4 < CR <= 1.5 ||50%|
|1.5 < CR <= 1.6 ||65%|
|1.6 < CR <= 1.7 ||80%|
|1.7 < CR <= 1.8 ||90%|
|1.8 < CR ||100%|
For the purposes of this formula, an asset is defined as an individual item. An institution wanting to dispose of, for example, two photocopiers will be looking to dispose of two assets not one.
Any questions or comments can be sent to firstname.lastname@example.org
6 July 2015
6 July 2015