Sale of plant and equipment and financial assets

Sale of plant and equipment and financial assets

Last updated 11 November 2016
Last updated 11/11/2016

This page explains when tertiary education institutions (TEIs) need the consent of the Secretary for Education to dispose of plant and equipment and other non-land and building assets and when consent isn’t required. It also explains how to work out your institution’s Asset Disposal Limit and the process and timeframes for getting consent.

Consent only required in some instances

Section 192(4) of the Education Act 1989 requires that TEIs get written consent from the Secretary for Education to sell or otherwise dispose of assets, or interests in assets. No consent is needed if the asset’s value is less than an amount determined by the Minister, either directly or by formula (see section 192(5)).

The Minister has approved a formula which provides a limit up to which TEIs may dispose of assets without getting the consent of the Secretary for Education. The formula doesn’t apply to land and buildings. All disposals of land and buildings need the consent of the Secretary for Education.


For information on how to apply for consent to dispose of land and buildings see:

Sale or long-term lease of land and buildings

Demolitions of buildings

Crown asset transfer and disposal

How to calculate your Asset Disposal Limit

The Asset Disposal Limit (ADL) takes into account an institution’s size (based on income) and its financial management (based on working capital).

The formula establishing the ADL for an institution is:

Asset Disposal Limit (ADL) = $50,000 + (Total Income Term x Modified Current Ratio Factor).

The Total Income Term is determined as follows:

 

Total Income (TI)
$ million

Total Income Term
$ thousand

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 it 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)

Modified Current

Ratio Factor

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%

Example calculation of an Asset Disposal Limit

An institution had a total income of $42 million for the most recent academic year for which it has a set of audited financial statements, current assets plus long-term cash investments of $12 million, and current liabilities of $8 million. 

The Total Income Term would be $55,000. 

The Current Ratio would be 1.5 (12/8) and the Modified Current Ratio Factor would be 50%. 

The Asset Disposal Limit for an asset at this institution would then be:

ADL = $50,000 + ($55,000 x 0.5)

ADL = $77,500

Definition of an asset

For the purposes of this provision, an asset is defined as any item with an individual asset/serial number.  For example, if an institution is upgrading the computers in its student hub it will be looking to dispose of, say 40 assets, not one.  As long as each individual asset has a current market value of less than the Asset Disposal Limit (ADL) for that institution, the institution doesn’t need the Secretary for Education’s consent to dispose of all the computers at the same time.

Any questions on the Asset Disposal Limit can be sent to camenquiries@tec.govt.nz.

When consent is required

The disposal of individual assets with a market value greater than the ADL for an institution requires consent from the Secretary for Education. 

If your TEI wishes to dispose of an asset with a market value greater than its ADL, you should write to the Group Manager, Tertiary Education (who holds the Secretary’s delegation for these consents) at the Ministry of Education (MoE), seeking consent under Section 192(4) of the Education Act 1989.

You should provide the following information about the asset and the TEI’s reasons for the disposal, as relevant, either in the request or as attachments:

  • a description of the asset (photographs can be helpful)
  • the rationale for the application
  • authority to act – evidence of the TEI council’s decision on the asset’s future, including a description of the options the council considered
  • the market value of the asset and indicative costs of sale
  • how the net proceeds of sale will be applied
  • any implications of the disposal for the delivery of educational or research programmes
  • an outline of the sale process
  • any other information considered relevant or helpful
  • the date by which consent is needed.

For further information or any queries about getting consent to sell plant and equipment and other non-land and building assets, with a market value greater than their ADL, email camenquiries@tec.govt.nz.

Assessment of your application

The Ministry of Education will decide whether or not to refer your application to us for assessment.  Our assessment will focus on the educational and financial impacts, including financial viability and the ability of the institution to fund replacement assets if required.  We will also check that the asset is not being sold below market value (without good reason) and that the proceeds are being appropriately reinvested.

Consents generally take a month

If you provide all the necessary information with your application, a consent can generally be issued within a month of the Ministry receiving your request.  Consent is required before you carry out the proposed transaction. Retrospective consents can’t be provided. If you need a consent more urgently, you should highlight that in your application and let your Investment Manager know.

Consent may include conditions

Through Section 192(7) the Secretary may impose conditions on any consents granted.  Any conditions would depend on the type of asset being disposed of.  You must comply with the conditions and tell the Secretary when the transaction has been completed and how the proceeds, if any, have been dealt with.

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