1.3 Timeliness of annual reporting

Local government: Results of the 2003-04 audits.

The annual reports of local authorities provide information that assists communities to assess the performance of those authorities. For this process to be effective, that information must be comprehensive and timely.

Each year, we examine the timeliness of annual reporting by local authorities to their communities.

In 2003-04, all local authorities were required to report for the first time under the provisions of the Local Government Act 2002 (the 2002 Act). However, this meant that the sector was reporting under two different timing regimes. Under section 279, local authorities could now base their planning either on new provisions relating to the Long-Term Council Community Plan, or on the previous annual plan provisions of the Local Government Act 1974 (the 1974 Act).18

Nine of the 86 local authorities elected to “go early”19 – in other words, to base their planning for the 2003-04 financial year on the LTCCP requirements of the 2002 Act. The other 77 authorities elected to base their planning on the 1974 Act provisions.

For the early 9, the 2002 Act imposed 2 timing requirements20:

  • The annual report, containing the auditor’s report, must be adopted within 4 months of the end of the financial year.
  • Within one month after the adoption of the annual report, the local authority must make its audited annual report and a summary of that report publicly available, along with an auditor ’s report attesting that the summary “represents, fairly and consistently, the information regarding the major matters dealt with in the annual report”.

The other 77 local authorities were required21 to adopt their annual reports within 5 months of the end of the financial year; that is, 30 November 2004. There was no requirement for these authorities to publish a summary of their annual report; nor to make the audited annual report available within a specified time after its adoption by the council.

In our view, the new requirements followed by the early 9 (which will apply to all local authorities for the 2004-05 financial year) are a significant improvement on the “lesser” requirements of the 1974 Act – both in terms of timeliness and the “user-friendliness” of the information to be provided to the community. The summary required by section 99 of the 2002 Act should not only help communities to better understand the action, performance, and position of their local authorities, but should also improve the accountability of those authorities.

The timing of the preparation and publication of the audited annual reports is determined by the local authority. The audit process fits into the approach adopted by the local authority.

Of all 86 local authorities in 2003-04:

  • the audits of 3 were completed by 31 August 2004 (4 in 2002-03);
  • the audits of 17 were completed by 30 September 2004 (16);
  • the audits of 23 were completed by 31 October 2004 (23);
  • the audits of 41 were completed by 30 November 2004 (43) – of these, 25 were completed in the fourth week of November (25); and
  • the audits of 2 were completed after 30 November 2004 (nil).

All except 2 local authorities were in a position to adopt their audited annual reports within the statutory time limit. One of the early 9 was required to adopt its report by 29 October, but its audit opinion could not be given until 17 December 2004.22 The other local authority also exceeded its statutory time limit of 30 November 2004. This authority’s opinion was given on 17 March 2005, but it has yet to formally adopt its audited annual report.

In our view, the timeliness of annual reporting by local authorities to their communities did not improve during 2003-04. This is very disappointing, given that 2003-04 gave 77 local authorities the chance to bring their annual reporting processes forward in the knowledge that they would have to do so for the 2004-05 year. Many local authorities will need to manage their year-end reporting better if they are to meet their statutory obligations within the required 4 months. The compressed timescale will require councils to manage their time with greater precision.

We also reviewed the timing of the release of annual reports to the community. As already noted, there was a 1-month requirement (including audited summaries) for the early 9. The remaining 77 local authorities had no statutory prescription.

For 2003-04:23

  • 2124 local authorities released their annual report within 5 working days of the adoption of their audited annual report.
  • 1625 local authorities released their annual report between 6 and 10 days after adopting their audited annual report.
  • 33 local authorities released their annual report between 11 and 20 days after adopting their audited annual report.
  • the remaining 16 local authorities required more than 20 days to release their audited annual report after its adoption, with 6 exceeding 30 days.

For 2003-04, the early 9 were legally required to release both the audited annual report and an audited summary within one month of adopting the audited annual report. The clearance performance for 2003-04 was:

  • 8 of the early 9 released the audited annual report within one month.26 The ninth local authority exceeded the statutory requirement by one day.
  • Only 6 of the early 9 provided an audited summary within the required one month of adoption of the audited annual report. Of the remaining 3, one took 34 days, one 63 days, and one is yet to successfully produce an audited summary.27

In addition to the early 9, 3 other local authorities voluntarily produced audited summaries of their adopted annual reports. These councils provided the summaries within one month of adopting the audited annual report.

The performance of local authorities in accounting effectively to their communities is therefore mixed. It is important to recognise that accountability is not achieved until the audited information is released to ratepayers and communities.

Most local authorities will need to give this matter greater attention in 2004-05 to ensure that their reporting not only encompasses audit clearance but also informs their communities on a timely basis; especially in a summarised, user-friendly form.

We will continue to monitor the performance of local authorities in meeting their important accountability responsibilities.

18: Section 279(1) of the 2002 Act enabled local authorities to prepare an LTCCP for the period beginning either 1 July 2003 or 1 July 2004. The relevant LTCCP planning provisions are contained in section 93. While the 2002 Act repealed the 1974 Act, section 281(1) enabled local authorities electing to plan under the 1974 Act to do so “as if [the provisions of the 1974 Act] had not been repealed by this Act”.

19: These 9 local authorities became collectively known as “the early 9”.

20: See sections 98(3) and 98(4) for the reporting requirements, and section 99 for the audit provisions.

21: See section 283 of the 2002 Act for the requirements, which are essentially those of section 223E of the 1974 Act.

22: This local authority adopted its annual report with audit opinion on the same day as receiving the opinion; that is, 17 December 2004.

23: No comparative figures are available for 2002-03.

24: Includes one local authority, which released its non-adopted annual report and summary within 5 days of receipt of the audit opinion. However, this authority did not correctly adopt its audited annual report until 3 February 2005.

25: Includes the one local authority yet to adopt its audited annual report. Once it had received the audit opinion, this authority did publish its annual report (with attached audit opinion) on its website within 8 working days.

26: With reference to paragraph 1.310, note that this figure includes one of the early 9, which could not complete its statutory annual reporting within the required 4 months of 30 June 2004. However, once this authority adopted its audited annual report on 17 December 2004, the audited annual report was released immediately to the community.

27: At the time of writing, this local authority was working with an audit service provider to meet its statutory obligation to provide its community with an audited summary annual report.

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