Part 7: Areas of focus for 2006-07

Local government: Results of the 2004-05 audits.

7.1 Proposed work programme

Each year, we consult with relevant stakeholders as a step in determining the Auditor-General’s proposed work programme for the following year. The full planning process is set out in our Annual Plan.

This article provides an update on work proposed for the local government sector and other performance audits in 2006-07.

Current and proposed work in the local government sector

Local government asset management, business planning, and risk integration

We have become concerned that asset management plans are not informing maintenance and development work as intended. We have taken a sustained interest in asset management for the last 15 years. We have generally focused on assessing the state of asset management and encouraging councils to improve the preparation of asset management plans. More recently, we have encouraged councils to move to enhanced plans. However, it appears that many councils still do not understand the benefit of good asset management planning, and that, while software tools are available to help councils integrate asset management information into business planning, these are not being used to their full potential.

We will undertake a performance audit using case studies of entities (identified through a general return in the Local Government Audit Brief) that are practising enhanced asset management planning.

The Local Government and Environment Committee will be offered a briefing on the outcomes of the audit, and our appointed auditors will be advised of the report through the Local Government Audit Brief. We will promote the report to the local government sector.

Local government consultation and decision-making – a guideline

The Local Government Act 2002 (the 2002 Act) imposes principle-based decisionmaking obligations that local authorities are embedding in their management processes, to give best effect to their purpose of promoting long-term, sustainable well-being, and democratic decision-making and actions. Local authorities also face risks if their decisions can be shown to be unreasonable, or if due process has not been observed.

We have dealt with a number of ratepayer enquiries about local authorities’ decision-making and consultation obligations. The areas of public concern focus around the robustness of business cases, the level of option analysis, and disclosure of this information for consultation. There is also concern about how “the 4 well-beings” (social, economic, environmental and cultural) are being considered in decision-making processes.1

During 2005, the Society of Local Government Managers (SOLGM) prepared guidance material for the sector that will supplement the original high-level guidance produced by sector organisations and the Department of Internal Affairs. This is expected to be available to the sector in 2006.

We intend to produce a guidance document in early 2007 that will supplement the guidance prepared by SOLGM. We will work with the sector, and gather together international and local good practice examples of decision-making and consultation that, in our view, meet the intent of the 2002 Act and demonstrate innovative practice.

Rates postponement

The Local Government (Rating) Act 2002 introduced a number of changes to rating and potential rating policy by allowing more flexibility in a range of areas. One of those areas was the ability of councils to establish policies for postponing rates on grounds other than financial hardship.

The Rates Postponement Consortium is a group of 6 councils that has been established to offer rates postponement to their ratepayers. The rates accrued on a property, as well as interest and administration charges, are paid to the council when the property is sold.

The objective of this audit is to provide assurance that councils are administering rates postponement schemes in the interests of all ratepayers.

In particular, the audit aims to provide:

  • Parliament and local authorities with a clear understanding of the nature of rates postponement schemes;
  • assurance over the sustainable development aspect of decision-making in regard to rates postponement schemes;
  • assurance over councils’ risk management with regard to the schemes;
  • assurance that councils have accurately informed ratepayers about their rates postponement schemes and the potential effects of those schemes for the council and ratepayers;
  • assurance over the legal compliance of the schemes; and
  • a summary of important points of good practice for other councils that may be considering such schemes.

We plan to report to Parliament on this performance audit later in 2006.

Report on the result of LTCCP audits

As noted in paragraph 2.176, we intend to formally report to Parliament on our work on, and experiences from, completing audits of the 2006-16 Long-Term Council Community Plans (LTCCPs). For both the local government sector and us, this was the first time prospective information within the local government context has been audited.

We recognise the importance of feeding our observations and lessons learned from these results back into the sector. Planning is important and will remain so for the sector.

7.117 The full scope of our report and the consideration of any matters have yet to be finalised. However, we see it as a priority once the final LTCCP opinions have been completed in June 2006.

Proposed performance audits for 2006-07

Land information management systems

Land Information Memoranda (LIMs) are the most important mechanism available from local authorities for property owners to obtain information about risks that might affect their property. Anecdotally, there have been concerns about the approaches to, and the quality of, recording land information for LIMs. We consider there to be potential for a review based on the expectations detailed in the SOLGM legal compliance modules and relevant case law.

A performance audit is proposed that would review the systems, policies, and procedures for recording land information for LIMs.

Waste management

The 2002 Act requires local authorities to have adopted a waste management plan by 30 June 2005. Most local authorities had such plans already, but there has been concern about the usefulness of the plans. The management of waste is an important issue for environmental sustainability that also has significant financial effects for councils.

The Local Government and Environment Committee has a general interest in waste management policies and has previously asked the Auditor-General to review them. Our review of a council’s financial planning documents also showed potential for council policies – such as Zero Waste – to not match the content of plans to give effect to such policies.

A performance audit is proposed to examine how councils give effect to waste management plans, possibly taking a case study approach and considering some councils with zero waste policies.

Collaboration in roading

The Land Transport Management Act 2003 potentially provides more scope for shared services and public-private partnerships. We propose to review some early forerunners of public-private partnerships for learning that may assist other initiatives that could emerge.

We propose to undertake a performance audit to examine the effectiveness of collaborative approaches (between local authorities and Transit New Zealand) to the provision of roading.

Sustainable development – implementation of programme of action

In 2002, an international working group of Auditors-General encouraged audits of government responses to the Johannesburg World Summit on Sustainable Development. New Zealand’s Programme of Action, published in January 2003,2 involves a whole-of-government approach in 4 work areas – water, energy, sustainable cities, and child and youth development.

Our proposed performance audit will assess the effectiveness of the response to the Programme of Action by looking at selected aspects of the Programme. We will look for opportunities to collaborate with government agencies on the audit. The relevant select committees will be offered a briefing, and we will also look for ways to promote the audit’s findings to government agencies and internationally.

Flood risk management

Our planned performance audit on flood risk management has been deferred, because the Ministry for the Environment is leading a 2-year work programme
to improve how New Zealand manages its flood risk and river control. We will
reassess the need for this performance audit at the conclusion of the Ministry’s work programme.

Our proposed performance audit was to review the site management practices of local authorities, including their management of flood-related assets, and their procedures when floods occur. The audit was to assess the effectiveness of flood protection assets associated with 2 floods that occurred in 2004, and had the aim of improving local authority management of such assets.

1: See section 77 of the Local Government Act 2002.

2: Sustainable development for New Zealand: Programme of action, ISBN 0478-263260, available at

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