Part 2: Summary of the report of expert reviewers on changes in LTCCPs

Matters arising from the 2006-16 Long-Term Council Community Plans.

2.1
In this Part, we present a summary of an external review we commissioned of the changes between the 2004-14 and 2006-16 LTCCPs.

2.2
We considered that this external review would help to stimulate debate in the local government sector about the effect of the requirements to prepare LTCCPs and about the direction of future change to address the requirements and intentions of the legislation relating to LTCCPs.

2.3
The review was carried out by four expert reviewers with experience in specialist fields as well as overall local government experience and expertise. They were:

  • Leanne Holdsworth, Director, Holistic Business Solutions Ltd;
  • Robyn Wells, Research and Assurance Specialist, Audit New Zealand;
  • Malcolm Morrison, Director, Morrison Low & Associates Ltd; and
  • Kevin Simpkins, Director, Kevin Simpkins Advisory Services Limited.

2.4
We asked them to review a selection of LTCCPs to identify changes that may be discernible to users of LTCCPs (being either improvements or deteriorations) between each selected local authority’s 2004-14 LTCCP and its 2006-16 LTCCP. We also asked the reviewers to use this work to make recommendations for future improvements.

2.5
The review was carried out on the understanding that the reviewers’ findings and recommendations would be included in a report to Parliament, be used to inform our advice in the context of any review of the legislation, and enhance the audits of LTCCPs in 2009 and subsequent years.

2.6
We asked the reviewers, when seeking to identify changes that may be discernible to the users of LTCCPs, to take the perspective of moderately interested and informed individuals and groups, such as media commentators, academics and analysts, members of relevant professional disciplines working with local authorities, and community groups such as ratepayer groups and associations.

Scope of the review

2.7
The review involved 30 final adopted LTCCP documents, comprising the 2006-16 LTCCP and the immediately preceding LTCCP for each of 15 local authorities. Of these 15, three pairs of LTCCP documents were reviewed in common by all four reviewers and three additional pairs of LTCCP documents were reviewed by each reviewer.

2.8
We requested the reviewers to focus their individual reviews in their particular fields of expertise:

  • sustainable development;
  • performance information;
  • asset management information; and
  • financial management and strategies.

2.9
We also requested the reviewers to take account of:

  • the statutory purpose of the LTCCP (outlined in section 93(6) of the Act); and
  • the need to consider their individual fields of expertise within the context of the whole LTCCP document.

2.10
The 15 local authorities selected for review represent a spread of local authorities of different size and scale:

  • Gore District Council;
  • Environment Canterbury;
  • Hauraki District Council;
  • Kapiti Coast District Council;
  • Mackenzie District Council;
  • New Plymouth District Council;
  • North Shore City Council;
  • Queenstown Lakes District Council;
  • Rotorua District Council;
  • South Taranaki District Council;
  • South Wairarapa District Council;
  • Stratford District Council;
  • Tasman District Council;
  • Thames-Coromandel District Council; and
  • Wellington City Council.

2.11
The expert reviewers’ summary and four individual reports are provided in a separate report attached to this report. The reports are:

  • "Reviewer’s Report 1: Sustainable development - findings and recommendations", by Leanne Holdsworth;
  • "Reviewer’s Report 2: Performance information - findings and recommendations", by Robyn Wells;
  • "Reviewer’s Report 3: Asset management information - findings and recommendations", by Malcolm Morrison; and
  • "Reviewer’s Report 4: Financial management and strategies - findings and recommendations", by Kevin Simpkins.

2.12 The summary is reproduced here:

Report of expert reviewers - summary
Our reviews have been based solely on each final adopted LTCCP, and we have not considered the systems and information which underlie the LTCCPs. Specifically, we have assumed that the underlying financial and asset information in the LTCCP itself is consistent with planned levels of service, and we have not considered any other documents referred to in the LTCCPs (such as detailed asset management plans).
Limitations of the review

The scope of this review results in certain limitations in the findings and recommendations we have made. Specifically each reviewer's findings are based solely on the 12 LTCCPs they have reviewed and, in particular, on comparisons between the 2004-14 and 2006-16 LTCCPs of the local authorities selected. Care therefore needs to be taken in extrapolating our findings across other local authorities.

Reviewers' recommendations are based on the review they have undertaken, although they have also taken account of other knowledge they have about LTCCPs generally and about the accountability and reporting environment of local authorities in seeking to make appropriate recommendations. Our review does not include any assessment of the actual level of assets and services provided by the council, but focuses on the information disclosed about the activities provided by the council in the LTCCP.
Approaches, findings, and recommendations

We report separately about each of the particular fields of expertise - sustainable development, performance information, asset management information, and financial management and strategy. Within each review report, our approaches, findings, and the recommendations arising from our reviews are set out in five parts:
  • Approach taken by the reviewer.
  • An assessment of the change (either improvement or deterioration) between the 2004-14 and 2006-16 LTCCPs based on the review of the six councils selected.
  • Observations on patterns discernible in relation to how well the information is presented over the six councils reviewed (such as whether the presentation and quality changes with size and scale of council).
  • Observations on the overall state of the information in 2006-16 LTCCPs, including strengths and weaknesses, and suggestions as to where future improvement work would best be focused.
  • Issues in relation to the legislation applicable to LTCCPs.
Summary of key findings and recommendations from all reviews

In this summary, we outline common and main findings from each of our reviews in respect of the change (either improvement or deterioration) between the 2004-14 and 2006-16 LTCCPs, patterns discernible in relation to how well the information is presented, the overall state of the information in 2006-16 LTCCPs, and suggestions for future improvement work.

Overall, there are discernible improvements between the 2004-14 and 2006-16 LTCCPs, although the extent of the improvement and the number of councils showing improvement vary across the areas reviewed and, within these, across the matters considered by each reviewer.

Despite these improvements, in our view LTCCPs have a significant way to go to move from compliance-focused documents that set out the contents required by statute to strategic and user-centric planning documents that are a strong expression of the purpose of local government (as set out in section 10 of the Act).

It may be that councils have focused on complying with the requirements of the Act and have improved the quality of the underlying information, but are still at an early stage in effectively using the integrated information to enhance their own decision-making processes and the quality of the planning process for all stakeholders. There is the capacity to significantly improve the integrated "story" about the challenges, options, and the long-term plans of the council. We encourage local authorities to view the legislative requirements as the starting point to be addressed within a wider more strategic integrated context.
Sustainable development

Overall, there has been improvement in the adequacy and presentation of information about sustainable development and community outcomes between the reviewed 2004-14 and 2006-16 LTCCPs. However, the review of the LTCCPs showed that:
  • the relationship between well-beings, community outcomes, and sustainable development within LTCCPs is often not clear, and there is limited evidence within current LTCCPs of sustainable development infusing the thinking of local authorities; and
  • there appears to be uneven understanding of the scope of sustainable development.
While improvements were more readily identified in larger councils, improvements are more closely related to the timing of a community outcomes process. Large councils were found to have undertaken a community outcomes process more recently.

While all councils refer to the four well-beings (social, economic, environmental, and cultural) in their LTCCPs, to a greater or lesser extent there are a number of areas requiring improvement to infuse council thinking on sustainable development into LTCCPs:
  • expressing how sustainable development is localised, owned, and defined at a council and community level;
  • ensuring that community outcomes are expressed at a level of specificity that is meaningful, and that it is clear how the council contributes to the outcomes;
  • reflecting consideration given to the needs of future generations’ well-being in decision making;
  • integrating thinking (across the well-beings) to express how activities (including the means by which they are delivered) satisfy the four elements of the section 14 sustainable development principle;*
  • using the sustainable development principle and the community outcomes as a framework for performance planning and management;
  • using a current and future wellbeing context to address statutory content areas, such as assumptions and negative effects, as well as to develop information about intended benefits and associated risks and key issues; and
  • "walking the talk" in outlining how sustainable development relates to councils’ internal functioning.
A stronger articulation of sustainable development and how it relates to and affects the intentions and operations of councils would be required to in turn improve the usefulness of LTCCPs both as a public articulation of strategy and objectives and as a management framework for councils.
Performance information

We found that there was a discernible improvement in the performance framework in the 2006-16 LTCCPs for all the councils, from a 2004 baseline that required significant improvement. There was no consistent pattern, but the main improvements related to:
  • specification and completeness of the performance measures;
  • provision of more background narrative to support the levels of service and performance measures;
  • direct connection of the levels of service and performance measures; and
  • specification of performance measures for the full 10-year period.
Larger councils tended to have more complete and sophisticated performance frameworks and information. Therefore there was less improvement in performance frameworks for larger councils compared to medium and small, as the larger councils started from a stronger base.

However, there were examples of good practice spread across all councils and also room for improvement across all councils.

Overall, we found that there was room for improvement in how well the LTCCP expressed the council’s strategic focus and how it flowed through to its activity statements, including the performance information. We consider that there is real scope for development in the performance information, particularly in further connecting the objectives, levels of service and performance measures with a clear context of the "big picture", including:
  • clear articulation within the activity statements of the planned levels of service and performance measures relative to previous years;
  • an appropriate focus on levels of service and performance measures to provide a meaningful picture of key aspects of the activity; and
  • appropriate and relevant performance measures that include at least some indication of the intended impacts of planned services. We note that it is the quality of performance measures that matters, not the quantity (that is, how the performance measures work individually and, more importantly, in combination).
Asset management information

Councils have made some improvements from the first LTCCP information, by expanding the detail of the information. For example, while 2004-14 LTCCPs tended to focus on key infrastructure assets, in the 2006-16 versions, other community assets such as parks, halls, and libraries were analysed to a similar extent as network infrastructure assets. However, the focus continues to be on the management of the currently held assets, rather than planning for the next 10 years for new assets.

Overall, the medium-sized councils provided the most useful information and could identify changes to existing or new assets and the rationale for the changes. While generally larger city councils produced larger LTCCPs for 2006-16 than did small and medium-sized councils, these plans contained a lot of detailed asset information that did not always link into other parts of the LTCCP.

Users, as defined for the purposes of this review, are not yet provided a transparent and complete assessment of the planning decisions used to determine the current and future services and asset requirements. In particular, the following areas were not well covered by any of the LTCCPs that we reviewed:
  • The Act’s Schedule 10 requirement that group of activities information outlines the additional capacity requirements, how the capacity will be delivered, and a discussion on the options considered.
  • Defining the future service level and capacity, and the linkage of the service level and capacity with the identified capital projects and ongoing expenditure.
Financial management and strategies

The forecast financial statements, accounting policies, and significant forecasting assumptions are all strong aspects of the 2006-16 LTCCPs. The funding impact statements are reasonable, as are most of the funding and financial policies examined.

However, there are two areas where improvement work would have the greatest capacity to enhance the value of the LTCCPs for users – explanation of the overall fiscal strategy, and enhancing the quality of the financial information about groups of activities.

How councils have addressed the balanced budget requirement is a demonstration of the weaknesses in articulating fiscal strategy, in that councils have not provided further comment where the operating revenues exceed the operating expenses. That is, where the balanced budget test has been met at a whole-of-council level, councils have not discussed whether the surplus is prudent or not.

The financial information about groups of activities represents an opportunity for a sector-wide effort to improve consistency in the manner of presentation of this information, as well as to improve the clarity of the information and the underlying logic. Separation of operating expenses from capital expenditure in the 2006-16 LTCCPs has led to some improvement. However, the funding part of these statements remains weak. In fact, the divergent underlying logic of funding approaches (including the confusion of real financial resources with accounting balances in some cases), and the terminology used by many councils, makes it very difficult for even an informed reader to understand the information.

Based on the selected local authorities, it appears that, in general, the larger the authority the better the information which has been presented. However, this observation is not valid across all of the financial management and strategy aspects examined in this review.

* Section 14(1)(h) of the Act, principles relating to local authorities, states that:
(1) In performing its role, a local authority must act in accordance with the following principles:…
(h) in taking a sustainable development approach, a local authority should take into account -
(i) the social, economic, and cultural well-being of people and communities; and
(ii) the need to maintain and enhance the quality of the environment; and
(iii) the reasonably foreseeable needs of future generations.

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