Part 4: Service-level and performance information in long-term council community plans

The Auditor-General's observations on the quality of performance reporting.

This Part summarises our work on local authorities’ 2006-16 LTCCPs.

We looked at the extent to which the forecast information and performance measures in the 2006-16 local authority LTCCP Statements of Proposal and final LTCCPs provide an appropriate framework for the actual levels of service provision to be meaningfully assessed.

Overall, the analysis from our LTCCP audits suggests that, for many local authorities, the performance framework requires major development. The attributes of effective performance reporting that we anticipated were often not reflected in the LTCCP or in the underlying information and assumptions. During our LTCCP audits, we noted weaknesses and issues in the elements and processes local authorities used for their performance planning, reporting, and management frameworks.

Common weaknesses that we identified during our LTCCP audits related to:

  • lack of a logical flow in performance reporting;
  • levels of service, and performance measures and targets; and
  • outcomes monitoring.

We were particularly concerned that levels of service identified by local authorities appear to be poorly defined. Levels of service are vital in their own right, and they also underpin asset management and financial planning.

The performance framework and information should form a feedback loop to fulfil its intended function. Although only two councils received non-standard audit opinions for issues about performance frameworks and information, we considered the performance framework and the information that constitutes this feedback loop to be the areas needing greatest improvement in the 2006-16 LTCCPs.

Although we accept that best practice is developing as the local government sector learns more about preparing LTCCPs, a determined effort is needed to improve the ability of many local authorities to do planning that allows them to address the long-term needs of their communities.

Logical flow in performance reporting

The appropriateness of selected levels of service performance measures and targets can be assessed only if the local authority sets out the rationale for its activities clearly and logically. The rationale should describe how its assessment of well-being and the community’s outcomes provide the basis for the selection and direction of its activities. The selection of levels of service and performance measures and targets should reflect this rationale, the local authority’s main strategies and objectives, and any associated risks and negative effects. Figure 3 shows the logical flow of the Local Government Act 2002 performance requirements.

Figure 3
Logical flow of the Local Government Act’s performance requirements

Figure 3: Logical flow of the Local Government Act's performance requirements.

Many local authorities struggled to demonstrate the overall alignment of the performance framework in their LTCCPs. In about 25% of LTCCPs, there was a weak link between the rationale for measures and levels of service information. This was because the reasons for providing certain services were not clearly stated. In more than 30% of LTCCPs, activities were only weakly linked to performance measures and outcomes, leading to confusion about how the activities would be measured and how they would contribute to furthering outcomes or well-being.

Levels of service and performance measures and targets

Information about levels of service and performance measures and targets is less meaningful when the logical flow of information is not complete or clear. The logical flow weaknesses noted in paragraph 4.9 compounded issues about levels of service and performance measures and targets.

Almost 25% of LTCCPs lacked clarity about definitions of levels of service within the information on each group of activities. We were surprised to find that about 20% of local authorities did not have clearly defined levels of service in their underlying asset management planning information.

Without sound asset information, it is difficult to assess and plan for the asset capacity needed to provide the intended levels of service and the associated financial costs. It is also difficult to measure whether those levels of service were achieved.

This lack of information about levels of service affected the extent to which local authorities were able to identify accurate, neutral, comparable, and reasonably based best-estimate performance targets.

More than 65% of local authorities had performance measure shortcomings to varying extents, which meant that the intentions of the groups of activities were unclear and that there was often no identifiable measure to assess achievement. These shortcomings most commonly related to:

  • the relevance of measures to the rationale for the activity;
  • the context of the environment and risks within which the activity operated;and
  • the reasonableness of the 10-year performance targets (that is, whether these were reasonably based best estimates).

We expected that the intended achievements resulting from a service or activity and the associated risks and potential negative effects would influence the selection of relevant performance measures.

Clause 2(1)(c) of Schedule 10 of the Act requires the LTCCP to outline, for each group of activities of the local authority, any significant negative effects that any activity within the group of activities may have on the social, economic, environmental, or cultural well-being of the local community. This requires the local authority to consider potential significant negative effects on community well-being and to disclose crucial assumptions. We observed that about 30% of LTCCPs either did not include information on negative effects or had poor coverage of negative effects.

The risks and negative effects that were identified in contextual information for groups of activities did not appear to have resulted in performance measures and targets for managing such risks. For example, contextual information identified that resource consent requirements for taking water were being frequently breached or that there was not enough water available to meet demand at peak periods, but there was no discussion about how water supply issues were being managed.

A common approach used to measure the performance of levels of service was to state that the levels of service, and therefore their performance measures and targets, were assumed to be constant for the duration of the LTCCP. More than 30% of local authorities showed constant, or near constant, levels of service for the 10 years of their LTCCP. However, when considered with the information about other groups of activities, it often appeared that local authorities had failed to integrate the effect of asset or financial decisions with their associated effects on levels of service. This meant that, while asset and/or financial information indicated significant change, levels of service inconsistently remained constant.

In 2006, this issue arose particularly around activity areas such as water services and building consents. Local authorities had not included the intended improvements in drinking water quality or supply within their levels of service and had not provided for changes affecting building consent services.

Many local authorities are struggling to meet the new requirements of the Building Act 2004, which raises a concern that local authorities are in a “double jeopardy” situation. The Building Act (among others) requires local authorities to process applications within certain time constraints. However, in many instances, the annual reports of local authorities show that they are not meeting these deadlines. The dilemma arises, therefore, whether a local authority should show a reasonable estimate based on past performance in its LTCCP and impliedly plan to breach the Building Act, or whether the LTCCP should show a target that reflects the legislative obligations but which is unreasonable.

In our view, a sustained historical failure to meet statutory requirements indicates the need to invest greater effort into a service. A local authority should advise, within the activity information in the LTCCP, that it has not previously met its statutory obligations, and outline the steps it is taking to remedy this. In suggesting that local authorities outline such steps, we appreciate that reasons for failure to meet statutory requirements may have long-term resourcing effects (for example, to increase funding to deal with new statutory requirements) or may not be resolvable in the short term (for example, where there are skills and expertise shortages).

Outcomes monitoring

As well as inadequate performance measures and targets, supporting information on the achievement of outcomes was frequently incomplete. Our analysis of the LTCCP audits found that nearly 30% of local authorities did not have complete outcomes monitoring. Again, this shows the lack of a direct link to measuring specific community outcomes. These outcomes often did not have specific targets and measures. The monitoring arrangements for community outcomes that were included were often expressed very generally.

We are aware that the framework and measures for monitoring outcomes were in the very early stages of development because of the different ways local authorities could identify outcomes in their first LTCCP in 2003 or 2004. Local authorities were required to include the information for the first time in the 2006-16 LTCCP. As a result, we expect outcomes monitoring information to show improvement when local authorities publish their annual and community outcomes reports.

Monitoring outcomes is a critical component of the performance framework. It allows local authorities to demonstrate the extent to which their activities are furthering community outcomes and well-being. Information disclosed in the LTCCP needs to communicate how the identified outcome is being achieved, and the measures used to assess change in the outcome over time.

Every three years, local authorities are required to report on their monitoring of the achievement of community outcomes to show the attainment of community well-being and the planned community outcomes. To show how the local authority is contributing to community outcomes, it is required to report annually on how activities it carries out are furthering community outcomes.

The community outcomes and well-being identified by the local authority should flow into the intended levels of service and the performance measures and targets to allow for meaningful assessment. Annual reporting should explain any variance between intended and actual levels of service, and how the levels of service link to activities that help to advance community outcomes and well-being.

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