Part 1: Timeliness of annual reporting

1.1
The annual reports of local authorities provide information that helps communities to assess the performance of their local authorities. For this process to be effective, the information needs to be comprehensive and timely.

1.2
Each year, we examine the timeliness of annual reporting by local authorities.

1.3
Under the Local Government Act 2002 (the Act), each local authority is required to:

• complete and adopt its annual report, containing audited financial statements, within four months of the end of the financial year;
• make its annual report publicly available within one month of adopting it; and
• make an audited summary of the annual report publicly available within one month of adopting the annual report.¹

1.4
The local authority decides when the audited annual reports and summaries will be prepared and published, within the requirements of the Act.

Summary

1.5
The timeliness of annual reporting by local authorities was significantly better for 2007/08 than it was for the year before. The timeliness of annual reporting for 2006/07 had been affected by the additional work required for the transition to reporting under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). However, results this year show that many local authorities still need to better plan how they will complete, adopt, and release their annual report within the statutory deadlines.

1.6
It is important that local authorities recognise that accountability is not achieved until the audited information is made available to ratepayers in a user-friendly form (the annual report summary). Some local authorities need to give this matter greater attention to ensure that their reporting not only allows for prompt audit clearance but also informs their communities without delay.

1.7
We will continue to monitor the performance of local authorities in meeting these important statutory deadlines.

Adoption of annual reports

1.8
Figure 1 shows the dates when the audits of local authorities were completed. It shows that, for 2007/08, 77 local authorities (90%) adopted their annual report by the statutory deadline of 31 October 2008.

Figure 1
When local authority audits were completed, for 2007/08 and the previous year

1.9
As at 30 November 2008, there were only two outstanding annual reports for 2007/08, and those audits were completed within the first two weeks of December. In comparison, for the 2006/07 year, as at 30 November 2007 there were 11 local authorities whose audits were not completed. Four of these were completed by the end of December 2007 but seven local authorities² still had annual reports outstanding as at 31 March 2008 (five months after the last possible date for completing and adopting an annual report). For the 2007/08 year, three³ of those seven local authorities again failed to complete their annual reporting within the statutory time frame of 31 October 2008.

1.10
While there has been some improvement since 2006/07 when implementing NZ IFRS was clearly a significant contributing factor we remain concerned about the lack of commitment to timely completion and adoption of annual reports, particularly by those local authorities that repeatedly fail to achieve the statutory deadlines. Without timely reporting, it is very difficult for communities to assess the performance of their local authorities.

Public release of annual reports

1.11
We also looked at when local authorities released their annual report to the community. The Act allows one month for public release from when a local authority adopts its annual report. Figure 2 shows the performance of local authorities in meeting this deadline.

Figure 2
When local authorities released their annual report, for 2007/08 and the previous year

1.12
Figure 2 shows an improvement in the number of local authorities meeting the statutory deadline. However, there was very little change in the number of local authorities publishing their annual report within 10 days of its adoption. Most local authorities make their annual report available to the public on their website. In our view, if the annual report is published on a website, local authorities should be able to do this within a few days of adopting their report.

Public release of summary annual reports

1.13
We also reviewed the timing of the release of audited summaries of annual reports. The Act requires both the annual report containing audited financial statements and an audited summary to be released within one month of the annual report being adopted. Releasing an audited summary is important for the accountability of local authorities. It is the most accessible information for most readers, and the easiest document to circulate and make widely available.

1.14
The performance of local authorities in releasing summaries of annual reports within the statutory deadline has improved slightly, as shown in Figure 3.

Figure 3
When local authorities released their audited summary of annual report, for 2007/08 and the previous year

1.15
Despite the general improvement in the timeliness of releasing annual reports, there are still some local authorities that consistently do not comply with the requirement to make a summary report available within one month of adopting their annual report. As we noted in our report last year, it is often the same local authorities that are failing to comply. We were particularly disappointed to note that, of the 10 local authorities that failed to meet the statutory deadline, two had also failed to meet it in 2006/07.⁴ This suggests a lack of commitment to timely reporting to their community by the local authorities concerned.

1.16
Local authorities need planning and time to summarise an annual report and have the summary published. However, as with publishing the annual report, it is a known obligation. We emphasise the need for local authorities to project manage the production, audit, and publication of their annual report and their annual report summary.

1.17
We were pleased to see a steady number of more efficient local authorities publishing their annual report and summary simultaneously, or near simultaneously, because of sound planning. We encourage this approach within all local authorities.

Invercargill City Council

Audit opinions

1.18
Because of issues involved in having their audits completed, Invercargill City Council (the Council) and its subsidiary companies have consistently been unable to meet statutory requirements for the timeliness of annual reports for the past few years. We drew attention to this in our reports on the results of the audits of local authorities for the 2005/06 and 2006/07 years.

1.19
The audit opinions for the Council and its subsidiary companies were issued well after the statutory deadline for the financial years ended 30 June 2005 and 2006 (32 and 20 months respectively). The audit opinions for the years ended 30 June 2007 and 2008 were issued in November 2008, so the 2007 opinion was about 13 months late. However, we are pleased to note that the audits are now up to date, and all outstanding audit opinions have been issued.

1.20
The audit opinions for the Council for the 2006/07 and 2007/08 financial years were qualified as a result of issues with the Council’s works company, Bond Contracts Limited.⁵ The qualifications were for limitations of audit scope relating to comparative and brought forward information included in the financial statements in 2007, and consequently in 2008. These qualifications are expected to continue in the audit opinion on the 30 June 2009 financial statements.

Improved planning and reporting

1.21
We have previously been concerned about the quality of the Council's planning as well as its timeliness in reporting. We did not consider that the Council's 2006-16 Long-Term Council Community Plan (LTCCP) was "fit for purpose". The combination of a lack of credible plan and the difficulty in finalising the Council's annual reports meant that the Invercargill community lacked information for holding its elected members to account.

1.22
We are pleased to note that the Council's 2009-19 draft LTCCP was a significant improvement on the 2006-16 version, and received an unqualified audit opinion.

1.23
The Council is now up to date with its planning and reporting. We congratulate councillors and management on this improvement, which will greatly enhance the Council’s accountability to the Invercargill community.

1: The actual timing required of any local authority is determined by when it completes and adopts its annual report. In 2007/08, the last possible date for completing and adopting the annual report was 31 October 2008, and the last possible date for making the annual report and the summary of the annual report publicly available was 30 November 2008.

2: The outstanding annual reports as at 31 March 2008 for the year ended 30 June 2007 were for Ashburton District Council, Buller District Council, Hurunui District Council, Invercargill City Council, Palmerston North City Council, Selwyn District Council, and Westland District Council.

3: The three were Invercargill City Council, Selwyn District Council, and Westland District Council. In the case of Invercargill City Council, the delay was closely linked to resolving issues from previous years. This time, Westland District Council was less than six weeks late. For Selwyn District Council, illness in our audit team contributed to the delay.

4: Far North District Council did not publish its annual report summary within the statutory deadline in either of the past two years. Whangarei District Council has not achieved this requirement for the past three years. We note that the performance of Far North District Council has declined in 2007/08 by 13 days, with the summary published 52 days after adopting the annual report. Although the performance of Whangarei District Council was still outside the statutory deadline, it has shown some improvement – from 47 days after adopting the annual report in 2006/07 to 35 days in 2007/08.

5: See the Appendix.