Part 11: Service performance information

Local government: Results of the 2007/08 audits.

In this Part, we set out our views about the quality of reporting of service performance information, and our intended work in 2009/10.

Service performance information1 provides primarily non-financial information that records the output delivery performance of a public entity against specified objectives. This information is usually shown in a statement of service performance (SSP) or equivalent report, and is compared with information contained in forecast non-financial performance reports such as a statement of intent (SOI).

In 2008, the Auditor-General reported that overall, in his view, the poor quality of performance reporting by public entities is disappointing and needs to improve significantly.2 Improving the quality of information about the performance of public sector entities should allow the public sector to demonstrate its accountability and to continuously improve its effectiveness.

The Auditor-General's views were based on our:

  • reviews of SOIs of government departments and Crown entities;
  • audits of the 2006-16 Long-Term Council Community Plans (LTCCPs);3 and
  • performance audit looking at statements of corporate intent and SOIs prepared by council-controlled organisations and council-controlled trading organisations.4

The Auditor-General noted in particular that many performance reports by public entities:

  • did not set out coherent performance frameworks that showed logical links between the information on medium-term outcomes and organisational strategies and the annual output information (or, for entities preparing an SOI, between the objectives and the performance measures and targets); and
  • lacked well-specified, relevant, understandable, reliable, and comparable performance measures and targets. For local authorities, government departments, and Crown entities, this applied to both the medium-term outcomes-based information and the annual output-based SSP information.

Performance reporting by local authorities

All local authorities must have robust performance management frameworks and meaningful levels of service, measures, and targets. Otherwise, it is difficult for ratepayers and the local authority to gain a clear understanding of its performance and effectiveness.

Since 2003, local authorities have used LTCCPs to further refine their performance planning and monitoring practices. This should give the local government sector an advantage over other parts of the public sector when it comes to performance reporting. However, despite having nearly 20 years' experience in preparing and using performance reports, local authority reports often:

  • fail to meet external readers' needs, because the performance reports are not as well prepared as they should be;
  • do not work as an effective tool for assessing public accountability, because the reports are not as well used by external readers as they should be; and
  • do not work well as a tool for improving organisational effectiveness, because the reports are not as well used by internal readers (managers and governors of local authorities) as they should be.

Review of our audit approach

Because we are concerned about the quality of performance information currently provided by public entities, we have been reviewing our own methods and standards for auditing performance information.

Currently, where an entity is required to report at the end of the year on performance against a forecast statement (for example, where an entity prepares an SSP against forecast statements in an SOI), our auditors verify the accuracy of the SSP. For local authorities, the SSP is included in the annual report, and reports against measures in the LTCCP.5

Currently, when we consider the “appropriateness” of the information, our existing auditing standard requires the auditor to qualify the audit report only if the performance measures are “fundamentally misleading or senseless”.

To address our concerns we issued a consultation draft of a revised Auditor-General's standard on auditing service performance information (AG-4)6 in December 2008. We expect that the revised standard will be adopted in mid-2009.

Our revised standard on the audit of service performance information will require auditors to report on whether service performance reports:

  • provide an adequate basis for assessing service performance; and
  • fairly reflect the entity's service performance.

We intend to apply our revised approach to auditing service performance information to the audit of SSPs in local authority annual reports for the year ending 30 June 2010. This gives enough time for local authorities and our auditors to prepare and adjust to the new standard. The 2009/10 year will also be the first year of operating under the 2009-19 LTCCPs. We consider the appropriateness of the performance framework as part of our LTCCP audit. Assessment of actual performance will be carried out as part of our annual audit work against the first year of the LTCCP forecast in 2009/10.

The 2009-19 LTCCP is an opportunity for local authorities to strengthen their performance information on how their activities affect the community they serve. As we note in Part 2 of this report, this aspect of local authority forecast and actual performance reports needs to improve.

From the 2009/10 audits onwards, we will be applying a new and stronger approach to our audits of performance reports of local authorities, including their reports on the effects of their activities on community well-being and outcomes required by the Local Government Act 2002.

1: For ease of reading, in this Part we use the term "performance information" when referring to service performance information.

2: The Auditor-General's observations on the quality of performance reporting (2008) is available on our website at

3: The Local Government Act 2002 requires the audit opinion on the draft and final LTCCP to report on the extent to which forecast information and proposed performance measures provide an appropriate framework for the meaningful assessment of actual levels of service provision.

4: Statements of corporate intent: Legislative compliance and performance reporting (2007), available on our website at

5: See also Part 2 "Reporting on activities in the annual report", in this report.

6: The revised AG-4 is intended to apply to those local authorities, government departments, and Crown entities required to prepare a statement of intent and statement of service performance under the Crown Entities Act 2004. This excludes the audit of service performance reports of other Crown entities (such as tertiary education institutions and those Crown entities required to prepare and report against a statement of corporate intent) whose service performance reporting requirements are governed by other legislation. AG-4 is available on our website at

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