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 after the end of the financial year;¹
• 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.²

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 2008/09 than it was for the previous two years. Only one local authority did not meet the statutory deadline for adopting its audited annual report.³

1.6
It is important that local authorities recognise that accountability is not achieved until the audited information is made available to ratepayers. In this respect, local authorities have generally improved their timeliness in making their annual reports publicly available.

1.7
Some local authorities still need to improve the timeliness of making their summary annual reports available. Summary annual reports are often more user-friendly than annual reports. Therefore, it is important that local authorities make their summary annual reports available without delay, to allow prompt audit clearance and to inform their communities.

Adoption of annual reports

1.8
Figure 1 shows the dates when the audits of local authorities were completed and the annual report adopted (these two events almost always occur on the same day). It shows that, for 2008/09, 84 local authorities (99%) adopted their annual report by the statutory deadline.

Figure 1 When local authority audits were completed, for 2008/09 and the previous year

1.9
For 2008/09, only one local authority breached the statutory deadline. This local authority has generally been able to meet its accountability requirements in previous years. Extraordinary matters prevented the Council from complying in 2008/09. This one local authority (1%) compares with eight local authorities (9%) for the 2007/08 year and 16 local authorities (19%) for the 2006/07 year.⁴ As at 30 November 2009, five months after the end of the financial year, there were no outstanding annual reports for 2008/09. In comparison, for the 2007/08 year, the audits of two local authorities were not completed by 30 November 2008.

1.10
Since 2006/07, there has been a significant improvement in the number of local authorities meeting their statutory deadline for completing and adopting their annual reports. In 2006/07, the transition to reporting under the New Zealand equivalents to International Financial Reporting Standards was a significant contributing factor for local authorities failing to meet the statutory deadline. It would appear that reporting on this basis is no longer a factor in the timing of reporting.

1.11
The eight local authorities that did not meet the statutory deadline for audit completion in 2007/08 did meet it in 2008/09.

Public release of annual reports

1.12
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 2008/09 and the previous year

1.13
Figure 2 shows a slight improvement in the number of local authorities meeting the statutory deadline. There was a significant change in the number of local authorities publishing their annual report within 10 days of its adoption, rising from 31 (36%) for the 2007/08 year to 44 (52%) for the 2008/09 year. Most local authorities make their annual report available to the public on their website. In our view, local authorities should be able to publish their annual report on a website within a few days of adopting their report.

Public release of summary annual reports

1.14
We also reviewed the timing of the release of audited summary annual reports. The Act requires both the audited annual report 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. Summary annual reports generally provide the best means for communicating key matters in the annual report – in other words, summary annual reports can help make financial statements, which often appear overly complex, reasonably simple and understandable. Summary annual reports are also the easiest document to circulate and make widely available.

1.15
The performance of local authorities in making summary annual reports available within the statutory deadline has decreased by one local authority, as shown in Figure 3. However, the number of local authorities that released their summary annual report within 10 days more than doubled (from 12 for the 2007/08 year to 26 for the 2008/09 year).

Figure 3
When local authorities released their audited summary annual report, for 2008/09 and the previous year

1.16
Eleven local authorities did not provide their communities with audited summary annual reports within one month of adopting their annual report, compared with 10 in 2007/08. In our view, this is unsatisfactory.

1.17
There were two local authorities that did not comply with the requirement to provide an audited summary annual report to their communities within the statutory deadline in either of the past two years.⁵ Far North District Council did not publish its summary annual report within the statutory deadline in the last three years. At the time of writing, Far North District Council still had not published its 2008/09 summary annual report.

1.18
Local authorities need planning and time to summarise an annual report and publish the summary annual report. 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 summary annual report.

1.19
We were pleased to see that more local authorities published their annual report and summary simultaneously, or near simultaneously, because of sound planning. We encourage this good practice and see no reason why it could not be standard practice for the whole sector.

1: If the date when the audit of a public entity's financial statements must be completed by falls on a non-working day, then the Interpretation Act 1999 requires that the statutory deadline date be read as the next working day. In 2008/09, the last possible date for completing and adopting the annual report was 2 November 2009.

2: The actual timing required of any local authority is determined by when it completes and adopts its annual report. In 2008/09, the last possible date for making the annual report and the summary of the annual report publicly available was 2 December 2009.

3: For 2007/08, eight local authorities did not meet the statutory deadline for adopting their annual reports.

4: Controller and Auditor-General (2008), Local government: Results of the 2006/07 audits, Wellington.

5: Otorohanga District Council and Opotiki District Council did not publish their annual report summaries within the statutory deadline in either of the past two years. However, both improved their timeliness considerably from the year before. Otorohanga District Council's annual report summary was just four days late, and Opotiki District Council's summary was nine days late.