Part 6: Service performance information

Local government: Results of the 2008/09 audits.


All local authorities must have robust performance management frameworks and meaningful levels of service, measures, and targets. Otherwise, it is difficult for the community and the local authority to clearly understand its performance and effectiveness.

Since 2003, local authorities have used their long-term council community plans (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.

The recently appointed Auditor-General has expressed general disappointment that performance reporting has improved very little in the last 15 to 20 years, despite considerable effort by many. She considers that better performance information and reporting will help address the current and ongoing challenges for the public sector, and has asked for continued support to achieve improvement.

In this Part, we set out what we did in 2009/10 to implement enhancements to our statutory duty to attest to the statement of service performance information in local authorities' annual reports. From 2009/10, auditors of local authorities will not only be reporting on whether the annual report reflects the local authority's performance for the year expressed by the existing measures in the LTCCP, they will also be checking that the annual report's use of these measures provides an adequate basis for the informed assessment of the local authority's actual service performance. Service performance information58 provides primarily non-financial information that records the output delivery performance of a public entity against specified objectives.

We are currently drafting a publication that showcases better practice performance measures from selected 2009-19 LTCCPs. The publication is intended to promote discussion rather than be a technical guide on performance measures for various activities.


During the last couple of years, we have reviewed and updated our approach to auditing performance information and have been phasing in improvements to how we audit this information. During 2009, we consulted on and finalised a revision of the Auditor-General's auditing standard on performance information (AG-4),59 which is available on our website ( The previous version of this standard required auditors to attest to whether the statement of service performance (SSP) fairly reflected the standards of service delivery compared with the forecast standards in the forecast SSP. Auditors applied this standard in auditing the 2008/09 annual report performance information.

The key change in the revised standard is that auditors will be required to attest to whether the SSP fairly reflects actual service performance for the year. This is a subtle wording change but an important change to the reporting required from local authorities and the judgement required by auditors. The change will mean that auditors will be expected to increase their focus on the appropriateness of the service reported by local authorities.

AG-4 (revised) The Audit of Service Performance Reports is effective for audits of service performance reports of local authorities for periods beginning on or after 1 July 2009.

Introduction of the Auditor-General's revised standard for auditing service performance reporting

The auditing standards set standards for auditors, not for those who prepare external financial and non-financial reports. AG-4 (revised) starts from the principle that our audit approach should be consistent with the approach we take to auditing financial information, varying to reflect the nature of the matters of audit interest. The changes of emphasis in the revised standard reflect legislative changes, local authorities' improved description of levels of service, and management and public expectations.

Given the new requirements, the focus of our work will be on:

  • confirming that the performance framework remains appropriate, taking into account any changes in activity since the LTCCP was prepared (taking assurance to the full extent permissible from the audit work performed on the LTCCP);
  • the quality of the overall "story" the performance reporting tells;
  • the reliability and accuracy of the reporting;
  • the completeness of the reporting against the performance framework outlined in the LTCCP; and
  • compliance with relevant legislation (in particular, Schedule 10 of the Local Government Act 2002).

A key change in our audit approach is that auditors will consider financial and non-financial elements of the audit together, to take into account how the local authority manages and delivers its services, how it manages its finances, and how service delivery affects its finances.

During the 2009-19 LTCCP audits, our auditors assessed whether the performance frameworks set out in local authorities' LTCCPs would be supported by:

  • good quality monitoring and reporting of what was actually achieved during the year;
  • levels of service, systems, and controls that are used in practice; and
  • a good quality assurance system that gives assurance about the quality and relevance of information.

In some instances during the 2009-19 LTCCP audits, our auditors were concerned that the specific service level measures and targets provided in LTCCPs may not result in reasonably complete and balanced reporting. However, the specific service levels, when taken with the other information provided about the activity as a whole, did give a more useful basis for an informed assessment. Local authorities were advised that, in preparing annual reports against their LTCCPs, they should provide information for each activity as a whole, to allow readers to make an informed assessment of the achievements for financial management of service delivery and assets.

Issues that may affect audit opinions

There are a range of circumstances under AG-4 (revised) that could cause us to modify the audit opinion on the service performance report, or otherwise require explanation in the audit report. These include:

  • the annual report not reflecting actual service performance against outputs or performance measures, or targets or results being omitted or inappropriately or poorly reported on;
  • unexplained and significant variations to the previous year's results and LTCCP forecast results;
  • omitted, inappropriate, or poor reporting on material outputs, performance measures, targets, or results;
  • results for material performance measures that cannot be substantiated, or deficient systems and processes for performance information;
  • non-compliance with laws and regulations for approval, format, publication, and circulation of plans and service performance reports; and
  • insufficient, inconsistent, or misleading management commentary in the service performance report, or between service performance and financial results.

We are yet to consider the effect of different circumstances on the nature of the audit opinion and will be working carefully through issues that arise in auditing under AG-4 (revised) as we carry out the 2009/10 audits of local authorities.

Implications for local authority audits

The local government sector has an important advantage over the rest of the public sector through its developing practice of planning and monitoring performance through LTCCPs.

Effective performance reporting is:

  • useful;
  • appropriate; and
  • presented in a structured, systematic, and logical way.

The revised auditing standard outlines how auditors assess local authorities as preparers of service performance reports. Our expectation is that local authorities will report against their actual achievements, including a description of achievements – assuming they have adequate performance information and controls, and there is an internal quality assurance process that gives confidence about the quality and relevance of the information. This is where local authorities should focus their efforts to get the maximum benefit from our increased audit effort.

We recognise that we have a key role to play in providing assurance about performance information, and that we must work with local authorities to meet the reasonable expectations of residents, ratepayers, and other stakeholders for useful information to underpin the system of accountability.

Better practice examples discussion paper

We are currently drafting a publication that showcases better practice performance measures from selected 2009-19 LTCCPs. The purpose of this publication is to highlight the better examples from common performance measures within those LTCCPs, and to suggest improvements for preparing 2012-22 LTCCPs. The 2009-19 LTCCP is, in most instances, the third 10-year plan that local authorities have produced in accordance with the Local Government Act 2002. Our forthcoming publication is intended to promote discussion rather than be a technical guide on performance measures for various activities.

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

59: The revised AG-4 is intended to apply to audits of local authorities and government departments, and of Crown entities that are required to prepare a statement of intent and statement of service performance under sections 139 and 150 of 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) and council-controlled organisations whose service performance reporting requirements are governed by other legislation.

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