Auditor-General's overview

The reform of local government in Auckland brings with it new governance and accountability arrangements. These changes are an important aspect of the reform and significantly affect the audit work that I am required to do.

This report covers aspects of the results of auditing Auckland Council's planning document, Auckland Council's Long-term Plan, 1 November 2010 – 30 June 2019, which became its long-term plan on 1 November 2010.

The Auckland Transition Agency's preparation of the long-term plan, and my audit, signifies the completion of a key planning and accountability milestone for Auckland Council and its first step as New Zealand's newest local authority.

It is pleasing to be able to provide assurance to the new, enlarged Auckland community that the planning document was reasonable. Our audit opinion acknowledged the importance of the document in creating a useful transitional position for the new Council.

What the planning document shows

The planning document shows the indicative trends for rates and borrowings, subject to decisions of Auckland Council. Rates are forecast to increase by 3.9% in 2011/12, the first year for which Auckland Council will set rates. This compares with an overall average increase of 6% that the former councils were forecasting for that year in their long-term plans.

In my audit opinion, I highlighted the significant assumption disclosed in the planning document about efficiency savings of $47.7 million annually from 2011/12. The 3.9% rates increase assumes their realisation, although the sources and timing of these savings were yet to be identified in detail at the time of finalising the planning document.

The planning document also shows the significant scale of Auckland Council's operations and assets. Auckland Council's initial annualised total income is $2 billion, of which rates is $1.4 billion. Its opening balance sheet includes total assets of $29 billion.

The planning document's disclosures about council-controlled organisations confirm the integral part these organisations will play in maintaining and managing core infrastructural assets, and in delivering Auckland Council services across the region.

Although the planning document was based on the information and plans of the former councils, this information was significantly changed to format it in a way suitable for Auckland Council. For example, the information had to reflect the unique aspects of Auckland Council that the reform created – in particular:

• shared governance and accountability arrangements between Auckland Council's governing body and its local boards; and
• substantial management of infrastructure and service delivery by Auckland Council's council-controlled organisations.

Looking ahead to Auckland Council's 2012-22 long-term plan

The planning document signposts clear opportunities for Auckland Council when developing its own strategic approach. It provides a first step in the detailed aspects of planning that Auckland Council must carry out and which will need to be integrated across the whole group.

The planning document also provides Auckland Council with a useful base on which to prepare its long-term plan for 2012-22, to best meet the long-term plan's purposes and best serve the Auckland community. Matters that will be particularly important for Auckland Council to consider when preparing its long-term plan for 2012-22 are:

• a performance framework that addresses Auckland Council's unique governance and accountability arrangements; and
• a clear financial strategy.

The Auckland reform process

The Royal Commission on Auckland Governance was initiated by the former Government, and reported in March 2009. After that report, the current Government decided to reform local government in Auckland. The process for this significant reform began in May 2009 with the enactment of the Local Government (Tamaki Makaurau Reorganisation) Act 2009. This Act set up the Auckland Transition Agency to prepare the new unitary Auckland Council and its group for operations from 1 November 2010 (the date of transition).

The new arrangements for Auckland Council are provided for by the Local Government (Auckland Council) Act 2009 and the Local Government (Auckland Transitional Provisions) Act 2010.

Aspects of the governance arrangements for Auckland Council differ from those for the former Auckland councils and for other local authorities in New Zealand.

The reform legislation provides for new accountability arrangements, and for how Auckland Council should transition towards them. The date of transition also required changes to the planning and reporting arrangements, which are usually based on a financial reporting period that ends on 30 June in the local government sector.

I was required to audit the planning document, which is a unique transitional accountability document defined in the reform legislation.

The purpose of the planning document and its audit

The planning document serves as Auckland Council's annual plan for 2010/11 and its long-term plan. It also provides a starting point for, and input into, future planning, decision-making, and management by Auckland Council. Auckland Council will report in its annual report against the budgets, measures, and targets included in the planning document.

The planning document was completed before the date of transition, and our audit opinion is unqualified. In our audit opinion, we draw attention to:

• the planning document's preparation for, rather than by, Auckland Council;
• the underlying assumptions and information being those of the former councils and the Auckland Transition Agency (including the assumed efficiency savings);
• levels of service, which are different across Auckland and its local board areas, being presented on an average basis; and
• financial and funding policies that are still to be integrated by Auckland Council.

I look forward to working with Auckland Council as the significant reform process for Auckland continues.

Lyn Provost
Controller and Auditor-General

9 December 2010