Part 1: Introduction

Local government: Examples of better practice in setting local authorities' performance measures.

Objective and background

Our intention in preparing this discussion paper is to identify better practices in common performance measures from the 2009-19 long-term council community plans (LTCCPs), and suggest improvements for local authorities to incorporate when preparing their 2012-22 LTCCPs.

The LTCCP is one of the accountability documents that local authorities produce to set out their purpose, goals, and objectives, and the services they plan to provide to the community.

The Local Government Act 2002 (the Act) requires local authorities to include in the LTCCP a statement of intended levels of service for each group of activities. This includes the performance targets and other measures that actual levels of service can be meaningfully assessed against. The performance framework covers the local authority's objectives, aims, operating intentions, activities and service levels, and performance measures and targets.

Performance information in LTCCPs provides a good starting point for communities to understand what sort of services and levels of service they can expect to receive from their local authority. Therefore, the performance measures and targets should be directly related to each local authority's community outcomes and long-term aspirations.

The examples in this paper provide an insight into the progress local authorities have made in developing performance measures to measure levels of service. We hope our findings will promote discussion about a number of matters, including the development of more appropriate and meaningful performance measures.

Long-term council community plans

In most cases, the 2009-19 LTCCP was the third ten-year plan that local authorities have prepared under the Act. Appointed auditors are required to issue an audit opinion on behalf of the Auditor-General on both the LTCCP Statement of Proposal (draft LTCCP) and the final LTCCP. A local authority adopts the final LTCCP after it has considered the results of the community consultation on its draft LTCCP.

Presently under the Act, for both the draft and final LTCCP, the Auditor-General is required to report on:

  • the extent to which statutory requirements have been complied with;
  • the quality of information and assumptions underlying the forecast information; and
  • the extent to which the forecast information and proposed performance measures will provide an appropriate framework for a meaningful assessment of the actual levels of service provided.

The Act requires local authorities to decide what activities they will carry out to achieve community outcomes and well-being, and how they will carry out those activities. The Act promotes the accountability of local authorities to their communities, and the LTCCP is specifically intended to enable this accountability.

In its LTCCP, a local authority's performance information for each group of activities sets out the rationale for the local authority's involvement in each activity, the planned levels of service for the next three years, and outline information for the subsequent seven years. The information on levels of service includes performance targets against which actual levels of service can be meaningfully assessed (as reported at the end of each financial year in an annual report). An LTCCP contains activity information about assets and finances, and provides an aggregated view of the local authority's activities.

A report on changes between the 2004-14 and 2006-16 LTCCPs stated:

The performance framework needs to provide clarity and a sense of direction on what the local authority plans to achieve in the short term and an indication of its plans and performance over the longer term. It provides the mechanism through which the local authority informs local people about the range, quality, quantity, and impact of services it intends to provide and demonstrate the choices made by the local authority in relation to its services.1

The Society of Local Government Managers recently completed a survey on local authorities' experiences with the 2009-19 LTCCPs. Of the respondents, 29% identified performance management as the most common weakness in the 2009-19 LTCCPs.2

Review of the 2006-16 LTCCPs

The appropriateness of performance measures and targets for selected levels of service can be assessed only if the local authority sets out the rationale for its activities clearly and logically. The selection of levels of service and performance measures and targets should reflect this rationale, the local authority's main strategies and objectives, and any associated risks.

In our 2007 discussion paper, Matters arising from the 2006-16 Long-Term Council Community Plans, we stated that more than 65% of local authorities had performance measure shortcomings to varying extents. The intentions for the groups of activities were unclear, and there was often no identifiable measure to assess achievement against. These shortcomings most commonly related to:

  • the relevance of measures to the rationale for the activity;
  • describing the context of the environment and risks within which the activity operated; and
  • the reasonableness of the 10-year performance targets (that is, whether these were reasonably based best estimates).

Scope of our review

The performance framework is made up of a number of components that together demonstrate the rationale for, and the relationships among, the elements in that framework (such as the outcomes and impacts, performance measures, and performance targets).

This paper specifically discusses the quality and nature of the performance measures in performance reports from local authorities, excluding regional councils. Performance measures are the criteria or means used to measure performance. We have not focused our review on performance targets because targets reflect each local authority's priorities, historical achievement trends, and future intentions. We have assessed the performance measures of selected activities rather than all the activities in particular LTCCPs. Part 2 sets out our process and rationale for selecting those activities.

In addition, we reviewed the relationship between performance measures and the community outcomes to which they contribute, and made observations about the data collection and reporting systems (if they were disclosed in the LTCCP).

Review of the Local Government Act 2002

The Local Government Act 2002 Amendment Bill (the Bill), introduced into Parliament on 29 April 2010, proposes a number of changes to the Act. One of the principles underlying the changes is that local authorities should focus on core activities.

The Bill would require the Secretary for Local Government to make rules specifying performance measures with which local authorities must comply in delivering certain key activities.3 The key activities are:

  • water supply;
  • sewerage and the treatment and disposal of sewerage;
  • storm water drainage;
  • flood protection and control works; and
  • the provision of roads.

If the Bill is enacted, local authorities will have to include in their LTCCP the performance measures that the Secretary for Local Government specifies for the five key activities listed above. A local authority will also set any other performance measures it considers will enable the public to assess the level of service it has provided for major aspects of groups of activities. Each local authority will remain responsible for setting targets for the performance measures.

The measurement system for non-financial performance is complex and a long lead time is required. Accordingly, a deadline of 30 June 2012 is proposed for implementing the measurement system.4 This means that local authorities will not be required to comply with any of the changes until the next LTCCP (2012-22), and annual plans for the years beginning on 1 July 2010 and 1 July 2011 will also not need to be compliant with the consequential amendments in the Bill. The mandatory performance measures are scheduled to be completely developed by 30 June 2014 for use in the 2015-25 LTCCPs.

The Bill proposes to remove sections of the Act relating to the audit of forecast service performance information requiring the appointed auditor to comment specifically in the audit opinion on the appropriateness of the local authorities' proposed performance framework (including the measures and targets in the LTCCP). However, the Bill proposes retaining the requirement for the auditor to report on legislative requirements about the LTCCP (including the forecast information requirements).

1: Report of expert reviewers on changes between the 2004-14 and 2006-16 Long-Term Council Community Plans, (June 2007), commissioned by the Controller and Auditor-General.

2: LTCCP 2009: The good, the bad and the ugly – results of a survey of local government experiences with the 2009-19 long-term council community plans, January 2010.

3: See explanatory note to the Local Government Act 2002 Amendment Bill, May 2010.

4: Paragraph 182, Improving Local Government Transparency, Accountability and Financial Management – Regulatory Impact Statement, April 2010, Department of Internal Affairs.

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