Article 4: The complete reporting of performance

Local government: Results of the 2009/10 audits.

We have consistently held the view that effective reporting of a local authority’s performance can only be achieved if it encompasses both financial and non-financial performance. In 2008, we reported to Parliament that:

A core purpose of performance reporting is to provide for public accountability for the responsible use of public resources and regulatory powers, including demonstrating that public services are being delivered effectively and efficiently. Entities can be truly accountable only if they are transparent about both their financial and non-financial performance and the relationship between the two.6

Our June 2008 report to Parliament reflected our concern that the public sector as a whole still needed to report purposively on all aspects of its performance. In the local government sector, the audit of LTCCPs provided the opportunity for these matters to be raised with the local government sector. The appropriateness of the proposed performance frameworks for supporting effective performance reporting – whether financial or non-financial – was assessed.

This was reinforced by Parliament, which asked us to audit LTCCPs and form an opinion on:

The extent to which the forecast information and performance measures provide an appropriate framework for the meaningful assessment of actual levels of service performance.7

For the year ended 30 June 2010, we aligned our opinions on local authorities’ annual reports with the same standard – that the annual reports show actual performance and not just performance against what was planned. The sector has reported to the latter, lower standard since 1989: there has often been minimal reporting on actual performance.

Our auditors were required to not only report on whether a local authority’s annual report reflected its performance for the year but to also form an opinion on whether the annual report’s use of measures from the 2009-19 LTCCP "provided an adequate basis for the informed assessment" of the local authority’s actual service performance. The expectation was for local authorities to report their actual achievements and, where actual performance was not adequately reflected through the planned measures, for additional comment and information to be provided.

The audit work focused on:

  • confirming that the performance framework remained appropriate, taking into account any changes in activity since the 2009-19 LTCCP was prepared;
  • the quality of the overall "story" the performance report told;
  • 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 Act).

Overall, local authorities made considerable effort to improve their service performance reporting and report their actual achievements for the year. The features of those local authority annual reports that stood out included:

  • a high-level summary of performance achieved and the challenges encountered during the year, complemented by disclosure of what effect the challenges have had, or are envisaged to have, on future years’ levels of service, outcomes, and well-beings (local authorities that had better disclosures also outlined their planned response to those challenges);
  • commentary that reflected positive achievements and unfavourable results;
  • information that was presented in an inviting and visually appealing layout with easy navigation around the document;
  • a logical flow of information within groups of activities and/or individual activities on the outcomes, impacts, levels of service, performance measures and targets, results, and supporting commentary on the results;
  • annual reports that used simple language to interpret technical concepts;
  • financial and non-financial information that was presented together and supported with comments to provide context; and
  • comparative information that looked at trends and that was supported with commentary to provide readers with a sense of progress towards outcomes and strategic objectives.

We issued three qualified audit opinions on service performance reports for 2009/10. In all three cases, the work of the auditor was limited as data had not always been collected, or could not be supported, for significant performance measures.

We will continue to seek improvement in reporting of performance information. Disclosing and explaining significant variations from forecast and prior year actuals, as well as the effect on the long-term provision of services by a local authority, is one area that we consider local authorities can and should continue to improve on.

We encourage you to continue to improve your reporting of actual service performance in next year’s annual report, specifically having regard to recommendations made by auditors in management letters. We also encourage you to consider these messages when preparing the 2012-22 long-term plans.

6: The Auditor-General’s observations on the quality of performance reporting (June 2008).

7: Section 94(1)(c) of the Local Government Act 2002.

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