Part 2: Timeliness of annual reporting

2.1
In this Part, we set out:

• the statutory requirements for adopting and publicly releasing an annual report;
• when local authorities adopted their annual reports, and the reasons why some were late;
• when local authorities publicly released their annual reports; and
• when local authorities publicly released their summary annual reports.

Summary

2.2
The timeliness of annual reporting by local authorities was worse for 2009/10 than for the previous year. This year, seven local authorities did not meet the statutory deadline for adopting their audited annual report. When we reported last year, only one local authority had not met the statutory deadline for adopting its 2008/09 annual report. We consider this year’s result to be of concern.

2.3
Many local authorities need to better plan how they will complete, adopt, and release their annual report within the statutory deadlines. This obligation is not new and is known to all local authorities. In 2008/09, all except one local authority demonstrated their ability to meet their statutory obligation.

2.4
It is important that local authorities recognise that accountability is not achieved until the audited information is made available to ratepayers. Five local authorities were not timely in making their annual reports publicly available after the reports were adopted.

2.5
Local authorities also need to improve the timeliness of making their summary annual reports available.

2.6
Many ratepayers rely on the more user-friendly summary document to provide information without having to read the full annual report. It is important that local authorities make their summary annual reports available without delay and inform their communities about how they have spent ratepayers’ money.

Background

2.7
Local authorities’ annual reports provide information that helps communities to assess the authorities’ performance. For this process to be effective, the information must be comprehensive and timely.

2.8
Each year, we examine the timeliness of local authorities’ annual reporting.

2.9
Under the Local Government Act 2002 (the Act), each local authority is required to:

• complete and adopt its annual report, containing audited financial statements and service performance information, 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

2.10
The local authority decides when the audited annual reports and summaries will be prepared and published, within the requirements of the Act.

2.11
We have considered the timeliness of annual reporting for 77 local authorities. This diff ers from previous years when we considered 85 local authorities. Because of the Auckland local government reform, we have not considered the former Auckland local authorities or the new Auckland Council. The former Auckland local authorities did not prepare annual reports for the year ended 30 June 2010 – instead, they will prepare 16-month reports for the period ended 31 October 2010. At the time of writing, the 16-month reports were not available. We have adjusted the previous-year information to exclude the Auckland councils.

Adoption of annual reports

2.12
The Act allows four months after the end of the financial year for local authorities to complete and adopt their annual report. More local authorities did not meet this statutory deadline than in 2008/09.

2.13
Figure 1 shows the dates when the audits of local authorities were completed, which gives an indication of when local authorities were able to adopt their annual reports. It shows that, for 2009/10, 70 local authorities (91%) were able to adopt their annual report by the statutory deadline of 1 November 2010.

Figure 1
When local authority audits were completed, for 2009/10 and 2008/09

2.14
For 2009/10, seven local authorities (9%) breached the statutory deadline. This compares with one local authority for 2008/09.

2.15
The seven local authorities that breached the statutory deadline for 2009/10 did not breach the statutory deadline for 2008/09. This shows that they were able to meet their obligations in the past.

2.16
Unfortunately, in one instance, the audit team and the local authority were jointly responsible for the late finalisation of a local authority’s audit.

2.17
As at 30 November 2010, five months after the end of the financial year, there were three outstanding annual reports for 2009/10. These annual reports were completed in December 2010. In comparison, for 2008/09, there were no outstanding annual reports for the same period. We consider this to be an unsatisfactory trend.

2.18
The reasons local authorities disclosed in their annual report for not meeting their statutory deadlines included:

• the local authority was waiting for information from subsidiaries or associates – where the audits of these entities had been delayed and the entities were significant to the local authority, this delayed finalising the local authority’s annual report;
• the scheduling of meetings after a council election – one local authority did not have a meeting scheduled to meet its statutory deadline; and
• delays by local authorities in obtaining information to support the information required to be reported in the statement of service performance.

Public release of annual reports

2.19
We also looked at when local authorities released their annual report to the community. The Act allows one calendar 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 2009/10 and 2008/09

2.20
Figure 2 shows a fall in the number of local authorities meeting the statutory deadline. The number of local authorities publishing their annual report within 10 days of its adoption also fell from 55% for 2008/09 to 36% for 2009/10.

2.21
Most local authorities make their annual report available to the public on their website. In our view, if the annual report is published on a website, then local authorities should be able to do this within a few days of adopting their report. We expect the whole sector to be able to meet this deadline.

Public release of summary annual reports

2.22
We also reviewed the timing of the release of audited summaries of 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. It is the most accessible information for most readers, and the easiest document to circulate and make widely available.

2.23
As Figure 3 shows, the number of local authorities making summaries of annual reports available within the statutory deadline increased slightly between 2008/09 and 2009/10. However, the number of local authorities releasing their summary annual report within 10 days of adopting their annual report fell to 11 (from 24 in 2008/09). That is, only 14% of local authorities released their summary annual reports within 10 days, compared with 31% in the previous year.

Figure 3
When local authorities released their audited summary annual report, for 2009/10 and 2008/09

* This report considered all information as at 31 January 2011. The 2008/09 information is at 31 March 2010.

2.24
Six local authorities did not provide their communities with audited summaries of their annual reports within one month of adopting their annual report, compared with 11 for 2008/09. We encourage local authorities to continue to work towards meeting the deadline and their statutory obligation.

2.25
One local authority, Far North District Council, did not comply with the requirement to provide an audited summary annual report to its communities within the statutory deadline in any of the last four years. At the time of writing, Far North District Council had yet to publish its 2009/10 summary annual report.

2.26
As with publishing the annual report, producing a summary annual report 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 annual report summary.

2.27
The project management for an annual report and summary annual report should allow for elections, because they are recurring and known events.

2.28
It is positive to see more local authorities meeting the statutory deadline for releasing their summary annual reports. However, the fall in efficiency is disappointing. Annual reports and summaries should be published simultaneously or near simultaneously. This can be achieved through sound planning. We encourage this approach as best practice and see no reason it cannot be standard practice for the whole sector.

1: If the date 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 should be read as the next working day. In 2009/10, the last possible date for completing and adopting the annual report was Monday 1 November 2010.

2: The actual timing required of any local authority is determined by when it completes and adopts its annual report. If the date the annual report summary is to be made publicly available by falls on a non-working day, then the Interpretation Act 1999 requires that the statutory deadline should be read as the next working day.