Part 2: Why good quality reporting of performance information is important

2.1
Public entities are required to report their plans and their performance against those plans to demonstrate that they deliver services effectively and efficiently. This supports their accountability to Parliament and to the public for responsibly using the public resources and regulatory powers entrusted to them.

2.2
Forecast performance reports need to tell the story about the services the public entity delivers, why it delivers them, and what difference it intends to make for the community where its services are delivered and/or to society. Good quality reporting, of both non-financial and financial information, allows informed consideration in Parliament, in the public sector, and in communities about what is happening and what could be done better.

2.3
In the public sector, readers of performance reports include customers (the recipients of public goods or services), funders and financial supporters (including taxpayers, ratepayers, and providers of grants and donations), elected or appointed representatives (for example, members of Parliament and select committees), and interested members of the public (for example, media commentators, academics and other analysts, and members of relevant professional or community groups).

Setting the scene for the forecast performance

2.4
The information that a public entity reports about its forecast performance needs to allow the reader to make an informed assessment – it needs to be relevant, reliable, understandable, and comparable.

2.5
A useful forecast is concise and balanced, and emphasises matters according to their significance. The reported information should articulate the public entity's performance story without referring to other documents.

2.6
The reported information should clearly set out the public entity's reasons for why it does what it does, focusing on outcomes, impacts, and outputs. This involves clearly articulating a strategy, linking that strategy to operational and other business plans, monitoring the delivery of those operational and business plans, and evaluating the strategy's effects and results.

2.7
The reported information should reflect what an organisation considers is most important for it to do and focus on, and what difference it will make. Effectively, this means that external performance reports should present information that is used to guide the internal management of the public entity.

2.8
Governors and managers of public entities that do not have appropriate systems for monitoring and aggregating the range of information needed for internal day-to-day management cannot be confident that they are fulfilling their responsibilities. Information assembled from internal management information is also more cost-effective to assemble and prepare than information collected solely for external reporting purposes.

2.9
Governors and senior managers also need to be mindful that most readers of their reported information:

• do not have access to detailed internal management information; and
• are unable to see the relationship between internal and other sources of information.⁵

2.10
This means that public entities need to understand the needs and interests of the different readers of their reported performance information, so that they can communicate in ways that meet those various readers' needs and interests.

Overview of the three featured public entities

2.11
Importantly, the three featured public entities have all – in our view – communicated the complexity of their business challenges and their day-to-day operations in reports that are understandable to a range of readers.

2.12
The three public entities show that better forecast performance reporting often does not require a greater volume of either information or specific performance measures. It requires a clear focus on identifying and aggregating the information needed to communicate the story of a public entity's performance.

2.13
The forecast performance information included in the SOI or Information Supporting the Estimates for each of the three featured public entities is generally simple and well presented, and clearly articulates the public entity's business. Collectively, this information has the following characteristics:

• The outcomes and impacts that the public entity is aiming to contribute to or influence are easily identifiable, with direct links to government outcomes, priorities, and strategic themes.
• There are clear links and relationships between outputs (goods and services) and impacts and outcomes.
• The output descriptions and output classes are understandable in the context of the services and their relationship to impacts and outcomes.
• Most of the main measures and the output measures are appropriate – relevant, reliable, understandable, and comparable.
• The output measures cover a range of dimensions of performance that are important to the public entity (such as, but not limited to, quality, quantity, and timeliness), so that a balanced and rounded picture of service performance can be obtained.
• Targets are reasonable best estimates based on the priorities of the public entity, and its resources, choices, and historical performance.
• There is contextual and comparative information that allows the reader to understand the public entity, its choices, and its planned performance.
• There is accompanying financial information that explains the assumptions and financial implications of the forecast service delivery.

2.14
We consider that, where these characteristics are met, the forecast information should provide a basis for making an informed assessment of service performance and related questions such as cost-effectiveness.

2.15
In our view, the strengths identified and the questions raised in our case studies remain of value to other public entities as they look to improve their own service performance information.

2.16
As well as highlighting those aspects of the featured public entities' documents that we consider are strengths, we have also identified where further improvement can be made. By doing this, we hope to help other public entities identify the types of questions that they may find helpful when considering their own service performance information.

2.17
In common with most forecast SSPs that we have reviewed, there is still scope for the featured public entities to improve the way in which they have specified the service performance measures that they will report against in their annual reports.

2.18
In particular, there is a need to:

• be clear about the good or service (output) that is being delivered;
• describe measures in a way that is understandable to the reader;
• provide information about demand-driven work over which the entity has no control but that affects the cost, quality, or timeliness of its services;
• increase the use of measures that reflect the quality of the service, as well as easier to measure dimensions such as quantity.

2.19
For any measures used, it is important to include current performance/baselines so that the reader understands whether the targets set are appropriate to what the public entity is trying to achieve and what the current state of achievement is. The three featured public entities' main measures were not always accompanied by either:

• directional or specific targets; or
• information setting out trends in results and performance for past years or, where relevant, comparable information about other entities that use similar processes or carry out similar activities.

2.20
Finally, we encourage the use of plain English, taking care with the appropriate use and consistency of language and headings, and attention to how information is presented. Reported performance information needs a simple and clear structure, based on consistent use of a well chosen set of outcomes, impacts, and outputs to which relevant measures and contextual information are attached.

2.21
Additional layers of complexity often increase the burden of preparation and reporting, without improving the usefulness of the information. Inconsistencies in labelling, jargon, and the use of acronyms and abbreviations can also make the performance information harder to understand.

Using service performance reports

2.22
Throughout the public sector, there has been inconsistent analysis of actual results and what the results tell us about the performance of each public entity, its future challenges, and its requirements. Little work has been done to understand what the performance reports produced by public entities over a number of years can tell the reader.

2.23
Therefore, we intend to look at public entities' performance management arrangements and the reporting of actual results. This is the point where results can be assessed and evaluative questions asked about emerging trends, capability, impacts, and cost-effectiveness.

2.24
During 2011, we expect to publish another discussion paper, looking at the reporting practices of selected public entities over time, to explore the analysis that can be carried out and trends that can be identified.

2.25
The case studies in this discussion paper are based on the forecast information produced in 2010. Although we consider that information is generally improving, the comments made and issues raised remain relevant for many. We expect that, when looking at their own information, many public entities will be able to recognise the strengths and areas for improvement that we have identified here.

5: Although governors (for example, Ministers and local authority councillors), central agencies, other monitoring agencies, and entities' management are also readers of external reports, they have access to, or are able to request, additional financial and non-financial performance information in carrying out their governance, monitoring, or management responsibilities.