Part 1: Introduction

Central government: Cost-effectiveness and improving annual reports.

This paper is aimed at government departments and Crown entities that prepare annual reports of their performance for external publication under the Public Finance Act 1989 (PFA) or the Crown Entities Act 2004 (CEA). However, the principles we discuss apply to all public entities.

By discussing current practices and using illustrative examples, we hope that this paper will help public entities to renew their focus on improving their analysis of their performance, as well as its reporting. This discussion paper is not a definitive or prescriptive guide to what is "best".

Our review of six years of publicly reported performance information

In 2010, we commissioned a study to analyse the publicly reported performance information of a number of public entities during the last six years (2005 to 2010). We asked selected reviewers1 with experience in public sector performance management and reporting to carry out the analysis on our behalf.

We asked the reviewers to use only publicly available documentation (primarily the annual reports) to determine what they could understand about an entity's performance during the six-year period. We asked the reviewers:

  • What trends does the externally reported performance information reveal about the full range of the public entity's performance (including outcomes and impacts, outputs, and financial results)?
  • What inferences can you make about evaluative assessments such as cost-effectiveness and long-term service sustainability?
  • What are the relative strengths and weaknesses in the reported information?
  • What questions or matters for potential evaluation or review are raised by the reported information?
  • To what extent does the public entity appear to have identified and responded to these questions and evaluation matters?
  • How could the information be used – and what were you prevented from doing – given what the public entity chose to report?

This paper summarises the findings of the reviewers and our analysis of their findings.

Scope and structure of this discussion paper

The paper focuses on findings that are common to a number of public entities. We have included those recommendations that, if effectively addressed, would lead to significant improvements in reporting public information on an entity's performance. Therefore, this paper does not cover every aspect of performance reporting.

In Part 2, we discuss the purpose of annual performance reporting, its readers and uses, legislative requirements, as well as the value of such reporting and which reporting practices are common.

In Part 3, we discuss the foundations of strong performance reporting – measuring, analysing, and reporting economy and efficiency measures of services.

Part 4 discusses the second important component of performance analysis – measuring and analysing impacts, outcomes, and cost-effectiveness.

In Part 5, we discuss the need to analyse trends over longer periods to show a more accurate picture of performance. We also show what we mean by "analysis" of performance data and how public entities could improve this.

Readers might find it helpful to refer to the annual reports of the public entities that we drew the examples from. The annual reports of the featured entities are on their websites, and the notes below the figures provide references to specific sources.

The six public entities featured in this report and their websites are:

1: Bakker Maniparathy Claridge was the primary contributor to this report. The other external contributors were PricewaterhouseCoopers and Parker Duignan.

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