Part 1: Introduction

Local government: Improving the usefulness of annual reports.

This discussion paper is aimed at regional and territorial local authorities, which are all required by the Local Government Act 2002 (LGA) to prepare annual reports of their performance for external publication. However, the principles we discuss apply to all public entities.

This paper is a companion to Central government: Cost-effectiveness and improving annual reports, which we published in June 2011 and which focused on the needs of central government entities.

Our views in this paper are based on an analysis of six local authorities' performance information. Using this analysis, we discuss current practices and use examples to show how local authorities can improve their reporting. However, this discussion paper is not a prescriptive guide to what is "best". Our aim is to encourage local authorities to keep improving their performance analysis and its reporting.

We also note that the annual reports discussed in this discussion paper were prepared before the LGA was amended by the Local Government Act 2002 Amendment Act 2010. Despite the changes to reporting that the amending Act brought into effect (which we discuss in Part 2), the principles that we discuss are relevant for preparing future annual reports.

How we reviewed performance information

In 2011, we commissioned an analysis by Deloitte of six local authorities' publicly reported performance information (primarily their annual reports) for the last seven years (2003/2004 to 2009/2010).1 Local authorities prepare annual reports to discharge their accountability responsibilities. This includes reporting against the strategic and other major issues, choices, and implications facing their communities.

We selected the six local authorities because we considered that they prepared their 2009/10 annual reports (in particular, aspects of their performance information) better than other local authorities.

The analysis evaluated the six local authorities' performance information, with particular focus on the following aspects:

  • financial performance at the local authority level, including debt, operational, and balance sheet analysis; and
  • cost-effectiveness (impact or outcome over cost), and standard and quality of service delivery (standard or quality over cost) for the following activities:
    • water supply, waste water, sewerage, transport, building control, and library services; and
    • river control and flood protection, pest control, and environmental activities (land, soil, air, and water).

This paper discusses our review of the analysis.

Scope and structure of this discussion paper

This paper focuses on findings that are common to a number of local authorities. We provide recommendations that, if effectively addressed, would lead to significant improvements in public reporting about a local authority'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, the value of such reporting, and which reporting practices are common.

In Part 3, we discuss reporting practices about activity service performance information.

In Part 4, we discuss reporting practices about financial performance information.

Readers might find it helpful to refer to the annual reports of the local authorities that we discuss. The annual reports are available on the councils' websites:

1: The analysis was at the council (parent entity) level rather than at the council group level.

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