Part 5: Other matters

Matters arising from the 2015-25 local authority long-term plans.

5.1
In this Part, we discuss some other matters that arose during our audit of the 2015-25 LTPs.

5.2
We discuss:

Mandatory performance measures for activities

5.3
LTPs must contain information about a local authority's main activities (described in the Act as "groups of activities"). The LTP must describe why the local authority is involved in the activity and how it will contribute to community outcomes, and state (in what the Act refers to as a statement of service provision) the performance measures and targets for the main activities.

5.4
In 2010, as part of reforms to make local government more transparent and accountable, the 2002 Act was amended to give the chief executive of the Department of Internal Affairs authority to make rules32 setting out standard performance measures for five groups of activities:

  • water supply;
  • sewerage and the treatment and disposal of sewage;
  • stormwater drainage;
  • flood protection and control works; and
  • the provision of footpaths and roads.

5.5
The Government developed the rules in consultation with the sector between 2011 and 2013. The rules came into force on 30 July 2014.33

5.6
In the latest LTPs, local authorities were required to include the performance measures specified in the rules. The LTPs also had to include:

  • performance measures for major aspects of other groups of activities for which measures have not been specified in rules;
  • performance targets for each performance measure;
  • any intended changes to levels of service, with reasons; and
  • the reason for any material change to the cost of a service.34

5.7
Council-controlled organisations that provide one or more of the five groups of activities must also include the relevant performance measures in their statements of intent.35

5.8
The aim of the mandatory measures is to:

  • provide standard and better information about the levels of service for five groups of activities carried out by local authorities;
  • help the public to contribute to discussions on future levels of service for their communities and to participate more easily in their local authority's decision-making processes; and
  • enable people to compare performance by local authorities in the five activity areas.36

Reporting on achievements

5.9
Every local authority's annual report must include an audited statement that:

  • compares the level of service achieved in relation to a group of activities with the performance targets for the group of activities;
  • specifies whether any intended changes to levels of service have been achieved; and
  • gives reasons for any significant variation between the level of service achieved and the intended level of service.

5.10
In their 2015/16 annual reports, local authorities will be required to report on their achievements against the standard performance measures and their other measures. This reporting will enable members of the public to compare the level of service provided by different local authorities for the mandatory groups of activities.

Guidance for implementing the standard performance measures

5.11
The Department of Internal Affairs has issued guidance for local authorities on implementing the measures for each of the five groups of activities.

5.12
The guidance provides an initial focus for local authorities' reporting, and is intended to provide the basis for local authorities to then add their own commentary.

5.13
Although the rules require local authorities to measure particular things, they do not include any specified targets for local authority performance. It is for each local authority, in consultation with its ratepayers, to work out the level of service it intends to provide.

5.14
The rules provide performance measures for the major aspects of performance of the services concerned for the five groups of activities.

5.15
The guidance notes that, where appropriate to their circumstances, local authorities can add additional measures to the mandatory measures.

Considering intended levels of service

5.16
Previously, the Auditor-General had an explicit mandate to report on the adequacy of a local authority's performance framework as part of auditing LTPs. This changed when the Act was amended in 2010.

5.17
In 2014, our mandate was further amended for the 2015-25 LTPs. The 2014 amendments to the Act removed the requirement for us to report on whether the local authority had complied with the requirements of the Act about the LTP (legislative compliance).

5.18
For the latest LTPs, our mandate was to report on:

  • whether the LTP gives effect to the purpose set out in section 93(6) of the Act; and
  • the quality of the information and assumptions underlying the forecast information in the LTP.37

5.19
The purpose of an LTP, as stated in section 93(6), is to:

  • describe the activities of the local authority;
  • describe the community outcomes of the local authority's district or region;
  • provide integrated decision-making and co-ordination of the resources of a local authority;
  • provide a long-term focus for the decisions and activities of a local authority; and
  • provide a basis for accountability of the local authority to the community.

5.20
Although we are no longer required to report on legislative compliance, the focus in section 93(6) on activities, outcomes, and accountability means that the audit must consider whether the performance measures and framework, as set out in the statement of service provision, provide an adequate basis for accountability to the community for reporting on performance achievements.

5.21
The Act requires any information included in LTPs or annual reports to be prepared in keeping with generally accepted accounting practice, where there is a relevant accounting standard.38 PBE IPSAS 1 is the relevant accounting standard for service performance frameworks and reporting.39 The standard covers the presentation of financial statements and statements of service performance and has an appendix that gives guidance on preparing those statements.

5.22
As noted earlier, the Auditor-General must also audit the statement of service provision in the annual report, which reports on the achievement of actual levels of service compared with forecast levels. The Auditor-General has an auditing standard that applies to the audit of performance reports in annual reports.40 The standard requires us to:

  • conclude on the appropriateness of the service performance reporting framework; and
  • verify key aspects of the service performance report, including outcome and impact information.

5.23
It is necessary for us, in the LTP audit, to consider whether the statement of service provision in the LTP sets up an adequate basis for reporting at the end of the financial year.

Implementing the mandatory measures – audit issues

5.24
Two issues related to the mandatory performance measures arose during our audit of the 2015-25 LTPs. These issues were:

  • One local authority proposed to omit a previous measure for an activity because the measure was not required by the rules.
  • One local authority did not wish to include performance targets for some mandatory measures.

5.25
A related matter arose about reporting on regional achievements against the measures.

Should local authorities include measures not required by the rules?

5.26
The performance measures for providing roads and footpaths cover the following aspects of service delivery:

  • How safe are the local roads?
  • What is the overall condition of sealed roads in the local road network?
  • Is the sealed roads network being maintained adequately?
  • Are the footpaths that form part of the local road network being maintained adequately?
  • Does the local authority responsible for the service provide a timely response if there is a problem?

5.27
These matters are considered to be the major aspects of performance for roads and footpaths that will be common to all local authorities. However, performance measures have not been specified for some important performance aspects for some local authorities (for example, the quality of unsealed roads and issues of traffic congestion) because these issues do not affect all local authorities equally.

5.28
A local authority with a significant percentage (about 40%) of unsealed roads in its roading network had previously provided performance measures for unsealed roads as part of its performance framework. However, it did not consider that it needed to continue with those measures after the introduction of the mandatory measures. It proposed to exclude any measures about the quality of the unsealed roads in its LTP.

5.29
The quality of roads (not just the unsealed roads) had been a major issue for the community in the past. It was also an important matter that the local authority had consulted on in its consultation document.

Our concern about the local authority's proposed approach

5.30
We considered that the performance framework would be inadequate if the local authority did not provide measures for unsealed roads, because of the extent of unsealed roads in the district. We considered that the local authority's performance framework for roading and footpaths would not:

  • be complete;
  • provide an appropriate basis for accountability to the community, because the local authority would be unable to fairly reflect its performance in all areas in its annual report;41 and
  • comply with generally accepted accounting practice.

5.31
We noted that the guidance on the rules says that local authorities can add additional measures where appropriate, and gives the example of unsealed roads as an activity for which some local authorities may wish to add measures. The guidance states:

Territorial authorities may wish to develop measures for unsealed roads, in addition to the mandatory performance measures. These measures could be voluntarily reported on by the territorial authority. This approach could be adopted by a territorial authority that has a significant portion of unsealed roads in their local road network. This could be useful for ratepayers and readers understanding of accountability documents and of the material levels of service being provided by the territorial authority to its community.42

5.32
We raised our concern with the local authority. It agreed to change its approach and include measures for unsealed roads, as it had previously. This meant that we did not need to include the matter in our audit report on the LTP.

Not including targets for the mandatory performance measures

5.33
Another local authority proposed not to include performance targets for all of the mandatory performance measures. This was because the local authority did not consider that it had enough information to provide realistic targets, and could not do so until it had the actual information it needed.

5.34
The Act requires the statement of service performance in the LTP to include the performance targets set by the local authority for each performance measure.43

5.35
The local authority's position was that it could not disclose targets for all of the mandatory measures because it had not set them. It did not consider it could set realistic targets without actual performance information.

5.36
We advised the local authority that it did need to set performance targets for all of the mandatory measures. If the targets proved unrealistic, the local authority could report on this at the end of the financial year.

5.37
The local authority included targets for the mandatory measures for the first three years of the LTP rather than the full 10 years. The local authority noted that it would have more information from which to set longer-term targets when it prepares its next LTP in 2018.

Reporting about a region

5.38
Reporting regional performance is related to these issues.

5.39
In late 2014, local authorities in Otago agreed to a joint performance framework that would:

  • provide communities with better context to assess the performance of their local authority in the Otago region;
  • enable better support and collaboration to drive improvement in Otago;
  • help to drive standards for future local government reforms; and
  • provide consistent performance information that allows closer scrutiny of efficiency and effectiveness.44

5.40
The Otago local authorities prepared seven key performance indicators, including for financial performance, and included them in each of their performance frameworks. They have not yet set targets because the measures are new.

5.41
Examples of regional performance indicators are:

  • the percentage of building and resource consents issued within statutory framework, and average building and resource consent processing days;
  • rates for each ratepayer as a percentage of household income; and
  • the cost of administrative and support services as a percentage of organisational (the local authority's) running costs.45

5.42
The intention is that, over time, there will be increasing commonality of performance reporting which, in turn, will enable ratepayers to assess the performance of their authority relative to the performance of other local authorities.

5.43
The Otago initiative fits with Local Government New Zealand's broader work on local authority performance. It also fits with the Government's intention that reporting against the mandatory performance measures in the five activity areas that the rules cover will enable people to compare performance more easily.

5.44
The initiative has considered whether each local authority in Otago could include in its annual report comparative information about the performance of other local authorities in the region. This would make it easier for members of the public to compare performance of their local authority with other local authorities in Otago. This information would be in addition to the core information required, and would not be covered by the audit opinion on the local authority's annual report.

5.45
In our view, it would be preferable for the comparative information to be based on audited (and therefore final) performance information rather than unaudited information. This would require good alignment for timing of reporting in the region.

Our comment

5.46
An LTP must provide a basis for accountability of the local authority to the community. To meet this requirement, an LTP must include an appropriate framework against which performance can be reported and assessed. In the two instances noted in paragraph 5.24, we did not consider that the LTPs as first presented to us would meet that test.

5.47
The local authorities responded to our concerns and made appropriate changes.

5.48
It is important for local authorities to consider the Act's requirements carefully when preparing their LTPs and ensure that their LTPs meet those requirements.

5.49
When planning and reporting on operational performance, material can be provided that adds to the statutory requirements where this is necessary to adequately inform the community about performance. We encourage all local authorities to add additional measures to the mandatory measures where this will improve the way performance is reported to the community.

5.50
Initiatives such as regional reporting in Otago encourage us. This is a good example of the sector thinking beyond how to meet the minimum requirements to provide useful information to communities and enhance performance.

New options arising during the consultation process

5.51
We noted a few instances where local authorities included matters in their LTPs that were not identified as options in their consultation documents but arose during the consultation process.

5.52
The Act requires local authorities to include the important issues on which they seek views in their consultation documents. For each significant issue, the consultation document must set out the principal options for addressing the issue and the implications (including financial implications) for each of those options. The usual approach is for the local authority to then decide on its preferred option, having considered views given during the consultation process, and include that option in its LTP.

5.53
A new option could emerge as a result of consultation. If this happens, a local authority should seek legal advice. We saw the legal advice given to a couple of local authorities and it helped them to work out their approach. In brief, the advice noted:

  • Where the new option arises during the consultation process, as a result of submissions, a local authority needs to consider if the option is of such significance that further consultation is required.
  • If the new option is a variation on an option on which the local authority has already consulted, then including the new option in the LTP would probably be low risk.
  • If the option is entirely new and was not in the consultation document, or did not arise as a result of public input but in some other way, a local authority would need to consider consulting on that new option.

5.54
Beginning a new round of consultation could put pressure on timeframes for adopting the LTP, so the new option would need to be very important.

5.55
Another way of dealing with it, if time does not permit consultation on the new option before adopting the LTP, is to amend the LTP after adopting it and consult on the new option as part of the amendment process or leave it until the next annual plan (if the issue just affects the annual plan that year and if there is time to wait).

5.56
Three local authorities consulted on proposed amendments to their 2015 LTPs within two months of adopting them. In one instance, a local authority proposed to commence an amendment process on its LTP on the same day of adopting it, but then decided it could wait for a couple of months. It would not usually be good practice to begin consulting on a new proposal at the same time as adopting a plan just consulted on. This could confuse the public.

32: Section 261B of the Act.

33: The Non-Financial Performance Measures Rules 2013 are available on the Department of Internal Affairs' website, www.dia.govt.nz.

34: Clause 4 of Schedule 10 to the Act.

35: Clause 10 of Schedule 8 to the Act.

36: The Local Government Mandatory Performance Measures are available on the Department of Internal Affairs' website, www.dia.govt.nz.

37: Section 94 of the Act.

38: Section 111 of the Act.

39: PBE is short for "public benefit entity" and IPSAS is short for "International Public Sector Accounting Standards".

40: Auditor-General's Auditing Standard 4, The Audit of Service Performance Reports.

41: See section 93(6)(f) of the Act.

42: The Non-Financial Performance Measures Rules 2013 guidance – Roads and Footpaths (February 2014).

43: Clause 4 of Schedule 10 to the Act.

44: See Queenstown Lakes District Council's 2015-25 LTP.

45: From Queenstown Lakes District Council's 2015-25 LTP.