Part 5: Other matters

Long-term plans: Our audits of councils’ consultation documents.

In this Part, we look at some other matters from our audit of consultation documents, including:

These matters show that consultation processes are sometimes not straightforward.

Preparing and adopting the underlying information the consultation document relies on

Before a consultation document is finalised and adopted, a council must prepare and adopt the underlying information that the consultation document relies on.22 Some of this information will be draft, not final, at that time.

Councils must make the underlying information available to the public. However, the underlying information must not be in the consultation document.23

Unbalanced budget

Several councils proposed to have "unbalanced" budgets for some years of their 2018-28 long-term plans.24 This is possible under the Act, provided that the elected members resolve that it is prudent to do so.

The Act sets out some matters elected members need to consider when making an unbalanced budget resolution, including:25

  • the funding and financial policies adopted under section 102 of the Act, including the revenue and financing policy; and
  • the estimated costs of achieving and maintaining the predicted levels of service provision set out in the long-term plan.

The long-term plan must contain a statement explaining the council's reasons for not balancing the budget.

Councils asked us about time lines for making an unbalanced budget resolution. Councils are required to adopt the underlying information that the consultation document relies on. If the consultation document proposes an unbalanced budget, information is needed to support that.

The requirement in the Act is to make the unbalanced budget resolution when setting operating revenue. It is in the long-term plan that councils set the budget for the 10-year period, rather than the consultation document. Therefore, the resolution has to be made before adopting the long-term plan.

Councils often update their revenue and financing policies every three years, which is the same time they adopt their long-term plans. Councils also consult on those changes at the same time as consulting on their long-term plans. Where that is the case, a council would not have the other necessary policies in place in time to make an unbalanced budget resolution before adopting the consultation document.

Another consideration is whether the council is consulting on the proposal or including it for information. If it is included for consultation, it would be too early to have formally resolved to set an unbalanced budget before consulting.

Where a consultation document proposes an unbalanced budget, we will look for evidence of a council decision to support that. The council must adopt this underlying information before adopting the consultation document. This is likely to be in the form of a draft financial strategy or a proposal in a report by officers rather than a formal unbalanced-budget resolution.

Targeted rates

We had a similar question about a consultation document that proposed a new targeted rate. The council intended to offer the option to pay the new targeted rate by lump sum contributions under the Local Government (Rating) Act 2002. This Act requires a council to prepare a capital project funding plan before seeking lump sum contributions, and adopt this plan as part of adopting the long-term plan or annual plan.26 We were asked whether the council had to adopt that funding plan before adopting the consultation document.

Again, we said that the content of the consultation document about the new targeted rate needed to be supported by information that the council had already adopted. In this case, the council had adopted information on proposed rates, including the new targeted rate and the option of seeking lump sum contributions, but had not yet prepared the formal funding plan required under the Local Government (Rating) Act. This was enough for the purposes of our audit and the statutory requirements.

How a consultation document fits with other consultation and decision-making processes

Council decision-making is an ongoing process. In practice, councils are often consulting with their communities, during the annual plan process and at other times. This means that, when it comes time to draft the long-term plan, the council might have already consulted on many of the issues facing the council and its community for the next few years. This can make it difficult for the council to include issues that are meaningful for the community in the consultation document unless there are new issues to include.

Councils have the discretion to use a consultation document to update people on progress with decisions and issues that have already been consulted on. That said, as outlined in Part 2, it is important for a consultation document to be clear on what the consultation issues are and what information is included to update people about progress on issues already consulted on.

Many of the councils that carried out pre-consultation activities did so to determine or refine the issues they included in the consultation document. Some councils also did this to promote interest in the long-term planning process. These reasons made sense to us.

Consulting on other policies or plans at the same time as consulting on the long-term plan

It is often necessary for a council to consult on other policies and plans at the same time that it is consulting on the long-term plan. The main requirement here is for a council to be clear that it is consulting on different issues at the same time, and to let people know when they can respond to each of them. A council can do this by including appropriate information and links in its consultation document.

A common example is when a council proposes to amend its revenue and financing policy at the same time as it releases its consultation document. A long-term plan has to contain the council's revenue and financing policy, which has to be adopted before the long-term plan is adopted.27 The revenue and financing policy must set out how the council will fund its expenditure, so it makes sense to review this at the same time as the long-term plan.

A consultation document must include any significant proposed changes to the way a council funds operating and capital expenditure, including changes to the rating system.28 A consultation document must include links to the more detailed information about proposed changes to the revenue and financing policy, rather than include that detail in the consultation document.

If the proposed changes to the revenue and financing policy are significant and are therefore included in the consultation document, we would consider them as part of our audit. If the proposed changes are not significant enough to warrant mention in the consultation document, the council still needs to consult on them but can do this alongside the consultation document process.

One council stated in its consultation document that it was consulting on its revenue and financing policy, and that the consultation document represented its statement of proposed changes to the policy. It was not currently proposing any changes to the revenue and financing policy, but might be entering into debt arrangements in the future. In our view, this might have confused readers. It also shows that working out how the consultation requirements in the Act apply at different points in time and the decision-making process can be difficult.

Adopting the consultation document

A council needs to adopt its consultation document before starting consultation. The consultation document must include our audit report.29

In our view, it is important for elected members to be fully involved with and "own" the consultation document when it is being prepared and during the adoption and consultation process. The adoption process is also an opportunity for our auditor to attend the council meeting and discuss any audit matters and for any interested members of the public to attend.

We considered some departures from the standard adoption process during our audit of the consultation documents, as mentioned below.

Amending a consultation document after adopting it

One council adopted its consultation document but then decided to add another consultation question that had some minor financial implications. We had already issued our audit report on the adopted consultation document. The additional question required a small amount of extra audit work because it involved financial information.

There is nothing in the Act about amending a consultation document after a council has adopted it. The council had legal advice that it could amend its consultation document without re-adopting it, as long as it documented the process. However, in our view, the legal advice did not take account of the audit requirement. We advised the council that we needed to audit the new information and that the council needed to re-adopt the consultation document with our audit report. The council was able to re-adopt the amended consultation document without significant delay to the consultation process.

Delegating the consultation document process

We are aware of two councils that delegated the process of adopting the consultation document.

One council delegated the process for adopting the consultation document and deciding all matters of strategic policy to a committee, but left the final adoption of the long-term plan to the full council. This was a continuing arrangement under the council's delegations process. The committee had the same authority in relation to the annual plan process.

The other council delegated the adoption process because of timing problems. The consultation document was not quite ready in time for a meeting scheduled by the council. Therefore, it resolved to adopt the draft consultation document in principle, subject to any amendments required by our auditor, and then delegated authority to the mayor and chief executive to make any final amendments and adopt the consultation document. We received some correspondence from ratepayers about this.

Under the Act, a council cannot delegate:

  • the power to adopt the long-term plan, annual plan, or annual report; or
  • the power to adopt policies required to be adopted and consulted on in association with the long-term plan.30

However, a council can delegate anything precedent (meaning preceding in time or order) to the exercise of those powers.

Both councils received legal advice that they could delegate the adoption of the consultation document for the long-term plan. Adopting a consultation document is not the same as adopting the long-term plan but is done before it.

From a policy perspective, it is unusual to delegate a core governance function, and for a mayor and chief executive to be given responsibility to "adopt" a consultation document. We were not clear how they would do that. Adoption is a formal process, done by council resolution and voting (if necessary), at a properly constituted meeting that is open to the public, unless there is particular reason to exclude them. The process is also formally recorded. In our view, it is preferable, from a governance perspective, for the elected members to adopt the consultation document with our audit report in it.

22: Section 93G of the Local Government Act 2002.

23: Section 93C(3) of the Local Government Act 2002.

24: An unbalanced budget is where a council sets its projected operating revenues at less than the amount needed to meet projected operating expenses.

25: Section 100(2) of the Local Government Act 2002.

26: Section 117B of the Local Government (Rating) Act 2002.

27: Schedule 10, clause 10 of the Local Government Act 2002.

28: Section 93C(2)(d) of the Local Government Act 2002.

29: Section 93C(4) of the Local Government Act 2002.

30: Schedule 7, clause 32 of the Local Government Act 2002.