Auditor-General's overview

Our 2018 work about local government.

E ngā mana, e ngā reo, e ngā karangarangatanga maha o te motu, tēnā koutou.

For councils, 2017/18 was a significant year. In addition to their annual reporting responsibilities, they were also required to complete their 2018-28 long-term plans (LTPs) and have these audited.

The LTPs show that councils are facing many significant and often conflicting challenges that they need to plan for. All councils are responding to the need to increase their spending on renewing infrastructure. The expenditure required is often higher than in previous years because of historical underinvestment and the need to improve services to meet increased standards and community expectations. Some councils are also responding to high levels of population growth.

Councils' 2017/18 financial information shows positive trends in investment in infrastructure. However, councils will need to maintain momentum in delivering significant capital projects to meet the levels of service they have committed to in their 2018-28 LTPs. This will require careful planning and management over an extended period of time.

Communities need to be well informed and, when appropriate, involved in the processes to address the challenges that they are facing. Communities are changing, as are their expectations of councils and government more generally. Communities want to interact with public organisations in different ways and be part of the conversation about responding to the range of challenges that could arise. Community members want to know what plans mean for them as individuals as well as for their community as a whole.

Councils need good information to support conversations with their communities and to make optimal decisions.

The LTPs and other work my Office has carried out during the year show that councils have more to do to collect better information about:

the condition and performance of their critical assets;
the likelihood of natural hazard events occurring (for example, flooding); and
the effects of climate change on their infrastructure and community.

These challenges are not just for councils to deal with. Central and local government need to work together to address them. The local government sector is currently subject to two major reviews by central government. Both of these – the review of how drinking water, wastewater, and stormwater (the three waters) are supplied and regulated, and the Productivity Commission's funding and financing review – could result in significant recommendations for change.

Responding to challenges will require councils to be agile and they could need to act quickly. However, that should not come at the expense of following proper processes and informed decision-making. Frameworks exist so that matters can be dealt with quickly and appropriately. Councils need full and proper records of their work that show what decisions were made, how they made them, and the basis on which these were made.

We saw that some councils are looking to new and innovative solutions to fund the delivery of their work programmes. It is important that councils carry out appropriate due diligence, given the inherent risks associated with non-standard approaches.

An effective audit and risk committee can be a powerful advisory group to help councillors. Audit and risk committees can provide external and independent perspectives to the risks, issues, and challenges facing councils. Many councils already have committees in place and greatly benefit from their advice. I would like to see all councils have an effective audit and risk committee with an independent chairperson. This would support councillors to consistently make well-informed decisions on behalf of their communities.

Finally, councils need to carefully plan for the preparation, audit, and adoption of their 2018/19 annual reports, particularly with 2019 being an election year. In 2017/18, seven councils failed to meet their statutory deadline for adopting their annual report. We know that many councils missed their statutory deadline because they had to resolve challenging technical matters, such as the valuation of assets and how to account for unusual one-off transactions. In a few instances, my auditors contributed to the delays as they worked through some complex matters. To resolve these matters effectively and in a timely way, councils need to identify and consider complex issues early and obtain appropriate accounting advice. This will also require early involvement of their auditor.

Since my appointment in July 2018, I have had the opportunity to meet many mayors, chairpersons, and chief executives in local government. I appreciate the welcome they have given me and their thoughts on challenges for local government and priorities for my Office.

My staff and I look forward to continuing to work with local government organisations in the coming year.

Nāku noa, nā,

Signature - JR

John Ryan
Controller and Auditor-General

23 May 2019