Appendix 1. The introduction of long-term plans and changes to their content

Matters arising from our audits of the 2018-28 long-term plans.

The Local Government Act 2002

The requirement for councils to prepare LTPs was put into the Act as part of significant local government law reform in 2002 to replace the previous Local Government Act 1974.

Under the 1974 Act, councils could do only what was expressly permitted by legislation. This sometimes limited their ability to carry out activities that they might have considered appropriate to meeting the needs of their communities.57 The Act changed that by empowering councils to do what was necessary to give effect to the purpose of local government in their city, district, or region. At that time, the purpose was stated to be:

  • to enable democratic local decision-making and action, by, and on behalf of, communities; and
  • to promote the social, economic, environmental, and cultural well-being of communities, in the present and for the future.58

This greater flexibility and general empowerment offered to local government was balanced by some new principles and procedures for consultation and decision-making. These principles and procedures were intended to encourage community participation and enhance accountability through more rigorous planning and reporting practices. The select committee that considered the Bill that led to the 2002 Act noted that:

The Bill empowers communities as well as councils, and requires local authorities to be more accountable to their electors. Councils are allowed greater flexibility in their activities but must ensure that their decision-making processes are open to the influence and scrutiny of their communities.59

The LTP was an important new mechanism to strengthen long-term planning, community consultation and participation, and accountability in local government.

As a further measure, after deliberating on submissions on the new legislation, the select committee proposed that the Auditor-General audit the draft and final LTP. The committee noted:

Our proposed amendment specifies that the report by the council's auditor would include the quality of information and the assumptions underlying forecast informationThis contributes to the information necessary for communities to assess the quality of the long-term plan in the draft stage and after adoption.
We recognise that this provision may add to the costs and time involved in preparing draft plans. However, it is essential that communities be enabled to participate in long-term planning for their locality.60

Part of the reason for requiring an audit was so that people who wanted to participate in the activities of their council could have confidence in the information contained in the LTPs. The select committee confirmed that the scope of the audit would be the quality and adequacy of the information and performance measures, rather than the merits of any policy content in the LTP.

For the 2006-16 and 2009-19 LTPs, our audit mandate had three aspects. For the LTP adopted by each council, we had to report on:

  • the extent to which the council has complied with the requirements of the Act in respect of the plan;
  • the quality of the information and assumptions underlying the forecast information provided in the plan; and
  • the extent to which the forecast information and performance measures provide an appropriate framework for the meaningful assessment of the actual levels of service provision.

At that time, councils had to prepare a full draft LTP and a summary of the draft for consultation. Our audit report on the draft LTP had to cover the same matters as outlined in the paragraph above.

Reform of the Local Government Act since 2002

The Act has been amended several times since it was enacted.61 The most substantive amendments that affected the content of the LTP were between 2010 and 2014, after several government reviews.

The 2010 review considered matters of transparency, accountability, and financial management and was known as the TAFM reforms. The 2014 amendments were part of further local government reform known as "Better Local Government". These reforms have led to some related changes to our audit mandate for LTPs.

What is the purpose of the long-term plan?

The purpose of an LTP, as stated in section 93(6) of the Act, 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 the local authority;
  • provide a long-term focus for the decisions and activities of the local authority; and
  • provide a basis for accountability of the local authority to the community.

Change in purpose since 2002

When the requirement was introduced, the LTP had an additional purpose, to:

(f) provide an opportunity for participation by the public in decision-making processes on activities to be undertaken by the local authority.

This requirement was repealed in 2014,62 as part of the 2014 reforms.

This change illustrates that the consultation document for the LTP, rather than the LTP itself, provides the opportunity for public participation in decision-making processes undertaken by the council.

Therefore, the LTP is not a basis for consultation. It is the end result of the consultation process and the plan that the council will be accountable for during the next three years.63

Changes to the content of the LTP since 2002

Some of the changes were intended to simplify the long-term planning process and give LTPs a more strategic focus. These included removing several operational policies from the LTP,64 merging the community outcomes process with the LTP process, and focusing on the outcomes the council will achieve.65 Changes also streamlined the annual plan process66 and reduced the circumstances that would trigger an LTP amendment.67

Other changes have added to the required content. There are now 19 clauses in Part 1 of Schedule 10, which sets out the content of the LTP, compared with 11 when the Act was enacted in 2002.68 That said, some of the original clauses have been amended and simplified or made shorter by putting some of their content into new clauses.69 The current required content for the LTP compared with the content required when the Act was enacted is below.

Current required content for long-term plans compared with original requirements

Current required content Compared with original content when the Act was enacted
1 Community outcomes Modified to focus on the council's contribution to community outcomes, and adjusted to focus on good quality infrastructure, local public services, and regulatory functions (as a result of change to the purpose of local government in 2012).
2 Groups of activities Modified to split out performance and asset information and to add in the prescribed groups of activities.
3 Capital expenditure for groups of activities Previously part of clause 2, groups of activities.
4 Statement of service provision Previously part of clause 2, groups of activities. Reference added to standard performance measures specified in a rule made under section 261B of the Act.
5 Funding impact statement for groups of activities Previously part of clause 2, groups of activities. Form now prescribed by the Local Government (Financial Reporting and Prudence) Regulations 2014.
6 Variation between territorial authority's long-term plan and assessment of water and sanitary services and waste management plans Simplified – previously had to also summarise the assessment and plan.
7 Council-controlled organisations Same.
8 Development of Māori capacity to contribute to decision-making processes Same.
9 Financial strategy and infrastructure strategy New.
10 Revenue and financing policy Simplified – LTPs previously had to include all section 102 policies.
11 Significance and engagement policy Essentially the same, but with new name.
12 Forecast financial statements Same.
13 Financial statements for previous year New.
14 Statement concerning balancing of budget Same.
15 Funding impact statement Form now prescribed by the Local Government (Financial Reporting and Prudence) Regulations 2014.
15A Rating base information New.
16 Reserve funds New.
17 Significant forecasting assumptions No significant change.
17A Additional information to be included in long-term plan for unitary authority with local boards New.

Financial strategy

When introducing the requirement for the LTP to include the council's financial strategy, Hon Rodney Hide, the then Minister of Local Government, stated that:

A financial strategy will help councils and ratepayers prioritise existing and proposed expenditure, by making clear the effect of proposals on services, rates, debt and investments.70

The Act sets out the purpose and required content for the financial strategy. The financial strategy must cover the period of the LTP (at least 10 years), and must be updated for each LTP.

Infrastructure strategy

The requirement for LTPs to include a 30-year infrastructure strategy was made after the 2014 Better Local Government reforms. This requirement was introduced because of concerns about variable asset management planning in the sector and that LTPs did not always refer to significant challenges beyond the 10-year planning period.

The 2014 reforms made the following changes about infrastructure delivery and asset management to the Act:

  • reinforcing the importance of asset management planning as part of a council's prudent stewardship of resources;71
  • requiring councils to prepare an infrastructure strategy for at least a 30-year period and to incorporate this into their LTPs from 2015; and
  • requiring councils to disclose risk management arrangements, such as insurance, for physical assets in their annual reports.

What do long-term plans now include?

As noted above, although some of the changes since the Act was enacted have reduced the content required in an LTP, other changes have added to the content.

In summary, the content required in an LTP is a mixture of:

  • Activities and outcomes – what the council is trying to achieve, what its activities are, how it will measure its performance.
  • Strategies and policies – to support prudent financial management and to guide the council's decisions, activities, and approach to consultation and engagement.72
  • Financial information – forecast financial statements for the period of the plan, how funding needs will be met, whether the budget is balanced, and significant forecasting assumptions and risks underlying the financial estimates.
  • Other miscellaneous disclosures – about council-controlled organisations, Māori involvement in decision-making, variations with the council's water and sanitary services assessments and waste management plans, and the projected number of rating units during the period of the plan.

The content of the LTP reflects the document's purpose by providing comprehensive information about planned activities, outcomes, forecast financial and non-financial performance, and strategies and policies. This sets the LTP up to be a basis for accountability, and a vehicle for integrated decision-making and co-ordination of resources, taking a long-term view.

Our audit mandate

Our audit mandate for LTPs covers:

  • whether the plan gives effect to the purpose set out in the Act; and
  • the quality of the information and assumptions underlying the forecast information provided in the plan.73

Our audit report must not comment on the merits of any policy content in the LTP.

57: Local Government Bill 2002, as reported from the Local Government and Environment Committee, page 3.

58: This part of the purpose was amended in 2012, from a focus on the well-being of the community to a more restricted focus on core services and cost-effectiveness. In 2018, the Government introduced a Local Government (Community Well-being) Amendment Bill to restore the former well-being purpose into the Act.

59: Local Government Bill 2002, as reported from the Local Government and Environment Committee, page 3.

60: Local Government Bill 2002, as reported from the Local Government and Environment Committee, page 14.

61: There have been at least 11 Local Government Act 2002 Amendment Acts since the Act was enacted and numerous other consequential amendments to the Act from other legislation.

62: Local Government Act 2002 Amendment Act 2014, section 30(2).

63: For further information about the consultation process, see Controller and Auditor-General (2018), Long-term plans: Our audits of councils' consultation documents.

64: The LTP still has to contain the council's revenue and financing policy, but only significant amendments to that policy need to be made by an LTP amendment. The LTP need not contain the liability management policy, investment policy, development contributions policy, and rates remission and postponement policies, including for Māori freehold land.

65: Hon Rodney Hide, 26 November 2010, Decisions for better transparency, accountability and financial management of local government – the Local Government Act 2002 Amendment Act, page 5.

66: Local Government Act 2002, section 95(2A).

67: Local Government Act 2002, section 97, as amended by section 15 of the Local Government Act 2002 Amendment Act 2010.

68: Schedule 10 was updated in 2010, by the Local Government Act 2002 Amendment Act 2010, section 48, and further amended in 2014.

69: For example, the original clause on groups of activity has been split into four separate clauses (see clauses 2, 3, and 4 of Schedule 10, compared with clause 2 of Schedule 10 as enacted).

70: Hon Rodney Hide speech 19 November 2010, The Next Phase of Local Government Reforms.

71: Local Government Act 2002, section 14(1)(g), as amended by section 8(2) of the Local Government Act 2002 Amendment Act 2014.

72: The financial strategy and infrastructure strategy, the revenue and financing policy, and the significance and engagement policy.

73: Local Government Act 2002, section 94.