Part 6: A refocus on well-being

Insights into local government: 2019

In this Part, we discuss the changes to the Local Government Act 2002 (the Act) that reinstated councils' focus on well-being.

In May 2019, the Act was amended to give councils the mandate to promote the social, economic, environmental, and cultural well-being of their communities in the present and for the future. The amendments restore the position to when the Act was enacted in 2002.

In 2012, amendments to the Act changed the statutory purpose of local government to require councils to focus on infrastructure, local public services, and regulatory functions in the most cost-effective manner.

The 2012 amendments removed references in the Act to social, economic, environmental, and cultural well-being. However, councils still had to report on the identified effects of their activities on community well-being generally. This applied to reporting periods from 2013 to 2018.

As a result of the 2019 amendments, the Act's decision-making, planning, and reporting regime returned the focus to well-being. Councils have to consider the four aspects of well-being when making decisions and planning how their activities will contribute to the desired outcomes for their communities.

Councils' LTPs have to describe the community outcomes they seek for the region or district, identify how their activities contribute to community outcomes, and identify any significant negative effects that their activities have on well-being.20

Councils also have to explain in their annual reports:

  • what they do (their groups of activities);
  • why they do them (the community outcomes to which the group of activities primarily contributes);
  • the results of any measurement of progress towards the achievement of those outcomes during the year; and
  • any identified effects that any activity within the group of activities has had on the social, economic, environmental, or cultural well-being of the community.

Our audit report is required to confirm that councils have complied with these disclosure requirements. We also audit the statement of service provision, which sets out the council's actual levels of service to the community against its planned levels of service.21

Councils have found reporting on community well-being outcomes to be an ongoing challenge. We reported on how well councils reported on these outcomes in their annual reports from 2004 to 2010, after the requirement was introduced. We summarise what we found below.22

Councils did not previously report on well-being outcomes effectively

Although councils were broadly reporting their activities to their communities from 2004 to 2010, many were not clearly reporting the identified effects of their activities on social, economic, environmental, and cultural well-being.

An "identified effect" is a measured or observed effect that can be positive or negative. However, some councils were reporting their intended effects, rather than identified effects.

We said that councils needed systems for measuring the effects of their activities on social, economic, environmental, or cultural well-being so that they could report on them. They needed to actively consider how their activities would affect these four aspects of well-being.

To report on those effects, councils needed to have measures and indicators of well-being as part of their performance frameworks. However, these were either lacking or in development.

It was challenging for councils to identify and report on the full range of effects that an activity could have on social, economic, environmental, and cultural well-being. Some effects were more visible and easily identified than others. However, other effects were less tangible and more difficult to identify, such as the effects of providing museums, art galleries, and community centres on social and cultural well-being.

Overall, we observed little improvement in the information councils presented about the effects of their activities on social, economic, environmental, or cultural well-being from 2004 to 2010. To improve compliance with the reporting requirement, and provide more useful accountability to their communities, we recommended that councils:

  • move from restating their intended effects and making general statements related to well-being to specific analysis and reporting of actual identified effects of their activities on well-being; and
  • ensure that the performance management framework was an integrated package that linked community outcomes and the rationale behind their activities to performance measures, targets, and levels of service. With such a linked framework, it would be easier for councils to report on progress towards community outcomes and the identified effects of activities.

We recognised the challenges involved but also the significant benefits of being able to report to communities about the effects of council activities on their well-being.

Productivity Commission commentary on well-being and outcomes reporting

The Productivity Commission considered local government reporting on community well-being outcomes in its 2019 report Local government funding and financing. It also noted the importance of an integrated and linked framework.

The Commission said:

Consistent with good practice, outcomes reporting should focus on a small number of meaningful metrics that meet well-established criteria for good indicators. An important consideration is the cost-benefit of gathering and analysing the data (measures that are so expensive to generate that they do not provide a net benefit should not be pursued).
Another consideration is the overall coherence of the reporting framework. Reporting measures should strategically align – linking the inputs, outputs, outcomes and costs for each activity (or group of activities). They should also not duplicate across these dimensions.23

The Commission recommended a first-principles review of the performance reporting framework in the Act. It considers that the current performance reporting requirements (financial and non-financial) are too detailed, inappropriately focused, and not fit for purpose.

The Commission favours a small set of mandatory measures for financial and non-financial performance, but not for outcomes reporting. The Commission noted that there is a need for flexibility, and that councils should continue to determine the most important outcomes for their communities, based on local preferences and circumstances, and use these to prioritise their activities.

The Commission said that central government could assist by providing guidance on developing robust well-being metrics and supporting the use of consistent data sources (both among councils and between central and local government), where appropriate.

Councils should consider their priority areas for well-being in the 2021-31 long-term plans

Councils giving greater emphasis to well-being is consistent with the Government's current well-being approach. Examples of the Government's approach include the 2019 Wellbeing Budget and work by the Treasury on a Living Standards Framework to advise successive governments about the likely effects of their policy choices on New Zealanders' living standards and well-being over time.

The local government sector is doing work to help councils with their well-being indicators and frameworks, and is considering how local and central government can work together on this. The Society of Local Government Managers is encouraging councils to produce a "well-being long-term plan".

Attention is also being given to improving how entities report to their stakeholders and making annual reports more useful for readers. Examples include encouraging disclosures about risks and opportunities associated with climate change and applying more sophisticated reporting approaches, such as integrated reporting.

A greater focus on well-being by central and local government, and the various improved reporting initiatives, provide a significant opportunity for collaboration on improving the well-being of New Zealanders and the environment and for more meaningful reporting on results.

As part of preparing their 2021-31 LTPs, councils should consider their priorities for promoting social, economic, environmental, and cultural well-being and their desired outcomes. Councils will need to ensure that their reporting framework links their activities to outcomes and well-being indicators, so that they can report to their communities on the identified effects of their activities on these four aspects of well-being, drawing on the guidance available to help with this.

20: Local Government Act, clauses 1 and 2 of Schedule 10.

21: Local Government Act, section 99 and clause 25 of Schedule 10.

22: We have not evaluated how councils reported on well-being in their 2018/19 annual reports. This is because the requirement to report on the four aspects of well-being was reintroduced in May 2019, near the end of the 2018/19 reporting period.

23: Productivity Commission (2019), Local government funding and financing, pages 115-116.