Appendix: A summary of current performance reporting requirements and guidance

Numerous pieces of legislation, guidance, and standards define or influence public organisations' preparation of their performance reporting. They also influence the subsequent monitoring and auditing of that reporting.

An overview of the main legislative requirements for performance reporting

For central government

The Public Finance Act 1989 requires departments and departmental agencies to submit an annual report that reports on their progress against their strategic intentions at the end of each financial year. Departments are statutorily required (by section 38 of the Public Finance Act) to set out their strategic intentions at least once in every three-year period.

Section 45 of the Public Finance Act states that the annual report:

… must provide the information that is necessary to enable an informed assessment to be made of the department's performance during the financial year.

The annual report must include an assessment of progress against the public organisation's strategic intentions; an assessment of its overall organisational health, capability, and operations; and the annual financial statements. Public organisations are also required to report on their end-of-year performance for their appropriations.

Parliament recently amended the Public Finance Act to embed a focus on well-being at a whole-of-government level. The Public Finance (Wellbeing) Amendment Act 2020 introduces new requirements for the government to set out its well-being objectives and how these and its fiscal objectives will guide its Budget decisions.

The amendments also introduced a requirement for the Treasury to report on well-being performance indicators alongside macroeconomic and fiscal indicators. There is no requirement for independent assurance of this reporting.

Alongside these changes and to support the Government's focus on well-being, the Treasury has encouraged departments and agencies to incorporate a well-being approach into their external planning and performance reporting.

For Crown entities

The Crown Entities Act 2004 requires Crown entities to submit an annual report at the end of every financial year. The annual report must report against the entity's strategic objectives, which are set in its Statement of Intent (section 138 of the Crown Entities Act), and its annual performance objectives, which are set in its Statement of Performance Expectations (section 149B of the Crown Entities Act).

Section 151(2) of the Crown Entities Act states that the:

… annual report must provide the information that is necessary to enable an informed assessment to be made of the entity's operations and performance for that financial year, including an assessment of the entity's progress in relation to its strategic intentions as set out in the most recent statement of intent.

For local government

The Local Government Act 2002 requires local authorities to submit an annual report at the end of each financial year.

Section 98 of the Local Government Act states that one of the two purposes of an annual report is:

… to compare the actual activities and the actual performance of the local authority in the year with the intended activities and the intended level of performance as set out in respect of the year in the long-term plan and the annual plan.

Part 3 of Schedule 10 of the Local Government Act states that an annual report must include:

• the main groups of activities of a local authority;
• the community outcomes the activities contribute to;
• any measurement of progress towards the achievement of those outcomes; and
• any effects that those activities have on the social, economic, environmental, or cultural well-being of the community.

Clause 25 of Schedule 10 of the Local Government Act requires an annual report to include an audited Statement of Service Provision that, among other things, compares the level of service achieved for a group of activities with the performance target or targets for the group of activities.

In addition to these broad legislative requirements, a public organisation's enabling Act can set performance reporting requirements and obligations that are specific to a particular kind of organisation.

An overview of the guidance and standards for performance reporting

The Treasury and Te Kawa Mataaho have published guidance and supporting material on performance reporting in the public sector. For example:

• In 2009, the then State Services Commission and the Treasury published guidance on performance measurement that provided advice and examples to help develop effective performance frameworks.⁷⁴
• In July 2019, the Treasury updated two guidance documents on annual reporting and end-of-year performance information on appropriations for government departments and Crown entities.⁷⁵
• In November 2019, the Treasury prepared new guidance for government agencies and Crown entities to incorporate a well-being approach into their external planning and performance reporting.⁷⁶
• In December 2020, the Treasury updated its guidance on improving external performance reporting in response to Covid-19 and the new standard on non-financial performance reporting (that is, PBE FRS 48, which we discuss further below).⁷⁷

Taituarā has published guidance for financial and non-financial performance reporting under the Local Government Act 2002.⁷⁸ The Auditor-General has also published good practice guidance on performance reporting and reports on improving the usefulness of local authorities' annual reports.

In 2013, the Department of Internal Affairs developed a mandatory set of standard non-financial performance measures that local authorities must incorporate into their long-term plans and report against in their annual reports. These include measures about water supply, sewage treatment, stormwater drainage, flood protection, and roads and footpaths. One of these, "customer satisfaction", is measured by the number of complaints received.⁷⁹

The Auditor-General currently has a standard on auditing performance reports (The Auditor-General's Auditing Standard 4: The audit of performance reports). The standard sets out requirements for auditors to audit and form an opinion on whether the performance that the public organisation reports fairly presents what the public organisation has achieved and whether it complies with generally accepted accounting practice. The standard refers to four qualitative attributes of performance information – relevant, reliable, understandable, and comparable.⁸⁰

In the public and private sectors, the XRB sets independent standards for general purpose financial and non-financial reporting and auditing. The XRB has recently issued new accounting and auditing standards for reporting service performance. These apply for reporting periods beginning or after 1 January 2022.

These new standards are written for the preparers (PBE FRS 48) and auditors (NZ AS 1) of service performance information in annual reports. The Auditor-General has had their own auditing standard for service performance information (AG-4) for many years.

One of the main objectives of the new service performance standard for preparers (PBE FRS 48) is to present service performance information that is useful for "users to make assessments of the entity's performance".⁸¹

The Standard notes that service performance information for public organisations should provide users with enough information to understand what the public organisation intends to achieve over time, how it is going about this, and what it has done in the last year.⁸²

The explanatory note to the Standard says that public organisations often want to know whether what they do works and what they could do better. Although the Standard does not require a public organisation to report on this, the explanatory note lists various ideas to help improve service performance information. These include collecting information about who is being served, listening and responding to the experiences of users, and evaluating and better understanding client needs.

Other international standard-setters, such as the International Auditing and Assurance Standards Board, are also considering how to gain assurance about information, including performance information, contained in different external reporting products, such as integrated reporting, sustainability reporting, and other environmental, social, and governance reporting by public organisations. The International Auditing and Assurance Standards Board has recently issued proposed guidance on this called Non-Authoritative Guidance – Extended External Reporting (EER) Assurance.⁸³

Figure 4 lists the main documents that regulate the preparation and publication of annual reports and the reporting of performance information in them.

Figure 4
Documents that regulate the preparation and publication of annual reports and the reporting of performance information in them

74: State Services Commission and the Treasury (2009), Performance measurement: Advice and examples on how to develop effective frameworks.

75: The Treasury (2019), Year end reporting: Departmental annual reports and end-of-year performance information on appropriations and The Treasury (2019), Preparing the annual report and end-of-year performance information on appropriations: Guidance for Crown entities.

76: The Treasury (2019), Information on applying a wellbeing approach to agency external planning and performance reporting.

77: The Treasury (2020), Improving external performance reporting – Treasury update.

78: New Zealand Society of Local Government Managers (2010), Performance Management Frameworks: Still your side of the deal – Performance Management in Local Government and New Zealand Society of Local Government Managers (2014), SUPPLEMENT: Performance Management Frameworks: Still your side of the deal – Performance Management in Local Government.

79: The rules for non-financial performance measures are available at www.dia.govt.nz.

80: Office of the Auditor-General (2020), The Auditor-General's Auditing Standard 4: The audit of performance reports (2020), pages 8307 and 8321 to 8324.

81: External Reporting Board (2017), PBE FRS 48 Service Performance Reporting, page 6.

82: External Reporting Board (2017), PBE FRS 48 Service Performance Reporting, page 8.

83: The consultation paper is available at www.ifac.org.