Part 2: Changes in performance reporting in the last 30 years

The problems, progress, and potential of performance reporting.

To help build and maintain trust, the public sector needs effective public finance, management, and accountability systems. These three systems all depend on regular financial and non-financial reporting about the performance of public organisations, sectors, and the whole of government.

In this Part, we discuss:

  • the various initiatives to improve performance reporting since the late 1980s and comments made about them; and
  • what has been learned since the 1980s' reforms.

A story of reform followed by incremental change

The performance reporting system involves a complex network of various organisations and people. These include:

  • governments, Parliament, and select committees;
  • central agencies and sector advocacy groups – for example, the Treasury, Te Kawa Mataaho Public Service Commission (Te Kawa Mataaho), and Taituarā – Local Government Professionals Aotearoa (Taituarā);
  • independent standard-setters (for example, the External Reporting Board and the Office of the Auditor-General);
  • audit service providers (for example, Audit New Zealand);
  • monitoring agencies (for example, the Education Review Office and the Tertiary Education Commission); and
  • people who read the performance reports and use them to make decisions.

An equally complex framework of legislation, standards, guidance, and convention defines many of the relationships between these people and organisations. Changes in the network of people and public organisations, and the frameworks surrounding them, mean that the performance reporting system is constantly evolving.

The last comprehensive review of the performance reporting system was part of wider reforms of the public finance, management, and accountability systems in the late 1980s. These reforms were a response to a perception that the public sector was inefficient, unresponsive, and increasingly ineffective.9

The reforms focused on improving the transparency and performance of public organisations. They were achieved by enacting the State Sector Act 1988, the Public Finance Act 1989, and the Local Government Amendment Act 1989.

The rest of this Part outlines how the current system of performance reporting came about. We also discuss the various initiatives to improve performance reporting since the late 1980s and comments made about them. Most of the initiatives and comments relate to central government.

From 1987 to 2000

In 1987, the Treasury successfully argued that building a better public management and finance system needed:

  • clear performance expectations;
  • an effective assessment of performance; and
  • adequate information flows.10

At the time, the Treasury recognised that a one-size-fits-all approach to assessing public sector performance would not work for most public sector activities. For example, the Treasury observed that organisations delivering social services needed to define the expected work and identify performance targets. However, that could not "be done in a mechanistic way with precise numerical measurement of all areas of activity".11 Various forms of performance assessment and reporting would be needed.

The then Auditor-General also developed new ways of auditing performance information to support these reforms.

New monitoring agencies were created to review performance in some sectors. For example, the Education Review Office was set up in 1989 to review school performance, and the Crown Company Monitoring Advisory Unit was set up in 1993 to monitor various public organisations. These included State-owned enterprises, health provider companies, and Crown research institutes.

Between 1988 and 1995, the state sector changed its approach to performance reporting. These changes were designed to improve the public sector's efficiency and responsiveness. They introduced accrual accounting, outputs-based budgeting, and performance-based employment contracts.

In 1992, forward-looking statements of intent were launched, and the first set of whole-of-government accrual-based financial statements were published.12 In 1995, strategic result areas and key result areas were introduced to help agencies work towards government priorities.

The Local Government Amendment Act (No. 2) 1989 required local authorities to implement accrual accounting. It also introduced a requirement for local authorities to report on "… performance targets and other measures by which performance may be judged in relation to the objectives, outputs and outcomes".13

There were also several reviews of the public management system during this time. A review of state sector reforms in 1991 commented that, although there had been improvements in public sector performance, there had also been a loss of government-wide co-ordination of strategy and an adverse effect on the collective interest of the government.14

In 1996, another report on the state of the public management system noted that the 1980s' reforms had led to improvements in efficiency, productivity, and responsiveness. However, it also noted that many public officials, especially those in smaller departments, were concerned about the increasing burden of complying with the demands for information and reporting from central agencies and Parliamentary committees.15

From 2000 to 2010

In 2001, a Report of the Advisory Group on the review of the centre was presented to the Ministers of State Services and Finance. This report identified many areas for improving the performance reporting system.

These included addressing the lack of information about whether outcomes had been achieved, the quality of monitoring, the costs of compliance, and inconsistencies in reporting performance. The report observed that "our system needs to be able to assess performance in terms of overall objectives (outcomes), service delivery (outputs) and ownership".16

In 2002, we published comprehensive guidance for reporting on the public sector's performance. The guidance emphasised that, for external accountability reporting, all elements of performance must be taken into consideration, particularly performance indicators that stakeholders want to know about.

The guidance used case studies and literature to illustrate good practice in measurement and reporting. It also discussed ideas that were innovative at the time, such as Balanced Scorecard and Triple Bottom Line reporting.17 Both of these ideas provide different ways of measuring and reporting multiple attributes of performance, such as financial, social, and environmental, and the perspective of the customer.

Between 2002 and 2004, many of the statutory provisions about performance reporting were reviewed. There was a particular focus on the medium to longer term context, requirements for outcome information, and increasing the number of public organisations required to report on their performance.18

During this time, a new initiative called "managing for outcomes" was introduced. The intention of the initiative was for public organisations to focus more on achieving results for New Zealanders.

The initiative included new guidance on planning, reporting, and assessing performance. The guidance observed that outcome performance measures needed to be used with caution, particularly where there was no clear attributable links to organisational outputs.19

The Local Government Act was amended in 2002 to require local authorities to prepare long-term plans. Part of this process involves local authorities consulting with communities. The purpose of this change was to strengthen local authorities' long-term planning, community consultation and participation, and public accountability. The long-term plans had to include financial and non-financial performance measures.

However, despite these reforms, we still found in 2008 that the quality of performance reporting remained a significant weakness in the public sector's accountability to its stakeholders. Much more needed to be done to improve that quality.20

In 2009, the then State Services Commission and the Treasury released substantial guidance for public organisations on preparing good performance measures and reporting frameworks.21

In 2010, the Treasury published its first Investment Statement. Its aim was to help people understand the performance of the whole of government's assets and liabilities, and to support better balance sheet management.22

From 2011 to today

Criticism of performance reporting continued in 2011, when the then Auditor-General called for public organisations to improve four aspects of annual reporting:23

  • measuring and reporting on effectiveness and cost-effectiveness;
  • more analysis and evaluation of their performance;
  • more analysis of longer-term trends; and
  • better reporting of results (the outputs and the cost of service delivery).

In 2011, the Better Public Services Advisory Group released a report advising Ministers on state sector reform.24 The two main recommendations were to:

  • reconfigure the system to focus much more directly on those results or outcomes that matter most to New Zealanders; and
  • improve the quality, responsiveness, and value for money of state services.

In 2011, Gill published the findings of a comprehensive three-year research project into New Zealand's performance management system and its evolution.

Gill described a case for change that was based on a threat to the credibility of reported performance information. This threat arose from a "vicious cycle of low demand, limited use and poor quality of supply for non-financial performance information". Gill observed that: "In a world of faster and less predictable change, performance information should play an increasingly important role."25

In 2013, the State Sector Act, Public Finance Act, and the Crown Entities Act were amended to:

  • promote the performance reporting system as a whole to better deliver results;
  • encourage better services and value for money;
  • strengthen leadership at the system, sector, and agency level; and
  • support more meaningful information so that Parliament and the public can more easily see what the use of public money has achieved.26

Other initiatives were introduced during this period to improve how performance information was assessed, reported, and used. These included:

  • Better public services – an initiative built on developing a number of measurable sector-wide results that reflected government priorities;
  • Performance improvement framework – an initiative to help senior leaders in the public sector lead performance improvement in their agencies and throughout the system;
  • Living standards framework – a policy advice tool that helps the public sector to consider New Zealanders' well-being in four "capitals" – physical/financial capital, social capital, natural capital, and human capital – and 12 well-being domains;
  • service performance reporting standards – the External Reporting Board (XRB) has recently published new accounting and auditing standards for performance reporting that are due to come into effect in 2021 and 2022, respectively; and
  • various reporting frameworks – for example, Extended External Reporting is a term that the XRB adopted to refer to various broader types of reporting beyond that presented in an entity's statutory financial statements (which can include integrated reporting and sustainability reporting).

The Treasury is currently working to modernise the public finance and accountability system to support a focus on well-being.27 As part of this work, the Treasury published a guide for central government agencies on how they could incorporate a well-being approach into their external planning and performance reporting.

However, despite these many initiatives, there continue to be concerns about the quality of performance reporting and its contribution to effective public management, finance, and accountability. We outline three examples of these concerns in the following paragraphs.

In 2017, the Productivity Commission found that system-wide accountability and performance requirements encouraged "a costly scramble for resources, siloed thinking, the appearance of being busy, risk averse behaviour and short-termism" throughout the state sector.28

In 2019, we wrote a letter to chief executives of central government organisations summarising our reflections on the 2017/18 central government audit results. In the letter, we said that there was considerable scope to improve the value of performance reporting.29 In the appendix, we noted:

  • the need to have strong links between strategy and performance measures;
  • the weak or non-existent links between outcomes and outputs or no clear description of attribution between impacts and outcomes;
  • that performance monitoring and reporting for external accountability purposes does not always align with internal management reporting;
  • unclear or undocumented reporting methodology and data definitions;
  • the need for agencies that use client satisfaction measures to make sure that those measures are based on robust methodologies and use appropriate data;
  • a lack of robust systems to report actual results;
  • not enough quality, quantity, and efficiency measures for each group of outputs; and
  • not enough assurance that third-party data is correct and verifiable.

In 2020, Dormer and Jahan reviewed a selection of New Zealand's central government departments' annual reports. Consistent with our concerns in 2019, they found that:

while New Zealand's central government departments provide a large amount of information, this tends to lack a consistent and coherent structure that combines both financial and non-financial performance information.30

Dormer and Jahan concluded that reported performance information "does not provide a meaningful insight into ‘what is going on inside' public organisations".31

What can we learn from the past 30 years?

Achieving effective performance reporting has been an important issue for decades, and there continues to be a strong interest in improving it. Despite many thoughtful initiatives, public organisations still struggle to tell their performance story easily or clearly, and criticisms about the analysis, reporting, and use of performance information continue to be made.

The various initiatives to improve performance reporting appear to have been introduced in an incremental and siloed way, with many ideas reflecting the latest innovation and/or the interest of the government of the day. There appears to have been little long-term co-ordination of their implementation.

It is also not clear how much thought has been given to understanding what New Zealanders, as citizens, want and need to know about the performance of the public sector and its organisations.

We discuss some of these initiatives and concerns further as part of our assessment of the current system in Part 3.

9: For a summary of, and background to, these reforms, see Centre for Public Impact (2019), "New Zealand's Public Financial Management Reforms".

10: The Treasury (1987), Government Management: Brief to the incoming Government 1987 volume I, background papers on social policy, pages 55-57.

11: The Treasury (1987), Government Management: Brief to the incoming Government 1987 volume I, background papers on social policy, page 469.

12: See Office of the Auditor-General (2000), Performance reporting for accountability purposes – lessons, issues, future.

13: See Office of the Auditor-General (2000), Performance reporting for accountability purposes – lessons, issues, future, page 5.

14: The Review of State Sector Reforms is also known as the Logan Review. This review is discussed in the Office of the Auditor-General (2000), Performance reporting for accountability purposes – lessons, issues, future, page 5.

15: Schick, A (1996), The spirit of reform: Managing the New Zealand State Sector in a time of change, Executive Summary, pages 7 and 81.

16: The Advisory Group (2001), Report of the Advisory Group on the review of the centre, page 16.

17: Office of the Auditor-General (2002), Reporting public sector performance.

18: Office of the Auditor-General (2008), The Auditor-General's observations on the quality of performance reporting, page 3.

19: The Treasury (2002), Managing for Outcomes: Output plans guidance for departments, page 13.

20: Office of the Auditor-General (2008), The Auditor-General's observations on the quality of performance reporting, pages 3 and 7.

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

22: The Treasury (2010), 2010 Investment Statement of the Government of New Zealand. Note in 2013, the Public Finance Act 1989 was amended to require the Treasury to report to Parliament with an Investment Statement at least every four years.

23: Office of the Auditor-General (2011), Central government: Cost-effectiveness and improving annual reports, page 5.

24: New Zealand Government (2011), Better Public Services Advisory Group Report,

25: Gill, D, et al (2011), The Iron Cage Recreated – The performance management of state organisations in New Zealand, Institute of Policy Studies, Victoria University of Wellington, page 479.

26: The Treasury (2013), State Sector, Public Finance and Crown Entity legislative changes overview & summary.

27: Robertson, G (July 2019), "Bringing Wellbeing into the Public Finance Act", speech published at

28: The Productivity Commission (2017), Efficiency and performance in the New Zealand state sector: Reflections of senior state sector leaders, page 40.

29: Office of the Auditor-General (2019), Insights and reflections: Our 2017/18 central government audit work.

30: Dormer, R and Jahan, A (2020), "Reporting Service Performance – A Message in a Bottle?" Centre for accounting, governance, and taxation research Working Paper series, Working Paper no. 118, page 32.

31: Dormer, R and Jahan, A (2020), "Reporting Service Performance – A Message in a Bottle?" Centre for accounting, governance, and taxation research Working Paper series, Working Paper no. 118, page 33.