Part 1: Preparing long-term plans

Matters arising from our audits of the 2021-31 long-term plans.

In this Part, we outline:

Why do councils prepare long-term plans?

The long-term plan is the key planning tool for councils. It is the basis for accountability with communities and a vehicle for integrated decision-making and co-ordination of resources, giving a long-term view.

The Local Government Act 2002 (the Act) requires a council to always have a long-term plan covering a period of not less than 10 consecutive financial years. A long-term plan remains in force for three years and can be amended by a council at any time.

After three years, councils are required to adopt a new long-term plan. A council must consult with its community on the proposed content of its long-term plan or any amendments to its long-term plan.1

Section 93(6) of the Act states that the purpose of a long-term plan is to:

  • describe the activities of the local authority;
  • describe the community outcomes of the local authority's city, district, or region;
  • provide integrated decision-making and co-ordination of the local authority's resources;
  • 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.

Essentially, a long-term plan describes the services a council plans to provide, the community outcomes it plans to contribute to, and the cost of this. Therefore, long-term plans are an important mechanism to strengthen long-term planning, community consultation and participation, and accountability.

Our audit work on long-term plans

What do our audits of long-term plans cover?

Our audits provide Parliament and the public with independent assurance that the long-term plan meets its statutory purpose and is based on reasonable and supportable underlying information and assumptions.

In completing our audits, we are not required to give a view on whether a council has met all of the Act's legislative requirements. However, we do consider whether the council has included the mandatory content and whether it is taking a financially prudent approach. Councils remain responsible for meeting legislative requirements.

Our role does not allow us to comment on the merits of any policy content that councils have included in their long-term plan. Policy decisions are for elected members to make. This is important because it helps us to maintain our independence.

Instead, our audit involves checking that the policies a council proposes are appropriately reflected in the forecasts it has prepared. In effect, we check whether councils' forecasts are consistent with what they say they will do.

A summary of the non-standard audit reports that we issued on the 2021-31 long-term plans

Figure 1 shows the audit reports we issued on long-term plans compared to the previous three long-term plan rounds. Appendix 1 sets out the types of audit reports we can issue and provides detail on each non-standard audit report we issued on the 2021-31 long-term plans.

As in our audits of consultation documents,2 we issued only four standard audit reports on the 2021-31 long-term plans, which is far fewer than previous long-term plan rounds. These four standard audit reports were for regional councils.

The audit reports for the long-term plans of all territorial authorities (other than Mackenzie District Council) and Greater Wellington Regional Council included an emphasis of matter paragraph that drew attention to the uncertainty of the impacts of the three waters reforms.3 See Part 5 for more information.

Figure 1
The types of audit reports issued on the 2021-31 long-term plans, compared with the 2012-22, 2015-25, and 2018-28 long-term plans

Audit report issued 2021-31 2018-28* 2015-25 2012-22**
Adverse audit opinion 2 0 0 1
Qualified audit opinion ("except-for" opinion) 9 1 1 2
Unmodified audit opinion that included an emphasis of matter paragraph*** 63 9 11 7
Standard audit report 4 67 66 67
Total 78 77 78 77

* Kaikōura District Council did not prepare a long-term plan in 2018. Because of the exceptional circumstances arising out of the 2016 Kaikōura earthquake, an Order in Council in March 2018 allowed the Council to prepare a customised unaudited three-year plan.

** Christchurch City Council did not prepare a long-term plan in 2012. The Council elected not to prepare and adopt a 2012-22 long-term plan. Legislation enacted after the Canterbury earthquakes gave the Council that option.

*** An audit report can contain more than one emphasis of matter paragraph. We included 146 emphasis of matter paragraphs in our 2021-31 long-term plan audit reports. Appendix 1 sets out full details for each council's audit report.

We issued two adverse audit opinions. We determined that the underlying information and assumptions in Palmerston North City Council's long-term plan were unreasonable. The Council had made assumptions about how it would meet the projected costs for the upgrade to its wastewater treatment plant in year three of its plan onwards. We considered that Palmerston North City Council's long-term plan did not have a credible plan to fund its activities and projects (see paragraphs 2.81 to 2.88).

In its long-term plan, Palmerston North City Council had made the assumption that the wastewater treatment plant would be funded by debt. However, the Council also acknowledged that it would be unlikely to secure this level of borrowing. The Council took this approach because of uncertainty about the proposed three waters reforms.

We also issued an adverse audit opinion for Mackenzie District Council. This was because the Council assumed it would continue to deliver the three waters services after the Government had formally announced that the proposed three waters reforms were mandatory for all councils and would take effect from 1 July 2024.

Other councils had made the same assumption but did so before the Government's announcement. Mackenzie District Council adopted its long-term plan in December 2021, after significant announcements by the Government on three waters reforms. Therefore, we took a different approach from the one we took with other councils (see paragraphs 5.25 to 5.29).

We also issued nine qualified audit opinions. Six of these related to certain funding assumptions that we considered unreasonable. The other three qualifications covered the quality of councils' asset information.

Some of the qualifications we issued in the consultation document audit reports were not included in the long-term plan audit reports. In part, this was because they related to the content of the consultation document and were not applicable to the long-term plan.

It was also pleasing to see that three councils made changes to their forecasts to address the concerns we had when issuing a qualified audit opinion on their consultation document.

Other sections of this report discuss the main themes that we identified from the audit reports that we issued. These are:

How the Covid-19 pandemic affected the preparation of councils' long-term plans

Preparing a long-term plan is not a simple task. Significant input from elected members and council staff is needed to effectively meet the purpose of a long-term plan (see paragraph 1.5).

Elected members are expected to set the direction of the council, make decisions that affect the content of the long-term plan, and ultimately approve the completed long-term plan. Council staff are expected to develop the underpinning strategies, policies, assumptions, and forecasts that are then presented in the long-term plan.

To support the sector in preparing long-term plans, Taituarā – Local Government Professionals Aotearoa (Taituarā) produced guidance that it shared with its members. The guidance recommends that councils should spend up to two years preparing the supporting material, drafting the long-term plan, and consulting with their communities about what they propose to include in the long-term plan. Most of the work will be completed between six and 18 months before the adoption of the long-term plan.

With this lead time in developing the long-term plans, councils need to stay alert for changes that they may need to incorporate into their long-term plan. Taituarā also provided specific guidance to assist councils in focusing on what would be important in the 2021-31 long-term plans.

Many in the sector told us that the 2021-31 long-term plans were the most difficult to prepare since the plans were first required. The most significant challenge for councils to navigate was the impact of the Covid-19 pandemic. The country went into the first lockdown at about the same time that councils were preparing their 2020/21 annual plans.4 This resulted in some rework on the 2020/21 annual plans. As a result, work on the long-term plans started later than usual. Taituarā's guidance was designed to help councils be more efficient in preparing their long-term plans given this context.

As a response to the economic downturn caused by the lockdowns, many councils looked to support their communities by minimising the 2020/21 rates increase or reducing the cost of some services not funded by rates. Where they could, some councils also brought forward programmes of work, with the aim of supporting the local economy.

The policy decisions that councils made as they prepared their 2020/21 annual plans had an impact on the 2021-31 long-term plans. Councils needed to consider whether they could continue to provide the support they had put in place. If they could not, they needed to determine what needed to change. Some councils could not continue to minimise their main funding source – their rates revenue – without affecting the levels of service they provide.

At the same time, the long-term issues facing councils had not gone away. These included responding to climate change, improving critical services such as providing safe drinking water, and adequately reinvesting in infrastructure.

Additionally, councils were facing proposed reforms (three waters and resource management) and a changing regulatory environment. To maintain and improve community well-being, councils needed to carefully balance their response to the Covid-19 pandemic with these other issues.

The Covid-19 pandemic also affected some of the assumptions that councils were using, such as population growth (for example, expected changes to immigration forecasts) and behavioural trends (for example, how people live and work, including how they use community facilities, what form of transport they use, and how often they use it).

At times, councils needed to reconsider the funding assumptions for some projects. This was because economic stimulus packages meant that councils could receive additional funding from central government.

The Covid-19 pandemic made preparing the long-term plans significantly more challenging. Staff had to work remotely at times during the long-term plan's preparation. Staff also had to factor in a new set of assumptions and consider their council's role in the economic recovery from the pandemic.

The Covid-19 pandemic also made the forecasts included in the long-term plan more uncertain. We are already starting to see the impact of this as councils prepare their 2022/23 annual plans. Councils face much higher interest rates and cost increases than they originally assumed in the long-term plans.

Responding to the impact of the Covid-19 pandemic meant that many councils effectively needed to restart preparing their long-term plans. This affected when councils adopted their 2021-31 long-term plans, as we discuss in paragraphs 1.36 to 1.45. We acknowledge the dedication, time, and effort that elected members and council officers put into preparing their long-term plans in these circumstances.

More 2021-31 long-term plans were adopted late

The disruption caused by the Covid-19 pandemic meant that some councils faced delays in preparing their long-term plans while they responded to elevated risks and uncertainties in many areas of the long-term plan's forecasts. Our auditors also needed to consider these risks and uncertainties as they completed their audits, which took more time.

Our audits were also affected by a shortage of qualified auditors throughout New Zealand. This affected our audits of council annual reports and led to Parliament passing legislation that extended the statutory reporting time frames for many public organisations, including local authorities, by two months for 2019/20, 2020/21, and 2021/22. The delays in our auditors completing their 2020 audits meant they started their audits of the 2021-31 long-term plans later than they ordinarily would.

These matters affected whether some councils were able to adopt their audited long-term plans on time. Section 93(3) of the Act requires a council to adopt a long-term plan before the start of the first financial year that the plan covers. That means that councils needed to have adopted their audited 2021-31 long-term plans before 1 July 2021.

Twelve councils adopted their audited 2021-31 long-term plans after 30 June 2021. By comparison, two councils adopted their 2018-28 long-term plans late. Consistent with our standard practice, we referred to this breach of statutory deadline in our audit reports.

Of the 12 councils that adopted their long-term plans late, Mackenzie District Council and West Coast Regional Council adopted their audited long-term plans more than three months after the statutory deadline. Even allowing for the impact of the Covid-19 pandemic, we consider this delay in providing those two communities with a long-term plan is unacceptable.

Mackenzie District Council's and West Coast Regional Council's decision-making has been compromised as a result. Their ability to levy their main source of revenue – rates – was delayed because they were unable to set the rates for 2021/22 until they adopted their long-term plan.

Taituarā recommends that councils apply six principles when preparing a long-term plan. One of these principles is "long-term planning requires project management disciplines".

The long-term planning process contains a lot of moving parts. Taituarā states that successful long-term planning needs careful project planning and sequencing the right activities in the right order. We endorse using project management disciplines when preparing a long-term plan.

If councils have not already held a debrief on their 2021-31 long-term plan to consider what went well and where there are opportunities for improvement in preparing future long-term plans, we recommend that they do this now.

Governors and staff need to understand the purpose of the long-term plan and their role in the process. The long-term plan cannot be seen as "business as usual". It is part of good local governance and organisational effectiveness. Input into the long-term plan is needed from a wide range of staff throughout the council.

There will still be considerable uncertainty for councils to consider when they prepare their 2024-34 long-term plans. We urge all councils to consider, with their auditors, where they can improve their project management processes.

1: The Act requires a consultation document to form the basis for public participation in a local authority's decision-making process about the content of its long-term plan. Each consultation document is required to contain an audit report from the Auditor-General. For more information about consultation documents and our audits of these, see, Consulting matters: Observations on the 2021-31 consultation documents.

2: For more information on the audit reports we issued on the consultation documents, see Part 5 of Consulting matters: Observations on the 2021-31 consultation documents at

3: Three waters service delivery relates to water supply, sewerage and the treatment and disposal of sewage, and stormwater drainage activities.

4: In response to the Covid-19 pandemic, the Government put in place a four-level alert system. Each Alert Level introduces more measures to protect people from contracting or spreading Covid-19. On 25 March 2020, all of New Zealand moved into Alert Level 4, which required many council workers to isolate and work from home.