Part 1: Our audits of councils’ 2024-34 long-term plans
1.1
Long-term planning has been a feature of local government in New Zealand for many years. Since 2006, the Local Government Act 2002 has required councils to produce 10-year long-term plans for their communities every three years.
1.2
This report describes the audit results and trends from the 58 long-term plans that councils adopted between June and October 2024.
1.3
The 2024-34 long-term plans show that councils are planning to increase their investment in infrastructure. Councils are also responding to cost pressures by planning to increase rates at higher levels than in previous years and to increase borrowing to fund capital expenditure.
1.4
Twelve councils took the option to defer adopting their long-term plans by a year. Another eight councils that had been affected by severe weather events were not required to prepare 10-year audited long-term plans, and prepared unaudited three-year plans instead.
1.5
Later in 2025, we will provide further analysis of our observations from our long-term plan audits, including for the councils that chose to defer adopting their long-term plans until 30 June 2025.
Why do councils prepare long-term plans?
1.6
Long-term plans describe how councils plan to deliver services to their communities, the outcomes those services will contribute to, how much they are expected to cost, and how they will be paid for.1
1.7
Councils have significant powers. They also have an important role in providing the everyday services that New Zealanders rely on, such as supplying drinking water, removing and treating wastewater, and maintaining local roads. These services are underpinned by infrastructure (such as water treatment plants), which require significant capital investment to replace and are expensive to maintain.
1.8
Councils also own and operate community and recreational facilities such as swimming pools, sports grounds, and libraries.
1.9
Long-term plans provide information about the decisions and trade-offs that councils need to make on their communities' behalf and enable communities to hold councils to account for these decisions. The consultation documents for long-term plans provide a basis for councils to seek their communities' input into how they will pay for council services and functions.
1.10
Long-term plans also provide transparency about the rates people can expect to pay, the levels of service they can expect to receive, and how councils plan to respond to future challenges such as changes in population and the effects of climate change.
Our audit work on long-term plans
1.11
Audits of long-term plans include assessing the evidence that councils have used to support the information and disclosures in their long-term plans. We check that the policies councils propose are appropriately reflected in the forecasts they have prepared. In effect, we check whether councils' forecasts are consistent with what they say they will do.
1.12
When auditing long-term plans, our auditors often identify errors or other matters that are corrected before the plan is adopted. This helps to ensure the accuracy of the information underlying long-term plans.
1.13
Our audit opinions on long-term plans provide communities with independent assurance that their council's long-term plan meets its statutory purpose and is based on reasonable and supportable information and assumptions.
1.14
Audit assurance supports communities to have trust and confidence in how their councils are planning for the future. Without this independent view, it would be difficult for communities to know whether they could rely on their council's long-term planning and fully understand how it would affect them – such as the amount they can expect to pay in rates, and the levels and types of service they will receive.
1.15
We last reported on councils' long-term plans in 2022 (for 2021-31). We reported then that:
- councils were taking steps to address historical underinvestment in infrastructure, with a focus on investing in three waters assets (drinking water, wastewater, and stormwater);
- many councils were collecting better information about the condition and performance of their assets;
- to fund increasing costs, councils were setting rates at a higher level than many had previously;
- councils were providing more discussion about the effects of climate change and what they were doing to adapt to and mitigate risks from climate change; and
- significant reforms in three waters and the Resource Management Act (1991) meant that councils were planning in a context of uncertainty.
The context for councils' 2024-34 long-term plans
1.16
In 2024, councils' preparation of their long-term plans was affected by the severe weather events of 2022 and 2023 and by announcements about changes to how water services would be managed and provided.
1.17
Eight councils that were affected by Cyclone Gabrielle and other significant weather events in 2022 and 2023 were exempt from the Local Government Act's requirement to prepare an audited 10-year long-term plan. Instead, they were required to prepare unaudited three-year plans.2
1.18
In February 2024, the Government introduced and passed legislation to repeal all water services entities legislation. The Water Services Acts Repeal Act 2024 repealed the Water Services Entities Act 2022, the Water Services Legislation Act 2023, and the Water Services Economic Efficiency and Consumer Protection Act 2023.3
1.19
The Act reinstated previous legislation about providing water services (including local government legislation). This continued councils' ownership and control of water services and their responsibility for providing those services.
1.20
The Act included some transitional support options to help councils complete their long-term plans, depending on their local needs and circumstances. These options meant councils could choose whether to have their consultation documents audited and when to adopt their audited long-term plans.4
1.21
Some councils could choose to:
- have their long-term plans audited and adopted by 30 June 2024 (these councils could choose not to have their consultation documents audited);
- defer the audit and adoption of their long-term plans by three months to 30 September 2024 (these councils could also choose not to have their consultation documents audited); or
- defer the audit and adoption of their long-term plans by one year to 30 June 2025 (these councils are required to have their consultation documents audited).5
1.22
Twelve councils decided to defer adopting their long-term plans until 30 June 2025.
1.23
Of the 58 long-term plans that were adopted by 31 October 2024:
- Thirty-two councils had their consultation documents audited;
- Thirty-six councils adopted their long-term plans by 30 June 2024;
- One regional council breached the 30 June 2024 statutory deadline and adopted its long-term plan in July 2024;
- Twenty councils adopted their long-term plans between 1 July and 30 September 2024; and
- One district council breached the 30 September statutory deadline for three-month deferrals and adopted its long-term plan in October 2024.
The 2024-34 long-term plans were prepared during significant uncertainty
1.24
When councils prepared their long-term plans, government policies and funding decisions were changing. This affected some of the assumptions the long-term plans were based on.
1.25
Our audit reports for both consultation documents and long-term plans reflected some of the uncertainty that councils faced. Despite the level of change and uncertainty, most councils were able to prepare long-term plans that met legislative requirements and were based on reasonable underlying assumptions and information.
1.26
The Government’s Policy Statement on Land Transport was still being drafted when many councils were preparing their consultation documents and long-term plans. The final policy statement was released on 7 June 2024, and the National Land Transport Programme was published on 9 September 2024.
1.27
This meant that councils had to estimate the amount of funding they would receive for local transport projects from the New Zealand Transport Agency Waka Kotahi. Some councils had to make late changes to their long-term plans because the final funding amounts differed significantly from the amounts they had estimated. Our audit opinion reflected where councils had not made the required changes or where there was significant uncertainty.
1.28
The Water Services Acts Repeal Act 2024 was followed by the Local Government (Water Services Preliminary Arrangements) Act 2024. This set up the Local Water Done Well framework and the preliminary arrangements for the new water services system. The Local Government (Water Services Preliminary Arrangements) Act 2024 requires councils to prepare Water Services Delivery Plans by 3 September 2025.
1.29
The Local Government (Water Services) Bill 2024 was introduced in December 2024. The Bill sets out arrangements for the water services delivery and regulatory systems. The Bill provides new water services delivery models for councils to choose from, including new water organisations owned by councils.6
1.30
This legislation may require councils to amend the parts of their long-term plans that relate to how they manage their water services assets and provide water services.
1.31
The Government has started several programmes of work that will have significant implications for councils. These include:
- proposed changes to the Local Government Act 2002 (including the intention to remove the four well-being provisions);
- policies for improving funding and financing for infrastructure;
- replacement legislation for the Resource Management Act 1991;
- the “going for housing growth” policy; and
- a framework for “Regional Deals”.7
Our audit reports of consultation documents acknowledged this uncertainty
1.32
We audited the consultation documents of 32 councils.
1.33
Consultation documents are meant to provide an effective basis for the public to participate in councils’ decision-making processes about their long-term planning. Consultation documents should:
- explain the overall objectives of what the council is proposing to include in its long-term plan;
- explain how what the council is proposing to include in its long-term plan will affect rates, debt, and levels of service in a way that the community can readily understand;
- identify and explain to the community significant issues and choices facing the council and the consequences of those choices; and
- inform discussions between the council and its community about what the council is proposing to include in its long-term plan.8
1.34
Figure 1 summarises our audit opinions on councils’ consultation documents. We provided 10 councils with an unmodified audit opinion on their consultation documents.9 This means that, in our opinion, the documents provided an effective basis for the public to participate in the councils’ decisions about the proposed content of the 2024-34 long-term plans and that there were no matters that we needed to draw the readers’ attention to.
1.35
We included “emphasis of matter” paragraphs in the audit reports of 19 council consultation documents to draw attention to aspects of those documents. The most common issues we drew attention to were uncertainty about:
- central government funding for transport and infrastructure projects;
- the delivery of capital expenditure programmes; and
- three waters renewals forecasts – including relying on information based on an asset’s age (rather than on its condition or performance).
Figure 1
The type of audit reports we issued on councils’ 2024-34 consultation documents, compared with their 2021-31 consultation documents
| Audit reports issued | 2021-31 | Percentage | 2024-34 | Percentage |
|---|---|---|---|---|
| Adverse opinion | 1 | 1% | 0 | 0% |
| Qualified audit opinion | 10 | 13% | 3 | 9% |
| Unmodified audit opinion that included an emphasis of matter paragraph | 60 | 77% | 19 | 59% |
| Unmodified audit opinion that included an “other matter” paragraph | 0 | 0% | 0 | 0% |
| Unmodified audit opinion | 7 | 9% | 10 | 32% |
| Number of audit reports | 78 | 100% | 32 | 100% |
1.36
We provided three councils with a qualified audit opinion for their consultation documents. They were West Coast Regional Council, Environment Southland, and Chatham Islands Council.
1.37
West Coast Regional Council’s consultation document included plans to improve Westport’s flood resilience in the first three years of its long-term plan. The Council assumed that it would have the in-house capacity it needed, that it would have the ability to source appropriate external contractors, and that it would obtain the required resource consents to complete the project within planned time frames.
1.38
Because the Council had not completed the design phase for the full project, we did not consider that these assumptions were reasonable. When the Council prepared its consultation document, it was also preparing the tender and resource consent applications for the initial two stages of the project. It was less progressed for all the other stages.
1.39
Because of these matters, the Council might need to adjust its plans if the project is delayed. We were unable to quantify the possible effects that delays could have on the information underlying the consultation document.
1.40
We were also unable to quantify the possible effects that unidentified climate risks could have on the information underlying the Council’s consultation document. This is because the Council had not used evidence-based data to consider whether it had identified all the climate risks that it faces.
1.41
Environment Southland’s consultation document included an assumption that the government would fund 75% of the $180 million cost of improvements to flood protection infrastructure. We concluded that this assumption was unreasonable because government funding had not been confirmed.
1.42
If the government does not provide funding, or provides less funding, the Council will need to reassess how to proceed with the improvements that it has planned.
1.43
Chatham Islands Council’s consultation document included an assumption that future government financial support will be based on 2023/24 government funding plus an annual inflationary adjustment totalling $7 million during the 10-year period of the long-term plan. The consultation document also included an assumption that the Council would make cost savings of $1.8 million.
1.44
We concluded that these assumptions were unreasonable because the amount of government support had not yet been confirmed and there is no history of the government annually adjusting support for inflation. The Council had also not identified how it would make additional cost savings.
Many of our audit reports on long-term plans reflected uncertainty in key assumptions
1.45
Figure 2 sets out the types of audit opinions we issued on councils’ long-term plans. We provided 44 councils with an unmodified audit opinion on their long-term plan.
1.46
We included emphasis of matter paragraphs in the audit opinions on 28 long-term plans. The common issues we drew attention to were uncertainty about:
- central government funding for transport and infrastructure projects;
- capital programme delivery;
- forecast cost savings;
- unbalanced budgets;10 and
- risks associated with councils almost reaching debt limits.
Figure 2
Type of audit reports issued on councils’ 2024-34 long-term plans, compared with 2021-31 long-term plans
| Audit report issued | 2021-31 | Percentage | 2024-34 | Percentage |
|---|---|---|---|---|
| Adverse opinion | 2 | 2% | 2 | 3% |
| Qualified audit opinion | 9 | 12% | 12 | 21% |
| Unmodified audit opinion that included an emphasis of matter paragraph | 63 | 81% | 28 | 48% |
| Unmodified audit opinion | 4 | 5% | 16 | 28% |
| Number of audit reports | 78 | 100% | 58 | 100% |
1.47
For Auckland Council, we also noted uncertainty about storm recovery funding arrangements, costs related to the City Rail Link Project, returns on the proposed Auckland Future Fund, and the impact of the Local Government (Water Services Preliminary Arrangements) Bill.
1.48
We provided 12 councils with a qualified audit opinion on their long-term plans. The common reasons we provided a qualified audit opinion were uncertainty about:
- central government funding, such as transport and infrastructure projects;
- the delivery of capital programmes;
- forecast cost-savings; and
- risks associated with plans to defer three water asset renewals outside of the long-term planning period.
1.49
We provided two councils with adverse opinions on their long-term plans. These were Chatham Islands Council and Palmerston North City Council.
1.50
An adverse audit opinion is quite rare. It indicates that the underlying information and assumptions in the long-term plan were unreasonable. This means that, in our view, the long-term plans of these councils do not provide an effective basis for their long-term decision-making, co-ordination of their resources, and accountability to their communities.
1.51
Chatham Islands Council’s adverse opinion was due to unreasonable assumptions about central government support and cost savings. The assumptions leading to the qualified audit opinion of its consultation document were reflected in its final long-term plan. Because of the significance of these matters, we concluded that the information and assumptions underlying the long-term plan were not supportable.
1.52
Palmerston North City Council’s adverse opinion stemmed from assumptions about the costs, timing, funding, and delivery of capital expenditure projects. We did not audit the Council’s consultation document.
1.53
Palmerston North City Council assumed that upgrading its wastewater treatment and disposal system would be entirely funded through the Infrastructure Funding and Financing Act 2020. The Council also assumed that constructing new roads and redeveloping the central library and Te Manawa museum would be funded by a combination of external grants, funding under the Act, public–private partnerships, and developers.
1.54
The Council did not have adequate evidence to support these assumptions. At the time of the audit it had not applied for funding through the Act, nor had it secured other external funding or agreed public–private partnerships. In our view, local government demand on the construction industry also means that it is highly uncertain whether the Council will be able to deliver its capital expenditure programme within the planned time frames.
1.55
As a result, the Council might need to delay or reprioritise some projects. This could have additional cost implications and reduce levels of service.
1.56
We had also provided Palmerston North City Council with an adverse audit opinion for its 2021 long-term plan. That opinion was also about the funding and financing assumptions that the Council had made about upgrading its wastewater treatment and disposal system.
1: Section 93(6) of the Local Government Act 2002 sets out what long-term plans are required to include.
2: See clause 5 of the Severe Weather Emergency Recovery (Local Government Act 2002 – Long-term Plan) Order
2023. The affected councils were Central Hawke’s Bay District Council, Far North District Council, Gisborne
District Council, Hastings District Council, Hawke’s Bay Regional Council, Kaipara District Council, Napier City
Council, and Wairoa District Council.
3: See “Local Water Done Well legislation” at dia.govt.nz.
4: Tauranga City Council’s Consultation Document was audited before the repeal was enacted.
5 These options were not available to the eight cyclone-affected councils, the Chatham Islands Council, or regional councils (except for Greater Wellington Regional Council). See section 42 of the Water Services Acts Repeal Act 2024.
6: See “Local Water Done Well legislation” at dia.govt.nz.
7: Regional Deals is a framework for setting up long-term agreements between central and local government. The agreements provide councils with funding opportunities and resources to make improvements in their region, such as to roads and infrastructure.
8: See section 93b of the Local Government Act 2002.
9: The Appendix explains the different types of opinions we include in audit reports.
10: The Local Government Act 2002 requires a council to budget operating revenue that meets planned operating expenses for each year of the plan unless, after considering certain matters set out in the Act, the council resolves that it is financially prudent to budget less operating revenue.