Local Government Magazine
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Keep it simple – less is more

Auditor-General Lyn Provost calls on local authorities to produce simpler reports that focus more on users’ needs.

It’s a busy time for us all. For me and my staff, this time of year is serious financial audit time. Right now my staff are focusing on finalising the opinions on the accounts of all 78 local authorities, and attending audit committees and council meetings. So, you may have seen me and discussed with me some of the important issues that local authorities are facing at the moment. I thought I’d use this article to reach out to some of the councils I haven’t managed to get to so far this year.

I’d like to talk about something new that my Office has done. Early in my term as Auditor- General I asked people to come up with a theme that we could apply throughout an entire year of audits.

I wanted to know – could one theme apply to all of the work my Office does? I’m the auditor of every one of the country’s 4000 or so public entities including your local authoritiy. Along with these audits, my Office carries out in-depth performance audits, and inquiries into the public sector. All of this work, throughout any given year, provides independent assurance to public entities, parliament, and the public that public money is being used wisely and as intended.

For the year 2012/13, I adopted the theme: Our future needs – is the public sector ready? And, in May this year, I published a report that drew together all of our work under this theme. I called the report Reflections from our audits: Our future needs – is the public sector ready?

LG_1_WebSince May, I’ve been discussing this report with everyone from a petrol station attendant in Taihape to the members of parliament sitting on the Finance and Expenditure Committee (and every other select committee that I present to).

GROWTH LIFTS DEMANDS

There is one particular message from this report that local authorities would benefit from hearing now that you are preparing your long-term plans (LTPs).

Local authorities’ forecast capital expenditure for the 10 years from 2012 to 2022 is $37 billion. Of this, 59 percent is to meet increasing demand or to improve levels of service. This is often as a result of growth.

My Office recognises that local authorities face increased spending to meet regulatory standards (for example, water supply standards), community expectations about levels of service, and changes in population and land use. In my report, I’ve said that local authorities have to balance these demands against what is reasonably affordable for their communities.

Debt is forecast to nearly double during the next 10 years as local authorities use debt to fund long-life assets. The gross debt for local authorities is forecast to increase from $9.8 billion in 2011/12 to $18.7 billion by 2021/22. Based on the 2012/22 LTPs that we audited in 2012 and reported on in 2012/13, the Auckland Council’s group debt was $4.8 billion in 2011/12. It is forecast to reach $12.5 billion in 2021/22, and significantly affects total gross debt across the sector.

NEED TO SIMPLIFY

It’s in that financial context that my report discusses the need for simpler reporting and integrated information. This will come as no surprise to anyone whom I have spoken to about LTPs. For my entire term as Auditor- General, I will continue to encourage local authorities to simplify public reporting.

In my view, local authorities have scope to improve how they report because long-term plans suffer from being too complicated and having too much information. I do not subscribe to the notion that more information is better. Information should be appropriate for the users of that information. Few ratepayers have the time or inclination to digest hundreds of pages of planning documents.

In fact, all accountability reporting would benefit from being focused more on users’ needs. Overall, standard-setters and public entities need to focus on relevant and appropriate reporting that is easy to understand and can be used to properly hold public entities to account. True accountability requires transparency about financial and operational performance, and an appropriate relationship between the two.

In the past few years, local authorities have been good at budgeting for their operational expenditure, but they have tended to overestimate their likely levels of capital expenditure. This indicates the challenges of delivering a diverse range of projects each year, and raises questions about the realism of local authorities’ longer-term assessments of the cost of their asset renewal and capital development programmes, as forecast in LTPs.

I consider that the new consultation document, which you are all now engaged in, is a constructive step in encouraging the focus on the right matters; while countering the risk of too much or irrelevant information.

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