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What to expect in 2016: The OAG’s view

The Office of the Auditor-General’s Local Government Team

There is no doubt that 2015 was a challenging year for the sector. Amendments to the Local Government Act 2002, introduced in 2014, required local authorities to review how they consult on their strategic plans and also develop new ways of engaging with their communities. Requirements were also introduced to regularly review existing arrangements for the delivery of services.

As part of their 2015-2025 long-term plan (LTP) development, local authorities produced consultation documents to replace, as a method of community engagement, the long, complex, draft LTPs. Our audit of the consultation documents determined that they were more concise and easier to read, and in most cases resulted in more focused feedback from communities.

The introduction of 30-year infrastructure strategies required local authorities to fill a gap in long-term infrastructure planning. Changing demographics, in particular an aging population, will require local authorities to evaluate whether their challenge is how to meet changing demand for services, or how to continue to pay for existing services with a smaller ratepayer base.

These infrastructure strategies have started valuable conversations between each local authority and its community as they prepare to face these challenges.

The recent transition to PBE (Public Benefit Entity) Accounting Standards has been challenging for local authorities, and required a significant amount of work, particularly around the recognition of revenue. The sector has generally responded well to the transition.

Our Office’s 2014/15 work programme theme focused on finding the factors that make for strong public sector governance and accountability.

What became clear from all our reports on this theme is that effective relationships, and adhering to strong governance principles, will inevitably increase the chances of success, regardless of the structure or nature of the entity.

Council-controlled organisations

Our review of council-controlled organisations found that relationships based on trust and respect between a council and its subsidiaries are fundamental to success. Clarity of purpose is essential, along with having effective processes that ensure monitoring and accountability arrangements are robust and transparent.

In 2015, we also looked at the governance arrangements in the arts, culture and heritage sector. We found that the governing bodies take their responsibilities seriously, and have appropriate structures in place to achieve their objectives.

Our report reviewing aspects of the Auckland Manukau Eastern Transport Initiative (AMETI) made 12 recommendations to strengthen the governance, accountability and programme management arrangements around the project. These improvements will support decision-making and programme delivery as AMETI moves toward completion in 2028.

We hope our recommendations will be considered and applied to other projects across the sector to ensure they deliver the intended benefits, at the intended price, in the intended timeframe.

We are currently looking at several co-governance arrangements in place to manage our environment. There are many such arrangements throughout New Zealand established to monitor, protect, and enhance the health of local environments.

So far, we have found that mutual trust and respect, a shared understanding of purpose, and a willingness to learn from each other are the foundations for good environmental outcomes.

Challenging yet exciting times ahead

What lies ahead in 2016? Local body elections will cause some changes as elected representatives come and go. Newly-elected councillors will benefit from induction training that addresses the importance of good governance, the challenges of managing significant assets on behalf of their communities, and the principles of prudent financial management.

This will ensure that new councillors are well placed to assume responsibility for the future strategic direction of their local authority, and to make decisions in the best interests of their communities.

Local authorities will begin considering communication protocols required during the three months before the election. Ensuring that public funds are not used for electioneering, that council staff remain neutral, and that business continues as usual during the election will be important considerations.

Upcoming themes

“Investment and asset management” is our work programme theme for 2015/16. There are opportunities and challenges confronting local authorities as they determine how they provide services, manage existing assets, and pay for new infrastructure in the long term. Changing demographics and growing pressure to contain costs, limit debt and maintain rates at affordable levels will increasingly bring this issue to the fore. The sector needs to be ready to contribute to the debate.

“Information” is the Office’s theme for the 2016/17 year. The use of good quality asset information continues to be important to support robust long-term decision making. In the year ahead, we propose to focus on how public entities use and manage information, and will look in particular at how local authorities are investing to improve understanding of their assets.

Making the best use of available information is essential to meeting this challenge, but it also requires a change in thinking; the status quo is no longer an option in many cases.

As we saw last year with the changed LTP process, the sector has responded well to new challenges. We are confident that local authorities will step up and face these emerging challenges head on, and it is important that they take their communities with them on this journey.

We look forward to working with the sector this year, and beyond, to support local authorities as they continue to deliver services, and plan for the future, in a dynamic environment.

This article was first published in NZ Local Government Magazine’s Perspectives 2016.

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