NSW councils applaud auditor-general's first foray into their sector

By Stephen Easton

February 6, 2018

New South Wales residents should be given more detailed information about how local councils spend their money and what they get out of it, the auditor-general recommends, and the peak body that represents them is all for it.

The NSW audit office’s first report on the local government sector calls on the state government regulator to set a higher bar for reporting across the board. The local government association says they’ve been waiting years for reform and the state government has been dragging its feet.

“Councils have a high level of autonomy in decisions about how and to whom they provide services,” the report observes, “so it is important that local communities have access to information about how well they are being delivered and meeting community needs.”

Council reports should demonstrate service delivery outcomes, the audit report argues, rather than just simple outputs. Objectives and targets should be clearly stated so people can see how their local government’s performance changes over time. This, of course, remains a challenge for a lot of agencies in the other tiers of government as well.

The Office of Local Government is in the process of reviewing the current planning and reporting framework. Acting CEO Tim Hurst told auditor-general Margaret Crawford that new guidelines would be published soon with stronger service delivery reporting requirements and said “further guidance and support to councils” would address her main recommendations.

One problem is that the present Integrated Planning and Reporting framework is “silent on efficiency reporting and provides limited guidance on how long-term strategic documents link with annual reports” according to the audit.

The auditors looked at 130 local government annual reports and found only one third of “reported activites” contained information on outcomes, and less than one fifth showed how performance had improved or deteriorated over time. More than half explained what the council was aiming to achieve, but there were also plenty that did not:

“We found more than a third of reported objectives in council reports do not have a related target, making it difficult for the community to assess a council’s achievements in implementing its service delivery program.”

The auditors observed “an interest amongst councils in improving their reporting and broad agreement with the good practice principles developed as part of the audit” and indeed Local Government NSW is pleased with the report’s recommendations to the regulator.

The peak body agrees that a “more transparent and meaningful” reporting framework is needed, but is also hoping the OLG will consider how red tape can be reduced. Its response notes the sector “was still looking forward to the NSW Government’s response to an April 2016 [Independent Pricing and Revenue Tribunal] report which examined the reporting and compliance burdens” on councils.

“Work to implement a single state-wide database to assist individual councils to meet their compliance requirements will be considered as part of the government’s response” to the IPART report, Hurst wrote in his response.

That IPART review counted 67 different acts, administered by 27 different state government agencies, that local governments have to comply with.

“Consolidating and coordinating reporting requirements under this framework would assist with better reporting over time and comparative reporting,” the audit office contends. “It would also provide an opportunity for NSW Government agencies to reduce the reporting burden on councils by identifying and removing duplication.”

Rural councils generally need to improve their reports more than their counterparts in regional population centres and metropolitan areas. The auditors didn’t spend much time wondering why – differences in population and geography are the obvious starting point – because there is “a clear rationale for giving more intensive support and guidance on service reporting to rural councils in the near term” regardless.

The audit recommended that the OLG issue its new comprehensive guidance on better reporting practices by mid-year, and make a start on simplifying the process by consolidating the information that councils need to provide to various state agencies.

Crawford would also like the regulator to “progress work” on a new Performance Measurement Framework and the associated KPIs by halfway through the year, and assist rural councils with improving their reporting capabilities. Hurst says the OLG is already working on the former, and agrees to “look at working with” rural councils, either individually or through joint organisations.

‘NSW Government needs to get cracking’

LGNSW president Linda Scott, a City of Sydney councillor, said the organisation had been calling for a better reporting framework for over five years and hopes the auditor-general’s first foray into the sector will give new impetus to a slow reform process.

“The 2012 audit of the OLG found the public reporting system required of councils did not include adequate information to judge council performance, and although OLG commenced a review of the Framework in 2013 it was deferred, with revised guidelines due last year,” Scott said in a statement.

“This report from the Auditor General is a timely reminder to the Government that if they are genuine about council transparency and accountability to ratepayers they need to get cracking to work with the sector on new guidelines and a response to the IPART inquiry.”

This reform will need to take account of the fact that some local governments are very different to others.

The LGNSW president repeated the concerns of some councils, which made it into the audit report, “that the current approaches to comparative reporting did not adequately acknowledge that councils need to tailor their service types, level and mix to the needs of their community.”

Essentially, these basic output-based measures can lead to unfair comparisons, the report explains:

“Comparative reporting approaches tend to focus on output measures such as number of applications processed, library loans annually and opening hours for sporting facilities, rather than outcome measures.

“These approaches risk unjustified and adverse interpretations of performance where councils have made a decision based on community consultation, local priorities and available resources.”

To come up with new outcome-focused KPIs for councils that consolidate reporting requirements for multiple parts of government, the OLG should adopt a “partnership approach” and ensure comparisons are between groups of councils of a similar size and location, the report recommends, partly based on a similar experience in Victoria.

Linda Scott agrees. “LGNSW urges the Government and the OLG to accept the Auditor General’s recommendations that they adopt a partnership approach to the development of a better reporting system, and that they consolidate the raft of reporting requirements,” she said.

“I also call upon the Government to remove the secrecy provisions so the Auditor General can share her draft findings, so the entire sector can work together to build a smart reporting system that is able to clearly demonstrate when councils are efficiently delivering the outcomes their communities want and need.”

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