Local Government Better Practice Guide Performance Statement 2014-15

 
Local Government Better Practice Guide Performance Statement 2014-15
Local Government
Better Practice Guide
                 2014-15

       Performance
         Statement
Local Government Better Practice Guide Performance Statement 2014-15
Local Government Victoria

Department of Transport, Planning and
Local Infrastructure
1 Spring Street Melbourne Victoria 3000

T: 03 9208 3631

www.dtpli.vic.gov.au/localgovernment

ISBN 978-1-922250-39-1

Authorised and published by the
Victorian Government
1 Treasury Place, Melbourne

Unless otherwise indicated, this work is made
available under the terms of the Creative
Commons Attribution 3.0 Australian licence.

To view a copy of this licence, visit http://
creativecommons.org/licenses/by/3.0/au/

It is a condition of this Creative Commons
Attribution 3.0 Licence that you must give credit to
the original author who is the State of Victoria.

Disclaimer

The materials presented in this booklet are for information purposes only. Information is provided solely on
the basis that readers will be responsible for making their own assessment of the matters discussed and are
advised to verify all relevant representations, statements and information and obtain independent advice
before acting on any information contained in or in connection with this booklet.

While every effort has been made to ensure that the information is accurate, the Department of Transport,
Planning and Local Infrastructure will not accept any liability for any loss or damage which may be incurred
by any person acting in reliance upon the information.

ACCESSIBILITY

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telephone (03) 9208 3631 or email local.government@dtpli.vic.gov.au

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Contents
1.   Introduction                                     1
2. Planning and Accountability Framework              3
3. Performance Statement (Overview)                   4
4. Performance Statement (Guidance)                   9
5.   Performance Statement (2014/15 Model)           17
6. Performance Statement (Full Model)                29
Appendix A – Example Workplan and Timetable          43
Appendix B – Materiality Guidelines                  45
Glossary                                             49
References                                           51
End Notes                                            52

Abbreviations
AAS		           Australian Accounting Standards

CEO		           Chief Executive Officer

EMT		           Executive Management Team

LGV		           Local Government Victoria

VAGO		          Victorian Auditor-General’s Office

VCAT		          Victorian Civil and Administrative Tribunal
1 Introduction

Local government in Victoria manages                    About this guide
approximately $73 billion of community
                                                        Councils are required to prepare an annual report
assets and infrastructure and spends                    in respect of each financial year consisting of
around $7.12 billion on the provision of                three parts:
services annually.i Local government,
in partnership with other levels of                      1. Report of operations: information
                                                        		  about the operations of the council
government, is responsible for aspects of
everyday life that people care about deeply                       2. Performance statement: audited
– from vibrant and safe public spaces, to                            results achieved against the prescribed
                                                                     performance indicators and measures
accessible libraries, to strong local business
and employment opportunities. Effective                           3. Financial statements: audited financial
planning and reporting by councils is                                statements prepared in accordance
                                                                     with the Australian Accounting
essential for ensuring transparency and                              Standards.
accountability to the community and other
                                                        This guide has been developed to help local
levels of government as to how public
                                                        government in meeting statutory requirements
money is being spent and the quality of                 relating to the preparation of an audited
services delivered.                                     performance statement. Guidance on the
                                                        preparation of the report of operations and
                                                        audited financial statements can be found at
The Local Government Act 1989                           the Local Government Victoria (LGV) website
                                                        www.dtpli.vic.gov.au/localgovernment
The Local Government Act 1989 (the Act) states
the primary objective of a council is to endeavour      The guide is presented in five sections.
to achieve the best outcomes for the local              1.   Planning and Accountability Framework
community having regard to the long-term and                 provides an overview of the relationship
cumulative effects of decisions.ii                           between the key planning and reporting
The Act sets out local government in Victoria:               documents
•   is a distinct and essential tier of governmentiii   2. Performance Statement (overview) provides
•   must provide governance and leadership for the         an overview of the statutory requirements
    local community through advocacy, decision             and best practice guidance for preparing a
    making and actioniv.                                   performance statement

The Act states it is essential there is a legislative   3.   Performance Statement (guidance) provides
framework that provides for councils to be                   detailed guidance on the preparation and
accountable to their local communities in the                audit of the performance statement, including
performance of functions and the exercise of                 guidance for ensuring the quality and integrity
powers and the use of resources.v It is a statutory          of information
requirement under the Act that councils prepare         4.   Performance Statement (2014-15 model)
and report on medium and short-term plans                    provides a model performance statement
to discharge their duties of accountability and              for inclusion in the annual report for the
transparency to their communities.                           2014-15 year that complies with the Act and
                                                             Local Government (Planning and Reporting)
                                                             Regulations 2014 (the regulations)

                                                                                                               1
1 Introduction

    5.   Performance Statement (full model) provides
         a model performance statement for inclusion
         in the annual report that complies with
         the Act and the regulations following the
         conclusion of the transitional provisions in
         the Act and Regulations (i.e. the financial year
         commencing on 1 July 2018)

    This guide is intended for use by specialists in the
    field of local government performance reporting
    as well as senior officers including chief executive
    officers (CEOs). It may also be instructive for
    councillors. Each council retains the responsibility
    for preparing its performance statement, including
    the format and the disclosures made. This
    guide represents the performance statement
    presentation required by LGV.

    The guide directs users to related information
    and further guidance. Endnotes are used to
    reference legislative provisions and other relevant
    information. Illustrative information and examples
    are provided in tables and boxed text.

2   Local Government Better Practice Guide Performance Statement
2 Planning and Accountability
  Framework

The planning and accountability framework is              The following diagram shows the relationships
found in part 6 of the Act and in the regulations.        between the key planning and reporting
The legislation requires councils to prepare the          documents that make up the planning and
following documents:                                      accountability framework for local government.
                                                          It also shows that there are opportunities for
•   a council plan within the period of six months
                                                          community and stakeholder input and feedback
    after each general election or by 30 June,
                                                          at each stage of the planning and reporting cycle.
    whichever is latervi
                                                          This is important to ensure accountability to
•   a strategic resource plan for a period of at least    residents and ratepayers.
    four years and include this in the council planvii
•   a budget for each financial yearviii
•   an annual report in respect of each financial
    year.ix

Figure 1 - Planning and Accountability Framework

     Time horizon                            Planning                          Reporting            Timing

     Medium term                                                                                  Jan – Jun
                          Council plan                   Stakeholder
                                                         and
                          > Strategic objectives
                                                         community
                          > Strategies
                                                         engagement
                          > Strategic indicators

                                                                                                  Feb – Jun
                          Strategic resource plan
                          > Financial statements
                          > Statements of non-
                            financial resources

                                                                                                  Mar – Jun
                          Budget
                          > Services and initiatives
                          > Service outcome
                            indicators
                          > Major initiatives
                          > Financial statements
                                                                                                  Jul – Sep
                                                                        Annual report
                                                                        > Report of operations
    Short term
                                                                        > Financial statements
                                                                        > Performance statement

                                                                                                               3
3 Performance Statement
      (Overview)

    Statutory requirements                                         Better practice guidance
                                                                   The performance statement contains information
    “The Act requires a council’s annual report to
                                                                   about the performance of the council for the
    contain an audited performance statement”
                                                                   financial year and is a key section of the annual
                                                                   report whereby council makes itself accountable
    Sections 131, 132 and 133 of the Act state that:               to the community.
    •    the performance statement must contain the                In 2012, the then Victorian Auditor-General
         prescribed indicators and measures of service             recommended that all councils should critically
         performance outcome, financial performance                review the performance information in their
         and sustainable capacity and the results for              annual reports to ensure it is relevant, balanced,
         each indicatorx                                           appropriate and clearly aligned with their council
    •    the performance statement must be submitted               plan strategic objectives to ensure performance
         to the auditor as soon as possible after the end          reporting is meaningful to the community.xiv In
         of the financial year and certified in its final          response, the Victorian Government introduced
         form by two councillors, the CEO and principal            a mandatory system of performance reporting
         accounting officerxi                                      for councils which prescribes performance
                                                                   information to be included in councils’ annual
    •    the auditor must prepare a report on the
                                                                   reports.
         performance statement to be included in the
         annual reportxii                                          The performance reporting framework is set out
                                                                   in the Act and regulations with further guidance
    •    the annual report must be submitted to the
                                                                   found in the Local Government Performance
         Minister for Local Government within three
                                                                   Reporting Framework Indicator Workbook to
         months of the end of each financial year (30
                                                                   support councils reporting against the prescribed
         September).xiii
                                                                   performance indicators and measures.
    In addition to sections 131, 132 and 133 of the
                                                                   Councils must describe the prescribed indicators
    Act, councils should review part four of the
                                                                   and measures in the performance statement so it
    regulations for further information required in the
                                                                   is clear to the audience what is being measured.
    performance statement.
                                                                   In addition, the performance statement must
                                                                   include the results achieved in relation to the
                                                                   prescribed service performance outcome,
    Checklist                                                      financial performance and sustainable capacity
                                                                   for the financial year and three preceding
                                                                   years.xv For the financial performance indicators
    The performance statement must include:                        and measures, the performance statement must
                                                                   also include the forecast results for four years
          the indicators, measures and results of the
                                                                   based on the financial statements included in
          prescribed service performance outcome
                                                                   the strategic resource plan.xvi Reporting trend
          indicators
                                                                   information helps the reader understand changes
          the indicators, measures and results of the              in council performance over time and acts as
          prescribed financial performance indicators              a point of reference for results. The regulations
                                                                   require that councils must also provide an
          the indicators, measures and results of the
                                                                   explanation of any material variations in the
          prescribed sustainable capacity indicators
                                                                   results between the current year and other
          any other information required by the                    years disclosed, to enable the reader to form an
          regulations.                                             understanding of the reason for the variation.xvii

4   Local Government Better Practice Guide Performance Statement
To provide context to the performance results,          This performance information in the report of
the regulations also require the performance            operations along with that in the performance
statement to contain a description of the               statement should form part of a performance
municipal district, including its size, location and    reporting framework with quarterly reporting
population.                                             of performance results to senior management,
                                                        the audit committee and councillors. Taking an
Additional performance indicators can be included
                                                        integrated approach to performance reporting
by councils in the performance statement noting
                                                        can help councils understand how well they
that they will be subject to audit by the Victorian
                                                        are performing in meeting the needs of their
Auditor-General’s Office (VAGO) and must pass
                                                        communities as well as achieving the strategic
the test of relevance and appropriateness as
                                                        objectives in their council plan.
defined by VAGO.
In addition to the performance information
required to be disclosed in the performance
statement, councils are also required to disclose
other performance-related information in
the report of operations in the annual report
including:
•   a governance and management checklistxvii
•   the prescribed indicators and measures of
    service performance, results achieved and an
    explanation of material variancesxix
•   a statement that reviews the performance of
    the council against the council plan including
    results achieved in relation to the strategic
    indicators included in the council plan.xx

     For further information refer to:

     •   Department of Transport, Planning and Local Infrastructure (2014), Local Government Performance
         Reporting Framework Indicator Workbook, State of Victoria

     •   Department of Transport, Planning and Local Infrastructure (2014), Local Government Report of
         Operations Better Practice Guide, State of Victoria

     •   Department of Transport, Planning and Local Infrastructure (2014), Local Government Model
         Financial Report, State of Victoria

                                                                                                           5
4 Performance Statement
      (Guidance)

    Quality and integrity of information                           Councillors take ultimate responsibility for the
                                                                   performance of a council and are accountable to
    Internal control environment                                   the ratepayers and community of the municipality.
                                                                   As councillors are not involved in the day-to-
    All performance information reported by a                      day operations of the council, they rely on the
    council to the community, ratepayers and other                 organisation’s policies, procedures and quality
    stakeholders should be subjected to a robust                   assurance protocols to provide assurance about
    review to ensure the factual accuracy and integrity            the information reported to them and in turn
    of the information signed off by the CEO and                   reported to the community and other stakeholders.
    councillors.
                                                                   Performance reporting by a council in the annual
    Internal control environment in this context                   report, whether it is in the report of operations or
    refers to:                                                     the performance statement, can often be more
        a council’s tone and attitude towards                     readily understood by members of the community
         performance reporting                                     than the financial reports. While councils have
                                                                   an extensive and mature environment in place to
        the level of commitment to high quality
                                                                   provide assurance around financial performance
         internal and external reporting
                                                                   information, the environment for reporting non-
        the policies, procedures and quality assurance            financial performance information about services
         protocols implemented to provide reasonable               and outcomes has not historically been as
         assurance regarding the accuracy of                       developed.
         performance measures reported
        the level of oversight by a council’s executive
         management team (EMT), audit committee
         and the councillors themselves.
    In plain language, what the organisation does
    to provide councillors with assurance about the
    performance information the council reports to the
    community.

6   Local Government Better Practice Guide Performance Statement
Policy

To support the need to have a strong internal
control environment around performance
reporting, a council should adopt a performance
reporting policy providing an overview of a
council’s attitude and commitment to performance
reporting. Suggested content for a performance
reporting policy is outlined below.

  A performance reporting policy should include:
                                                                Box
                                                                 1

            the council’s objectives in reporting performance (i.e. is it a compliance exercise, or
            does council seek internal focus and motivation from performance reporting?)
            identification of the council’s stakeholders (i.e. does compliance with the regulations
            through the annual report disclosures meet stakeholders’ information requirements?)
            the protocols for the dissemination of performance information by the council in
            circumstances other than formal published performance reports (i.e. are performance
            measures reported to the audit committee and councillors throughout the year and
            how rigorous is the process of verifying the performance measures reported?)
            whether the council considers the prescribed indicators of service performance,
            financial performance and sustainable capacity to be a relevant, appropriate
            and comprehensive set of indicators of the council’s performance against its
            stated strategic objectives (i.e. has council identified a need to provide additional
            information, indicators and measures to communicate performance?)
            the level of assurance that the CEO and principal accounting officer require to enable
            them to certify the performance statement (i.e. is the assurance provided by a direct
            review of the supporting evidence by the CEO and principal accounting officer or is
            assurance provided by the responsible directors for each relevant service area?)
            the role of the audit committee in advising the council of the adequacy of the
            council’s performance reporting to external stakeholders
            the level of assurance the councillors require to enable adoption of the performance
            statement.
4 Performance Statement (Guidance)

    Procedures                                                      is prepared infrequently throughout the year or
                                                                    in circumstances of staff transition. Standardised
    The council should also document the procedures                 procedures for performance reporting can also
    involved in preparing performance reporting                     enhance consistency of the information reporting,
    information to build and retain the organisation’s              particularly where the measures are reported
    knowledge. Formalised procedures can provide                    across a time span of several years. Suggested
    efficiency and enhance planning to ensure                       content for performance reporting procedures is
    timeframes are met where performance reporting                  outlined below.

        Performance reporting procedures should include:
                                                                              Box
                                                                               2

                       specific sources of data for each indicator (i.e. software, report name, report fields
                       selected, any filters applied and supported with screen captures or hard copy
                       examples)
                       contact details for relevant personnel both internally and where data is provided to
                       the council by third parties (e.g. Department of Health or operators of outsourced
                       services)
                       nomination of officers responsible for the collation and verification of data collected
                       the frequency at which data needs to be collected (i.e. daily, weekly, monthly,
                       quarterly or annually) and the lead time on collecting the data
                       identification of other controls that may exist in the collection and verification of
                       indicator data to ensure it is complete and accurate (e.g. is the data monitored on a
                       regular basis to identify unusual or unexplained variances?)
                       nomination of the council officer responsible for ensuring performance reporting data
                       is centrally collated in time for:
                       • internal reporting
                       • preparation of the performance statement
                       • audit of the performance statement
                       the timing and frequency with which performance indicators and measures are
                       reviewed by the EMT
                       the actions to be taken by the audit committee when reviewing the draft performance
                       statement
                       the format of any formal statements provided by responsible officers to the CEO,
                       principal accounting officer and councillors.

8   Local Government Better Practice Guide Performance Statement
Third party information                                  It is not uncommon for a council to outsource
                                                         the operation of some service areas such as the
Some of the prescribed indicators require the            operation of swimming pools or the kerbside
collection of supporting data from sources external      garbage and recycling collections. While a council
to the council. These include:                           can outsource some day-to-day operational
•   annual community satisfaction survey results         activities, it still retains responsibility for the
    from LGV                                             oversight of the provision of the service to the
                                                         community and ultimate risk in the management
•   municipal population and socio-economic              of facilities and operations.
    disadvantage data from the Australian Bureau of
    Statistics                                           Councils may need to review and revise service
                                                         level agreements with contracted service providers
•   home and community care municipal target             to ensure the data required for performance
    population from the Department of Health             reporting is provided within the council’s required
•   notice of decisions from VCAT hearings.              timeframe.

The planning process for the preparation of
performance reporting should separately identify
data required from external sources, and the
reporting timetable and data format requirements
should be communicated to the third party data
providers to ensure the council receives the
correct data at the required time.
The format and content of the data received from
third parties should be sufficiently robust to support
the level of assurance required by councillors,
the CEO and the principal accounting officer in
certifying the performance statement. As a number
of the indicators will be subject to audit, council
officers should request supporting evidence at a
level that enables a critical review and assessment
of the reliability of the data provided. For example,
an email advising a numeric input for a measure’s
numerator or denominator does not provide the
same level of assurance as a copy of the source
report from that third party’s operational software.

                                                                                                               9
4 Performance Statement (Guidance)

     Operational control                                                  Audit committee

     In some instances a council that has outsourced                      The audit committee is an advisory committee
     the provision of services or transferred the                         to the council and its membership is usually a
     functional operation of facilities through formalised                combination of councillors and independent
     contracts, leases or funding agreements may                          advisors. This provides a balance between in-depth
     believe that it no longer has operational control
                                                                          understanding of the council’s strategic objectives
     of the service. If a council does not believe it
                                                                          and operations and the independence required to
     has operational control of one of the prescribed
     services and does not collect data to facilitate                     challenge the information presented to the council
     performance reporting, it will need to obtain and                    for consideration. The draft performance statement
     document an understanding of the background of                       should be reviewed by the audit committee as
     the original outsourcing decision and why it does                    part of the internal control environment to provide
     not believe it can influence the outcome of the                      an informed basis for a recommendation to the
     service delivered.                                                   council for adoption. The audit committee’s
                                                                          review should include an assessment of the
                                                                          materiality thresholds applied for each indicator
        To help councils determine
                                                                    Box   and the resulting explanations of material variations
        whether they have operational
                                                                     3    to ensure the explanations are adequate and
        control of a funded service, the                                  consistent with their understanding of the council’s
        following tests should be applied:                                performance.
                                                                          The audit committee’s assessment of the quality
                                                                          of the assurance provided to support the draft
        1.    If the service is asset dependent such as                   performance statement will be enhanced if
              in the case of a pool then the first test                   the audit committee receives reports on the
              will be whether all the risks and rewards                   performance indicators at least on a quarterly
              associated with owning the asset have                       basis throughout the year enabling the members
              been transferred away from the council                      to establish a level of normalised and expected
              (e.g. this could be done through a lease                    results. The audit committee’s charter should
              agreement)                                                  include its roles and responsibilities in regard to the
        2.    The second test relates to whether the                      council’s reporting of performance as part of an
              council has significant influence over the                  overall performance reporting framework.
              service outcomes – i.e. does the council                    Events after year end
              have the capacity (ability or power) to
                                                                          Occasionally an event will occur after the end
              substantially affect the outcomes of the
                                                                          of the reporting year that could impact on the
              service. For example, this might be the
                                                                          manner in which the performance indicators and
              case if, despite the council making a
                                                                          measures are reported or interpreted. For example
              financial contribution, decisions over the
                                                                          a particular service provided by the council could
              service outcomes rest with the funding
                                                                          cease after 30 June.
              agency.
                                                                          The format of the certification of the performance
                                                                          statement specified in the regulations includes a
     In many instances a council retains a sufficient                     representation that:
     level of responsibility and obligation under the
                                                                             At the date of signing, we are not aware of
     formal agreement that would suggest the service is
                                                                             any circumstances that would render any
     still ultimately under the control of council.
                                                                             particulars in the performance statement to
                                                                             be misleading or inaccurate.

10   Local Government Better Practice Guide Performance Statement
The council’s framework for performance reporting                  Roles and responsibilities
should include procedures to ensure any events
that occur after year end that could impact on the                 In order to meet the reporting timelines for
results are identified and brought to the attention                preparation and audit of the performance
of the council, CEO and principal accounting                       statement a council should formally allocate
officer prior to certification of the performance                  roles and responsibilities across the council.
statement.                                                         The following table provides a summary of the
                                                                   responsibilities for each of the key parties in the
A mechanism for this procedure could be to seek
                                                                   performance statement reporting process.
a formal certification from each of the responsible
directors dated as close as possible to the date of
certification.

                                                                      Roles and Responsibilities
                                                                                                                   Box
 Role                       Responsibilities
                                                                                                                    4

 Responsible service         •   extract /collate data to calculate results
 area officer                •   request and obtain data from third parties (if applicable)
                             •   critically review data to ensure the data is accurate and complete
                             •   provide supporting evidence in preparation for management review
 Service area                • review results
 manager/director            • review the supporting source data to verify the calculation of the results
                             • investigate unusual or unexpected results
                             • monitor negative or unanticipated trends and recommend options for an
                               appropriate response
                             • provide explanations for material variances
                             • provide assurance representations to EMT as to the accuracy and completeness
                               of the results and the adequacy of the supporting source data
                             • engage with team members for planning achievement of future performance
                               objectives
 Performance                 •   prepare the performance reporting workplan and timetable1
 reporting team              •   communicate requirements to responsible service areas
                             •   collate quarterly and final results to be reported
                             •   provide quarterly performance reports to the EMT, audit committee and Council
                             •   prepare the draft performance statement and supporting data evidence for audit
 Executive                   •   receive and consider quarterly performance reports
 Management Team             •   consider recommendations for intervention where unfavourable or
 (EMT)                           unanticipated trends are identified
                             •   review the draft performance statement and consider the results in the context
                                 of the quarterly reports received throughout the year
                             •   identify material variations at the council level for explanation (i.e. in the context
                                 of the council’s priorities)
                             •   review the assurance representations provided by service area managers/
                                 directors
                             •   provide a recommendation to the CEO and principal accounting officer

1 Appendix A to this guide contains a sample workplan and timetable for performance reporting.

                                                                                                                          11
Roles and Responsibilities
                                                                                                                          Box
         Role                           Responsibilities
                                                                                                                           4

         Principal accounting •               review the materiality levels adopted in identifying the variations requiring
         officer                              explanations in the performance statement
                              •               review and approve the draft explanations for material variances in the
                                              performance statement
                                        •     review the recommendation provided by EMT for certification of the
                                              performance statement
                                        •     once satisfied with the quality of reporting, certify the performance statement in
                                              the required format
         Chief Executive                •     review the materiality levels adopted in identifying the variations requiring
         Officer (CEO)                        explanations in the performance statement
                                        •     review and approve the draft explanations for material variations in the
                                              performance statement
                                        •     review the recommendation provided by EMT for certification of the
                                              performance statement
                                        •     provide a recommendation to the audit committee
                                        •     provide a recommendation to the council
                                        •     certify the performance statement in the required format following completion
                                              of the audit
         Audit committee                •     receive and consider quarterly performance reports
                                        •     review the draft performance statement and consider the results in the context
                                              of the quarterly reports received throughout the year challenging any unusual or
                                              unexpected results
                                        •     enquire as to the internal control framework and level of assurance received
                                              around the accuracy and completeness of the information reported
                                        •     discuss the results of the audit of the performance statement with the external
                                              auditor
                                        •     provide a recommendation to the council
         Council                        •     receive and consider quarterly performance reports
                                        •     review the draft performance statement and consider the results in the context
                                              of the reports received throughout the year challenging any unusual or
                                              unexpected results
                                        •     review the recommendations received from the CEO, principal accounting
                                              officer and audit committee
                                        •     adopt the performance statement in principle
                                        •     have two councillors certify the performance statement in the required format
                                              following completion of the audit
                                        •     adopt the annual report
                                        •     submit the annual report to the Minister

     Each of the parties in the above table also has                       •   a statement that reviews the performance of
     similar responsibilities in regard to performance                         the council against the council plan including
     information disclosed in the report of operations in                      results achieved in relation to the strategic
     the annual report including:                                              indicators included in the council plan.xxiii

     •     the governance and management checklistxxi                      Refer to the Department of Transport, Planning
                                                                           and Local Infrastructure (2014), Local Government
     •     the prescribed indicators and measures of
                                                                           Report of Operations Better Practice Guide for
           service performance and the results achievedxxii
                                                                           more information.
12   Local Government Better Practice Guide Performance Statement
Preparation of the performance
statement
Form and content

The Act requires a council to include in its annual
report an audited performance statement. While
the format of the performance statement is not
prescribed, the Act and regulations require the
performance statement to contain:
•   a description of the municipal district, including   Materiality
    its size, location and population
                                                         The regulations require the performance statement
•   the results of the prescribed indicators and
                                                         to contain an explanation of any material variations in
    measures for:
                                                         the results contained in the performance statement.
    - service performancexxiv                            Materiality, in the context of performance reporting,
    - financial performancexxv                           is the threshold at which omission or misstatement
    - sustainable capacity performancexxvi               of information could influence the decisions made
                                                         and expectations formed by reference to the data
•   for the prescribed indicators and measures, the      reported. For example:
    results for:
                                                         •   a significant change in a service performance
    - the current financial year                             result that does not have an explanation could
    - the three preceding years (following a 		              give the reader the impression that the service is
      transition period)xxvii                                not important to the council
    - results forecast by the strategic resource 		      •   a significant misstatement in a sustainable capacity
      plan (financial performance only)                      result could result in incorrect strategic planning
•   explanations of any material variations in 		            decisions being made by the council in the future.
    the results                                          By contrast, the provision of explanations for all results
•   certification in the prescribed format by            will not identify to the reader the important messages
    two councillors, the CEO, and the principal          about the council’s performance as the key messages
    accounting officer                                   may be lost in the volume of information.

•   a copy of the auditor’s report on the                The decision about what is material has both
    performance statement.                               qualitative and quantitative factors. The qualitative
                                                         factors include:
Basis of preparation                                     •   the council’s overall strategic objectives and
                                                             priorities as identified in the council plan
The primary purpose of the performance statement
is to communicate the council’s performance              •   the relative importance of the service to the
to the community in the context of prior                     council in the context of its whole operations
performance and for the financial performance
                                                         •   what is important to the stakeholders and
indicators, forecast performance. To help the
                                                             readers of the performance statement
reader understand the objective and purpose of the
performance statement and provide a context, the         •   the relevance and appropriateness of the
council should explain the performance reporting             indicator in accurately reporting performance
framework and key estimates and judgements used          •   the drivers underlying the calculation of the
in preparing the performance statement.                      measure.
                                                                                                                      13
4 Performance Statement (Guidance)

     An indicator that is more important to a council or            Certification
     its stakeholders will be more sensitive and therefore
     will have a lower materiality threshold and require            The regulations prescribe the format and content
     more expansive explanations. Conversely a less                 of the performance statement certification and
     sensitive indicator can bear a higher materiality              require that it be certified by two councillors, the
     threshold and will require less or no explanation of           CEO and principal accounting officer. The content
     variances.                                                     of the certification should include:

     Quantitative factors are easier to define as                   •   an opinion as to the fair presentation of the
     indications of materiality, however councils should                council’s performance presented in accordance
     be aware that even though a variance may not                       with the Act and regulations
     be significantly different when quantified the                 •   confirmation that the performance statement
     variance may be important and warrant explanation                  contains the relevant performance indicators,
     when assessed against the qualitative materiality                  measures and results in relation to service
     factors. The results of the prescribed indicators                  performance, financial performance and
     and measures consist of absolute numbers,                          sustainable capacity
     percentages, ratios and dollars and accordingly the
     materiality threshold decision will be different for           •   confirmation that at the date of signing,
     each indicator.                                                    the persons signing are not aware of any
                                                                        circumstances that would render any particulars
     Appendix B to this guide contains quantitative                     in the performance statement to be misleading
     materiality guidance for explaining material                       or inaccurate
     variations in the results of the prescribed
     performance indicators and measures in the                     •   confirmation that the persons signing have
     performance statement for the following                            been authorised by the council to certify the
     comparisons:                                                       performance statement in its final form.

     •   current year versus the prior year results                 The council, the CEO and principal accounting
                                                                    officer need to obtain sufficient assurance about
     •   current year versus the three preceding year               the quality of performance reporting and the ex-
         results                                                    planation of variations to enable them to certify the
                                                                    performance statement.
     •   current year versus the results forecast by
         the strategic resource plan (for financial
                                                                    Audit of the performance statement
         performance indicators only).

     Each council will need to make its own assessment              The Act requires the annual report to include an
     of the appropriate materiality threshold taking                audited performance statement. The purpose
     account of both qualitative and quantitative                   of an audit is to enhance the credibility of the
     factors and circumstances specific to that council.            information reported through the provision of an
     Councils should also be cognisant when preparing               independent opinion on the report. The opinion
     explanations of material variations that they                  provided is in addition to the certification of the
     will be subject to audit and must be capable of                performance statement by the relevant officers and
     substantiation and supported by adequate source                councillors. The audit opinion does not take the
     documentation.                                                 place of this certification.

                                                                    The audit will be conducted by the VAGO or
                                                                    appointed contractors in accordance with the
                                                                    Audit Act 1994, Australian auditing standards and
                                                                    professional and ethical requirements. This audit

14   Local Government Better Practice Guide Performance Statement
Checklist for certification
                                                 Box
                                                  5

      The checklist for certification must include:
             the results of the prescribed indicators and measures are supported by sufficient and
             appropriate documentation
             the explanations for material variations are consistent with the adopted materiality thresholds
             and include explanation for unusual or unexpected results
             appropriate enquiries have been made up to, including and post the date of certification
             about the existence of any circumstances that may have arisen that would render the
             performance statement misleading or inaccurate
             the performance statement includes all the indicators, measures, results and other
             information prescribed by the Act and regulations
             the certification is in the format prescribed by the regulations
             the EMT has reviewed the results of the prescribed indicators and measures, materiality
             thresholds and explanations provided for material variations and provided a recommendation
             that the performance statement be certified by the CEO and principal accounting officer
             the audit committee have reviewed the performance statement and explanations for
             material variations and have recommended the performance statement be adopted in
             principle by the council and certified
             the council has adopted the performance statement in principle and authorised the relevant
             officers and councillors to certify the performance statement once audit clearance has been
             obtained
             all issues raised by the auditor have been resolved and VAGO has provided clearance to
             certify the performance statement.

framework provides a methodology for auditors              •   to have the audit conducted in an efficient and
to plan an audit, gather sufficient appropriate                effective manner with as little disruption to the
audit evidence and conclude on results of testing              organisation’s operations as possible.
to form an audit opinion on the performance
                                                           A council will have the best chance of achieving
statement. The opinion provided is not a guarantee
                                                           these objectives through the creation of a strong
that the information is 100 per cent correct; rather
                                                           internal control environment, planning and
it is an opinion providing reasonable, but not
                                                           coordinating the year-end performance statement
absolute, assurance.
                                                           preparation and anticipating the amount and
The major objectives of the audit process from a           persuasiveness of the supporting data required to
council’s point of view are:                               be presented for audit.

•   to provide sufficient supporting documentation         During the audit, the council’s officers will be
    for the results of the prescribed indicators           required to make a number of representations
    and measures and explanations of material              to the auditors about the completeness and
    variations in the results to obtain a ‘clear’ audit    accuracy of the performance reporting data
    opinion to co-ordinate the preparation for and         and about the occurrence of any events after
    conduct of the audit to meet the performance           year end that could impact on the performance
    statement reporting milestones                         statement. The Australian auditing standards

                                                                                                                   15
require the auditor to obtain confirmation of
     such representations in writing in the form of
     a management representation letter signed by
     the CEO and principal accounting officer. This is
     usually requested at the end of the audit prior to
     certification of the performance statement.

         Checklist for audit
                                                                    Box
                                                                     6

             Before the audit, the council must ensure:
                       the performance statement has been drafted and includes all the indicators, measures,
                       results and other information prescribed by the Act and regulations
                       the results of each indicator and measure is supported by copies of documentation
                       identifying the data source of the numerator and denominator and has been collated
                       centrally
                       information provided as source data by third parties is robust, the source of the data is
                       evident and the calculation of the measures is supported by copies of documents
                       the explanation of material variations in the results is capable of substantiation, is supported
                       by adequate source documentation and the basis for identifying the materiality threshold for
                       each indicator and measure has been documented
                       the draft performance statement including the results, explanation of material variations and
                       supporting documentation has been reviewed by the relevant service area director
                       the draft performance statement including the results and explanation of material variations
                       has been reviewed by the principal accounting officer, CEO and EMT
                       staff in each service area are aware that the audit is being conducted and additional
                       information may be requested (the auditor has authorisation to request access to
                       confidential file data)
                       third party data providers are aware that the audit is being conducted, that their information is
                       subject to audit and they will respond to any additional information requests from the auditor
                       the basis for a decision to not report the results of the indicators and measures for a funded
                       service in the performance statement, is documented and is available for review by the
                       auditor.

16   Local Government Better Practice Guide Performance Statement
5 Performance Statement
  (2014-15 Model)

Victorian City Council
Performance Statement
For the year ended 30 June 2015

                                  17
5 Performance Statement (2014-15 Model)

     Performance Statement
     For the year ended 30 June 2015

          Ref

          Reg

          17(1)       Description of municipality

                      The Victorian City Council (the council) is situated on the south-eastern fringe of the Melbourne
                      metropolitan area and has a significant rural and horticultural hinterland. It includes more than 30
                      communities stretching from the foothills of the Dandenong ranges in the north to the shores
                      of Western Port Bay in the south. The council is at the ‘front’ of Melbourne’s south east growth
                      corridor which stretches in a narrow band along the Princes Highway. The main industries include
                      food manufacturing, agriculture, meat and meat product manufacturing, motor vehicle and part
                      manufacturing. The council covers an area of 1281 square kilometres and has a population of 77,000
                      which is expected to grow to 142,000 over the next 20 years.

                      During the financial year council experienced significant rainfall resulting in wide areas of flooding across
                      the municipality. Extensive works were required to rectify flood damaged infrastructure.

18   Local Government Better Practice Guide Performance Statement
Sustainable Capacity Indicators
For the year ended 30 June 2015

    Ref                                                   Results
   Reg        Indicator/measure                            2015      Material Variations
   15(3)      Own-source revenue
   Sch3       Own-source revenue per head of               $990      No material variations
              municipal population
   16(1)      [Own-source revenue / Municipal
   17(2)      population]
              Recurrent grants
              Recurrent grants per head of                 $198      The Financial Assistance Grants increased in the
              municipal population                                   current year following a period of strong population
              [Recurrent grants / Municipal                          growth
              population]
              Population
              Expenses per head of municipal              $1,190     No material variations
              population
              [Total expenses / Municipal
              population]
              Infrastructure per head of municipal        $6,390     No material variations
              population
              [Value of infrastructure / Municipal
              population]
              Population density per length of road        180       No material variations
              [Municipal population / Kilometres of
              local roads]
              Disadvantage
              Relative socio-economic disadvantage          8        No material variations
              [Index of Relative Socio-economic
              Disadvantage by decile]

Definitions                                                       “population” means the resident population estimated by
                                                                  council
“adjusted underlying revenue” means total income other
than —                                                            “own-source revenue” means adjusted underlying
                                                                  revenue other than revenue that is not under the control
(a) non-recurrent grants used to fund capital                     of council (including government grants)
    expenditure; and
                                                                  “relative socio-economic disadvantage”, in relation to
(b) non-monetary asset contributions; and                         a municipality, means the relative socio-economic
(c) contributions to fund capital expenditure from                disadvantage, expressed as a decile for the relevant
    sources other than those referred to in paragraphs            financial year, of the area in which the municipality
    (a) and (b)                                                   is located according to the Index of Relative Socio-
“infrastructure” means non-current property, plant and            Economic Disadvantage (Catalogue Number
equipment excluding land                                          2033.0.55.001) of SEIFA
“local road” means a sealed or unsealed road for which            “SEIFA” means the Socio-Economic Indexes for Areas
the council is the responsible road authority under the           published from time to time by the Australian Bureau of
Road Management Act 2004                                          Statistics on its Internet website
                                                                  “unrestricted cash” means all cash and cash equivalents
                                                                  other than restricted cash.
                                                                                                                             19
5 Performance Statement (2014-15 Model)

     Service Performance Indicators
     For the year ended 30 June 2015

          Ref                                                       Results
          Reg         Service/indicator/measure                      2015     Material Variations
         15(1)        Governance
         Sch3         Satisfaction
         16(1)        Satisfaction with council decisions             60      The council introduced an Engagement Policy and
                                                                              Guidelines in 2013 which has a strong focus on
         17(2)        [Community satisfaction rating out of                   consulting with the community over major decisions
                      100 with how council has performed
                      in making decisions in the interest of
                      the community]

                      Statutory Planning

                      Decision making

                      Council planning decisions upheld at          100%      The council introduced a number of new land use
                      VCAT                                                    planning policies during 2013 and 2014 including
                                                                              height restrictions and heritage overlays
                      [Number of VCAT decisions that did
                      not set aside council’s decision in
                      relation to a planning application /
                      Number of VCAT decisions in relation
                      to planning applications] x100

                      Economic Development

                      Economic activity

                      Change in number of businesses                 10%      A major industrial estate was opened in the north of
                                                                              the municipality in early 2014 increasing the number
                      [Number of businesses with an ABN                       of businesses in the current year
                      in the municipality at the end of the
                      financial year less the number of
                      businesses at the start of the financial
                      year / Number of businesses with an
                      ABN in the municipality at the start of
                      the financial year] x100

                      Roads

                      Satisfaction

                      Satisfaction with sealed local roads            51      The council experienced significant rainfall and
                                                                              subsequent flooding of major local roads during
                      [Community satisfaction rating out of                   the current year which resulted in a long period of
                      100 with how council has performed                      detours during the reconstruction
                      on the condition of sealed local roads]

                      Libraries
                      Participation
                      Active library members                         15%      No material variations
                      [Number of active library members /
                      Municipal population] x100

20   Local Government Better Practice Guide Performance Statement
Ref                                               Results
Reg   Service/indicator/measure                    2015     Material Variations
      Waste Collection
      Waste diversion
      Kerbside collection waste diverted           82%      No material variations
      from landfill
      [Weight of recyclables and green
      organics collected from kerbside
      bins / Weight of garbage, recyclables
      and green organics collected from
      kerbside bins] x100

      Aquatic facilities
      Utilisation
      Utilisation of aquatic facilities             12      The council constructed a new indoor aquatic facility
      [Number of visits to aquatic facilities /             in 2013 to service the population growth being
      Municipal population]                                 experienced in the west of the municipality

      Animal management
      Health and safety
      Animal management prosecutions                16      The council’s policy was changed in 2013 in relation
                                                            to dog attacks from legal action to mediation
      [Number of successful animal
      management prosecutions]

      Food safety
      Heath and safety
      Critical and major non-compliance           100%      No material variations
      notifications
      [Number of critical non-compliance
      notifications and major non-
      compliance notifications about a food
      premises followed up / Number of
      critical non-compliance notifications
      and major non-compliance
      notifications about food premises]
      x100
      Home and community care
      Participation
      Participation in HACC service                30%      No material variations
      [Number of people that received
      a HACC service / Municipal target
      population for HACC services] x100

      Participation
      Participation in HACC service by CALD        24%      No material variations
      people
      [Number of CALD people who receive
      a HACC service / Municipal target
      population in relation to CALD people
      for HACC services] x100

                                                                                                                    21
5 Performance Statement (2014-15 Model)

          Ref                                                       Results
          Reg         Service/indicator/measure                      2015       Material Variations
                      Maternal and child health
                      Participation
                      Participation in the MCH service               81%        No material variations
                      [Number of children who attend the
                      MCH service at least once (in the year)
                      / Number of children enrolled in the
                      MCH service] x100

                      Participation
                      Participation in the MCH service by            64%        The Commonwealth Government funded a 4
                      Aboriginal children                                       year campaign commencing in 2012 focusing on
                      [Number of Aboriginal children who                        engagement with Aboriginal mothers
                      attend the MCH service at least once
                      (in the year) / Number of Aboriginal
                      children enrolled in the MCH service]
                      x100

     Definitions                                                              “HACC service” means home help, personal care or
                                                                              community respite provided under the HACC program
     “Aboriginal child” means a child who is an Aboriginal
     person                                                                   “local road” means a sealed or unsealed road for which
                                                                              the council is the responsible road authority under the
     “Aboriginal person” has the same meaning as in the                       Road Management Act 2004
     Aboriginal Heritage Act 2006
                                                                              “major non-compliance outcome notification” means a
     “active library member” means a member of a library who                  notification received by a council under section 19N(3)
     has borrowed a book from the library                                     or (4) of the Food Act 1984, or advice given to council
     “annual report” means an annual report prepared by a                     by an authorized officer under that Act, of a deficiency
     council under sections 131, 132 and 133 of the Act                       that does not pose an immediate serious threat to public
     “class 1 food premises” means food premises, within the                  health but may do so if no remedial action is taken
     meaning of the Food Act 1984, that have been declared                    “MCH” means the Maternal and Child Health Service
     as class 1 food premises under section 19C of that Act                   provided by a council to support the health and
     “class 2 food premises” means food premises, within the                  development of children within the municipality from
     meaning of the Food Act 1984 , that have been declared                   birth until school age
     as class 2 food premises under section 19C of that Act                   “population” means the resident population estimated by
     “Community Care Common Standards “means the                              council
     Community Care Common Standards for the delivery                         “target population” has the same meaning as in the
     of HACC services, published from time to time by the                     Agreement entered into for the purposes of the Home
     Commonwealth                                                             and Community Care Act 1985 of the Commonwealth
     “critical non-compliance outcome notification” means a                   “WorkSafe reportable aquatic facility safety incident”
     notification received by council under section 19N(3) or
                                                                              means an incident relating to a council aquatic facility
     (4) of the Food Act 1984 , or advice given to council by
     an authorized officer under that Act, of a deficiency that               that is required to be notified to the Victorian WorkCover
     poses an immediate serious threat to public health                       Authority under Part 5 of the Occupational Health and
     “food premises” has the same meaning as in the Food Act                  Safety Act 2004.
     1984
     “HACC program” means the Home and Community Care
     program established under the Agreement entered into
     for the purpose of the Home and Community Care Act
     1985 of the Commonwealth

22   Local Government Better Practice Guide Performance Statement
Financial Performance Indicators
     For the year ended 30 June 2015

        Ref                                                Results            Forecasts
        Reg    Dimension/indicator/measure                  2015     2016   2017    2018   2019   Material Variations
       15(2)   Operating position
       Sch3    Adjusted underlying result
       16(1)   Adjusted underlying surplus (or deficit)      2%      5%     8%       12%   15%    The result for this measure is expected to increase by 13
       16(2)   [Adjusted underlying surplus (deficit)/                                            percentage points over the 4 year period to 2019. The
               Adjusted underlying revenue] x100                                                  improving trend from over the 4 year forecast period is due to
       17(2)                                                                                      the introduction of cost containment measures in 2015 and rate
                                                                                                  increases above CPI to address council’s renewal gap
       17(3)
               Liquidity
               Working capital
               Current assets compared to current          225%      185%   187%    184%   190%   The result for this measure is expected to decrease by 40
               liabilities                                                                        percentage points in 2016. The significant decrease in 2016 is
                                                                                                  due to unspent flood emergency grants being on hand at the
               [Current assets / Current liabilities]
                                                                                                  end of the 2015 financial year
               x100

               Unrestricted cash
               Unrestricted cash compared to                55%      45%    47%      44%   60%    No material variations
               current liabilities
               [Unrestricted cash / Current liabilities]
               x100

               Obligations
               Loans and borrowings
               Loans and borrowings compared to             61%      55%    49%      43%   37%    The result for this measure is expected to decrease by
               rates                                                                              24 percentage points over the 4 year period to 2019. The
               [Interest bearing loans and borrowings                                             decreasing forecast trend reflects the scheduled repayment of
               / Rate revenue] x100                                                               debt over the four period

               Loans and borrowings repayments               8%      7%     6%       5%    4%     The result for this measure is expected to decrease by
               compared to rates                                                                  4 percentage points over the 4 year period to 2019. The
               [Interest and principal repayments on                                              decreasing forecast trend reflects the scheduled repayment of
               interest bearing loans and borrowings                                              debt over the four period
               / Rate revenue] x100

23
24
                                                               Ref                                           Results               Forecasts
                                                               Reg   Dimension/indicator/measure              2015     2016     2017     2018     2019     Material Variations
                                                                     Indebtedness
                                                                     Non-current liabilities compared to      56%       57%      57%      58%      58%     No material variations
                                                                     own source revenue
                                                                     [Non-current liabilities / Own source
                                                                     revenue] x100

                                                                     Asset renewal
                                                                     Asset renewal compared to                82%       94%     100%     100%     100%     The result for this measure is expected to increase by 18
                                                                     depreciation                                                                          percentage points by 2017. The increasing trend reflects
                                                                                                                                                           measures taken since 2014 to address the asset renewal gap
                                                                     [Asset renewal expenses / Asset
                                                                                                                                                           through rate increases above CPI
                                                                     depreciation] x100

Local Government Better Practice Guide Performance Statement
                                                                     Stability
                                                                     Rates concentration
                                                                     Rates compared to adjusted               60%       61%      61%      62%      62%     No material variations
                                                                     underlying revenue
                                                                     [Rate revenue / Adjusted underlying
                                                                     revenue] x100

                                                                     Rates effort
                                                                     Rates compared to property values        0.4%     0.4%      0.4%     0.4%    0.4%     No material variations
                                                                     [Rate revenue / Capital improved
                                                                     value of rateable properties in the
                                                                     municipality ] x100

                                                                     Efficiency
                                                                     Expenditure level
                                                                     Expenses per property assessment        $2,830    $2,870   $2,950   $3,005   $3,012   The result for this measure is expected to increase by $182 per
                                                                                                                                                           assessment by 2019. The slowing upward trend reflects cost
                                                                     [Total expenses / Number of property
                                                                                                                                                           containment measures taken by council since 2014 resulting in
                                                                     assessments]
                                                                                                                                                           forecast increases in expenses below CPI
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