Flujo de Requerimientos

The objective of SSP reporting is to strengthen public accountability for the delivery of outputs (NZICA, 2002, para 1.10). However, the SSP reporting of public-sector entities (including local authorities) has been criticised as poor, thus the accountability is also poor and needs improvement.

53 _{In February 2008 AASs 27, 29, and 31 were withdrawn (Australian Accounting Standards}

Board, 2008). However, their requirements have been incorporated into numerous other accounting standards which are broader in focus with application to all public benefit entities.

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The Office of the Auditor-General (2008) expressed its disappointment in the quality of reports by public-sector entities (including local authorities) in spite of nearly 20 years of public-sector experience in preparing statements of service performance, and the development of the relevant GAAP in early 2000s. The Office of the Auditor-General (2008) also sought significant improvement in the reports to allow Parliament and the public to hold public entities to be accountable for their use of taxes and rates and for the effectiveness of their service delivery.

Regardless of the OAG‟s disappointment at SSP reporting practice for 2007/2008, all 2007/2008 SSP disclosures by local authorities were unqualified.54 This may be because of the lesser requirement under the Local Government Act 2002 for SSPs to be audited only against Schedule 10, Part 3 (15(e)), not GAAP. In addition, the threshold for auditor to qualify the report is high. An auditor would not consider qualifying an audit report unless the disclosures were both significantly and fundamentally misleading or not meaningful (Neale & Pallot, 2001). This raises the concern on the unqualified statements on SSPs, which are not explicit about the non-compliance with the authoritative requirements, if there is.

Given the long-standing criticism of poor SSP reporting, some reasons discussed by accounting professionals are as follows:

1. Lack of demand: It is possible that because SSPs are not well used by the public the reporter lacks incentives to produce high quality reports (Office of the

54 _{Usually, the unqualified statement for SSPs states: “The service provision information of the}

council… fairly reflects the levels of service provision as measured against the intended levels of service provision adopted, as well as the reasons for any significant variances, for the year ended on that date.”

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Auditor-General, 2008). The Office of the Auditor-General (2008) suggests that public-sector entities need to be encouraged consistently in the use of performance reports, in particular, by exploring the needs and interests of their different users, and by reporting information that better meets their different needs.

2. Lack of resources: Some public entities may not have sufficient resources (staff, and system capacity), ability (know-how), and data to prepare the reports (Neale & Anderson, 2000).

3. Avoiding intervention: Chief executives may try to avoid generating reaction from media and politicians and therefore do not report more than is required, particularly in relation to bad news (Neale & Anderson, 2000).

4. Lack of comprehensive standards: Guidance by the legislation and accounting profession is not helpful enough in the preparation of SSPs (Office of the Auditor- General, 2008; Webster, 2007). The Office of the Auditor-General (2008) argues that financial reporting standards heavily prescribe financial statements in their structure, composition, measurement, and disclosure. However, no reporting standards exist in New Zealand specifically for SSPs. TPA-9 is highly relevant but has limited authority compared to a financial reporting standard (Office of the Auditor-General, 2008).55 Webster (2007), the Assistant Auditor-General, is critical that the authoritative requirements describe the purposes, elements and qualitative characteristics of service performance reports, but they have been pitched at a higher or more conceptual level than financial reporting standards.

55 _{TPA-9 has recently been updated for consistency with New Zealand International Financial}

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The Office of the Auditor-General (2008) adds that New Zealand Equivalents to International Financial Reporting Standards (including NZ IAS 1, NZ Framework) are written to cater the needs of large, profit-oriented entities in the private-sector rather than for the public-sector‟s specific needs for performance reporting. Large profit-oriented entities in the private-sector place emphasis on financial statement reporting (R. Gray, 1983). Public-sector entities on the other hand highlight their service performance reporting (Boyne & Law, 1991; Hyndman & Anderson, 1995). It is possible that International Financial Reporting Standards are based on economic framework highlighting decision- usefulness objective of private-sector‟s reporting, which is not suitable for public- sector reporting (Mack, 2003; Parker & Gould, 1999). In short, the current authoritative requirements based on economic framework for the New Zealand public-sector‟s SSP reporting provides less than adequate guidance on the preparation of SSPs.

Webster (2007) and the OAG (2008) conclude that the development of standards and guidance for service performance reporting needs more attention by the accounting profession to improve the current SSP reporting by public-sector entities. The Office of the Auditor-General responded seemingly to the call for more guidance on SSP reporting. In 2010 the OAG issued the discussion paper – Local Government Examples of Better practice in Setting Local Authorities’ Performance Measures – in an attempt to improve performance information in 2012-22 LTCCPs (Office of the Auditor-General, 2010). In essence, the discussion paper provides examples of appropriate performance measures specifically for local authorities‟ core activities – roading, water supply,

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wastewater, libraries, and building control. In particular to wastewater disclosures, the performance measures suggested are related to standard met, reliability of the service, and response time for a service (Office of the Auditor- General, 2010) which reflect the quality and time dimension of wastewater services. It is possible that this discussion paper could have an impact on local authorities‟ SSP disclosures for the 2012 forward when the performance measures are addressed in the LTCCP.

Further, in the near future, there will be the accounting standard frameworks for public-sector entities‟ reporting which embrace the accountability obligation of public-sector entities‟ reporting. Currently, the International Public Sector Accounting Standards Board (IPSASB) is in the process (Exposure Draft) of issuing Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities with the objectives of the financial reporting be both for accountability and decision usefulness (International Public Sector Accounting Standard Board, 2010). New Zealand Accounting Standards Review Board, which supports the adoption of International Financial Accounting Standards, has concluded its intention to adopt the new accounting conceptual framework for public-sector entities (Accounting Standards Review Board, 2011). It is expected that the new framework would enable the public-sector entities in New Zealand to prepare their SSPs.

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