1.4 Planning, Reporting, and Rate-setting Adoption Requirements

1.401
During the year – as a result of both our work in the local government sector and responding to ratepayer enquiries – we encountered a number of issues relating to formal adoption requirements in the Local Government Act 2002 (the 2002 Act) and its predecessor, and the Local Government (Rating) Act 2002 (the Rating Act).

1.402
These issues related to local authorities’ resolutions to adopt their:

• long-term council community plan (LTCCP) or annual plan;
• annual report; and
• rates resolutions.

1.403
Councils cannot delegate responsibility for the adoption of these resolutions, and must adopt each of the three resolutions in a meeting of the Council that is called under the public notice requirements of the Local Government Official Information and Meetings Act 1987.

1.404
We are concerned to have encountered issues in such fundamental, but essentially straightforward and clear, requirements. Such adoptions are also important, as failure to adopt the LTCCP or annual plan or the rates resolution in the required manner could invalidate a local authority’s annual revenue for rates.

1.405
A ratepayer who raised concerns about the adoption of their local authority’s annual plan commented to us that errors in requirements such as adoption have caused them to feel doubt about the general conduct of the local authority’s business – an understandable concern.

Adoption of the LTCCP or Annual Plan

1.406
Under section 93(3) and 95(3) of the 2002 Act, a local authority must adopt its LTCCP or annual plan before the start of the period to which it relates.

1.407
A recent ratepayer enquiry identified a potentially significant issue relating to a Council that might not be adopting its annual plan in the manner required. The 2002 Act requires either the LTCCP or annual plan to be adopted by resolution at either an ordinary or special meeting of the Council.

1.408
We requested all local authorities to send to us for review their minutes adopting either their LTCCP or annual plan. No local authorities were identified to have breached the adoption requirements. However, we did note that some local authorities chose to adopt their LTCCP or annual plan by sub-committee, and then ratified that adoption through either a Council meeting, or special Council meeting. This procedure appears reasonable, as long as local authorities ensure that public notice is given, that the ratification occurs before the statutory adoption date, and that clear records are kept.

Adoption of a Rates Resolution

1.409
Section 23 (1) of the Rating Act requires that:

(1) Rates must be set by a resolution of the local authority.

(2) Rates set by a local authority must –

(a) relate to a financial year or part of a financial year; and

(b) be set in accordance with the relevant provisions of the local authority’s
long-term council community plan and funding impact statement for that
financial year.

1.410
During the course of our review on rating (see pages 67-79), we noted that two local authorities did not adopt a rates resolution at the time of adopting their annual plan. This appears to have occurred as a result of confusion arising from some local authorities believing that the requirement to adopt a Funding Impact Statement as part of the LTCCP or annual plan had replaced the need to adopt a rates resolution.

1.411
As part of our analysis of rating this year, we are reviewing copies of rates resolutions from all local authorities to determine whether the failure to adopt a rates resolution under section 23(1) had occurred in other local authorities. We obtained the rates resolutions from the Department of Internal Affairs, where local authorities are required to send their resolutions under the Rating Act.

1.412
Both of the local authorities that we identified as omitting to adopt a rates resolution for 2003-04 at the time of adopting their annual plan have taken action to re-set the rates under section 119 of the Rating Act. We are aware that there is debate about whether the power to re-set the rates can be applied in a situation where rates were not properly set in the first instance. However, one of the local authorities involved sought legal advice, which has concluded that the provision is available. We have therefore accepted the actions taken by the local authorities to rectify the setting of the rates.

1.413
Our review of rates resolutions for the 2003-04 year disclosed a small number of resolutions that did not contain an appropriate level of detail. This is because many local authorities’ rates resolutions refer to the information in their adopted annual plan, rather than setting out the intended rates fully in the rates resolution.

1.414
In our view, local authorities should ensure that their rates resolutions provide the level of information recommended as good practice, as set out in the Local Government Knowhow Guide to the Local Government (Rating) Act 2002.

Adoption of the Annual Report

1.415
Under section 98 of the 2002 Act, local authorities are required to adopt their audited annual report within four months of the end of the financial year to which the report relates.⁴

1.416
We have reported separately on the completion dates of our audits (see paragraph 1.304).

1.417
Completion of the audit and issuing of the audit opinion, and adoption of the annual report, requires co-ordination between the auditor and the local authority to ensure that the report on which an audit opinion is issued is the final report of the local authority that will be presented to the community.

1.418
In our article on the timeliness of annual reporting (see pages 16-17), we noted that timely information is necessary to assist communities to assess the performance of their local authority, and to hold it to account for that performance. We will be monitoring local authorities’ adoption and issuing of their annual reports and summaries more closely in future, in particular their implementation of the 2002 Act’s new adoption and public reporting responsibilities.

4: The Local Government Act 1974 provided that audited annual reports were to be adopted within five months of the end of the financial year to which the report related.