Analysis of Council Organisations

Analysis of Council Organisations
01 Feb 2009

There are 85 local authorities in New Zealand that provide services to their communities.

The majority of services are provided within the ‘core’ council structure. However, NZ local government legislation permits councils to establish ‘arms-length’ organisations to assist them in reaching council goals and ultimately agreed community outcomes.

These ‘arms-length’ organisations are commonly referred to as Council Controlled Organisations (CCOs), or Council Organisations (COs).

This report analyses the extent and breadth of COs in the 2006/07 financial year. It looks at the financial resources they bring to bear, and how the COs contribute financially to council coffers. It also examines the breadth and extent of performance reporting by COs to the councils. Finally, the analysis gives pointers to how COs contribute to the four wellbeings (economic, environmental, cultural and social) that councils are mandated to deliver to their communities.

Our analysis is based on the information contained within the 2006/16 Council LTCCPs and 2006/07 Council Annual Reports.

We identified 257 COs in the LTCCPs or Annual Reports. 16 councils did not identify any COs. We believe some councils may not have differentiated between Council Organisations (COs), where there is lesser council control, and CCOs. The true figure of COs may, therefore, be smaller.

The 257 COs are mainly organised into the legal form of companies (around half), Trusts (a quarter), and Joint Ventures (one fifth).

COs help councils in delivering services to their community. We analysed the types of services and activities that COs deliver. These are spread over 15 activities, the principal ones being economic development, transportation, recreation and corporate functions. We were surprised at the relatively low numbers of COs delivering works and infrastructure services. We extended this analysis further to assess the relative impact of CO functions on the four wellbeings of local government. As expected, CO functions primarily impact on the economic wellbeing (66%) and relatively lightly on the three remaining wellbeings.

We endeavoured to assess the financial resources tied up in COs and the degree to which councils rely on them for dividend revenue. We were constrained by the lack of information in many reports, the lack of comparability of information and questionable robustness of data. We were unable to establish the total of CO financial surpluses across the sector. Nevertheless, we surmise that the value of CO assets at 30 June 2007 is $6 billion, or 8% of the value of total council assets. CO liabilities were estimated at $3 billion or 56% of council liabilities as at 30 June 2007. Around 90% of CO assets and liabilities were concentrated in 10 councils.

The next part of the analysis was to assess the extent and balance of performance reporting by COs to Council. We found a ‘mixed bag’ of reporting. There were 830 performance measures across the 257 COs. Two thirds of the measures were orientated toward economic wellbeing. Only 10% of measures were focussed on environmental wellbeing. This was surprising and disappointing given the mandate of local government to deliver four wellbeings.

The final part of the analysis looked at the above areas (types of COs, activities, wellbeings, financial resources etc) when analysed by type of council ie regional, metropolitan or rural/provincial council. The major findings were that more metropolitan councils have on average more COs than the other two categories. In all council categories the CO emphasis is in the economic development area, and contributed primarily to the economic wellbeing. Although there are numerically fewer COs of regional councils they account for a sizeable proportion of assets and liabilities of all COs. An analysis of COs of ‘high growth’ councils did not yield any discernable trends.

As a concluding comment, we must be mindful of the limitations of this analysis. Information was extracted purely from two public sources but, even so, we were disconcerted with variability and incompleteness of the information.

Page last modified: 15 Mar 2018