DEPARTMENT OF LOCAL GOVERNMENT AND COMMUNITY SERVICES. Performance Indicators Information Paper
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1 DEPARTMENT OF LOCAL GOVERNMENT AND COMMUNITY SERVICES Performance Information Paper
2 1. Introduction Performance management is the process of setting agreed objectives and monitoring progress against these objectives. The performance information gained from this process can be used to make management decisions about prioritisation and the allocation of resources to confirm or improve policy decisions. Local government performance management also provides verifiable reporting information about a council s performance to the constituents, residents, governments and external providers of funding. 2. What the Act says The Northern Territory Local Government Act (the Act) prescribes that regional, shire and municipal councils must define and use performance indicators: in the regional, shire or municipal plan for judging the standard of its performance (section 23 (d)); in the annual report (section 199(3)). The report must also contain an assessment of the council s performance against the objectives stated in the relevant municipal or shire plan (applying indicators of performance set in the plan); and in the annual budget (section 127 Annual budgets). (2) The budget for a particular financial year must: (a) outline: (i) the council's objectives for the relevant financial year; and (ii) the measures the council proposes to take, during the financial year, towards achieving those objectives; and (iii) the indicators the council intends to use as a means of assessing its efficiency in achieving its objectives. 3. What is performance? In the context of local government, performance is a measure of how well a council meets its objectives given the external restraints placed on it and the resources that it has available. It can only be assessed after considering the context in which the organisation operates. For local government councils these external restraints and the context are considered as part of the municipal or shire planning process. The Act prescribes the following: (s23) Contents of municipal, regional or shire plan (1) A municipal, regional or shire plan: (c) must contain, or incorporate by reference, the council's most recent assessment of: (i) the adequacy of constitutional arrangements presently in force for the council under this Act and, in particular, V1.0 26/11/2012 Page 2
3 whether they provide the most effective possible representation for the area; and (ii) the opportunities and challenges for local government service delivery in the council's area; and (iii) possible changes to the administrative and regulatory framework for delivering local government services in the council's area over the period to which the plan relates; and (iv) whether possibilities exist for improving local government service delivery by cooperation with other councils, or with government agencies or other organisations. This assessment will provide councils with a clearer understanding about the environment in which they operate so that they can devise workable objectives that are feasible to undertake. It also allows councils to set reasonable expectations and targets regarding service delivery. 4. What is an indicator? An indicator is a guide or pointer. It is an attempt at showing a much broader and complicated process by identifying an aspect that reflects the effectiveness, quality and efficiency of the actions, program or process. A good indicator is therefore able to convey a verifiable story about what has changed. A performance indicator for a council is designed to show how much progress is being made by a council towards meeting the planned objectives within the performance context. These objectives are developed within the constraints, opportunities, resources and context that a council operates in. The context of an indicator allows the interpretation of the indicator. This may include: A predetermined target A trend in performance over time Benchmarked relative performance of similar councils. This contextual information allows councils to determine performance through comparisons with previous performance over time. This implies that indicators should remain reasonably consistent from year to year so that performance can be tracked. 5. What activities need to be measured? Performance indicators are primarily a means of communication to the constituency, councillors, external stakeholders as well as internal staff. All of these stakeholders require an understanding on a regular basis about the progress of council s initiatives: Council staff need tracking information as a decision making tool so that they are able to adjust inputs and strategies. Councillors need performance information to inform their decision making processes and engage with their residents. The constituency will want to know if council is delivering services in accordance with their needs and planned targets. External stakeholders such as government need to know if the council is operating effectively and efficiently. Rate payers and funding bodies need to know if they are getting value for money. V1.0 26/11/2012 Page 3
4 While the council may need performance information for a broad range of its activities including departmental work plans, agency services and individual performance plans, for the purpose of complying with the prescribed documents the primary requirement are to develop indicators that are associated with council service delivery and funding. Performance indicators are generally not required for accountability purposes for agency and contracted services in the annual plan as their accountability is already included as part of the contractual reporting arrangements made with external funding bodies however the council and constituency may want to be informed about a particular agency service. If the council has included strategic objectives from a community or strategic plan, the constituency will want to know what progress has been made towards achieving these so performance indicators will also be required for these. 6. How are they developed? Performance indicators can come from any part of the process to achieve an objective however for the purpose of local government planning and reporting they usually have more meaning if they connected to the outputs or outcome of a planned activity. Planning to meet an objective can use the following logic framework. Inputs Actions Outputs Outcomes Impacts Staff Money Equipment Time A description of what planned actions will take place What is actually delivered For example, the number of times rubbish bins are collected per week The anticipated results of the outputs For example, tidy streets and cleaner houses The long term effects of many outcomes. For example, improved health outcomes. Machinery etc The indicators need to identify the activity that is to be quantified or measured. The measure also needs to be identified and stated to inform the indicator. 8. What qualities should performance measures have? can measure a broad range of dimensions of an activity including the perceptions of service users, the increase in quality or quantity of a service and improvements in assets or infrastructure of a local government. The aspect of the service delivery to be measured can often be determined by a balance between what is reliable and relevant and what is practical in terms of gathering the data to inform the indicator. Performance indicator measures are usually grouped into: Efficiency : The way that resources are transferred into goods and services. Quality : The quality of goods and services, how well they are delivered to the constituency and to what extent they are satisfied. Effectiveness : How well the service delivery compares with the planned purpose or objective. V1.0 26/11/2012 Page 4
5 For example: Objective Outcome Performance Indicator Measures To collect household rubbish two times per week and dispose waste at a well managed tip Tidy streets and cleaner houses Household waste collected Effectiveness: Number of weekly kerbside collections per 100 households Quality: Customer satisfaction survey regarding the amount of litter collected in the township Efficiency: Cost per household collection 9. How many performance indicators? The number of performance indicators for a local government could be prolific if there is an indicator for every anticipated action and outcome. So indicators used in the higher level legislated plans are best restricted to key performance indicators that are directly linked to service delivery, finance, budget and governance outcomes. Too many performance indicators can result in excessive amounts of time collecting data that is not being used to inform decision making. However, too little performance information can lead to uniformed decision making and a lack of assessment about the progress made towards achieving objectives. So the number and type of indicator is best determined by the decisions that need to be made and the information that needs to be communicated. For the purposes of assessing and communicating the council s performance to the constituency and other key stakeholders, performance indicators should be related directly to the key council objectives that they have control over in terms of efficiency, quality and effectiveness. This may preclude agency services that the council has agreed to undertake and that are subject to a contractual arrangement with another agency unless the service is directly related to objectives stated in the strategic or community plan. At the level of a municipal or shire plan, service delivery plan and annual report, where broader strategies and objectives are documented, this could generally be between 20 to 30 key performance indicators. At the departmental and work plan level of plan there will be additional indicators related to the achievement of particular tasks within specified timeframes. These indicators provide management and staff with the key information and are secondary indicators that are not included in the higher level council plans. 10. What makes a good performance indicator? There are a number of general characteristics that can help to ensure that proposed indicators will be useful and effective. While it is very difficult to develop a performance indicator that has all of these qualities, they generally need to align with the SMART test: Specific Measurable Achievable Relevant Timed can use both quantitative and qualitative measures. As the word implies they indicate or show the reality of the story being conveyed. So indicators are part of a process that tells a convincing story. V1.0 26/11/2012 Page 5
6 There are advantages for designing indicators that are consistent and are able to be used over a long period of time. The advantages are: The data collection required to inform the indicators can be built into the day to day operations of the councils so that it does not become an onerous and costly one-off task. The cost, both financial and time, of gathering data is progressively is reduced through efficiencies gained through it being a repeated operational task with well developed capture and storage systems. Management, constituents and other interested stakeholders become familiar with the indicator and are able to better understand its meaning and context. become useful when appropriate comparisons are developed. Benchmarks can then be established which validate the goals of the council. 11. Representing performance information One of the key benefits of using performance indicators is that they can efficiently and effectively show key aspects of complex actions and processes with visual information and succinct explanations. This can include graphs, tables, scales, dashboards and scorecards. The essential information required to communicate performance indicators is: Indicator Measurement Source Explanation Representation Roads maintenance Percent of budget spent on roads maintenance Council financial statements Annual amount spent by 30 June each year Graph of percent of budget spent compared with previous years Performance indicators also allow comparison over time if they are reliable. Once an indicator has been chosen and the measurement source identified a council can continue to use the same indicator consistently over many years if the associated objective is still relevant. This provides the audience and councils with a way to see if council performance is continuously improving over time. 12. Linking council planning and reporting Council planning is intended to provide a consistent and logical planning and accountability framework that encompasses the roles, functions and objectives of local government in the Act. Planning is a cyclical process centred on accountability to the primary stakeholder; the community that they are there for. It starts with identifying the long term interests of the constituency and develops a response based on the capacity, resources and functions of a council. For each plan there is an accountability process based on measuring, assessing and reporting achievement and progress. The assessment of the degree to which targets are being met and progress being made, provides council management, elected members and the community with the tools to make decisions about how well the plan is operating. This information can then be used to make changes to plans with the view to continually improving council s performance. Performance management is central to this process. While there is a plethora of tools and techniques for measuring the progress being made towards meeting objectives, the use of performance indicators provides an understandable method for making assessments and communicating these to the key stakeholders. V1.0 26/11/2012 Page 6
7 The diagram below shows how council planning and reporting is linked by performance indicators. For External Partners, Community and Interest Groups and Engagement with Individuals Measuring Achievement Reporting Progress Community Plan and/or Strategic Plan Community Community Plan Report Councillors Long Term Financial Plan Service Delivery Plan Budget Estimates Success Criteria Performance Annual Report Annual Plan Strategic Directions Annual Budget Annual Plan Financial Sustainability Key Performance Report on Organisational Performance Department and Workgroup Plans Department and Workgroup Measurement each plan, performance indicators are identified for each of the key objectives. These form the basis for the Annual Report which is the primary accountability document for council s progress reporting. 13. The annual report and performance indicators The key legislated document for reporting from councils is the annual report. Performance indicators are the primary reporting mechanism and if presented in a readable and understandable way, can produce a succinct and verifiable report that accurately reflects the council performance. The information can be represented using tables, explanations and graphically. This table presents an example of a format that can be used by councils to show performance in the annual report. Service category Key Performance Indicator Sector Average (Benchmark) 3 Year Average Prior Year Average Actual Variance Waste management Clean houses and tidy streets. (efficiency) $225 per house per year $300 $275 $280 $5 V1.0 26/11/2012 Page 7
8 The graph below represents an alternative presentation option: Waste Management Performance The metric and visual representation of data often requires an explanation in the form a narrative. In the example above which is concerned with cost efficiency of waste management service, the narrative could be: The shire council aimed to retain the level of waste management services to residents whilst also finding efficiencies to reduce costs. Whilst there has been a slight increase this year, the service level has been maintained and costs have been kept below the three year average. 14. Disclaimer The Performance Information Paper" ("this paper") is a reference guide only. This paper has been prepared by the Department of Local Government and Community Services on behalf of "the Northern Territory of Australia". This paper does not form part of the Local Government Act or Regulations which should be used as the authoritative source for all legislative requirements and compliance. While all care has been taken to ensure that information contained in this paper is true and correct at the time of publication, changes in circumstances (including amendments to legislation) after the time of publication may impact on the accuracy of its information. The Northern Territory of Australia gives no warranty or assurance, and makes no representation as to the accuracy of any information or advice contained in this paper, or that it is suitable for your intended use. You should not rely upon information in this publication for the purpose of making any serious, business or investment decisions without obtaining independent and/or professional advice in relation to your particular situation. The Northern Territory of Australia disclaims any liability or responsibility or duty of care towards any person for loss or damage caused by any use of or reliance on the information contained in this paper. 15. For more information For further information or advice about planning and reporting please contact the Department of Local Government and Community Services. E: localgovernment.dlgr@nt.gov.au P: V1.0 26/11/2012 Page 8
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