Performance Measurement In Local Government In Victoria

Performance measurement has been introduced in the local government environment in the UK through the use of performance indicators. The introduction of these measures has often been associated with the movement towards improvement in the quality of services provided by local government to the citizens. The State Government of Victoria, Australia recently enacted legislation which requires the 78 local councils in the State to report on their performance through the Office of Local Government in the Department of Infrastructure. The method of reporting is through the supply of values for a set of performance indicators which have been laid down in the legislation. This paper presents the results of a survey of local government officers in Victoria Australia who are responsible to the councils for the preparation of the performance indicator reports to the State Government. The paper reports on the state of preparedness of the councils to produce the performance indicators. It also reports on the perceptions of the local government officers of the relationship between the performance indicators and the quality of services provided by Victorian local councils to their citizens. 1.0 Introduction The role of local government touches the lives of all citizens, often providing or facilitating the provision of services central to the lives of those citizens. As reported by Donnelly[1998], the moves towards the collective provision of services by local government brought about the plentiful supply of potable running water, a safety net health service and environmental protection among other benefits. All of these provisions relate to the quality of life of citizens and represent part of the civilising of society. As local governments developed and matured, the scope of their provision of services, one of their many complex and often interacting roles, expanded into other fields. The role of local government was viewed by some as continuing to act as in the past, with budgets expanding to compensate for inflation and additional demands for existing and new services. In the United Kingdom, this changed significantly in the 1980’s, and the Audit Commission in England and the Accounts Commission in Scotland began to address the issue of performance measurement in local government. Under the Local Government Act 1992 the Audit Commission was required to formally collect indicators which were to reflect efficiency and effectiveness of local council services. A range of local council services is measured using 200 indicators. (Industry Commission [1997]) and contextual information is included to help in the interpretation of the indicators and the differences between councils. In Australia, the Commonwealth Government, as a provider of significant funding to local government, has taken an increasing interest in local government performance. The Local Government (Financial Assistance) Act 1995 required the Commonwealth Minister for Local Government to report annually to parliament on the performance of local government. The report is to be ‘based on comparable national data’. At present, there are no nationally based performance measurement systems in place. All States have established their own systems for the measurement of performance. The situation has increased in complexity in recent years as a result of significant reorganisation of local government throughout Australia. This process has advanced more quickly in some states than in others, and so the process of performance measurement and reorganisation have developed and advanced inhomogeneously across the Commonwealth. 2.0 Performance Measurement One of the issues quite often mentioned in literature is the dimensions on which performance should be measured. Authors offer a variety of dimensions to be used for performance measurement. Attention at the moment varies from the measures of input, output and outcome to the relationship between them. Performance can be measured using the dimensions economy, efficiency or effectiveness. The traditional approach is to have a performance system with indicators to measure economy and efficiency, rather than effectiveness or to measure outcomes. However, how to measure outcome is an important problem, especially in local government because of the difficulty to define objectives with different stakeholders. That is why Tichelar (1998) observed that “a general view from the literature was that outcome measurement was still in its infancy, and that greater attention should be given to developing performance indicators in the context of political debates about the purpose of public services”. For local government, from the body of literature, there is a recognised tendency to measure something easy in terms of costs and data collection. Palmer(1993) in her study of local government performance in the UK concluded “authorities, perhaps not surprisingly, concentrate on measuring what is easily measurable and this results in a bias towards measuring performance in terms of economy and efficiency, rather than effectiveness” (Palmer, 1993). With the same view, Carter (1987) observed that the performance indicators systems in local government that “tend to have few performance indicators sensitive to consumer’s needs or to quality” ( Cit. Palmer, 1993). Another issue of performance measurement in local government that attracts attention is the capability of using indicators for valid comparison between councils. The approach of using performance indicators for comparing seems to be active in UK, Australia, including Victoria and US. However, recent research on this issue in the UK challenges this approach. Research by Boyne (1997) evaluated the Audit Commission Indicators for comparing the performance of local authorities in UK. He conducted an extensive empirical study with over 400 local authorities. From his research, Boyne concludes, “it would therefore be unwise for local citizens or central government to evaluate the relative performance of different councils purely on the bases of the Audit Commission’s data”. 3.0 Performance Measurement in Local Government in Australia In Australia, in the process of radical change in management in local government for improved performance, performance measures have been placed among the important management tools to make local government more accountable, responsive and effective. Recent research on the issue by the Australian Industry Commission concluded “interest in performance measurement at the individual council level has increased throughout Australia in recent years” (The Industry Commission, 1997). There was an effort to develop a national approach to performance indicators that could be used for comparison between local councils across Australia. However, at the moment it seems, at best, to be premature for such approach. The difficulty of pursuing this approach can be summarised as follows: • There is a difference between the councils across the states that make the development of an uniform performance indicators which could used for comparing between them an daunting task. • There is an disagreement of the councils about the feasibility of such approach with the argument that there is a significant differences for a good comparisons because of the differences in terms of the state legislation • At the moment, there is a quite different performance indicators approach developed by each state. As at 1997 (except Victoria(1998)), all states in Australia (except New South Wales (NSW) and Victoria (VIC) the systems are already in place) planned to introduce a set of performance indicators for all councils. These indicators vary in services covered, the number of indicators, and the dimensions of performance the indicators address. From 1995, all councils in NSW were required to report against 26 key performance indicators. These indicators cover 11 functional areas, including sewerage and water supply services (These are excluded for councils in Victoria). It should be noted that all 26 indicators are efficiency measures. All other States, excluding Victoria, are drafting or conducting a pilot program to set up a set of performance indicators to use for their local councils. For example, Queensland’s draft performance indicators, which are at the pilot data collection stage, only cover 5 functional areas with 28 indicators. However, unlike those indicators required in NSW, QLD’s indicators are concerned with both efficiency and effectiveness dimensions of performance. With respect to measuring efficiency, QLD and NSW indicators are quite similar. West Australia (WA) proposed 30 key indicators covering 9 functional areas. One of the aspects of WA’s indicators is the focus of measurement on spending in specified areas and WA’s indicators are efficiency measures. South Australia (SA), compared to other States, have drafted the most extensive performance indicators with over 150 indicators covering 24 functional areas. These indicators are grouped as efficiency and effectiveness. However, it should be noted that some indicators are categorised as effectiveness indicators, but in fact more a measure of activity and others categorised as efficiency measures, are a measure of spending. Unlike others States, SA does not plan to collect and publish comparative performance information. The remaining states, namely Tasmania, Northern Territory and Australian Capital Territory have either only simple financial performance indicators as is the case with Tasmania or will develop the performance indicators in the near future. 4.0 Performance Measurement in Local Government in Victoria Since 1990, there has been performance measurement activity in Victoria with the comparative financial data in 1991 and core performance indicators for Local Government with a guide published in 1993 by Municipal Association of Victoria (MAV). It should be noted that the indicators developed in 1993 were quite extensive.