Local Authority Governance of Subsidiary Entities.

Many local authorities own shares in companies carrying out a diverse range of commercial activities: building and maintaining roads, developing land and property, operating ports, and managing forests. Local authorities also use a number of structural options for carrying out non-commercial activities. Development of new arrangements continues – with regional ventures, shared services, and joint ventures between the public and private sectors being only a few of those arrangements under considerations.

In 1994 we published a report on governance of local authority trading activities. Feedback from the sector indicates that local government welcomed the guidance we provided through that report. I considered it timely to undertake a further study on this topic, given the array of governance structures with local government. This report has a broad scope and looks at the challenges, risks and lessons for local government in current and emerging governance issues. It also includes case studies on three governance structures established to address particular needs – Watercare Services Limited, Infrastructure Auckland and the Canterbury landfill joint venture project.

In general, awareness in the local government sector about governance issues has grown since our last study. I consider this a very positive sign. We have our own set of expectations about governance practice, and we give credit to those whose efforts are supporting good governance in local government. We also highlight the risks where governance arrangements are not functioning well, and recommend specific improvements where we believe these should be made.

D J D Macdonald
Controller and Auditor-General

23 March 2001