The usefulness of performance indicators in the annual reports of government departments

Around the early 1980s requirements for departmental annual reporting for the Australian Commonwealth and for the states and territories were introduced, during a period of increased concern that the public sector should be more accountable. In Victoria, the study site for the research, the emergence of performance reporting as part of the annual reporting process can be readily traced to the early 1980s, with legislation being enacted in 1983 requiring the reporting of performance information. The reporting requirements in each of the other states and territories, as well as the Commonwealth, now also generally require the reporting of performance information, however, a review of the legislation suggests that these reporting requirements remain generally vague and that they fail to provide guidance. There has not been a comprehensive evaluation within Australia of the usefulness of the reporting of performance information within the annual reports of government departments, since the emergence of this requirement. An evaluation of the performance measures contained within the 1996-97 annual reports of Victorian government departments was undertaken using content analysis, demonstrating a disappointing standard of reporting. To provide an initial examination of the nature of the recipients of the annual reports, data were gathered on the number of reports printed and distributed through each of the distribution channels by Victorian government departments. Further, an analysis of annual report mailing lists was undertaken, suggesting that the majority of the annual reports go to other government agencies and libraries. The study used a decision-useful model, from the accounting discipline, to provide a framework for the evaluation of the usefulness of performance information within the annual reports. The results of a survey, with 414 respondents, who were recipients of the 1996-97 annual reports of the eight Victorian government departments reveal that use of the annual reports is high. The most useful items of information within the annual reports were the descriptive review of operations followed by the statistical performance information. The survey identified the types of measures regarded as most useful and also the most preferred forms of presentation of performance information. The primary reasons for using annual reports do not appear to be those identified by the accounting conceptual framework, raising some questions for further consideration. The qualitative characteristics of information identified in the accounting conceptual framework were seen as being highly relevant to the needs of users. The survey identified a number of personal characteristics of users of the annual reports of Victorian government departments suggesting that users are sophisticated. A comparison of the responses of parliamentarians, as a specific user group, with those of non-p~rliamentarians identified some significantly different views. Bivariate analysis of the survey findings identified a number of statistically significant relationships providing support for the main hypothesis of the study that there is a relationship between the usefulness of the annual reports of government departments, with particular reference to performance indicators, and: the personal characteristics of users; the purpose for using the annual reports; and the qualitative characteristics of information.