A Review of the Literature on Capital Budgeting and Investment Appraisal by tlp18405

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                           Beverley R. Lord,
                          Yvonne P Shanahan,
                            Jennifer R Boyd

                        University of Canterbury
                            Private Bag 4800
                       Christchurch, New Zealand

                        Phone: +64-3-364 2620
                         Fax: +64-3-364 2727
                 Email: beverley.lord@canterbury.ac.nz

                      Accepted for Presentation at the
 Fourth Asia Pacific Interdisciplinary Research in Accounting Conference
                              4 to 6 July 2004


Lapsley and Pallot (2000) predicted that the new public management ideology would see the
incorporation of more formal accounting structures in local government. As a test of their
prediction, this research undertook an examination of capital budgeting practices in 37 New
Zealand local authorities, using a survey.

Consistent with the above proposition, quantitative techniques were used by 72.4% of the
respondent authorities, and there was a high adoption rate of post-audits, with quantitative
information being the most likely information to be post-audited. However, qualitative
aspects were found to be of greater significance than quantitative techniques, due to the
difficulty in measuring all costs and benefits in quantitative terms (Barton, 1999). The
findings suggest that local authorities are taking capital investment decision- making
seriously, in conformance with the requirements of the legislation, which should ensure
positive long-term effects on the community.

Key words:     public sector, local government, capital budgeting


       "Substantial funding is at stake in capital budget decisions and … funding
       capital budgets commits resources into the future and affects the long-term
       spending of a community" (Beckett-Camarata, 2003, pp. 27-28).

Capital budgeting plays an important role in any organisation’s decision- making process, as
most investments undertaken represent large amounts of money (Sekwat, 1999). Due to the
long periods involved (O Brien, 1997), the outcome is often uncertain, which can affect the
performance of an organisation. This is even more so in the public sector, where investments
may be so large that private sector organisations would not be able to finance them (e.g.
infrastructure assets) and where the time- frame may be longer than the lifetime of the
decision- makers (Pallot, 1997; Barton, 1999).

Most capital budgeting studies have tended to focus on the quantitative techniques used in
organisations, including net present value and internal rate of return, payback period,
accounting rate of return, revenue-expense ratio, cost-benefit ratio, and post-audits. Studies
in the US have found that discounting techniques were mostly commonly used (Ryan and
Ryan, 2002; “IRR and NPV…”, 2003; Farragher et al., 1999). Sandahl and Sjögren (2003),
although finding a high usage rate of discounted techniques in 129 Swedish companies,
determined that payback was still the dominant technique. Graham and Harvey (2002) found
high usage rates of payback in the US, and O Brien (1997) found a similar result in Ireland.

Sandahl and Sjögren (2003) and Sekwat (1999) found that size of the company, the overall
capital budget and the individual capital expenditure item (Ryan and Ryan, 2002) influenced
the use of discounted techniques.

Studies in relation to the use of post-audits have shown varying results. Neale and Buckley
(1992) found that 43% of UK and 68% of US companies used post-audits, yet Farragher et al.
(1999) found an 88% usage rate in the 128 US companies studied. Azzone and Maccarrone
(2001) reported that 70% of 34 Italian firms most frequently post-audited quantitative data,
reflecting the view of Neale and Holmes (1990) that qualitative data is often seen as a
problematic in post-auditing. Mills and Kennedy (1990) argue that an independent person
should conduct the post audit, and the area of expertise is most likely to be in accounting or
finance. However, Farragher et al. (1999) found that a person associated with the investment
normally carries out the post audit.

The findings in New Zealand capital budgeting studies are similar. Patterson (1989) found a
strong reliance on non-discounted techniques. However, later studies have shown an
increasing use of discounted techniques, although the use of non-discounted techniques
remains strong (Northcott et al., 1991; Paulo and Gan, 1996). Northcott et al. (1991) found
that 62% of manufacturing firms conducted post-audits, but only for selected, usually large,

Most of the above studies have focussed on the private sector, and in general have
concentrated on the quantitative techniques used, ignoring qualitative aspects. Reliance solely
on quantitative techniques has been criticised (see, for example, Shank, 1996; Lyons et al.,

Beckett-Camarata (2003, p. 24) claimed that "capital budgeting studies in the public sector
have been limited to case studies", although Richardson (1998) compared capital decision-
making between the public and private sector us ing an experimental method, and reported
one study which had used a survey method (Kee et al., 1987).

Lapsley and Pallot (2000) pointed out that "the significant role played by management
accounting [in local government] in the quantification of management options deserves
further research" (Lapsley and Pallot, 2000, p. 227). This research provides an insight into
the capital budgeting practices of public sector organisations within New Zealand, focusing
specifically on local authorities, using a survey.

The structure of this paper is as follows. The ne xt section will review the literature on capital
budgeting in the public sector. The scene is then set for undertaking a study of capital
budgeting in local authorities, because of the changes in local government legislation and the
existing body of public sector research. The method used is then described. The following
section presents the findings, and the final section the conclusion.


As early as 1986, Lapsley found that, for capital budgeting, discounting techniques are being
increasingly utilised in the public sector, but noted that heavy reliance was still being placed
on accounting measures, such as payback and revenue account analysis. He also noted with
concern that 17% of the respondents had no formal techniques of appraisal for capital
investments. Richardson (1998, p. 21) found that "a lower proportion of public managers
(20%) utilize NPV than private managers (46%)". Reasons for this lower level of use were
the difficulty in estimating the expected bene fits and costs, political rather than economic
processes influencing investment decisions in the public sector, and the difficulty of
converting qualitative costs and benefits into monetary terms. Sekwat (1999) found a high
reliance on the cost-benefit ratio and payback by 166 US municipal governments.

Local authorities invest significant amounts in maintaining and upgrading capital facilities,
and capital expenditure can represent large amounts of their total spending (Sekwat, 1999).
In New Zealand, the Local Government Amendment Act of 1996 and later legislation
"brought in a new wave of initiatives" (Lapsley and Pallot, 2000, p. 214), including new
reporting requirements for both operating and capital expenditure decisions (Pallot, 1992).
Local autho rities are required by law to prepare a long-term financial strategy of at least 10
years, which contains estimated expenses and costs for activities, along with capital
expenditures (The Local Government Act 2002).

Numerous pressures also affect the capital budgeting system in local authorities (Sekwat,
1999). When preparing the long-term financial plan, local authorities are required to follow a
specific consultation procedure, in which consideration is given to the interests and views of
the public, Maori and other stakeholders (The Local Government Act 2002). There is also a
focus on financial management, with local authorities required to be prudent in, and
accountable for, their spending (Neale and Daken, 2000). In this respect, local authorities are
required to balance being financially accountable and efficient in their spending with
maintaining a broader strategic focus and investing in effective projects. Reporting "entails
clear specification of non- financial objectives and performance measures in a manner which
allows comparison of achievement against plans" (Pallot, 1992, p. 46).

Barton (1999, p. 22) criticises the belief that private and public sectors "are fundamentally
similar in the information needs … in their operating environments", claiming that "parts of
the public sector environment are so different from a business environment that a
differentiated approach is required. Moreover, the public sector environment is itself so
highly heterogeneous that it cannot be treated as one for accounting purposes, and
generalisations cannot be made which embrace the whole of the sector" (Barton, 1999, p. 22).
He highlights the differences between assets in the two sectors, especially infrastructure,
heritage, community, environmental, natural capital, and stewardship/trust assets in the public
sector. Costs and benefits of these public sector assets are hard to quantify and put into
monetary terms. Therefore carrying out traditional capital budgeting calculations for these
types of investments may be very difficult.

There have been a growing number of studies on the impact of the specific “new public
management” initiatives which ha ve been implemented by successive governments in New
Zealand since 1984. Many of these studies have focussed on the accounting implications of
these reforms in various organizations in the public sector in New Zealand. However, none
to date have focussed on capital budgeting.

Lawrence et al. (1994, 1997) examined the financial reforms in the health sector using
Giddens' and Latour's perspectives. Lapsley and Pallot (2000, p. 219) explored "the extent of
management change and … the involvement of management accounting as a trigger or
constraining factor in change" in two NZ local authorities. Northcott (1998) reported the use
of accounting technologies, such as discounted cash flow analysis, and using structuration
theory, explained the conflict which is apparent between the accountants' and the clinicians'
view of the use of accounting information in the health sector.

The above literature establishes the rationale for this study. Despite changes in legislation
and the importance of capital budgeting in local authorise, there exists scant research in this
area. Therefore this research examines the accounting techniques used in the capital
budgeting process in local authorities, using a survey.


The population for this study was local territorial authorities in New Zealand, as defined by
the New Zealand Local Government Act of 2002. There are 74 local authorities, consisting of
15 city councils, 58 district councils and the Chatham Islands council. The population was
divided into two strata, city authorities and district authorities, to account for different sizes,
and a random sample of half of each stratum was taken, a total sample of 37 local authorities.

A mail survey was used, with a self-administered questionnaire (see Appendix) sent to the
finance manager, on the assumption that the finance manager would be involved in the
capital budgeting process and have the required knowledge to complete the questionnaire.
Non-respondents were followed up after two weeks.

Although the use of a well-established and tested questionnaire would have added to the
validity of the research (Cooper and Schindler, 2003), the questionnaire was designed to suit
the particular nature of local authorities; for example, questions were included on the need for
consultation with interest groups such as Maori (Local Government Act 2002, S. 82).

Twenty-nine questionnaires were returned, a response rate of 78% of the sample (39% of the
total population). Six of the total responses were from city councils and the other 23

responses represented district councils. A non-response bias test comparing answers between
early and late respondents was performed, with no significant differences being identified.



The respondent organisations differed greatly in size, from a district council with a
population of 3,483 and capital expenditure of $1.9 million to a city council, population
401,500 and capital expenditure $140 million. Most of the respondents (86%) represented
constituencies of less than 120,000 people and had capital expenditure of less than $40
million. As there were only six respondent organisations tha t were much larger than the
others, it was not possible to statistically compare responses for a size factor.

                                 [insert table I about here]

There were also differences in the capital expenditure planning period (see Table II), which
ranges from three to 100 years. Ten years was the most common, used by 20 respondents.
This corresponds to the period used for long-term financial plans. Several respondents
indicated that different time frames were used for different assets, in accordance with the
requirement for asset management plans (Local Government Act 2002).

                                 [insert table II about here]

The most common period at which capital expenditure plans were reviewed was annually,
with several respondents indicating that the review was carried out during the production of
the annual plan or through their public consultation process (see Table III).

                                [insert table III about here]

Capital Budgeting Teams

Only five respondents (17.2%) indicated they have specific capital budgeting teams. Eight
respondent organisations (27.6%) set up capital budgeting teams for individual projects. The
majority (84.6%) of teams were small (0-10 people – see Table IV), yet a wide range of
training areas were covered, such as engineering, accounting and planning (see Table V).

                             [insert tables IV and V about here]

Project Consultations

Respondents were asked to indicate how they identify investment projects for consideration.
Table VI presents these results in descending order of usage. Suggestions from council
employees were the most used source, followed by the public, community boards, business,
and dedicated teams. Other sources of capital investment projects included councillors,
council committees, engineering consultants, and plans and documents, such as asset
management plans, structure plans and strategies. The latter reflect the requirements under
the Act for the production of asset management plans. The use of strategy and planning
documents to identify investment projects corresponds with the view that strategy should
guide capital investment decisions (Camillus, 1996; Beckett-Camarata, 2003).

                                [insert table VI about here]

The groups consulted during the process of making capital investment decisions are
contained in Table VII. Community, Maori, environmental and business groups were
dominant, as local authorities have obligations to consult with them (Neale and Daken, 2000;
Local Government Act 2002, S. 82). Several respondents stated that other interest or user
groups were consulted if the particular project requires it, while one respondent indicated that
funding suppliers, such as banks, were consulted sometimes.

                                 [insert table VII about here]

Quantitative and Qualitative Aspects

Formal written procedures for evaluating capital investment projects were not used by 72.4%
(21) of the respondents. This finding implies that written procedures and investment manuals
play a lesser role in the capital budgeting process in local authorities. This may be due, in
part, to the existence of qualitative and intangible benefits that cannot be dealt with through
standardised procedures (Segelod, 1997).

Twenty one (72.4%) of the respondents used quantitative methods when evaluating capital
investment projects (see Table VIII). However, the responses indicate that they were not used
extensively. The cost-benefit ratio (mean 3.6) is the most common method (cf. Sekwat, 1999)
and the only method with a mean above the midpoint of three.

                                 [insert table VIII about here]

The extent to which qualitative aspects were considered in investment decisions is presented
in Table IX, in descending order. The first four qualitative aspects were used extensively.
However, all six have means higher than three, suggesting that all qualitative aspects play an
important role and were considered frequently. This finding is consistent with Barton (1999)
and Richardson (1998).

                                  [insert table IX about here]

The difference between the overall mean for quantitative techniques (2.5368) and the overall
mean for qualitative aspects (3.8765) was statistically significant (p- value 0.0000). That is,
qualitative aspects are more important in capital budgeting decisions for local authorities than
quantitative techniques. This differs from previous research, which shows that quantitative
techniques are important and that qualitative aspects a rarely discussed. However, it
confirms earlier findings that non-discounted techniques are used by public sector
organisations (Sekwat, 1999; Richardson, 1998).

The mean (2.44) for quantifying qualitative benefits and costs in monetary terms indicates
that this is not a common practice. This may be due, in part, to the large number of qualitative
aspects considered within each investment project and the complexity involved in quantifying
them. However, subjective judgements were more frequently used and important (mean:
3.34). The difference between the means is statistically significant (p-value 0.0019). That is,
subjective judgements were used more in capital investment decisions than quantifying
qualitative benefits and costs. This corresponds with Sekwat’s (1999) findings that municipal
governments in the US used subjective judgements in making investment decisions due to
qualitative reasons.


Twenty- four respondents (82.8%) indicated they do compare actual benefits and costs with
estimates, although one respondent indicated that generally just costs were compared. This
result is comparable to previous studies (Farragher et al., 1999; Azzone and Maccarrone,

Of those 24 respondents, eight (33.3%) compare actual with planned costs and benefits for all
investment projects, while the other 16 (66.7%) compare for selected projects only. Table X
indicates that the size of the capital expenditure outlay is the most important basis upon
which these projects are selected. Due to the large amounts of expenditure involved in capital
investments, it could be expected that this would be the most important basis (Northcott et
al., 1991).

                                  [insert table X about here]

As found by Kennedy and Mills (1988) and Farragher et al. (1999), accounting and finance
members were the most likely to carry out the post-audit comparisons (see Table XI).
However, the differences between the me ans are not statistically significant (ANOVA F-
statistic 1.0653, p-value 0.3724). Other people listed as carrying out post-audits included
managers, divisions and departments responsible for the asset or project, and consultant

                                  [insert table XI about here]

Quantitative information is frequently compared in post-audit comparisons and is considered
important (mean 4.04). Although qualitative information has a slightly lower mean (3.2353),
it is still above three, indicating that it is important but compared less frequently. The
difference between the means is statistically significant (t-value 3.5957, p-value 0.0009). This
supports previous findings that most post-audits focus on quantitative information (Neale and
Holmes, 1990; Azzone and Maccarrone, 2001).


Lapsley and Pallot (2000, p. 216-217) claim that "the new institutionalism has advanced the
theory that formal organization structures are reliant on institutional rules to give legitimacy
to the organizations activities … result[ing] in local government seeking to incorporate
externally legitimated formal structures [like capital budgeting techniques]". This research
provides empirical evidence supporting this normative proposition.

Existing practice in local authorities shows an extensive reliance on formal capital budgeting
structures in the new legislative environment. Quantitative techniques were found to be used
by 72.4% of the respondent authorities, the most common technique used being the cost
benefit ratio (Sekwat, 1999). However, the emphasis placed on the use of quantitative
techniques is lower than that placed on qualitative aspects, which were fo und to be of greater
importance and significance to the respondent authorities (Barton, 1999; Richardson 1998).

The adoption rates of post-audit comparisons was found to be comparable to those of recent
studies (Farragher et al., 1999; Azzone and Maccarrone, 2001), and the respondent
authorities placed great importance on post-audits of quantitative information (Azzone and
Maccarrone, 2001).

In conclusion, the Beckett-Camerata (2003) quote is re- iterated:

       "Substantial funding is at stake in capital budget decisions and … funding
       capital budgets commits resources into the future and affects the long-term
       spending of a community" (Beckett-Camarata, 2003, pp. 27-28).

The amounts of capital expenditure in this study are large, ranging from $1.9 million to $140
million. It appears that local authorities are taking decisions relating to these expenditures
seriously, in conformance with the requirements of the legislation, which should ensure
positive long-term effects on the community.

                             APPENDIX: QUESTIONNAIRE
                   Capital Budgeting in New Zealand Local Authorities
This survey is examining the capital budgeting practices of local authorities in New Zealand.
Its purpose is to gain an understanding of capital budgeting within local authorities and to
identify specific is sues applicable to public sector capital budgeting. Your answers will be
kept confidential and anonymous.

PART A: Introductory Questions

1. What is the population of the area this council covers?              ______________

2. What is the annual amount of the capital expenditure programme (approximately)?

3. How many years ahead does the council plan for capital expenditure? ________ Years

4. How often is the capital expenditure plan reviewed?                  ______________

PART B: Capital Budgeting Team

5. Does the council have a specific capital budgeting team? (Please tick the relevant box)
         Yes ¨ Please go to number 7            No ¨ Please go to number 6

6. If no, are capital budgeting teams set up for individual projects? (Please tick the relevant
          Yes ¨ Please go to number 7          No ¨ Please go to number 9

7. What is the approximate size of the capital budgeting team? (Please tick one)
     0-10         ¨                 11-20       ¨                21-30       ¨
      31-40       ¨                 41-50       ¨                 50+        ¨

8. Please tick all areas of training and experience that this team generally represents.
      Accounting          ¨           Engineering       ¨           Environmental        ¨
      Finance           ¨           Management        ¨           Planning             ¨
      Strategy          ¨
      Other (please specify):

PART C: Project Consultations

9. How do you identify projects for consideration?
                                                      Rarely                             Extensively
                                                        Used                                Used
     Teams are dedicated to searching and identifying ..... 1                2   3       4    5
     Suggestions from businesses ...................................... 1    2   3       4    5
     Suggestions from Community boards ........................ 1            2   3       4    5
     Suggestions from council employees ......................... 1          2   3       4    5
     Suggestions from the public ....................................... 1   2   3       4    5
     Other (please specify):
      _________________________ ................................ 1           2   3       4    5
      _________________________ ................................ 1           2   3       4    5

10. When making capital inve stment decisions, what interest groups are consulted?

                                              Never          Sometimes       Regularly       Always
     Business groups                            ¨                  ¨             ¨                ¨
     Community groups                           ¨                  ¨             ¨                ¨
     Environmental groups                       ¨                  ¨             ¨                ¨
     Maori interest groups                      ¨                  ¨             ¨                ¨
     Other (please specify):
      _________________________                 ¨                  ¨             ¨                ¨
      _________________________                 ¨                  ¨             ¨                ¨

PART D: Quantitative and Qualitative Aspects

11. Does the council have a formal written procedure for evaluating capital investments?
(Please tick the relevant box)
          Yes ¨ Please go to number 12     No ¨ Please go to number 13

                                                                    Rarely               Extensively
12. To what extent is this procedure followed?                         1     2   3       4    5

13. Are quantitative methods used to make capital investment decisions? (Please tick the
relevant box)
         Yes ¨ Please go to number 14      No ¨ Please go to number 15

14. To what extent are the following quantitative methods used in making capital investment
decisions? (If the method is not used, then please tick the ‘method not used’ box).
                                         Method                          Rarely                    Extensively
                                         Not used                          Used                       Used
      Accounting Rate of Return........ ¨ ............................ 1                   2   3   4    5
      Cost-Benefit Ratio ..................... ¨ ............................ 1            2   3   4    5
      Internal Rate of Return.............. ¨ ............................ 1               2   3   4    5
      Net Present Value ...................... ¨ ............................ 1            2   3   4    5
      Payback Period .......................... ¨ ............................ 1           2   3   4    5
      Revenue-Expense Ratio ............. ¨ ............................ 1                 2   3   4    5
      Other (please specify):
      _________________________ ................................ 1                         2   3   4    5
      _________________________ ................................ 1                         2   3   4    5

15. To what extent are the following qualitative aspects considered in capital i vestment    n
                                                                           Rarely      Extensively
      Environmental ............................................................ 1 2 3 4    5
      Ethical......................................................................... 1   2   3   4    5
      Legal........................................................................... 1   2   3   4    5
      Political....................................................................... 1   2   3   4    5
      Social/Community...................................................... 1             2   3   4    5
      The Treaty of Waitangi/Maori aspects ....................... 1                       2   3   4    5
      Other (please specify):
      _________________________ ................................ 1                         2   3   4    5
      _________________________ ................................ 1                         2   3   4    5

16. To what extent are qualitative benefits and costs                            Rarely            Extensively
quantified in monetary terms?                                                       1      2   3   4    5

17. To what extent are subjective judgements used                                Rarely            Extensively
in making capital investment decisions?                                             1      2   3   4    5

PART E: Comparison of Actual versus Estimated

18. After making capital investments, does the council compare actual benefits and costs with
estimates used in the original decision? (Please tick the relevant box)
         Yes ¨ Please go to number 19            No ¨ Please go to number 23

19. Are these conducted for all investment projects? (Please tick the relevant box)
         Yes ¨ Please go to number 21          No ¨ Please go to number 20

20. If the council compares actual with estimates for selected projects, on what basis are these
projects selected?
                                                                       Rarely      Extensively
       Size of capital expenditure ......................................... 1 2 3 4    5
      Quantitative considerations ........................................ 1      2   3   4    5
      Qualitative considerations .......................................... 1     2   3   4    5
      Randomly selected...................................................... 1   2   3   4    5
      Other (please specify):
       _________________________ ................................ 1               2   3   4    5
       _________________________ ................................ 1               2   3   4    5

21. Who carries out these comparisons of actual with estimates?
                                                                   Rarely                 Extensively
     Accounting staff member ........................................... 1 2          3   4    5
      Finance staff member ................................................. 1    2   3   4    5
      Capital budgeting team member................................. 1            2   3   4    5
      Independent member .................................................. 1     2   3   4    5
      Other (please specify):
       _________________________ ................................ 1               2   3   4    5
       _________________________ ................................ 1               2   3   4    5

22. What information is compared?
                                                                      Rarely              Extensively
      Quantitative information ............................................ 1     2   3   4    5
      Qualitative information .............................................. 1    2   3   4    5
      Other (please specify):
       _________________________ ................................ 1               2   3   4    5
       _________________________ ................................ 1               2   3   4    5

23. Thank you for taking the time to complete this questionnaire. Please return it in the
postage paid envelope provided.

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   Table I: Respondents by population size and capital expenditure
                                    Capital expenditure
Population size (000) n      %                              n      %
         0-40         13     45%              0-20          18     66%
        40-80         10     34%             20-40           5     18%
       80-120           2     7%             40-60           1      4%
      120-160           0     0%             60-80           1      4%
      160-200           3    10%            80-100           0      0%
      200-400           0     0%           100-120           1      4%
        400+            1     4%           120-140           1      4%
  Total responses     29 100%         Total responses       27 100%

           Table II: Capital expenditure planning periods
           Planning period           No. of respondents
           3 years                            2
           5 years                            1
           10 years                          20
           15 years                           1
           20 years                           2
           10-50 years                        1
           10 years (all),
           20-100 (some)
           20 years (asset
           management plans),                 1
           5 years (other assets)

               Table III: Capital expenditure review periods
              Review periods             No. of respondents
              1 year                             20
              3 years                             3
              1-3 years                           1
              1 year or quarterly                 1
              1 year (full),
              Quarterly (part)
              1 year (short term),
              3 years (long term)
              1 year with two
              re-forecasts during year

                   Table IV: Capital budgeting team size
                   Size of team         No. of respondents
                       0-10                     11
                      11-20                      1
                      21-30                      0
                      31-40                      1

          Table V: Capital budgeting team training and experience
              Areas of training         No. of respondents
              Engineering                       10
              Accounting                         9
              Environment                        9
              Finance                            9
              Management                         9
              Planning                           9
              Strategy                           6
              Internal audit                     1
              Political                          1

        Table VI: Identification of investment projects for consideration
                                      Mean       Std. Dev.     n    Min Max
Council employees suggestions         4.0357      0.9616      28     2    5
Public suggestions                    3.5357      0.6929      28     2    5
Community board suggestions           3.0455      1.2141      22     1    5
Business suggestions                  2.4583      0.8836      24     1    4
Teams dedicated to searching          2.4348      1.4717      23     1    5

               Table VII: Consultations during project consideration phase
                                     Never      Sometimes      Regularly       Always
Community groups                       0             4             13             11
Maori interest groups                  1             5             15              7
Environmental groups                   1             4             17              5
Business groups                        1            10             10              5
Full general public / community
                                       0             0              2                    2
Other interest/user groups             0             1              1                    1
Funding suppliers                      0             1              0                    0

                        Table VIII: Quantitative methods and usage
                                                             Method          Range
                                  Mean      Std. dev.    n   not used
                                                                        Min      Max
   Cost-benefit ratio             3.6000     1.0463     20      1        2           5
   Net present value              2.6500     0.9333     20      1        1           4
   Payback period                 2.4211     1.0174     19      2        1           4
   Revenue-expense ratio          2.2500     1.0553     12      7        1           4
   Internal rate of return        1.8462     0.8006     13      8        1           3
   Accounting rate of return      1.7273     0.9045     11      9        1           4

                          Table IX: Qualitative aspects
                                      Mean      Std. dev.   n
                                                                     Min Max
  Social/Community                    4.3448     0.6695     29        3      5
  Legal                               4.0345     0.7784     29        3      5
  Environmental                       4.0000     0.7071     29        3      5
  Political                           4.0000     0.9258     29        2      5
  Treaty of Waitangi/Maori Issues     3.6071     0.9940     28        1      5
  Ethical                             3.1923     1.1668     26        1      5

               Table X: Basis for selection of investment projects
                                      Mean      Std. dev.    n
                                                                     Min    Max
Size of capital expenditure           4.0625     0.8539      16       3       5
Quantitative issues                   2.8462     0.8006      13       1       4
Qualitative issues                    2.7857     0.6993      14       2       4
Randomly selected                     2.0000     1.2910       7       1       4

          Table XI: Member that carries out post-audit comparisons
                                   Mean Std. dev. n
                                                              Min   Max
  Accounting member               3.5882     1.3720      17    1      5
  Finance member                  3.4667     1.1872      15    1      5
  Capital budgeting team member   3.1818     1.2505      11    1      5
  Independent member              2.7000     1.4944      10    1      5


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