Local Government Audit Service: Discussion

At the request of the broadcasting and recording services, members and visitors in the Public Gallery are requested to ensure that, for the duration of the meeting, their mobile phones are turned off completely or switched to airplane, safe or flight mode, depending on their devices. It is not sufficient to put phones on silent mode as that will maintain a level of interference with the broadcasting system.

The next business is an overview of the work of the Local Government Audit Service in 2017 and related matters. On behalf of the committee, I welcome Ms Niamh Larkin, director of audit, and Mr. Richard Murphy, both of whom are from the Local Government Audit Service.

I draw witnesses' attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If, however, they are directed by the committee to cease giving evidence in respect of a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

I invite Ms Larkin to make her opening statement.

Ms Niamh Larkin

The Local Government Audit Service, LGAS, performs the independent, external audit of local government, as established by the Minister for Housing, Planning and Local Government. The LGAS audits the annual financial statements of local authorities, including regional authorities, motor taxation offices and other bodies.

The Minister for Housing, Planning and Local Government appoints auditors, known as local government auditors, to carry out or assist in the carrying out of audits of local authorities and other bodies. All local government auditors are qualified accountants and recruited following open public competitions. Each local government auditor is assigned an audit district under warrant of authority from the director of audit. Local government auditors are independent of the Department when discharging their professional functions. This independence is protected in legislation in accordance with section 116(2) of the Local Government Act 2001. The Act sets out the primary duties of the local government auditor as follows:

In the course of the audit of accounts of the local authority or other body, the local government auditor shall carry out such audit tests as he or she considers appropriate in order to be satisfied as to—

(a) whether the annual financial statement is prepared in accordance with section 107 or with the accounting requirements otherwise applicable to the body concerned,

(b) whether the annual financial statement presents fairly the financial position of the authority or other body and of its income and expenditure for the period in question,

(c) whether the transactions of the audited body conform with the statutory or other authorisation under which they purport to have been carried out.

There are a number of outputs from the audit. Following the audit, each local government auditor issues an audit opinion, an audit report and a management letter to the chief executive of the local authority. It is the local government auditor's main statutory duty, following completion of the financial audit, to give his or her independent audit opinion on the annual financial statement of the audited body as to whether it presents fairly the financial position of the audited body and of its income and expenditure for the period under audit.

In addition to the audit opinion, it is custom and practice to issue statutory audit reports covering any matter or matters that the auditor considers should be reported. The chief executive of a local authority is required to respond to this report and his or her comments shall be included, if of material significance, as part of the final report. This procedure has enhanced public scrutiny of local government as management responses to address the issues raised at audit now form part of the published audit reports.

In accordance with international standards on auditing, an auditor may issue a management letter drawing attention to any weaknesses in financial procedures and-or internal controls identified during audit and make appropriate recommendations.

This report provides an overview of the work of the Local Government Audit Service in delivering on its statutory remit of providing the external audit of local government, in accordance with sections 114 to 126 of the Local Government Act 2001, as amended by the Local Government Reform Act 2014. The report is divided into three sections. Section 1 covers the role of the Local Government Audit Service and the legislation that governs it. It details the various relationships the Local Government Audit Service has with other bodies, including local authorities, their audit committees, the National Oversight and Audit Commission, NOAC, and the Office of the Comptroller and Auditor General. It also highlights the role the value for money unit plays in assisting local authorities to learn from best practice.

Section 2 summarises the financial performance of the 31 local authorities audited for the year ended 31 December 2017. It details the main sources of both revenue and capital income and expenditure, together with historic data, so that comparisons can be made. It details the value of assets under the control of local authorities and the liabilities that they face in both the short and long term.

Section 3 outlines some of the findings included in some of the local government auditors' audit reports and opinions. The findings are set out under the following headings for the purpose of the overview report: financial standing; income collection; unfunded capital balances; capital projects; loans payable; development contributions; fixed assets; transfer of assets to Irish Water; procurement and purchasing; local authority companies; and governance, internal audit and audit committee. The findings included in the overview report are not an exhaustive list of all findings but a summary of the main areas. The audit reports for each local authority deal with the findings in detail. Auditors continue to issue unqualified audit opinions on local authorities' audited financial statements, with one report, concerning 2017, containing an emphasis of matter. Our primary sources of information for the overview report are local authority audited financial statements and the annual audit reports.

I hope this overview report gives an insight into the work carried out annually by the Local Government Audit Service. I look forward to discussing it with members in detail. As director of audit, I thank the committee for inviting me and my colleague, Mr. Richard Murphy, to today's meeting.

I apologise in advance because I will have to leave to go to another meeting at 11.30 a.m. I welcome the auditors and their work, which is important. The auditors keep a proper, professional eye on the activities and functions of local government to make sure there is total transparency and accountability, books are kept properly and well and any issues that arise are brought to the attention of the individuals and councils concerned. Everybody benefits as a result.

I made a query to the Local Government Audit Service last year or perhaps it was the year before in respect of a former student of mine who claimed he had been defrauded. I am not naming names or even the council concerned; I want to be very clear on that point. There was a court case and a person was deemed to have committed a criminal act and suffered penalties as a result. The issue that arose was how the county council found itself in the position that it did. There is a question in regard to what due diligence was done on the contract to ensure the company which was awarded the contract was actually the same company that had secured it previously. Part of the issue was that the same notepaper and letterhead were used in both cases. The basic detail is that a person was defrauded of money and the criminal justice system dealt with the matter. How did the Local Government Audit Service deal with the case, however? As it took place in 2009, I acknowledge that it was not a recent audit. However, it was the outcome of a criminal case. I do not expect the witnesses to comment on any criminal issues or matters that could impinge on someone's rights were any such things to happen in the future. Having said that, how was that case dealt with?

Deputy O'Dowd is referring to a specific case. The witnesses do not have to answer that question because we are here to discuss the broader work done by the Local Government Audit Service.

I accept that totally.

It may not be appropriate for the witnesses to make any comment on this issue.

I accept that. It is entirely fine if they do not wish to comment. I advised them before the meeting that I intended to raise this issue. I want to know how the audit of a county council did not pick up this issue. People have to be deemed to have been treated fairly and properly. If somebody feels aggrieved, he or she has every right-----

Deputy O'Dowd is raising a particular case. We are here to deal with broader issues.

No, we are dealing with all of this.

We are not dealing with specific cases.

I am asking questions regarding audit reports and-or management letters in respect of a matter I brought to the attention of-----

There can be a question on the broader context but not on a specific case.

I brought this matter to the attention of the director of audit. That is what I am dealing with. I am looking for accountability regarding the narrative of what actions were taken in respect of this case. That is all.

The witnesses may not have that information.

They do have it.

Nobody was aware this issue was to be raised today. We are here-----

The witnesses have the information. I raised the matter before the meeting with one of the persons present.

Ms Niamh Larkin

I am aware of the case because we have spoken about it previously. We looked at it as part of the 2017 audit and we wrote to the person concerned as part of the audit.

Ms Niamh Larkin

As has been said, it is an ongoing criminal investigation and An Garda Síochána is dealing with the case at the moment.

I accept that totally.

Ms Niamh Larkin

That is the correct course to follow in such instances. If Deputy O'Dowd wishes to know about the wider issue-----

Yes, on the wider issue.

Ms Niamh Larkin

-----of how we deal with issues in audit reports, we have a mechanism - involving audit reports and our management letters - whereby anything raised in those letters is carried forward to the following year and forms part of our risk profile for that local authority for that year. We do, therefore, have a mechanism to deal with an issue with a local authority and for tracking and following it up. It is dealt with as part of the overall audit. Regarding the incident mentioned by Deputy O'Dowd, I am aware of what he is talking about and we have responded.

Is there a duty on a local government authority, wherever it might be, whether Wicklow, Louth or elsewhere, to-----

In fairness, this is a matter that is before the courts.

No, it is not before the courts. It has been dealt with by the courts. There has been a conviction and I am not talking about that aspect. I am only talking about the audit and I am being very careful with my words. The question I am asking is whether there is a duty of care on a local government authority to inform the auditor that there has been a criminal case during the period being examined, regardless of the outcome.

Ms Niamh Larkin

We have two systems for dealing with that. At the start of each audit, we meet the chief executive and each of the directors of services and go through anything that has happened during the year. We go through all of the minutes of senior team management meetings and the council. We would, therefore, be aware of any matter arising. We also specifically ask the chief executive if there has been any fraud in the local authority during the year. We deal with this issue under the remit of fraud. We also speak to people such as the head of internal audit and head of finance about fraud. If there was an incident of fraud, or a case like that, the local authority would, therefore, bring it to our attention.

I think the case I referred to occurred in 2009. I am not sure of the exact year. Was that case brought to the attention of the Local Government Audit Service before I raised it?

Ms Niamh Larkin

I would have to go back and check the files as 2009 is before my time with the Local Government Audit Service.

Ms Niamh Larkin

We only keep records for about seven years, so the earliest I could go back now is probably about 2012.

This particular case has been dealt with. Has it changed the view of Ms Larkin's organisation in any way? I am talking about audits, checks and balances and the transparency of assessing applications for contracts, etc.

Ms Niamh Larkin

No, because we have always had a robust system in respect of procurement. It can be seen in the overview report that procurement and purchasing feature heavily within audits. A sample of items procured is picked from each local authority every year and we make sure that the relevant legislation, procurement guidelines and the guidelines of the local authority itself have been followed. We only pick a sample rather than checking every single contract.

Regarding the case I referred to and the local authority concerned, were any audit reports written or any management letters issued as a result of what happened?

Deputy O'Dowd is coming back to the individual case.

I will ask a question then. Were any audit reports or management letters issued to any councils in that year?

Ms Niamh Larkin

Every local authority receives an audit report and a management letter each year. The items would be-----

Are they available to view? Could I see them?

Ms Niamh Larkin

Yes, all of the audit reports are on the Department's website and they include those of the past number of years.

Would Ms Larkin help me out by sending me a copy of the report for the county to which we are referring?

Ms Niamh Larkin

Yes, I will.

That is fine. I thank Ms Larkin.

Ms Niamh Larkin

Is it for any particular year?

We will start with 2009 and then for every year after that. I am only trying to ensure that something similar does not happen again, just as the Local Government Audit Service is trying to do. I am trying to ensure that a situation does not arise again where a person is placed in a position in which he or she loses a significant amount of business. That is what happened in the case I mentioned, through no fault of the Local Government Audit Service. The person's entire business is now gone. It is a very sad case.

Ms Niamh Larkin

I will certainly make a note of that and we will pull together the relevant audit reports.

I have to excuse myself now. I bet there is relief I am heading out the door.

I look forward to hearing from Senator Boyhan now.

Can Deputy O'Dowd not wait for the next part?

I am sorry but I have to meet someone else. I apologise and thank the committee.

I thank Ms Larkin and Mr. Murphy for attending today. I am a great supporter of the Local Government Audit Service. It carries out an amazing function. During the engagement with Deputy O'Dowd, I heard mentioned that the Local Government Audit Service reviews the minutes of councils. This is the first I have heard of that and it is an important message to disseminate because councils will raise many issues in any particular year. I was a councillor in Dún Laoghaire for many years. I used to raise issues and wonder if I was mad for doing so. I derive great comfort from hearing Ms Larkin state council minutes are examined as part of the audit process. I state that because there are diligent councillors and some will always be involved in specific areas. As was said to me, there will always be a small group of councillors who want to get under the bonnet. I refer to those who want to know about governance issues and the really important issues that the public will not necessarily know much about. They will always be a cohort of people interested in that-----

Then they become Senators.

-----and I am one of them. I looked at the report, which is excellent, and the combined report, which I downloaded from the website. Then, as auditors do, I looked at ten local authority reports at random. A few issues kept jumping out of the pages. Before I delve into those in more detail, I have a general comment that might be taken on board. The timelines for public engagement with the auditing process are very tight. Ms Larkin will be aware that statutory notices are placed in most of the national and provincial newspapers informing people when an audit is taking place. It could be next Monday, for instance. I saw one such notice last week - I think it was in the Meath Chronicle - which stated that due notice was being given that an audit was taking place and that it would commence the following Monday.

That newspaper came out on the Thursday. There was a ten day period, which is far too tight. I ask that the witnesses look at this again. People may buy a weekly provincial newspaper, such as the Wicklow Times, which will tell them on a Saturday that on Monday one can go in, within a very tight timeframe, pay a few euro and look at the accounts. Most people, however, would not quite understand the whole thing. Perhaps the witnesses might send a message to look again at this. If we are serious about public engagement, about engagement with the finances and the corporate governance of authorities around transparency and about seeking the public's opinions and views, which is all very positive, then we must assist them. Many of these people are lay people. They are not financial experts. I have heard where people have presented to the council and copies have not been made available, or the person asking for it is made to feel a bit of a nuisance. It is not encouraged, which is a pity. I would ask the representatives to look at this.

Reference was made to the management letters and I picked up on this from Deputy O'Dowd's engagement with the witnesses. Every local authority gets an audit report, but does every local authority get a management letter? It does. The witness confirmed that. Are these management letters sent directly to the councillors? We are aware from the audit reports that they are usually sent to the chief executive or the cathaoirleach of the local authority but are not sent to the local authority members. The chief executive invariably will tell the local authority members that it cannot be made public until he or she has discussed it with the audit committee. In many cases, their audit committees only meet four times a year so if, for example, it is not to meet for another three months, there is a situation where it is running late and councillors are looking at 2017 audit reports in 2019. I am aware it does not take two years but it takes some 15 months and there can be another deferral. There is not a proactive response. Some local authorities do not like engagement.

I was informed about two councils and I took the time to look at the webcasts of the meetings where the councils only discussed these reports briefly, sometimes just for ten minutes. We need to look at the situation of how the audit reports are circulated. I want the witnesses to confirm this to me. I see no reason, when the Local Government Audit Service sends the report to the chief executive and the cathaoirleach or the mayor of the council, that all the councillors should not have it also. At that stage, it is all done. The audit committee cannot adjust or tweak any element of the audit report so there is no good reason all elected members of the council could not have the report. I ask the representatives to consider this and take it on board. It is feedback.

I now turn to the issue of the fixed asset register. I will give an example of some comments that are in some of the audit reports. I will not identify the councils because it would be unfair. A review of one council's fixed asset register of lands and buildings indicates that it has not been properly maintained. The report identifies that council assets have been incorrectly registered to a third party rather than to that particular council or were never registered in the names of the council. The Local Government Audit Service stated that a council needed to:

Review its historic assets, as issues highlighted above identify assets that were either unregistered or registered to an incorrect party. The Council must ensure that it has recorded appropriate title to all its assets. [This had not happened] Identify all way leaves or permissions pertaining to these assets, and record and register all its assets with the Property Interest Register [which were incomplete].

Another report said that a council should "Complete the process of transferring title to IW [Irish Water] for assets removed from the books of the Council totalling €300m." This is in a Local Government Audit Service report and is common in relation to the transfer of assets to Irish Water. Another report says that a council must ensure that "the insurance register needs to be reconciled with fixed assets", which is not happening in some cases. This is to ensure that all the assets are properly insured at year end. The report on corporate estate governance and management of local authorities shows that a number of local authorities are not carrying through on those audits. The audit service said that the follow up progress reports identified by a certain number of councils did not have such plans in place but would commence and have given an undertaking that they would do so. The standard chief executive response in all the audit reports I read was that they had a resource problem. We cannot have a situation where chief executives tell the audit service that the local authority has a resource issue. Millions of euro of real estate should be properly registered.

I commend the Local Government Audit Service on its work. It has identified that assets are not on insurance registers and are not on proper asset registers of local authorities. This has been going on for years. I am not going to ask the witnesses more about this because the audit service accepts this and knows it to be the case, a true account of which it has given in its reports. It is, however, an area that I would ask about. The audits are not one of my functions and I am only giving the feedback but we need a real focus on this. We need more training, more assistance and more IT skills. The mapping of our real estate is very important across the 31 local authorities.

This brings me back to Rebuilding Ireland, the land development agency, and all the various agencies that are now challenged with tapping into the potential of the State's real estate. Clearly, the remit of the Local Government Audit Service is the local authorities but there are also Irish Rail properties, the ports and many other places. There are vast tracts of land. In the case of my own local authority there are parklands that are not even registered. No one even seems to know them. There is a massive amount of work to be done.

Another area that needs to be looked at is the issue of companies associated with the councils. We aware that many local authorities have wholly owned subsidiary companies, of which the local authority is the sole shareholder. Substantial money is involved. The chief executives of those local authorities act as the agents on behalf of the shareholders. The companies are wholly owned by the local authorities and deal in millions of euro of real estate, yet we do not seem to know how the agent is accountable to the shareholder. This is a real challenge for local government auditing. There is now a situation where vast numbers of assets and properties are being put at arm's length away from the elected members. The witnesses will be familiar with section 83 and how we can dispose of properties. We cannot altogether blame the councils because the councillors themselves do not always have the expertise. They have the willingness and the desire to keep control as part of their elected mandated, but now we have these companies that are at arm's length and where the council executive is making the decisions unknown to the elected members of the council. The executives propose to dispose of the assets of these companies and in some cases are disposing of assets that are zoned for residential purposes or potentially for residential development. There is an issue there. Is the Local Government Audit Service planning to look at this? I would suggest that this is an area of focus, perhaps in a future audit, for the Local Government Audit Service and that it would look at these wholly owned subsidiaries and companies. I note in every audit report that the Local Government Audit Service has a section in the back. This goes from sports and leisure companies to arts, theatres and so on. There are a lot of problems around these issues with accountability and good governance. This is not to suggest that there is any other thing wrong, although the audit service has mentioned that. I do not want to get into those specifics here.

Does the Local Government Audit Service believe it has sufficient resources to carry out what is a very onerous task? Much work is required and the witnesses might want to comment on that. Do the witnesses have a view on the Committee of Public Accounts? Perhaps they have a view and do not want to share it, which I understand. Is there some format in which we can bring the Accounting Officers to account? It is all about accountability. From the Local Government Audit Service audit reports over the years, I have picked up that the service is doing excellent work and it is identifying weaknesses, but it is getting the usual old message from the chief executives saying "We do not have the resources." I do not believe the Local Government Audit Service has enough teeth to sanction. While the service can identify the problems and weaknesses, somehow this is about accountability also. The chief executives are very well paid and they have an onerous task, but they do not take personal responsibility. They are not personally held accountable for issues around this whole area. In private sector business they would be held accountable because there are consequences when people fail in the private sector. I am not convinced there are sufficient consequences for chief executives for failures that may be found, having gone through due process - I am not judging anyone. Would the Committee of Public Accounts or the Office of the Comptroller and Auditor General be the format? I would be very interested to hear the relationship the Local Government Audit Service has with the Office of the Comptroller and Auditor General.+

Is there a mechanism with which we can elevate the Local Government Audit Service's work? I am thinking of a means to bring chief executives to a public forum and hold them to account on the key issues, the recommendations the service makes and the areas it deals with. Indeed I would suggest going beyond that. I would be really interested in helping. I congratulate Ms Larkin on her agency's really important work. My concern is with following up on it and holding the right people to account on behalf of the public.

Ms Niamh Larkin

I will take each of those points in sequence. I have raised the issue of the circulation of our audit reports. We work under a very tight deadline to have all our audits finished by 31 October each year. The audits for 31 December 2018 are now ongoing. They are all expected to be finished by 31 October. We work under a very tight schedule to achieve those deadlines and get those reports out. As the Senator notes, we have a mechanism whereby we send them to the chief executive and the head of finance of the local authority involved. Different local authorities follow very different plans after that. Some local authorities put the audit report on their own website the minute we send it to them, give us permission to post it on the Department's website and circulate it to the council in the next council pack. Other local authorities, as was said, wait until the report goes to the audit committee. Then there is a time delay because the audit committee has to prepare a report which must go back to the council. That is not satisfactory for us because then we are looking at accounts for December 2017 in December 2019. They are too far out of date. The issues have become dated for the councillors. Ideally, we would like to see it circulated.

There are two pieces of legislation that cover the issuance of our audit reports. Legislation requires us to send our audit report to the chief executive. There is also legislation under which the audit committee must consider our report. The problem is that the two pieces of legislation each stand alone. They do not outline a sequence which local authorities must follow. To resolve this issue, I have raised it with the County and City Management Association, CCMA, and the heads of finance. The Department is now looking to put together some guidance for local authorities on what should happen on receipt of our audit reports. Ideally, I would like for the report to be circulated within a very short time of us issuing it so that the issues can be actioned in a timely manner.

The second point the Senator raised concerned the management letters. When an issue is raised as part of the audit, it either ends up in the audit report or the management letter. We decide where it ends up based on the priority rating we assign it. We rate all our issues as high, medium or low priority. We also rank them. The most important issues end up in the audit report and the other issues end up in the management letter. The format of the management letter is such that we set out the issue, its implications and our recommendation on it. We rank that issue and then ask management for a response and a timeframe within which it will address the issue. We then follow up on that timeframe in the next audit. I know that a lot of the audit committees receive the management letter. From speaking to the audit committees, I know that they use our issues, put them into a template and track them as part of their audit committee meetings. Some audit committees now call in members of the senior management team to talk about issues in our audit report or management letter and see what progress has been made. We welcome that. That is another means of looking at the issue in order to resolve it.

Fixed assets are an area we would look at. As the Senator said, a lot of value is contained in assets. Some of the fixed assets consist of things like roads and parks, but our main concern is land and buildings. Those are the areas on which we concentrate. All the issues are listed on page 39 of our summary report. It is important to note that while some of the issues come up year after year, some progress is being made on them. This progress can be seen in audit reports as well and it is summarised on page 39. The problem is that many of these are legacy issues. As the Senator said, there is a legal issue. The local authority must find a legal title and map the site. Many local authorities are using things like geographic information systems, GIS, and technology to help make progress on that, but there is still a lot of work to be done in that area. We welcome any progress local authorities can make in that area.

The Senator's fourth point concerned companies. This comes up every year. There is a separate appendix at the back of the annual financial statement, AFS, appendix 8, in which the local authority has to list all the relevant companies. We audit that as part of the process. We ask for the audited accounts of those local authorities. We look at the audit report and any guarantees given by the council. We have raised all those issues and obviously we have several concerns about those companies. As the Senator said, there is sometimes a lack of governance or control where these companies are concerned. They may be operating at deficits in situations where the council has guaranteed their funding, or they may owe large amounts to councils. We have concerns, which we raise. Some of these are small companies that might be set up to run a swimming pool, for example. Some are very substantial companies that hold real estate. In those cases we do a lot more work on the figures behind the accounts. The auditors sometimes meet with the boards of those companies and look at board minutes to make sure that any concerns are reflected in our audit reports.

The Senator asked about our resources. We have 32 members of staff at the moment. We are currently running four or five vacancies. We find it difficult to attract staff because of the economic conditions in the major cities. We faced this problem last year and this year. We deal with it through the use of seconded staff from accountancy firms. However, that is not something we want to continue and we are working with the Department of Housing, Planning and Local Government and the Department of Public Expenditure and Reform to address those shortfalls. Our priority is audit, so our focus each year is on ensuring that all the audited financial statements are completed by 31 October. If we have extra days we use them to examine value for money. If we do not have enough staff we do not undertake as much value for money work as we would in years when we have a full complement of staff.

The Senator asked about accountability. I know the National Oversight and Audit Commission, NOAC, also spoke about having more oversight and accountability. There are mechanisms that work, such as the audit committees, which have been up and running for a few years. I refer particularly to their approach to tracking the issues in the last two or three years. We are very closely linked with the NOAC. We agree our programme of work on value for money in advance with NOAC and it informs us of the areas it is looking at. We undertook four reports last year on what we consider to be audit issues. We looked at unfunded balances, rates, loans and the cost of pensions to local authorities. We consulted with the NOAC on areas it wished to focus on and on audit issues we had seen coming up. We ask for input into our planning for work on value for money issues.

In regard to our relationship with the Comptroller and Auditor General, I note that we are part of a group called the Public Audit Forum, PAF. It is made up of audit bodies in the UK, Scotland, Wales and Northern Ireland as well as the Comptroller and Auditor General. We get together and share thinking on emerging trends such as data analytics. We look at best practice in our areas of work. On top of that, I meet periodically with one of the directors from the Office of the Comptroller and Auditor General to talk about things like training and work practices.

What Ms Larkin has said is very helpful. To wrap up, I would like to suggest three things that her agency might consider in its next audit. These are only suggestions, because I have no statutory function in all of this. The value and cost of pensions to local authorities is a ticking bomb.

That is something on which a special report is needed. I refer secondly to the issue of the lands and assets register and whether there is a need for additional training and resources. It is a specialist area and technology will crack it in time to a great extent. There are multiple agencies doing this work and it is an area which needs a special report. I refer also to the issue of these wholly-owned private companies associated with local authorities in terms of their governance and accountability to the elected members who are ultimately charged with responsibility. Having read many of the service's audit reports, those are three areas which jump off the pages as areas in which alarm bells should be rung. While it is a matter for the audit service as to how it does its work, those are three areas I would like to look at again. Certainly, I will keep a keen eye on the next reports. They are three areas on which we need work and, perhaps, special reports. The audit service does special reports and in that context, these are areas it might consider. In any event, I say "Well done" and thank the witnesses for coming in.

Ms Niamh Larkin

I draw the Senator's attention to a specialist report we compiled on pensions which came out just before Christmas. I can send the Senator a copy. It looked at the number of pensioners, the sums paid out each year in pensions and the actuarial review carried out by the Department of Public Expenditure and Reform for local authorities as to overall viability. We have done a very detailed report on pensions and the pensions gap in local authorities regarding income and expenditure. Land and asset registers and local authority companies are areas we are already looking at as part of the 2018 audit and they will appear again for 2019.

If that report is sent to the secretariat, it can distribute it to all members. It is a valuable report.

Ms Niamh Larkin

Four reports were done and I might send copies of all of them.

We can give reports to the members. Having served on an audit committee in Wicklow, I confirm that we were always shown the management letter from the auditors. In fairness, it gave one a greater insight into what the thinking behind the report was. It was always a valuable piece of information. Pensions have been mentioned. The cost of pensions is a recurring issue in every budgetary process in every local authority. I have not read the report referred to and I look forward to doing so.

When one looks at the report before the committee, there is not much of concern that is not covered. It covers almost everything from unfunded capital balances to capital projects, loans payable, development contributions and so on. Is there a trend whereby one or two of these issues arise across all local authorities or is each authority unique? Are there specific areas of concern on which the committee should focus? Having gone through 12 Estimates processes - it is in late November since the property tax has come in - I note that we still sit during the last week waiting for the phone call from the Department to say the local government fund will be in or about the same as last year. The huge area that local authorities take a gamble on relates to grants, whether for roads or whatever. We always take a punt on that and think we will get what we got last year or budget for a 5% increase in the hope that we get it. Is that the right way to do business? Is there a more transparent way to deal with that issue?

I have a concern that once again we have kicked the local property tax review down the road. Wicklow is currently going through a rates review for the first time in 40 years. The implications for some businesses are unbelievable. We have not carried out a local property tax review for more than five years and seem to be going the same way in that regard. There are thousands of properties which pay absolutely nothing in property taxes which could help to fund local authorities. Can Ms Larkin give a view on those few items?

Ms Niamh Larkin

On issues that arise in each local authority, we ask that local government auditors comment on certain things in each audit report. We always ask that financial standing is commented on and we always ask that income collection is commented on. Those are massive areas in a local authority. The transfer to Irish Water is another and then we ask for consideration of governance arrangements around internal audit, audit committees and local authority companies. Outside those areas, the local government auditor can deal with the issues he or she feels are relevant. There are items that occur in many local authorities, simply by virtue of their nature. For example, fixed assets, procurement and purchasing will usually appear. Usually, there is something in the area of unfunded balances or development contributions. One sees those in the majority of audit reports. That is simply the nature of the topics.

I was asked about budgeting. We look at the budgets local authorities prepare each year and then we look at the actual turn out compared to budget. Looking at how local authorities go about preparing their budgets is outside our remit. However, I would have thought finance would have built up a great deal of knowledge on what comes in. Those people are working with the different Departments that award the grants and would have a history there.

While it was not in the area of LPT, one of the special reports we prepared was on properties not being captured for rates, to which the Vice Chairman has just referred. There are properties also awaiting valuation, which means there is a loss of income to the local authority. We looked at that area. LPT is a policy matter and we only look at how accurately it is reflected in the financial statements. On LPT and properties being revalued, we look only at how the policy is implemented.

I thank Ms Larkin and Mr. Murphy for attending and engaging with the committee today.

The joint committee adjourned at 12 noon until 9.30 a.m. on Wednesday, 15 May 2019.