JOINT COMMITTEE ON THE ENVIRONMENT, HERITAGE AND LOCAL GOVERNMENT debate -
Tuesday, 20 Jan 2009

Local Government Audit Service: Discussions with Local Government Auditor and Department of the Environment, Heritage and Local Government.

Chairman

The joint committee will deal with No. 4 on its agenda for this meeting, which pertains to local government audit services. Members will recall our examination in 2008 of dispute resolution in the local government sector arising from a request from Deputy Fitzpatrick to examine the impact of such disputes on local employment. Following the joint committee's meeting on the matter with the Secretary General of the Department of the Environment, Heritage and Local Government, members agreed to invite the local government auditor before the joint committee to discuss this matter, as well as the general issue of his role.

I am delighted that Mr. Noel O'Connell has agreed to attend this meeting to discuss his work as local government auditor. I thank him and the representatives of the Department, namely, Mr. Des Dowling, assistant secretary, local government division and Mr. Laurence Kelly, local government finance section, for their attendance and they all are welcome.

The format of the meeting will involve a brief opening presentation by the witnesses, followed by a question and answer session. Before beginning their presentations, I wish to draw witnesses' attention to the fact that members of this joint committee enjoy absolute privilege but this does not extend to witnesses appearing before the joint committee. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise, or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I also caution members that Mr O'Connell may discuss his work in general terms and should not be asked to comment on individual cases, which may be confidential. Mr. O'Connell, rather than me, will be the best judge of that. As there will be two presentations, the witnesses should proceed.

Mr. Des Dowling

I thank the Chairman and members of the joint committee for the opportunity to make a brief statement.

Arising from an earlier meeting of the joint committee, interest was expressed in audit arrangement relating to local government. My colleague, Mr. Noel O'Connell, director of the local government audit service, will shortly describe the work of the audit service more fully. To assist the committee, I propose to give a broad overview of the financial arrangements in place regarding local government, of which audit is a component part.

Members of the joint committee will be familiar with many facets of local government. It is, perhaps, worth reviewing in broad terms the scale and depth of operations undertaken by local government in the context of the public service and the broader economy. The local government sector and the services it delivers play a crucial role in the economic and social life of the State. Total current and capital expenditure by the sector in 2008 amounted to approximately €12 billion, representing approximately 6% of gross domestic product. It is crucial for public confidence that there are systems in place to ensure that all income and expenditure is properly and transparently accounted for and that good governance structures are in place in local authorities in respect of accountability, efficiency and value for money. Current expenditure covers the day-to-day running of the local authority, including staff salaries, environmental protection, housing and road maintenance, operational costs of water and waste water treatment plants, libraries, etc. Current expenditure by local authorities was estimated at €5 billion in 2008.

Income for current expenditure is financed from a number of sources, those being, rates, Government grants and subsidies, the local government fund general purpose grant and charges for goods and services. The sources of funding for local authorities are being broadened with the proposed introduction of a new charge to be levied on the owners of non-principal private residences, as announced in the budget. The new charge will come into effect during 2009. Legislation will be introduced at an early date to give effect to the new charge, which will provide an additional income stream and is a significant development for local government.

Capital expenditure was estimated at €7 billion in 2008. Such expenditure results in the creation of an asset beyond the year in which that asset is provided. Examples would include construction of local authority houses, road construction, provision of water and sewerage facilities, library and swimming pool facilities. Capital expenditure is financed largely by State grants with the balance funded from development levies, borrowings and own internal resources and the proceeds of the disposal of assets. Some projects may be funded entirely by local authority own resources and borrowing.

It was acknowledged by Indecon in its report on local government financing, published in March 2006, that local government has made significant progress in the areas of efficiency and value for money in recent years. While local authorities have primary responsibility for these in their activities, the Department is actively involved on a range of fronts to ensure that they are achieved and monitored.

Some key initiatives in this regard include the following. Within the wider public service, local authorities were the first to introduce financial management systems based on modern accrual accounting principles and now have a range of tools to continue to measure and deliver value for money and efficiency. Local authorities are increasingly engaged in sharing services in areas such as regional waste management strategies, water services and the collection of rents, rates, fees and fines on behalf of the town authorities.

A developing area is that of value for money reports on local authority activities, the most recent of which was a study on financial management reporting within local authorities completed in September 2007. This study set targets for local authorities in implementing its recommendations that will significantly enhance their financial management practices. A value for money study is under way on the planning process.

A new costing system has been rolled out to local authorities. It will deliver enhanced management information, particularly regarding the unit costs of service provision. The costing system will also facilitate the comparison of service costs across local authorities, as appropriate, and will promote efficiencies in the manner in which services are provided.

The functions of audit committees were extended substantially under the Local Government (Business Improvement Districts) Act 2006. A key focus of these committees, which are being established in all local authorities, is assessing and promoting efficiency and value for money in local authorities. The full implementation of the new costing system and audit committees will contribute to and unearth potential for greater efficiencies. The new provisions extended the functions of an audit committee to include reviewing financial and budgetary reporting practices and procedures within a local authority, fostering the development of best practice in the internal audit function, reviewing auditors' reports and special reports and assessing follow-up action by management, assessing and promoting efficiency and value for money, reviewing risk management systems and making such recommendations to the authority as the committee considers appropriate in respect of the foregoing.

To enhance transparency on local authority expenditure, a number of changes were made to the format of local authority annual financial statements that provide enhanced information on pay costs and other operational expenses. The Department will pursue further disaggregation of expenditure and receipts in line with best practice.

The Oireachtas has set down the operating parameters for the local government system, including oversight by local elected representatives and management of the financial affairs of the councils with the assistance of the local government auditors. Local government is publicly accountable for its policies and programmes at monthly council meetings and the elected council is made accountable to the citizen at the ballot box every five years. This accountability is further reinforced in a number of ways, including by the Ombudsman, under the Freedom of Information Acts, by the local and national media, by audit and by the EU.

The local government accountability framework is based on a number of elements. The county or city manager has direct responsibility in law for the executive functions of the local authority and is accountable in important respects to the elected council and the local government auditor. Elected members have direct responsibility in law for all reserved functions, which include adopting the annual budget and authorising borrowing. The authority's annual financial statement is subject to audit by the independent Local Government Audit Service, LGAS, which has powers to disallow expenditure or apply surcharges. General responsibility for overseeing the actions of local authorities is assigned by the Legislature to the Minister for the Environment, Heritage and Local Government, who has formal powers of direction, approval and inquiry in respect of local authority matters and power ultimately to remove local authority members from office. The Minister is in turn accountable to the Oireachtas regarding the exercise of those powers.

At national level, the Minister and his Department exercise this oversight role in respect of local authorities. This oversight flows in the first instance from setting the legislative and policy framework for most local government functions. The Department also monitors that framework and identifies legislative amendments that may be required from time to time. In addition, the Department monitors the performance of local authorities in the carrying out of their functions. This occurs in a number of ways. Enhanced reporting arrangements have been put in place in recent years to this effect, including the joint Department-local authorities committees covering various functions and programmes, such as housing, planning and the environment, which work on the development and implementation of policies. Service indicators that measure performance across a wide range of functions have also been introduced. Extensive guidance has been issued to local authorities in the light of experience, including regarding the major programmes, as well as in such areas as customer service, corporate plans and ethics.

The recent Government statement on the public service relating to the task force report Transforming Public Services, in combination with the OECD report, outlines recommendations for moves towards increased efficiency, effectiveness and value for money across the public service, including the local government sector. The Department is leading the roll-out of this transformation agenda in local government and work is already under way in a number of areas. The amalgamation of the local government management services board and computer services board has commenced. The boards provide services to the Minister and local authorities. Work has already begun on an audit of existing services and resources as part of this process. The ultimate objective is a more efficient merged organisation, with a corresponding rationalised structure. In addition, 27 local authorities are working together to develop a shared human resources, payroll and superannuation system.

The service indicators initiative, which was established in 2004, is a first for the public service and measures the performance of local authorities in a range of different areas, including planning, environment, housing and water. Initially, 42 indicators were included but following a recent review, the number of indicators has been increased to 46 from 2008 onwards and some indicators have been amended to make them more meaningful and relevant. A report is published each year outlining the statistics across local authorities and data are verified by an external independent assessment panel. The initiative has brought increased transparency to the local government sector in terms of service delivery to the citizen and makes it possible to compare the performance of a local authority year-on-year. The Department continues to oversee and monitor the service indicators from a policy perspective and ensures that they reflect developments in the local government sector so that the indicators remain meaningful.

During the course of last year, I met the committee in connection with the Green Paper on Local Government — Stronger Local Democracy: Options for Change, which contains proposals and options regarding the further development of local government. Work on the connected White Paper is nearing completion and will be the subject of relevant consideration in due course. I thank the committee for the opportunity to make this statement.

Chairman

I call on Mr. Noel O'Connell to make his opening statement, which has been circulated to committee members.

Mr. Noel O’Connell

The opening paragraph of my submission refers to the history of local government. I am a great believer in history and the lessons to be learned from it. I referred to how local authorities have been in development since the 1830s and how local accountability also developed in line with local government procedure.

The current statutory remit of the LGAS is contained in sections 114-126 of the Local Government Act 2001. The LGAS is responsible for the audit of all local bodies, such as city, county, borough and town councils, as well as regional authorities and assemblies and some other miscellaneous bodies, such as harbour commissioners, motor tax offices, etc. The total number of bodies under its remit is 184.

The next paragraph sets out my own remit. It is the first time the role of the head of the audit service was incorporated into legislation. One could say that it is my job description. The first two points in my submission set out my day-to-day responsibilities in managing the audit service and the resources within the audit service and the assignment of audits to local government auditors. We must carry out our audits in accordance with a code of audit practice. I was involved in the development of this code of audit practice within the legislative framework and I am involved in leading it throughout the local government audit service.

The next point in my presentation refers to the value for money unit, which was established as a working section of the local government audit service by the Local Government (Financial Provisions) Act. From time to time I report to the Minister on the performance of the local government audit service.

The legislation underpins my separate statutory role. While I work in co-operation with the Department, the independence of my office is protected to allow me to undertake my mandate. I am not a member of the management advisory committee and, as such, am not involved in either its day-to-day management or policy formulation. Local government auditors are independent of the Department and the audited bodies, when discharging their professional functions. This independence is protected in legislation in accordance with section 116(2) of the Local Government Act 2001. The protection and maintenance of a strong, independent audit service is the kernel of audit practice. This is copper-fastened by the code of audit practice.

Each local government auditor is assigned an audit district under warrant of authority from the director of audit. An audit district comprises a number of audits grouped, as far as possible, in convenient geographical areas. These are grouped into three regions — western, southern and eastern. Principal auditors assist in the regional organisation and supervision of audits and have direct responsibility for the major audits in their region.

All audit staff are professionally qualified accountants and have, for many years, been recruited externally. Having staff who have worked in industry, public audit firms and public sector bodies gives a mix of skills that enhances the organisation. The local government audit service was the first public sector audit body in Ireland to be a recognized employer for CPD purposes for members of the Association of Chartered Certified Accountants.

The local government audit service provides independent scrutiny of the financial stewardship of local authorities. Its role is to carry out audits of local authorities and other bodies in accordance with its code of audit practice, thereby fostering the highest standards of financial stewardship and public accountability; to promote the achievement of value for money in authorities by undertaking value for money audits; and publishing reports thereon. My presentation includes three tables, one of which gives an indication of the staffing of the audit service. I have a total staff of 41 fully qualified accountants. Some 34 are assigned to financial regulatory audit and seven to the value for money audit unit. We have 184 local bodies to audit. The major ones are the five city councils, the 29 county councils and five borough councils. That gives a flavour of the audit remit. The final table gives a flavour of the scale of activity of local government, showing revenue expenditure of €4.22 billion in 2006 and €4.75 billion in 2007. Capital expenditure is approximately €5.44 billion in 2006 and €6.77 billion in 2007, which is a major activity.

The process of local government audit has been updated and consolidated in sections 114 to 126 of the Local Government Act 2001. Audits are carried out in accordance with a prescribed code of audit practice, which covers the purpose of audit, the powers and duties of auditors, the audit approach, outputs from audit and public accountability. There are special formalities in the serving of notices of audit, the deposit by bodies subject to audit of their books and draft annual financial statements for public inspection immediately prior to audit, the closing of audits, and the availability to the public of copies of the audited annual financial statements and any associated audit reports.

In addition to entering an audit opinion on the annual financial statement of each body audited, local government auditors may also issue associated audit reports. These public reports provide brief commentaries on significant trends or outturns disclosed in the accounts, such as budgetary comparisons, capital projects, inter-authority transactions, reliance or otherwise with the authority's internal audit function, revenue collection performance, residual matters from previous audits and other internal financial control issues.

A new initiative introduced in the 2001 Act is that before reports are finalised, the auditor must consult with the manager or chief officer of the audited body and these comments may also be incorporated into the auditor's final report. This is a new requirement, which was provided for in section 120(4) of the Local Government Act 2001, and is what public accountability is all about, namely, holding management to account. Auditors may also issue management letters in accordance with the code of audit practice.

I now refer to the publication of audited financial statements and any associated audit report. When an audit has been completed the local authority is required to furnish a copy of the audited financial statement and any report to every member of the local authority for consideration at the next practicable meeting of the local authority or body concerned. Members of the public who request these documents are entitled to them on payment of the cost of making the copies. On the Minister's direction, a local authority may be directed to publish the auditor's report in a newspaper circulating throughout its administrative area.

The value for money audit unit of the local government audit service consists of a central research team, staffed by a principal local government auditor and three local government auditors, together with further audit days provided by assistant auditors at district level. I have established a value for money audit consultative committee representing the main stakeholders, and chaired by me, to identify significant local systems, practices and procedures that would form part of the work programme for the unit. This committee includes Mr. Des Dowling, assistant secretary at the local government division; two nominations from the County and City Managers Association, two heads of finance and the value for money co-ordinator. An advisory group is established for each value for money study undertaken, comprising representatives from local authorities, the Department and individuals with expertise in a particular field.

The unit has produced 24 value for money reports to date. The staff of the unit is currently working on two national studies on the following subjects, Part V and development contributions. It is hoped to publish these reports in the first quarter of 2009. Feasibility studies are also being prepared on three topics, procurement practices, housing maintenance and management and sick leave. The work of the value for money unit has focused on undertaking national studies on single-issue topics and publishing reports thereon. During 2009 the unit will broaden its sphere of activity by issuing progress reports on the implementation, by local authorities, of the recommendations contained in national studies issued by the unit; inquiring into council's arrangements for securing economy, efficiency and effectiveness in the use of resources through the use of a questionnaire and structured interviews; and carrying out spot-checks on behalf of the Department on capital projects undertaken by local authorities in accordance with guidelines issued by the Department of Finance.

Audit committees are in the process of being established in all city and county councils in accordance with section 5 of the Local Government (Business Improvement Districts) Act 2006. This initiative will add considerably to the corporate governance agenda in local government. These committees will normally comprise five members, three external members including the chairperson and two councillors. They will carry out their functions under a formal charter, as will the internal audit function. The local government audit service actively promoted the establishment of these new audit committees in its value for money report No. 23, entitled Follow-up Report on the Development of Internal Audit in Local Authorities.

Chairman

I thank the delegates for the two presentations. I call Deputies Bannon, Fitzpatrick and Lynch.

Deputy James Bannon

I welcome our friends from the Department of the Environment, Heritage and Local Government. We are all in this game for greater value for money and greater efficiency in local government. There is nothing wrong with radical reform to bring about greater benefits for citizens. This should be an aim for all of us. Bureaucracy and red tape are destroying local government. When I worked in a local authority in 1985, the position was different from what it is today. A document, Better Local Government, was adopted in approximately 2000. Is it planned to review it, as it needs to be reviewed? I cannot see any sense in the systems in place when services are suffering.

Smaller local authorities have the same structures in place as larger ones. It is not based on population. A local authority may have four or five directors of service, a county manager and senior engineers, all of whom must be serviced in smaller local authorities as well as in larger ones. Much of the budget allocated to a local authority goes on administration. There is an absence of services because it takes so much to administer some of the smaller local authorities. I would like to see more services provided for citizens, which should be the aim of local government.

Suggesting local government reform is not a criticism of officials but about introducing a smoother and smarter system of local government. Reform of the local authority system is imperative in the national interest and needs to be examined. Will the Department review Better Local Government and make the delivery of services and provision of information more citizen-centred? The general public has a deficit of knowledge about services which needs to be addressed. One should be able to access services with ease. This attracts the confidence and support of citizens.

Choices in the way people do business with local authorities should be promoted through e-mail and text messages and using bank cards to pay for motor taxation and other such services provided by a local authority. Citizens are involved in committees and groups but the general public must have a greater input in designing the highest standards for local government. Often corporate committees are talking shops behind closed doors. They should meet in public.

Democracy is all about people ruling themselves and being encouraged to take a greater interest in society. As a former secretary of the Local Authority Members Association, this is the cry of public representatives. Greater leadership is needed.

Deputy Michael Fitzpatrick

I welcome the delegations and thank them for their enlightening presentations. I am also a former member of a local authority. Often at estimates meetings we were presented with figures which had no relevance to the overall expenditure of the local authority in the particular year. We were provided with figures for staffing, roads and water services but it was hard to siphon from them where the money had been spent.

With regard to value for money, if a legal firm is employed by a local authority to deal with a particular problem, is it under the terms of a fixed contract or can the legal firm prolong the case in the courts for as long as it requires? If a legal firm is not too busy, it would love to work for a local authority and prolong a case. I know of an example where on completion of work for a county council, a contractor expected to receive a bounty but instead he was not even paid for additional work done. Rather than sitting down to settle the matter it has gone through conciliation and is now going to arbitration. I blame the legal people who attended the meetings with the officials, some of whom were brought from England to do so. The cost to the local authority will be enormous and there will be no winners.

Local authorities should be more astute in using public money. There is no limit to what they can do. A private person must stop when his or her money runs out or when he or she can go no further. However, a local authority has the power to continue and bring people through a range of procedures. Legal people, engineers and consultants should be brought in on fixed contracts to do particular work. If a case is lost, the professionals should take responsibility for providing bad advice for a local authority which has spent a great deal of money on it.

I understand the point made on openness and transparency in local authority audit committees. What role does the Department have in monitoring the activities of audit committees? Is it the function of the manager and directors to do so? Recently the Government decided that local authorities must cut payroll costs by 3%. Will the auditors have an interest in examining how a council achieves this cut? Some local authorities take a lazy approach and will let go temporary workers and those on contracts because it is easy rather than doing detailed research on how best to service the local authority area and use the manpower available to it.

Does an audit committee examine individual contracts awarded during the year? A local authority auditor will add up the figures and produce documentation. Does the Department accept the final figure or does it go into detail on how a contract was awarded, the original contract cost, the overrun on a contract and how conclusions were arrived at?

Deputy Ciarán Lynch

I thank Mr. Dowling and Mr. O'Connell for their presentations. Earlier this year the Comptroller and Auditor General published a report which showed that in excess of €1 billion was held on account by local authorities. It was of significant concern to the Comptroller and Auditor General that €1.2 billion had been accrued mainly through the collection of development levies. Why did it take the Comptroller and Auditor General to furnish us with this figure when local authorities have an auditing service? Is this part of its role?

I am unsure as to the terms of reference of the service. Will Mr. Dowling flesh them out for us? Is it a financial regulator for local authorities, with a remit to ensure they manage their finances appropriately, in accordance with legislation, and efficiently? Will it ensure accountability and that appropriate accounting practices are followed? A number of local authorities in the United Kingdom invested funds in Icelandic accounts. I am sure that did not happen in Ireland but equally sure significant amounts of money are held on deposit about which there might be a certain level of public concern.

My other point relates to the current economic environment. A sum of €1.2 billion is substantial and would create significant employment if it were to be released to local authorities. I have written to every county manager to ask him or her how much money he or she has. It is not uncommon for a local authority to have between €30 million and €50 million held on account. Most of the money is for ring-fenced projects for which no starting date has been given. Is the role of the local government auditor to ensure money is actually being spent, rather than held on account indefinitely? This would enable development levies to be rolled out at the time development is taking place, in order that we would not have to wait four or five years for recreational and other services. The vast majority of development levies are being spent on water treatment programmes. Cork County Council is spending over 90% of its development levies on updating water programmes across the county. While this is necessary, when housing estates are built, there is an expectation that trees and football pitches will be provided.

Deputy Fitzpatrick referred to tendering overruns. The most infamous case which the Chairman has raised on a number of occasions is where a local authority engages in a tendering process in which there are cost overruns at the exit point and no built-in provisions to ensure both parties are acting appropriately. The water scheme in Limerick where the cost overrun amounted to a multiple of the original price is probably the best example.

Given the fact that local authorities have millions of euro on account, what flexibility is built into the tendering system? I do not know if it is within the auditor's brief but is there flexibility to ensure it is not the cheapest tender which is accepted but the one which gives the best results after the infrastructure in question has been put in place? Many overruns are created because big multinational companies tender below the price asked by local providers and win the contract but end up with an overrun. This makes the tender process questionable. A local business would have created local employment for the same price and probably submitted a more honest tender at the outset but it suffers as a consequence of the process. Is the auditor's role to examine the costs of procurement? Will it make recommendations in this regard? If his role is not as a financial regulator for local authorities, does the Department have an opinion on whether such a role would be welcome?

Mr. Des Dowling

I will respond to some of the general points made and Mr. O'Connell will follow up.

Deputy Bannon asked very important questions about the overall objectives which are to provide services for the citizen. He also referred to the Better Local Government, BLG, programme. The Green Paper which we discussed with the committee earlier and which will be followed by a White Paper seeks to strike a balance between services for the citizen and local accountability. A consistent trend in the submissions has been the desire not to have the bureaucracy and red tape to which the Deputy referred. Things have moved on since the BLG programme, not least the scale of activities for which local government is now responsible. The evidence can be seen in additional fire stations and libraries with extended opening hours, all of which have been to the benefit of the citizen at local level.

There is always a concern about excessive administration but the figures show local government employment at just over 33,000, slightly lower than the 2002 level. There are not too many areas within the public service which have expanded their range of activities while keeping overall administration rates at the same or lower levels. However, we take the issue seriously and the intention of the White Paper is to continue the process. The word "reform" is sometimes used but I am not too comfortable with it and prefer to see the process as part of the continued development of government systems. Our theme is how we can develop the powers of local representatives in a way that will keep faith with what the Oireachtas sought in terms of the balance between the national and the local. A continuing theme in the submissions we received was the question of how local representatives' powers could be enhanced.

That brings me to some of the questions raised by Deputy Fitzpatrick on budget meetings and other matters. It is not that councillors do not have the statutory powers they need because they are reserved functions in the context of budgets. However, there is concern about the information available to councillors when they make decisions. We hope to address these issues which also arise from some of the VFM reports by ensuring timely reporting on the part of financial managers within the local government system.

A number of other issues were raised. The committee previously considered matters relating to conciliation and arbitration where disputes arise. The Secretary General indicated that the Department was working on a guidance document for local authorities in respect of these matters. I understand the committee received a copy of the document which seeks to set out, in a structured way, an approach for local authorities. The Deputy is correct to say that while the clock is running, costs can build up. Most councillors and local authorities want to have projects finished, as nobody wants to end up in lengthy arbitration procedures and disputes. In working with legal advisers the emphasis will be on bringing these processes to a conclusion as early as possible. This is not just to do with legal costs; it relates to bringing projects to a conclusion. People are waiting for roads, water services and so on which may be the subject of disputes. We suggest the guidance document is a help and we take these matters seriously.

I am conscious that the committee has discussed the Limerick contract and so on but all of this relates to a previous regime of contracts, which brings us to the issues raised by Deputy Lynch, particularly fixed price contracts. My colleague will talk about the role of auditors in these matters. Deputy Lynch will know that the difficulty with contracts prior to the introduction of the new format was, while one could tender, there were elaborate arrangements, whereby during the course of the contract coming to completion, further claims could be made relating to changes over the lifetime of the project. A fixed contract price is now set; one cannot pitch in with a low tender and hope to make up ground along the way through the making of claims. This was a criticism levelled at the previous set of arrangements. The dispute mechanism is available should an issue arise relating to an element of the contract.

The matter of the application of retrenchment relating to pay and the reduction in pay costs arose with regard to financial management. The role of the audit committee also arose, on which Mr. O'Connell may wish to comment more broadly. The terms of reference of the audit committee allow it to examine efficiency and effectiveness across the range of local authority functions. Pay is one of the largest costs that most organisations will bear. Therefore, one can see a role for the audit committee in scrutinising the overall pay overhead as part of the overall operations of the local authority. audit committees are new and were set up under recent legislation; it is fair to say, therefore, that they are still finding their feet. The goal was to get them established and have independent chairpersons and appropriate persons with relevant qualifications involved.

Mr O'Connell may wish to address the question of development levies. It goes without saying that we wish to see these resources fully deployed on projects that need to be delivered. Regarding what Deputy Lynch said, priority is certainly given to water projects because they are critical to development. The Planning and Development Act gives scope for how the levies can be used. Some of them are for specific projects, while others allow the local authority more flexibility in how they are used. Water projects should be given priority but the key is to ensure they proceed and that the funds are fully utilised. There are time factors in this regard because often a number of years pass before projects are fully planned and the other necessary ingredients come into play.

We acknowledge that while significant development levies are available to be utilised, they will not be as strong in the future owing to changing economic circumstances. This may be all the more reason to press ahead with projects and draw moneys down as quickly as possible. We encourage local authorities, when approaching this issue, to have regard to the effects of their actions on local employment. In terms of a recovery approach and Government spending and investment, local authorities can have a key influence on local employment through the projects it sponsors which we encourage.

Deputy James Bannon

Mr. Dowling referred to 33,000 talented individuals working in local government. I do not doubt this but the public is frustrated by the number of consultants taken on by local authorities to do jobs they consider should be done in-house. Have the overall fees of consultants employed by local authorities been calculated? We must look at this issue. Is there statistical information on the amount spent in each county on administration, as compared with the delivery of services? I would appreciate information to this effect from the Department.

Mr. Des Dowling

We can supply information on the breakdown of staffing and the percentage spent on administration, as compared with service provision.

Deputy James Bannon

And consultants.

Mr. Des Dowling

We can provide information on consultants. The Deputy will be aware that there have been concerns in recent years about the amount spent on consultants. One of the objectives of the current budgetary process is to halve overall expenditure on consultants by Civil Service Departments and to apply this to the local government sector. We will come back with figures on the position in that regard.

Mr. Noel O’Connell

I wish to take up an important point raised by Deputy Fitzpatrick relating to how audit committees will perform their functions. As I said, the audit service is very much involved in leading this initiative. I have always believed there must be accountability at a very high level, with proper engagement with local members. Issues raised in audit reports must receive due attention and the advent of audit committees should improve all of these arrangements.

Audit committees are relatively new and were established only in the past year in most local authorities. As head of the audit service, I will be active in my role and will follow the outturns. Under section 5 of the legislation under which they were established, the audit committees must make annual reports to the councils. Not alone are their activities scrutinised at regular meetings, they must also report to the councils. This is how the role of public accountability will be improved.

As head of the audit service, it is good that the staff of local government auditors will engage with their reports at a proper level. I was a local government auditor for 16 and a half years and spent most of my professional life working with local authorities. I grew up with that system and have a great affinity for local government, although perhaps I should not say that at a public meeting. Local government receives some undeserved bad publicity. It is important that our reports receive due consideration. In my role as a local government auditor I always sought the minutes of meetings because they are a conduit to how business is done at local authority level. I was always dismayed by the term "auditor's report noted" and promised I would change it if I could.

The audit committees are new and a step in the right direction and I am very committed to them. I have attended 19 inaugural meetings of audit committees and made presentations. I found it very engaging and it was fantastic. Time will tell, but I will certainly keep a watching brief and the audit service will support them as much as it can. I hope this is the right direction to take.

Deputy Lynch mentioned the spending of levies and so forth. To be candid, I do not know anyone who likes auditors, but as someone must do the job, it might as well be us. We can be blamed for many things, but the spending of levies is not our responsibility, on which I want to be quite clear. However, our role on the ground is important. I emphasise to my staff the independence of auditors and ensure we walk the walk. The issue of spending the money is tied up in legislation, of which local government auditors are creatures. The Local Government Act 2001 is the modernising factor. As good auditors, we have to follow these procedures. Under the planning Acts, it is a requirement that the levies be spent on capital projects. Whenever they are spent, we ensure they are earmarked for these purposes. The spending of the balance is a matter for management.

Deputy Ciarán Lynch

Local government auditors have audited each and every local authority. In the report the amount of money held on deposit which did not seem to be moving — €1.2 billion — was substantial, even in the middle of a boom, never mind a recession. Do the auditors consider the local authorities in their entirety at the end of the audit process to see whether there are themes, in terms of difficulties or good practice, developing across local authorities? It looked to me like an aspect of bad practice.

Mr. Noel O’Connell

I have to hold responsibility as the head of the audit service, but it is a local government audit service and the word "local" is very important. My staff are assigned a block of work at local level. They are responsible for auditing and signing off on their audits. We produce local reports. Every year we probably produce more than 100 reports for the various local authorities. That is where accountability lies — within the local authorities. I do not engage in a checking exercise. I am sorry, but I do not. Accountability lies at local level and the reports go to councillors. Under the legislation, they are addressed to members for full discussion. They are accountable at local level. That is the way the system works.

Capital contracts were mentioned. I am responsible for them. I am also responsible for the audit procedures that apply within the audit service. Everything goes back to our audit procedures. We have to have a very strict accountability framework, for which I am responsible. We have strict audit procedures. The planning of an audit is probably the critical aspect and if one gets it wrong, one might go wrong in other areas. I have provided tables to help the committee understand the scale of the operation. In terms of the financial audit, we have a resource of 34 professional staff. For 2007 we are talking about an expenditure of €11 billion. It is a colossal business. Of this, capital accounts for about €6.7 billion or €7 billion. Therefore, we are talking about significant funds. In the course of any audit it is a judgment call for the local government auditor in the region to plan the audit and apply resources to each individual area within the audit. We have a risk assessment system and obviously capital is high risk. There is no question about it — in every local authority capital projects will be examined. I do not do a national trawl; it is just done at local level.

Deputy Johnny Brady

I welcome the gentlemen from the local government audit service. I was a member of a local authority for many years. I remember too well, when first elected to the council back in 1974, that one could not gain access to senior officials for weeks on end prior to an audit. I suppose they had to get everything in order. However, in later years, before I left the council, it was only a matter of form. Perhaps I am wrong, but that is the way I saw it.

Mr. Dowling spoke of how Better Local Government — A Programme for Change was of advantage to local authorities, but there is no doubt it has been the greatest disaster since the sliced pan. We have not seen any improvements in the services provided, not only for the general public but also elected members. Prior to Better Local Government, there was a time when one could get hold of officials, but since its introduction they are never around. They are doing interviews here or something else there, or they are studying or whatever the case may be. They even go to university to study before applying for new positions such as county manager. I was never used to that and I am sure persons who have spent a long time in local government are not used to it either. The whole scene has changed — not for the better — from the point of view of local representatives or local people. The one-stop shops, of which there are many in County Meath, are the same. One would think that providing services locally would improve things but it has not.

The audit committee would probably be good if it were left to the elected members to appoint it, but I understand it is the county managers who suggest the number of members. It may be three elected members — the chairperson and two others — but that does not happen everywhere. If the manager considers he or she needs to have people from outside the local authority — unelected members — he or she will increase that number. Perhaps that is not true, but that is what I am being told by many councillors.

Chairman

I am confused. In his reference to the chairperson the Deputy was referring not to the cathaoirleach of the council but the chairperson of the audit committee. Therefore, we are saying there are two councillors and at least three outsiders. The majority——

Deputy Johnny Brady

There are three outsiders.

Chairman

Yes. I thought the Deputy meant the cathaoirleach.

Deputy Johnny Brady

I thought that too.

Chairman

That is how we interpreted it.

Deputy Johnny Brady

Yes; that is not the situation.

Chairman

The point the Deputy is making is right. The chairperson of the audit committee is a non-member.

Deputy Johnny Brady

That is correct. Elected members should be in a majority on an audit committee and the chairperson should be an elected member. However, that legislation is probably not the fault of the delegates, but it is something that needs to be changed. Perhaps we will bring the matter up with the Minister. If there is a need to change it, it should be changed. However, it is wrong.

There are a few other questions I would like to ask the auditors. The Department issued a circular letter advising local authority officials to avoid over-expenditure, to first seek the approval of local elected members, or, in the case of an emergency, seek it as soon as possible after the expenditure was incurred. Is the auditor satisfied that this directive is observed by officials?

In the context of adopting the estimates, does the auditor agree that some local authority officials do not reduce their credit balances and transfers to capital in order to seek a greater increase than is necessary? Is the auditor satisfied that senior local government officials make realistic projections — in both income and revenue — when preparing the annual estimates? There is a feeling that expenditure is sometimes over-estimated, while receipts are understated. The outcome in most cases gives a misleading picture of the real financial position of the council. Can the auditor give the committee any figures relating to the number of charges and surcharges imposed by local government auditors following the completion of audits? Are these appealed to the Minister and what has been the outcome of the appeals? I would be pleased if the delegation could provide the figures for the past three years. If they are not available today, perhaps the delegation could forward them to us later.

I refer to recommendations made by auditors following audits. How seriously are these taken by county managers? When auditors return to carry out the next audit, do they check to establish if the recommendations of the previous audit have been implemented, and what are the findings? What are the delegation's views on sending the auditor's report directly to the elected members, rather than to the local authority, as only the cathaoirleach and the county manager receive the report from the Department at present?

Chairman

A Dáil vote has been called and I propose to suspend the meeting for the duration of the vote. We are obliged to go to the Chamber but we will resume later.

Deputy Johnny Brady

Are we resuming afterwards?

Chairman

Yes, because I have some questions to put. We will not resume for too long, but there will be a short resumption after the vote.

Sitting suspended at 4.01 p.m. and resumed at 4.20 p.m.

Senator Paudie Coffey

I have some general points and questions. In 2007 more than €11 billion of taxpayers' money was spent in the area of local government. It is essential to have an audit service to provide an oversight mechanism, if nothing else, to ensure taxpayer's money is spent in an appropriate and proper manner by local authorities.

Other bodies were mentioned. There are 184 bodies in total within the remit of the delegation, as well as 41 auditors. It is a broad remit and I do not want to underestimate the work done. Regarding value for money, when a local authority carries out work and the auditor finds there has not been good value for money, how far does he or she go? Does he or she make a report which is submitted to elected members and the relevant Minister? What course of action is taken? I ask the delegation to clarify the matter.

I am aware there are service indicator systems operating in local authorities. I was a member of a local authority for seven years and considered some of the measurements were unrealistic. One such example was waiting times for housing applicants. The timeframes set down seemed very short compared with what I knew was more realistic. Are comparisons made across all local authorities to see what the average good service indicator would be versus what may be unrealistic?

I am interested in shared services because it is an area in which savings and efficiencies can be made by local authorities. It was stated payroll was being looked at in order that local authorities could introduce a shared system, but I may be wrong. Can the audit service make other recommendations where efficiencies can be made and indicate other systems which could be shared by local authorities?

Local authorities are strapped for cash and any savings which could be made would be welcomed. The audit service can play an important role because it works across the range of local authorities and can see where some authorities are performing better than others. It has a role to play to make recommendations, through its own office, the Department or the Minister, as regards where efficiencies can be made or shared services improved. I would like to hear the comments of the delegation.

The White Paper was mentioned. Is there a timeframe for its publication?

I wish to make a general comment on Better Local Government. There have been some improvements in the delivery of services, particularly in their extension to rural areas. There are many layers of management, as referred to by others. Many managers are delegating responsibility for much of the work previously done by their own hands, which is a concern for elected members all over the country. I will not say managers are not accessible because they are, but they are not as hands-on as they used to be. That is a retrograde step in the management of local authorities. They need to be more involved and seen to be so by elected members and, most importantly, citizens.

Mr. Dowling mentioned non-principal private residences. It is a new area which will be an added income stream for local authorities. I seek clarification on how it is expected to be managed or audited from a public scrutiny point of view. Compiling a proper register of all second properties will be a significant draw on the funds of local authorities. How is it proposed to manage this area? It will be a good income stream for local authorities but I would hate to think we would capture only some, while others escape from the system.

Audit committees represent a welcome development. For many years the estimates and auditor's report were produced, but elected members did not fully understand the system of accounts, estimates and budgets. Members rely on the advice of managers. They should be assisted more, through the provision of independent professional advice provided by local authorities or having specialised training seminars for councillors in dealing with estimates. It is an area which should be looked at to provide for better scrutiny and accountability at council meetings. Financial reports can be complex to a lay person. Elected members cannot be experts on everything and deserve support through the provision of independent advice, assistance or training.

Mr. Des Dowling

Mr. O'Connell will answer some of the questions raised by Deputy Brady. Some general points can be dealt with first.

The figures of €11 billion for 2007 and €12 billion for last year are correct. It is a significant amount of money. We must balance appropriate oversight at national level and local level. The 2001 Act gave additional powers to councils to try to manage this matter. They require the regular submission of financial statements authorising budget expenditure, the establishment of the audit committee, the obtaining of information on any aspect of local authority business and require managers to prepare plans, specifications and costings for any works specified by the council. These were additions to try to assist councils and to ensure they were sufficiently empowered to delve into particular issues, some of which might be unearthed by service indicators. We do not claim perfection. When established, they were not seen as suited to a league table approach. Therefore, comparisons between one council and another must be approached with caution. The aim of service indicators was to allow councils and users of services to make judgments on what was correct. In the case cited, it is a matter for the council to determine if the suggested period in the house being let was the standard the council sought to achieve. The experience of other councils can be noted. It can be readily seen how the figure can be a function of the range of the stock available, the number on the housing list and so on.

Regarding the White Paper, the only information I can provide is that work is at an advanced stage. It is for the Minister and the Government to determine the precise timetable.

I am not sure if I should discuss the broader matter of Better Local Government and the critique made. When one looks at the range of services provided, there are at least seven specific categories: housing and building, roads and transportation, water and sewerage, planning and development, environmental protection, recreational amenities and miscellaneous services. In the period in question, all areas have expanded in size. The OECD in its independent scrutiny commented very favourably on the contribution of the local government system to general economic and social development in that period. We must give some credit to the local government system for this, notwithstanding the judgments people might make on the systems of administration in place.

I am not in a position to give much advice on the new charge on non-principal private residences because the Minister will have to introduce legislation which will set out the detail in which Deputies are interested.

The question of empowering and enabling local representatives to deal with budgetary matters was raised in a value for money study of financial management systems in local government. I referred to it in a different way when responding to Deputy Fitzpatrick's question on the information that would be available in the first instance to local representatives. We are putting in place new induction courses in co-operation with the representative bodies for councillors to be undertaken by the Institute of Public Administration. The courses will give priority to a financial module in the light of the forthcoming local elections. Our plan is that they will be available in the second half of the year and they will, I hope, contribute to dealing with the issue the Deputy raised.

Mr. Noel O’Connell

The first issue Deputy Brady raised was over-expenditure. In this regard, the provision and procedures for are contained in the Local Government Act 2001, with which management must comply. My auditors have a duty at local level to ensure adherence to them. A small but comprehensive problem is that there are 184 bodies, some of which are small, for example, joint drainage boards. The money is also small but they may meet only twice a year which holds up some audits because the members may not have approved the over-expenditure. We monitor this serious issue. The out-turn vis-à-vis the estimates and financial statements is noted in the new annual financial statements for the attention of elected members, which is helpful.

The follow-up on audits and issues arising is important and taken into consideration in the planning of each year's audit. We approach each audit as a new one. Therefore, we go through the planning process systematically. Last year we issued a public report. We also issue what I call management letters of internal control recommendations within the local authority. They are an important part of our contribution to local government because they track these issues. I cannot say they will all be dealt with but we keep track of anything material and recurring and report on it. I take these issues very seriously. In my day as a local government manager I believed I was contributing to local government by raising these housekeeping issues in the management letter, including the lack of proper procedures and a review of systems and practices — for example, we consider payroll matters such as the payment of increments. These would not be major sins but reporting on them forms part of the added value. If some of these items recurred year on year and procedures were not given due consideration, it would be my policy to include them in the public report.

Deputy Brady mentioned charges and surcharges. No charge or surcharge has been raised in the past three years. I have a strong view on these matters. The surcharge legislation dates back to section 12 of the Local Government (Ireland) Act 1871 and the charge legislation dates back to section 20 of the Local Government (Ireland) Act 1902. I suppose I come from a different school of thought because I take this issue seriously. As head of the audit service, I passionately believe reporting in the public interest is the most important means of getting the message across. Time has passed on the issue of charges and surcharges. The general competence of local authorities has rightly expanded significantly. The first move forward in that respect was mde in section 6 of the Local Government Act 1991 which gave a general competence to local authorities to do what was best for the local community. It was the first dilution of the legal aspect of general competence. The Local Government Act 2001 is a consolidated Act and has been good from the point of view of the audit service because it covers many aspects about which we may be concerned and gives a great deal more power to local authorities. That may not answer the Deputy's question but that is as far as I can go in answering it.

We are all concerned with value for money. I am not sure whether my budget represents good value for money in housekeeping. There are two aspects to our work, the financial regulatory audit and the value for money unit. In the course of the financial audit we might make recommendations in management letters, including on best practice, and challenge expenditure in certain areas such as excessive overtime payments. Therefore, we consider value for money within a local authority in that respect.

I would like to develop the value for money unit. I compliment the Secretary General who preceded Mr. Dowling as assistant secretary in charge of local government because for some time I pressed for more resources and she helped me to enhance the value for money unit by giving me an extra three staff members. I hope I can keep them. I have great ideas for the unit, including issuing a progress report on the implementation by local authorities of the recommendations contained in national studies issued by the unit. That is critical. We intend to issue questionnaires to every local authority. We are following up by reporting progress nationally on our value for money reports Nos. 23 and 24. I am committed to continuing to press for these initiatives. The follow-up on reports will be carried out nationally.

Senator Paudie Coffey

When the value for money unit is established, will it consider efficiencies in the matter of vacant houses and local authority stock? I understand that in many local authority areas there are houses remaining vacant for some time without being refurbished because the local authorities state they do not have the necessary resources. By the time they get around to refurbishing them the cost has greatly increased owing to deterioration or vandalism. There must be economy of scale. Local authorities need to prioritise and refurbish vacant houses quickly. Otherwise they deteriorate and six months to a year and a half later are almost destroyed. This is an efficiency issue that cuts across all local authorities. When the value for money unit is established, it should examine this issue.

Deputy Johnny Brady

I agree with Senator Coffey. Not only are houses not refurbished, many lie vacant for one year or more and in the meantime people are paid rent allowance for private accommodation. The amount lost to the Exchequer is enormous.

Mr. Noel O’Connell

It is very important that we have this engagement. I appreciate what has been said and will certainly take it on board. It is timely because in my paragraph on VFM I mention we are conducting a feasibility study of housing maintenance and management. It is a critical issue, which is why we picked it. I thank the committee for bringing it to our attention.

Deputy Michael Fitzpatrick

I have a number of questions. Does Mr. O'Connell, as auditor, ever address the County and City Managers Association to outline what the requirements are? I am still a little concerned about the role of the audit committee. I suspect county managers ignore audit committees and make decisions themselves. The issue that concerns me is the Government's requirement for a 3% cut in payroll costs. I refer not to the reduction in funding from the Department but the Minister's direction to cut payroll costs in the public service by 3%. I understand some county managers are achieving this by terminating the contracts of staff who are easy to get rid of, those on the lowest incomes. If the audit committees and the county managers, working with councillors, discussed the issue among themselves, they would find fairer ways of addressing the payroll cut rather than, as is happening in County Kildare, letting 80 staff go between now and the end of March. That can be pointed out later when the audit for the county is being carried out, but is there any way Mr. O'Connell as auditor could communicate his ideas on the issue to a local authority?

Mr. Noel O’Connell

I thank the Deputy who is certainly challenging me today. My role is to be positive and call it as it is. The 3% cut is a matter for management to decide. I have no role in regard to it.

I do not address the County and City Managers Association. However, because it is very important that we have dialogue, if issues arise during an audit or there are new developments such as the establishment of audit committees and the new VFM function, I make a point of getting out of my cave to engage. That is very important. I make a point of meeting the County and City Managers Association from time to time, perhaps annually, on a number of issues. If there is a crisis — the Deputy has raised an issue — I have no problem addressing the association. Implementation of the 3% payroll cut, however, is a matter for the executive.

Chairman

Before we conclude, I would like to make a few comments. It has been mentioned that there are 33,000 staff in the local authorities and that 27 local authorities are now moving to a shared human resource payroll and superannuation system. How can we be sure this will not turn out like the Health Service Executive's PPARS? Which is the lead authority? What competence does it have to be a lead authority in the area of IT and human resources? What consultants has it in mind and what stage has the project reached?

There was a reference to development levies amounting to €1.2 billion. I do not require a response to this; I am making an observation. It is outstandingly good news that local authorities have been collecting money and have a fund available. I am at a loss to understand why some Members of the Oireachtas and others believe it is a negative story. It is a most positive story that local authorities have been collecting development levies and have plans regarding work to be done with them. The schemes are approved by the elected members. If it is a water scheme in Cork, the elected members approved it as their priority in spending development levies in Cork and decided that so much would go towards water services. It is good that the local authorities have a fund to do this.

One issue I always questioned when I was a member of a county council was over-expenditure. I thought it made nonsense of the Estimates debate if elected Members of the Oireachtas approved the Estimates and, during the course of the year, council management could decide to spend hundreds of euro in one area and not in another as passed in the Estimates and that all it needed to do at the end of the year was produce a list of areas in which there was over-expenditure which was roughly balanced by under-expenditure in others. The fact that there is such massive scope to do this negates the detailed work done by committee members on the Estimates. I would like a comment on this.

The most important question I have relates to timely reporting. I heard only one mention of this in the entire debate. Of the 184 bodies audited, how many reports for 2007 have been cleared? Perhaps Mr. Dowling would also comment on the shared human resource payroll and superannuation system.

Mr. Des Dowling

Mr. O'Connell will deal with the question of reports. I will try to deal with the others. I will return later to deal with the scope of the system in detail.

The broad theme has been to try to expand shared services across local authorities and HR, services and personnel was the area we came to next as part of an IT based approach. It is being led by a project team which involves the Local Government Computer Services Board, a team of officials from the local government system. The computer services board has significant experience in rolling out these projects. The purpose of the organisation is to drive joint systems. We can have some confidence based on our experience with Motor Tax Online, to which members of the committee have referred, which was driven by the computer services board. The board is funded by the constituent local authorities and comprises managers from the local government system. It is very much in the driving seat in ensuring that whatever systems are proposed meet the needs of the constituent authorities and are adopted by the participating authorities. I can provide further details on the nature of the system

Chairman

Perhaps Mr. Dowling could give the committee a detailed note outlining which of the 27 bodies are involved and how many staff will be covered by it and where he is as regards consulting. The real issue has not been addressed but will be in a letter to me. The problem with PPARS was not computerisation but the raw material. Simply, if one computerises a mess, one ends up with a computerised mess. The problem was that there were 2,700 payroll permutations in respect of time off, days off, half days, overtime, time off to go to Mass, bank holidays, etc. I want to receive a note on the matter. One has to identify what needs to be computerised. The mistake the HSE made was that it did not remove all the nooks and crannies but tried to computerise everything. It ended up being a nonsensical procedure. The HSE had 80 payroll systems for porters. Each hospital had its own local arrangements for its porter. If the system is to be successfully computerised, there is a need to streamline existing operations beforehand. If there are many variations at local level, there will be complications in computerisation. Some of the anomalies have to be removed through negotiation. That is my understanding of how the problems occurred. Will Mr. Dowling tell the committee who the consultants were?

Mr. Des Dowling

The question——

Chairman

Does Mr. Dowling understand the point I am raising? Computerisation was not the problem.

Mr. Des Dowling

Yes.

Chairman

They needed to smooth the field first.

On the issue of timeliness, I am an accountant and take the view that the more out of date a financial report is when received the more diminished it is in value. If it is not timely, it loses value. What is the position on the 2007 audits? For comparison purposes, the Comptroller and Auditor General published his 2007 report at the end of September 2008 and signs off on all departmental reports within nine months of year end. He publishes his report in September each year. Does the Local Government Audit Service operate within that timescale?

Mr. Noel O’Connell

The Chairman's question is pertinent. I accept that timeliness of information is critical. From my own point of view, I am pleased with the progress made in these matters. When I took up duty with the audit service, we were working on reports three years in arrears. Through many endeavours, we have turned this around significantly. I am very pleased with the work done by auditors on the ground in achieving this turnaround. As is clear from my statement — this is not an excuse — I am giving the committee some idea of the business in which we are involved because it is critical that I do so. That is the reason I have included it in my report. We have a staff of 24. We audit 184 bodies with expenditure of €11 billion. Therefore, it is big business. What has been achieved by the audit service with the resources available to it is excellent.

On the presentation of the annual financial statements of local authorities, their publication is covered by the accounting code of practice and financial regulations set down by the Department. Paragraph 4(2) or 4(3) provides that the annual financial statement of a local authority must be produced by 1 April of the following year. While we do not engage in interim auditing, I would like to move towards it in keeping with commercial practice. Having come from such a background, I would like to be able to move towards this but I am not in a position to do so at present. We work one year in arrears. For example, the audit of the 2007 accounts will be completed between April and March 2009. By the end of March we expect to have the whole programme completed. To date, for 2007, the team has completed an audit of 108 bodies which include all of the motor taxation offices. Of the main local authorities, an audit of the four city councils and 16 county councils is in progress and will be wrapped up shortly. A total of 108 bodies have been reported on; 34 are in progress and 44——

Chairman

Will Mr. O'Connell, please, repeat that?

Mr. Noel O’Connell

Some 108 bodies have been reported on.

Chairman

They are complete.

Mr. Noel O’Connell

Yes. An audit of 34 bodies is in progress. An audit of 44 of the smaller bodies, town commissioners and so on, has not yet been completed.

Chairman

I happened to see an advertisement in my local newspaper last week concerning the 2007 accounts audit for Portlaoise Town Council.

Mr. Noel O’Connell

I understand that——

Chairman

Does Mr. O'Connell know from where I am coming?

Mr. Noel O’Connell

——nobody is more committed to the process. While I have a good team, I can only push so far.

Chairman

I want to follow through on this point. I will be upfront and say I am unhappy with this level of progress. Perhaps it is the legislation that is at fault, as it allows for a 15 month period. The Comptroller and Auditor General publishes his report nine months after year end. As Chairman of this committee, I am saying that if the legislation is at fault, I demand that it be upgraded and that the nine month period apply. We have all talked about the MAC and the accounting system at local level, the names of which I cannot recall. I would have thought the figures would be available for audit much more quickly owing to computerisation. If the legislation allows for a period of 15 months, that is not good enough.

I am pleased to hear that some 108 audits have been completed. I presume they involve the more substantial bodies. On audit reports, I have an instinct that what the delegates say to the committee is what they think. I have never heard a debate in a council chamber on an audit report, although I appreciate the delegates mentioned that such reports are noted. I have heard members say they have received the audit report and that it is available if anybody wants to see it. One has to go and seek that documentation. I am on the mailing list of my own local authority, as an Oireachtas Member, and receive everything presented at every council meeting and have yet to see one.

Mr. Noel O’Connell

An audit report.

Chairman

I have yet to see one, even though I joined the council in 1999. Part of the problem is that the annual report of the local authority does not have to include its financial report. In their annual report most organisations have to include their financial and audit report. It is a one-page document showing income and expenditure. Do the management letters issued through the manager go to the corporate strategy group or are they confidential? What is the difference between the reports? I appreciate the delegates issue their audit report and think they said something about a public report. If a matter of concern arises, do they issue a report which they would expect to be made available to the elected members? How many such reports would be issued in a year? Will the delegates please explain what happens to the management and audit reports?

Mr. Noel O’Connell

In accordance with practice, like any commercial firm of accountants as opposed to commercial auditors, we differ in that we call it an audit opinion on the annual statements. Also, we issue a public audit report.

Chairman

Have the delegates had to qualify the accounts of any local authority?

Mr. Noel O’Connell

We have qualified about three.

Chairman

On what?

Mr. Noel O’Connell

A lack of information or records. We would not have received sufficient evidence in conducting the audit.

Chairman

Is Mr. O'Connell saying——

Mr. Noel O’Connell

The public audit report is one of our main outputs for local elected representatives. We issue——

Chairman

Is Mr. O'Connell saying that in 2006 there were three organisations which had to be issued with——

Mr. Noel O’Connell

They actually——

Chairman

We have to be upfront. They are public bodies. If Mr. O'Connell cannot name them now, I ask him to forward to the committee a list of the names. I am curious to know how a public body, unless it is defunct, was not in a position to supply a particular record? If there are significant bodies, the committee would like to know about them. Is that Mr. O'Connell's true and fair view on the audit?

Mr. Noel O’Connell

Yes.

Chairman

How many audit reports were issued last year?

Mr. Noel O’Connell

We issued approximately 100.

Chairman

Is it Mr. O'Connell's understanding that members would see them?

Mr. Noel O’Connell

It is absolutely critical that they do. That is——

Chairman

My instinct is that everybody in his county——

Senator Paudie Coffey

I have seen auditor's reports but can only recall seeing them in the last two or three years of my time in the council.

Chairman

Yes, just recently.

Senator Paudie Coffey

My membership came to an end in 2007. Reports may have been produced and just noted. I do not doubt it.

Mr. Noel O’Connell

From our point of view, it is important in terms of public accountability that reports are produced. As far as I am concerned, they are for members. Under the new Act, I made sure they were addressed to them. I am concerned about this.

Chairman

Is the management letter sent to the manager only?

Mr. Noel O’Connell

It is addressed to the manager.

Chairman

It would relate to issues of internal control or other concerns.

Mr. Noel O’Connell

Procedural issues.

Chairman

That might not merit inclusion——

Mr. Noel O’Connell

In the public report.

Chairman

Has the Minister ever asked for any of these reports to be published? One of the representative made reference to the fact that the Minister had the power to seek to have the reports made public. Has that ever happened?

Mr. Noel O’Connell

Not in my time.

Chairman

I was pleased to see the local government activity report of August 2006 on the website of the Department and the Local Government Audit Service. It covers the 2004 accounts. I have not seen an update since, although it is probably not a statutory requirement. There appears to be excellent reading for 2004 but I would have liked to have seen the ones published for August 2008. What is the intention in that regard? Was it just a once-off procedure?

Mr. Noel O’Connell

Under the Act, I may issue such a global report. As the Chairman is aware, audit is a regularity issue and, unfortunately, many points arise year on year. I am in the process of issuing another report which should be published in the next two or three weeks. It will be available on the website.

Chairman

Of this.

Mr. Noel O’Connell

On one similar to it, yes.

Chairman

Mr. O'Connell might notify the committee in that regard. If it is available on the website, we will download it but I ask Mr. O'Connell to let us know as soon as it is available. Will it cover 2007?

Mr. Noel O’Connell

It refers to our work programme for 2006, 2007, the end of December 2007 audits.

Chairman

It will cover the 2007 audits.

Mr. Noel O’Connell

Yes. Our year does not end until March 2009 for the 2007 block of work. I am issuing it for the end of December.

Chairman

December 2007.

Mr. Noel O’Connell

Yes.

Chairman

One of these reports is coming up.

Mr. Noel O’Connell

Yes.

Chairman

We might have a discussion on it if a significant issue arises.

I have noted and it has been mentioned here that some of the items in the report have worked their way into the Comptroller and Auditor General's report on the Department of the Environment, Heritage and Local Government. I see a reference to Eyre Square, Galway, the Limerick drainage scheme and development contributions. Is there contact between the Local Government Audit Service and the Comptroller and Auditor General's office or how does it work?

Mr. Noel O’Connell

Yes. There is a standing arrangement that the Comptroller and Auditor General receives a copy of each of the auditor's public reports. He receives a copy of all our audit reports.

Chairman

He can take it from there, if he chooses.

Mr. Noel O’Connell

Yes.

Chairman

It will be helpful that we will see the report in a few weeks. My view, as Chairman — I am sure members will agree — is that with modern computer accounting systems and all the procedures streamlined the 15 months time lag is not longer acceptable, although it may have been in the past. If the Department of the Environment, Heritage and Local Government can have its audit report produced by the Comptroller and Auditor General and commented on within a nine month period, the Local Government Audit Service should at least be working to that timescale at local authority level. One of the difficulties is that when the estimate for next year is being dealt with, the final figures for the previous year are not available because they have not been audited. Even when the outturn in a previous year is being examined, never mind the current year, one is told it is not a final figure because it has not been audited yet.

We have covered all the ground that needs to be covered and found the meeting useful. It is our first time to meet Mr. O'Connell and hear about his position in the Department. We are pleased to hear about it because, as he said, a sum of €12 billion goes through the local authorities. I am always of the view that it would be remiss of us not to delve a little into what happens all the money that goes through the Department. We look forward to receiving the early report in the coming weeks.

The joint committee adjourned at 5.05 p.m. until 3.30 p.m. on Tuesday, 27 January 2009.