COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 6 Apr 2006

Ministerial Correspondence: Discussion.

Mr. J. Purcell (An tArd-Reachtaire Cuntas agus Ciste) called and examined.

Chairman

We will deal now with the minute of the Minister for Finance regarding section 5 of the committee's report on proposals for alterations in the way that Dáil Éireann considers estimates for expenditure. This section deals specifically with central and local accountability and the view expressed by the Minister in his minute is contrary to the opinion of the committee.

The committee's view was that those functions carried out by the local government auditors in auditing local authorities should be integrated or transferred to a central audit office and that the audit function would be centralised in one office for central government Departments and agencies, and for local authorities. The Minister for Finance talks about two tiers of government which should be kept separate and that the accountability issue should also be separate. He maintains the status quo while we propose change.

Deputy McGuinness had a specific interest in this.

Deputy McGuinness

I do not accept what the Minister for Finance and the Minister for the Environment, Heritage and Local Government have outlined in their response to us. It is remarkable that they would take this position, particularly given the amount of effort and thought that all members of the committee put into this report. This is a cross-party position. It is unusual too in that the Ministers concerned have sent this minute to us, rejecting our proposals, but it is not open to us to bring them here for a face-to-face debate because this is a matter of policy. That weakens our position because their statement, not that of the Secretaries General, is before us but we must engage in some form of shadow-boxing with the Secretaries General to get our message across.

That is neither a reasonable nor a proper way to do business. The report will bring us in line with developments that have taken place in Scotland, Northern Ireland and Wales and is a long-standing practice in New Zealand, countries with which we compare most of our work. The moves we request would bring greater and more direct accountability and would form one Department responsible for detailed auditing of all Departments and State agencies. It would make people directly responsible to this House.

I do not wish to rehearse the argument but local government receives a considerable sum of money directly from central Government. I was a member of a local authority and it is difficult enough to deal with the local budget at the end of year without adding the job of auditing or overseeing its own accounts. I have not seen any local authority take up the legislation that enables it to put a local public accounts committee in place.

This committee uncovered certain practices in local authorities that the auditors did not uncover. Two or three counties came to our attention here because of their handling of certain financial matters and we dealt with and corrected these problems. On a separate occasion, when money from the Office of Public Works was allocated to another county over which questions arose, it was raised here and corrected. If the local government auditing system had been functioning properly, it would have been picked up at local level. It was picked up through the Committee of Public Accounts.

Due to the huge spend by local government, there is a need to make it directly accountable to the Committee of Public Accounts. The public would want this as it would be in line with best practice. The Minister for Finance and the Minister for the Environment, Heritage and Local Government are out of tune with what is required. They are not taking into consideration the wide range in respect of the spend by local government. The minute from the two Ministers does not stand up. It is a whitewash and does not address the issue. It is a mechanism for cutting off debate at the Committee of Public Accounts on an issue that is of public concern.

Whatever mechanism is open to us, we should confront either both Ministers or the Secretaries General of the Departments and take whatever steps we can to ensure this change is introduced. A debate in the House is necessary to articulate the finer points of the argument. I do not accept what the Ministers have said.

Deputy Curran

The Minister's minute does not reflect the committee's view. Many believe the role of the auditor is to follow the money trail. The committee frequently concerns itself with other issues such as good management, best practice and value for money. It is not just that money is spent efficiently, as there are other issues involved. I note from the reply that the Exchequer meets 50% of local authority expenditure, 25% of its current expenditure and 70% of its capital expenditure. That is a substantial amount of money which the committee can follow so far. Then the trail is gone.

The Ministers note that the Comptroller and Auditor General, through his value for money reports, has been able to engage with local authorities. However, the committee does not have the access it would like. We know of Departments, where at the start of the year they had an estimate for particular projects which were dependent on local authorities buying into them. In many cases they did not and there were surpluses. It is hard for the committee to make definitive findings when it is only looking at half of the picture.

If the Ministers claim the committee's proposal is not acceptable, the committee must highlight the issue. Instead of it making the recommendation, the Minsters and the Departments should be asked to give theirs. The moneys from the Exchequer to local authorities are evident in various projects such as the swimming pool programme, village renewal schemes and road building projects. However, the point comes when the committee can no longer follow the money trail, which involve substantial amounts.

The Ministers state it is a policy issue. The issue the committee has identified stands. If the Ministers cannot accept these proposals, they should be asked what mechanisms and changes they would recommend in order that the committee can carry out its work more thoroughly and efficiently.

Deputy Boyle

Last week I expressed my support for Deputy McGuinness's position. The committee has an oversight role where local government has an indirect and nominating role for bodies such as vocational education committees and tourism boards. It is inconsistent for the Government to state there are some areas of local government expenditure with which the committee can concern itself. I agree with Deputy Curran's comments on the substantial moneys received by local authorities from the Exchequer. It is a grey area in which more accountability is needed.

Chairman

Will Mr. Purcell give us a short brief on the circumstances in which he can examine local projects where a significant proportion of the money used comes from central government?

Mr. John Purcell

The short answer is that under the Comptroller and Auditor General (Amendment) Act 1993, local authorities are specifically excluded from my remit in both inspection and value for money reports. That is the statutory position.

The minute states I have been able to review the performance of certain local authority delivered programmes in value for money reports. That is true. The advent of the National Roads Authority, an intermediary body, for which I have audit responsibility and which is accountable to the committee, gave me some leverage which I used, not because I wanted to be confrontational, but because large amounts of moneys were disbursed on the roads programme, on which two reports were compiled. The latest was a special report presented several years ago which the committee considered.

Last week I informed the committee that I was conducting a value for money examination on expenditure on the Ballymun regeneration project. Again, there is a slight difference in that the project is managed by a subsidiary of Dublin City Council, Ballymun Regeneration Limited. In that case, I am not precluded from examining it.

I am conscious of the need to audit moneys sourced from the Exchequer, particularly capital expenditure. There is a difficulty where local authorities are used as agents to deliver national programmes funded by the Exchequer. On a statutory basis all I can examine is that the relevant Department has systems in place to monitor expenditure. That precludes me following the public euro down to local authorities.

As this is policy, I am not permitted to express an opinion on its merits or objectives. That clarifies the references in the minute that there is a review of the performance of certain local authority delivered programmes in value for money reports. I may have personal views on the matter but to express them would be to comment on policy. I hope the Chairman will be understanding.

Deputy J. Higgins

The Committee of Public Accounts must supervise the massive amounts spent at local authority level. It should pursue this issue.

Chairman

I am of the same view. The Secretary General of the Department of Finance is before the committee on 11 May. We should file this as a separate agenda item for that day and debate it here in public with the Secretary General. There is another issue of which colleagues will be aware. The Minister's minute argues about two tiers of Government and the spending of local government moneys being a reserved function of members. The argument is that local government auditors carry out the audit and that, in effect, the elected members in local authorities could perform the functions we carry out here in scrutinising the expenditure in order that there is full accountability.

However, one increasing and very significant tranche of money is no longer in the remit of the elected members, namely development charges. These charges are now yielding to local authorities revenue of a couple of hundred million euro. The responsibility for spending development charges is vested in the manager, whether it is the city or county manager. As it is not a reserved function, there is now this very significant tranche of money which is outside the remit of the elected members. While most prudent managers would request advice from elected members, they have no statutory function in the expenditure of these moneys, which is vested in the manager.

There is an additional argument. I understand an answer to a parliamentary question recently showed that something in the region of €160 million or €170 million was collected last year in development levies around the country. Development charges have brought Limerick City Council into surplus from a serious debt situation in just one year. These are very significant amounts of money outside the control of elected members. It is an additional reason for continuing to press the case for a central office to deal with expenditure whether by central government Departments and agencies or by local authorities.

I propose we file section 5 of the Finance minute as an agenda item for the meeting on 11 May with the Secretary General of the Department of Finance. We should take it first, as a separate item, and detach it from the Vote. When we are finished with it, we should proceed to the Vote. We should also clarify with the Secretary General of the Department of the Environment, Heritage and Local Government as to the current state of the local government audit. Members will recall that at a recent meeting when the question was put, the Secretary General said that the audit was up to date in respect of virtually all local authorities.

However, when he last examined the Department's accounts, the Comptroller and Auditor General seemed to recall that quite a number of local authorities were not up to date. We will ask the clerk to the committee to seek clarification by way of a letter. If necessary, we could request the Secretary General of the Department of the Environment, Heritage and Local Government to attend here as well. Since responsibility for the minute rests with the Minister for Finance, I suggest that in the first instance we should deal with the Secretary General of the Department of Finance when he comes before us on 11 May to discuss the Finance Vote.

Deputy McGuinness

As regards the information being sought relative to the local government audit, will that provide a list of counties and the year of the last audit? When I asked that question at the last meeting, the reply given was 2004. I do not know whether that applies to every single local authority and I should like to find out if this is the case.

Chairman

What is Mr. Purcell's understanding of the situation?

Mr. Purcell

I had a spreadsheet, which was produced in the Department as of February this year. That did not indicate that all of the 2004 accounts had been audited. As I said at the time, it could be a matter of definition. In those cases at that time, certainly less than 50% of the audit reports were received. I regard an audit as being completed when the auditor's report has been signed off. I am just speculating, but it may well be that the fieldwork had been carried out in the various local authorities and the final audit report had yet to be received by the Minister. I suggested at the close of that meeting that the Accounting Officer should provide the committee with the information to which Deputy McGuinness refers.

It is available in spreadsheet form and it lists all of the local authorities, including town councils.

Deputy McGuinness

I suppose it depends on the question being asked. We should be particular about this. If the fieldwork is completed and issues have arisen, these must be referred by report to the members of the particular local authority. The members of the local authority then deal with the issues that have arisen and the report is signed off. We need to know in detail relevant to each county the date being referred to as regards the fieldwork. We need to know whether there are counties in which issues were raised pertaining to the fieldwork and whether these are waiting for members, or perhaps officials, to sign off. That is the type of in-depth information we need.

I have one last question as regards the procedure for the meeting. If we stray into an area of policy, the Chairman is obliged not to allow that to happen. This is an area of policy, however. Therefore, when we have the Secretaries General from both Departments before the committee, how can we ask about the policy and what happens and then discuss the need for change? They will only discuss with us the issues arising from the scrutiny of accounts, not the policy matters, but this is, in effect, a policy matter. It restricts our discussions with the Secretaries General. We can ask about local government audits but we cannot go beyond that because they will say it is a policy matter.

Chairman

On the first issue, the Deputy is correct in saying we should ask the secretariat to provide us with information from the Department of the Environment, Heritage and Local Government on which audits are completed in terms of the fieldwork. It should also be specified which audits on completion of the fieldwork have compiled reports. We may then ask whether these reports have been communicated to the individual local authorities and if the local authority members have signed off on the audit, because it is that which completes the picture.

Like the Deputies I was a member of a local authority for nine or ten years. I never recall a special meeting on an auditor's report. They were taken as routine items and noted, without discussion. I never recall a scrutiny of management in the sense that we have scrutiny of Departments here. As Mr. Purcell says, there is an issue of definition. In the correspondence we should try to pin them down to ensure we have the same understanding as they have of the information being provided.

On the second issue, there is a cross-over as regards policy and the accounting issue. As the this is the Committee of Public Accounts it is totally in our remit to discuss the manner in which the accounts of Departments and agencies are audited and presented. We are now making a new recommendation that the methodology we apply to Departments and agencies — within the remit of the Comptroller and Auditor General and, consequently, within our remit — should be extended. In other words, the list of agencies within our remit should include local authorities. We should discuss that and it is for the Secretary General to say when he believes we are crossing the line into policy. If everybody accepts the validity of our authority to make such a proposal, while not necessarily accepting the proposal, we could have a fruitful discussion without getting into conflict on the policy issue. Is it agreed to proceed on that basis? Agreed.