Joint Committee on Housing, Planning and Local Government díospóireacht -
Wednesday, 19 Sep 2018

National Oversight and Audit Commission: Chairperson Designate

Chairman

We are now in public session. At the request of the broadcasting and recording services, members and visitors in the Public Gallery are requested to ensure that mobiles phones are switched off completely or to airplane, flight or safe mode, depending on the device, for the duration of the meeting. It is not sufficient to just put phones on silent mode as this will maintain a level of interference with the broadcasting system. Apologies have been received from Senator Martin Conway, Deputy Ruth Coppinger and Senator Jennifer Murnane O'Connor. Deputy Mick Barry will be substituting for Deputy Coppinger.

I remind members that we will have a private session following our engagement with Mr. McCarthy and Mr. McGowan. No. 1 on the agenda is the chairperson designate of the National Oversight and Audit Commission, NOAC. Today's meeting will involve two sessions. The purpose of our first session is to engage with the chairperson designate of NOAC, Mr. Michael McCarthy, who is no stranger to this room, and discuss his strategic priorities for his role and his views on the challenges currently facing NOAC. The committee welcomes the opportunity to meet with the chairperson designate in public session to hear his views and we trust that this serves to provide greater transparency to the process of appointments to our State boards and bodies. On behalf of the committee, I welcome Mr. McCarthy back in a different role - I know he sat in this chair a number of times prior to me. I welcome him back to the committee and I look forward to his opening statement.

Mr. Michael McCarthy

I thank the Chair, the committee members and the secretariat for the opportunity to address the committee this morning. I reiterate my thanks to the committee for the invitation. It is an honour for me to be present as the Minister's nominee for the chair of the National Oversight and Audit Commission. I welcome this important first engagement and I am very much looking forward to working with all stakeholders in this new role. I hope to continue the good work that has already been completed to date and to build on this work so that real reform is evident and that any challenges in perception and reality are addressed. I am aware that real reform takes time and that only through working together will we continue to make the necessary progress over the coming years. I come to NOAC with great interest in and an understanding of local government and with a genuine belief that I can make a useful contribution to the work of NOAC. I am coming into this role without baggage or any conflict of interest. This will allow me to engage credibly with all stakeholders and hopefully bring some fresh thinking and new ideas to further enhance the role of NOAC.

I will begin by outlining what NOAC is about and how it operates. NOAC was established in July 2014 as an independent statutory body to provide oversight of the local government sector in Ireland. It is a key element of the local government reform agenda that emerged from the proposals set out in the action programme for effective local government. It is underpinned by the Local Government Reform Act 2014. NOAC’s functions are wide-ranging, involving the scrutiny of performance generally and financial performance specifically. NOAC also supports best practice, oversees the implementation of national local government policy, monitors and evaluates implementation of corporate plans, adherence to service level agreements and public service reform by local government bodies. A Government Minister may also request that NOAC be asked to prepare a report, relevant to its functions, on any specified aspect of local government.

NOAC has published 18 reports to date. Its reports and recommendations are presented to key decision makers in the local and national government sector including the relevant joint committee of the Houses of the Oireachtas. NOAC publishes annual local authority performance indicators and composite public spending code quality assurance reports. Those published to date cover the years 2014, 2015 and 2016. The 2017 reports will be published early in quarter four of 2018. The annual performance indicator report published by NOAC is one of its key reports every year. NOAC has the function of scrutinising local authority performance against relevant indicators. The performance indicator subgroup’s mandate is to recommend appropriate performance indicators for local authority activity and to oversee the data collection, verification, compilation and publication of a report on those indicators annually. NOAC believes that monitoring performance over time and against comparable authorities has the potential to encourage continuous improvement in local authority service provision. A list of all NOAC’s published reports is available on the NOAC website.

NOAC operates a subgroup structure covering the areas of performance indicator reporting, customer surveys, financial performance, housing studies, local enterprise offices, LEOs, reporting under the public spending code, PSC, and the oversight of efficiency reform implementation. Each subgroup consists of three to four members, who take responsibility for progressing various projects, with regular reporting to the full NOAC when key decisions are required. The nature of NOAC’s statutory functions means that there will be an ongoing requirement for some subgroups, while others may only exist for the duration of a particular project. NOAC’s membership is statutorily prescribed as a minimum of six and a maximum of nine members. There is provision for the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy, to increase, by order, the number of members to a maximum of 12 for a period of up to two years. SI 536 made by the Minister on 19 October 2016 increased the number of members to 11.

NOAC does not have a separate executive and the Department of Housing, Planning and Local Government provides its secretariat. Earlier this year, a new section was established with a staff complement of five to provide the secretariat functions for both NOAC and the new water advisory body.

As I have mentioned, NOAC’s role in local government policy is to oversee how the national policy is implemented by local government bodies. NOAC does not have a function of providing input into the development of policy for the sector. When it comes to financial performance, NOAC’s role is to scrutinise the performance of any local government body in respect of the financial resources available to it, including value for money. To fulfil this function, NOAC carried out a review of local authority rates collection performance because this is a significant revenue source for the sector. It also reviews the reports by the Local Government Audit Service, LGAS, of its annual audits of local authority financial statements and follows up on selected aspects raised in those reports. NOAC also reviews value-for-money reports produced by the value-for-money unit of the LGAS. Regular meetings are held between NOAC and the director of the LGAS, and NOAC has established a good working relationship with the director there and her team.

In 2017, NOAC started compiling profiles of each local authority based primarily on the material in our reports and meetings with the chief executives. The profile also included information provided by the authorities themselves outlining the particular context within which they each operate. The chief executive and management team attend a NOAC meeting to answer questions from the NOAC members on topics such as finances, customer service, corporate planning, housing issues, performance indicators, tourism initiatives, employment within the county, and economic and community development. To date, three meetings have taken place with Louth and Offaly county councils and Cork City Council. It is planned to progress and expand on this work in the remainder of 2018 and into 2019 using the recent validation visits for the performance indicators report as a first step in this process.

Customer service is an important area and NOAC is engaged in a three-year programme of carrying out a customer survey for similarly sized local authorities. The report for the largest ten local authorities was published this summer. Work will continue in 2018 on a local authority customer satisfaction survey for the next ten largest local authorities. Other areas being worked on are reviews of aspects of financial performance and the internal audit function, as well as the annual performance indicators and public spending code quality assurance reports.

I am aware that NOAC receives substantial support and assistance from the Local Government Management Agency, LGMA, particularly in the collection and compilation of data for the performance indicators report. The LGMA’s assistance in organising NOAC events such as the very successful good practice in local authorities seminar and the customer service workshops was also invaluable. NOAC will periodically hold such events to disseminate clever and innovative practices or examples of efficiencies in the performance of local authorities that it encounters in its work. It is important that this relationship continues to grow and develop so that real alignment with the local government sector is evident.

At all times I will be conscious of the role of NOAC and will be striving to see NOAC recognised as an organisation that can deliver real reform. Central to this will be making sure that local authorities are delivering real value for money while adhering to proper governance. NOAC will also ensure that it supports the best practices that are central to the work of local authorities. Successful transformation requires robust planning, clear and coherent leadership and suitably skilled staff. The impact of increasing demands across local government, the changing landscape in which councils operate, and the impact of the significant uncertainty as well as increasing complexity brought about by Brexit mean that planning and oversight have never been more important. Robust plans that project how local authorities’ outcomes and priorities will be delivered and funded are essential to ensuring the sustainability of services to the public. It is important that NOAC be there to ensure that these decisions are taken in a planned and co-ordinated way and that the impact of decisions on communities and outcomes is transparent and understood.

I very much look forward to working with the NOAC members, chief executives, liaison officials and performance indicator co-ordinators of the 31 local authorities and with the other bodies, agencies and Departments that supported NOAC in its work. I express my gratitude to the outgoing chairman, Pat McLoughlin, for the time he has taken to update me on the role and for the valuable and extensive work that he has carried out during his time as chairman of NOAC. He and his board members have done some valuable work, and I look forward to continuing the very important work they have started.

Chairman

A number of people are indicating to ask questions but I made an oversight in that I forgot to read the note on privilege.

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

Our first question is from Senator Boyhan.

Senator Victor Boyhan

I wish Michael McCarthy well and congratulate him on what is ultimately a nomination by the Minister. I want to be clear that this is not an interview process and I thank him for coming in and sharing with us his hopes, aspirations and plans for NOAC.

I take the view that before every meeting of the Joint Committee on Housing, Planning and Local Government I notify councillors around the country of all groups and none on what is going on and the agenda. I told them yesterday that Mr. McCarthy would be coming here and I did some research on NOAC. It was interesting to me that within 20 minutes I had seven emails. I will not talk about the councillors' questions but they came back immediately from Fingal, Kildare, Dublin City Council, Dún Laoghaire-Rathdown twice, Kildare again and then Waterford. The gist of those emails was that some of them did not fully understand what NOAC is about and what its functions are. A common and recurring theme was that it has no teeth, it is a public relations, PR, exercise, and that it is commissioning reports with only 100 people surveyed so it cannot be accurate. Those are just some of the criticisms. Someone correctly suggested that NOAC picked ten of the largest sitting local authorities out of the 31 local authorities, and Mr. McCarthy would know about all of that.

One of the challenges for NOAC is to explain its role more. It has completed 18 reports so far and some of them are very well done, but what is happening behind that? NOAC carried out a major survey on the subsidiary companies of local authorities and we have a plethora of subsidiary companies across the 31 local authorities, of which serious questions must be asked about their corporate governance and, more importantly, about their impact on local authorities, where the authorities are finding themselves having to give letters and guarantees in terms of funding to prop up some of these companies. I would go as far as to say that some of these companies are not viable, if not totally insolvent. They are only trading on the basis of letters of guarantee and backup. They vary from property companies to other companies involved in sports, leisure and recreation, but I am more concerned about the property companies. I have had a look at the accounts of some of these property companies and there are serious questions about them.

My concern is, and NOAC's concern should be, the impact this will have on the taxpayer and the local authorities and the deficit in corporate governance from the elected members. If there are council nominees, their duty of care would be to the corporate affairs of the company, but if they are elected members as well then there is a conflict. Mr. McCarthy's predecessor identified these issues in a recent report and I appeal to Mr. McCarthy to look at the reports that NOAC has done, without looking to do more reports, and examine how NOAC can act on the impact of those reports after six or eight months. There are serious concerns and NOAC has done good work. It may require further legislation and that is a matter for Mr. McCarthy, his board and colleagues and his contacts with the Department and the Minister. I suggest that he looks at a closer synergy and a greater relationship with the Local Government Audit Service.

Another deficit coming from these emails that I wish to raise, even though I acknowledge and appreciate that it is not Mr. McCarthy's direct responsibility, is the audit committees and their relationship with the greater local authorities.

If Mr. McCarthy is sending a report on the NOAC, he should write to the cathaoirleach of each local authority to ask to have it put on the agenda because sometimes it is all about communication. The NOAC is doing good work and if information is being sent to a city or county manager - the chief executive as he or she is now called - I am not convinced that it is filtering down. For instance, a number of members of local authorities contacted me to say they had not seen the NOAC's audit report. The challenge must be to have greater engagement with elected members to explain the NOAC's role and functions. That might mean a road show for Mr. McCarthy throughout the country to explain them to them and encourage them as major stakeholders in ensuring good local governance. It is a two-way street. It involves not just the executive but also the elected members. If anything, there is a deficit in that regard.

I wish Mr. McCarthy well. I am aware of his experience. I took some time yesterday to look him up. I am aware that he is committed to assisting local authorities. I am confident that he has the necessary skills and hunger to succeed. He might take on board some of the issues I have raised.

Senator Grace O'Sullivan

I welcome Mr. McCarthy and congratulate him on his appointment. What is his current analysis of the local authorities? I am interested in knowing, as he enters this new position, what his overview is. On his ambitions for the NOAC, what is his vision and set of priorities for it?

In his presentation Mr. McCarthy talked about the different areas in which NOAC members were involved, one of which is housing. How, in his view, are the local authorities performing in the delivery of housing to the market?

To support what Senator Victor Boyhan said, communication is key and critical in the functioning of any agency, particularly one with a public face and one with an interface with the community. How can Mr. McCarthy improve communication with elected members and, moreover, communities in order that we will have openness and transparency and that communities will be able to engage with the NOAC in what it is doing?

Deputy Pat Casey

I wish Mr. McCarthy the very best of luck in his new role.

Senator Victor Boyhan identified many of the key points I was going to mention. The NOAC does an incredible amount of good work. As Mr. McCarthy stated, 18 reports have been completed. I often wonder how many of the actions or recommendations made within those reports have been implemented by local authorities.

From my point of view, having served on the audit committee when it was first established, I found it to be a fantastic body in moving the local authority in the right direction. Equally, it gave guidance to the chief executive, but, again, many of the recommendations of the audit committee were not implemented.

I have looked at some of the reports. The report on commercial rates was one on which I would have always focused at local authority level. Has each local authority been sent copies of the reports or are NOAC reports sent directly to the relevant SPCs? The amount of information contained in the reports is incredible and can help.

I always find trying to make comparisons between local authorities almost impossible because they all have different interpretations of matters and different ways of presenting information, including on performance indicators. I would have been involved in planning and seen that one local authority presented information in a different way from another. It is time to standardise how information is presented across the 31 local authorities.

Going back to commercial rates, having served for 12 years on a local authority, it was eight years before I realised housing rent payments were written off in the budget process and that one could see the figure. I could not understand how collection rates were high in the case of social housing rent payments, yet in the case of commercial rates we were not doing what we should have been.

Another issue I had at local authority level was no one ever went out to collect money. Local authorities did not take a proactive approach, even though they had the power to do so. They had a lien on commercial property which could not be sold until commercial rates were paid. Rates that were owed by an individual which could be dealt with in a year or two were manageable, but in year eight or nine they became unmanageable and the business closed. That had a knock-on effect. The local authority was not proactive in collecting the rates due.

I wish Mr. McCarthy well in his position. The NOAC does an incredible amount of work, but how much do the members of the local authorities know about it?

Mr. Michael McCarthy

I thank members for their courteous comments and constructive engagement. I will give an holistic response and try to touch on as many of the topics raised as possible.

In response to Senator Victor Boyhan, I have examined the position. I am no different from the Senator, Deputy Pat Casey and Senator Grace O'Sullivan. My previous life did not differ from that of the vast majority of practitioners of the political arts. It would have been born primarily out of a local government base. At that rudimentary democratic level one become involved in the business of the local authority and aware of how it does its business. There are a number of issues that stand out from that experience, one of which is the manner in which different local authorities do their business differently from others and successive administrations have tried to co-ordinate their activities or put them on a level platform. It is splintered in that way. There are now 31 local authorities, some of which are good at doing some things, while others may be not as good in some respects.

There is a big challenge for me, as chairperson, to raise the profile of the NOAC and sell its message. It does a lot of good work. I, too, share the view that once someone has a good story to tell, it is difficult to tell it. If someone was doing something wrong, everybody would be aware of it and it would dominate the news cycle. That is how it is nowadays. I see its work as important in the context of stakeholder engagement. I refer to the Local Government Audit Service, the County and City Management Association and the elected members of local authorities. I have great respect for the system of public administration, but I have always deferred to the manner in which local authority members go about their work. They are the eyes and ears of communities throughout the country in every parish and one cannot but be affected in some positive way by the roles played by local authorities, be it in the provision of housing, roads, libraries and playgrounds. It is a meaningful part of the democratic system. In my chairmanship of the NOAC I am anxious to co-ordinate the activities of the different stakeholders and focus on areas where we think there are improvements to be made, bearing in mind the remit is one of oversight.

To answer Senator Grace O'Sullivan's question, particularly about housing, I reiterate this line because it is important that I do not create the impression that I can comment on it directly or can directly influence policy because I am expressly forbidden from doing so. The NOAC does not have a function or an input in the development of policy for the sector. Our role strictly is to oversee how national policy is being implemented at local government level.

To chime with Deputy Pat Casey's point, I see the valuable work audit committees are doing across local authorities. There is an obvious connection between the overarching role of the NOAC and the individual work being completed by audit committees in local authorities.

Bearing in mind that I have not been officially appointed, I have only had a tertiary role in monitoring the functions of the NOAC. I am aware, however, that all of the reports have been sent to key decision makers in local authorities. I want to ensure all elected members have access to them. The reports are put up on the website. I am anxious to ensure all of the reports and the stories surrounding them will be directly communicated to local authority members because they include important information that has been gleaned from the Local Government Audit Service, also on behalf of the NOAC.

That can be useful and beneficial to local authority members when it comes to budgetary planning issues, audit services and so on.

Primarily, I see the role as being very important in raising the profile of NOAC, but also in engaging critically with the stakeholders, beginning with the local authority members and their organisational and representative associations.

Chairman

I thank Mr. McCarthy. Are there any further comments for him?

Senator Victor Boyhan

I will pick up on one or two things mentioned by Mr. McCarthy. I fully agree that councils are the eyes and ears of every community. What can be done is to shine a light on a dark place by upping one's game as to how one launches one's reports and how one engages with the media on those reports. Councillors and local authorities are particularly sensitive to criticism. That can be used in a positive way, or it can be a negative if one sees it as a negative. I see it as a positive. One has guidelines and national indicators and where people are not performing, they should be flushed out and exposed. I see that as a role for the commission. It is about imaginatively using one's role. One can push out the parameters of one's role but can also stay within the remit set down for the commission by the Minister and the Department.

In relation to Mr. McCarthy's comment on the audit committees, I believe that they are not working as well as he might think. Mr. McCarthy will learn this in time. It is sometimes the dynamic of a local authority that is evident. There are certain predictables on the audit committees. By their very nature they are a closed shop. That is not necessarily a good thing, which is another issue one might look at. When one has reports, good, bad or indifferent, the commission should use its office and resources. That is the challenge I am putting to the commission, to use its resources, its office and its staff to go to the public and inform them. The media will not be slow to pick up on this. That is perhaps the best lever to effect change. I wish Mr. McCarthy well.

Chairman

Has Mr. McCarthy any further comments?

Deputy Fergus O'Dowd

I am sorry I am late. One of the reasons, about which the Cathaoirleach will be glad to hear, is that there was a dog on the M1. I do not know if it was a Fianna Fáil dog or not. It caused a bit of disruption but went quietly in the end. It held us all up for about 20 minutes.

I welcome Mr. McCarthy to the committee. I know he has been the chairperson of committees and is very knowledgeable. I wish to make a number of small points. The accountability of local government and audits is hugely important. When was the last independent analysis of local government financing done? This relates to how councils present their accounts and data. I often felt councillors were very knowledgeable but they are given reports in a set format by the local authority. When I was a member - we cannot be, and have not been, members for a number of years - one of the things I was aware of was that the headings and subheadings could not be changed. One could find a couple of million euro in a miscellaneous account and one did not know what it was for. An independent analysis of the structures to look behind these miscellaneous items and to look at what I always believed was hidden expenditure that was not accountable and that one could not get at might change the perception.

The other point relates to the annual budget. Councillors have always had a statutory role in passing the local authority finance provisions but they never had the time or expertise to go through the budget properly, that is, line by line, item by item. If councillors had access to an independent view or analysis of what was there and of what they were being told, there might be a better outcome. While I am not accusing local authority officials of hiding things, the more transparency there is, the better. In County Louth, there is a great deficit in the local authority. Parking spaces for commuters are being cut as are high-profile items of great importance which everybody wants. We must try to see behind this and get accountability. I am not sure if that is the role of the commission. This would very helpful as far as I am concerned.

Mr. Michael McCarthy

I thank Deputy O'Dowd. In relation to the direct question about the last independent analysis of local government finances, many reports have been done by the local government audit service and other stakeholders, I am not in a position now to give a direct answer to that question, but I will supply this information to the committee later. I thank the Deputy for his comments and want to reiterate the importance of the operation of NOAC but also the transparency involved in how local authorities do their work and how that story is transmitted through NOAC and through to other stakeholders. That will be a key feature of the development of NOAC during my tenure as chair. Key to my chairmanship of the board will be selling the message, which is really important, and explaining that in an accountable and transparent fashion.

Chairman

I wish Mr. McCarthy the best. There is an open invitation to him from this committee. Senator Boyhan wants NOAC to be on our work programme later in the year. He was very proactive in wanting NOAC to come into the committee. We look forward to further engagement with Mr. McCarthy. He comes with vast experience and it is very appropriate that he is in that position. On behalf of the committee, I wish him the very best and thank him for attending this morning.

I propose we suspend for a few moments to allow our second witness to take his seat. Is that agreed? Agreed.

Sitting suspended at 10.06 a.m. and resumed at 10.12 a.m.