Mr. John McCarthy:

I am pleased to be here this morning to assist the committee in its examination of chapter 8 of the Comptroller’s report for 2016, dealing with

central Government funding of local authorities and the accounts of the local government fund for 2016. I am joined by colleagues whom the Chairman has already introduced

At the outset, I thank the Chairman for his kind remarks at the beginning of the hearing. They are very much appreciated, not least by me, because they save me the embarrassment of having to explain why some of us on this side of the room probably look a little bit the worse for wear. I echo the comments and I thank everyone involved, particularly in the Department and Met Éireann as well as a range of other Departments, agencies and local authorities that came together in a tremendous national effort. Also, I note the great sense of community. Without that community effort in so many places around the country we would not have been able to respond in the way that we did.

As requested, I have provided some advance briefing for the meeting. In addition, on 14 February I provided the committee at its request with detailed information on local government financing and oversight arrangements. I will therefore keep these opening comments short.

The chapter of the Comptroller and Auditor General’s annual report concerning central government funding of local authorities provides an overview of local authority expenditure and income, detailing the range of programmes for which local authorities are responsible, including housing, roads and environmental services, and the range of related funding sources.

As the chapter shows, transfers of funding from central Government sources to local authorities in 2016 totalled over €2.2 billion. The local government fund, LGF, accounted for 42% of this amount. A range of Departments, including my Department and the Department of Transport, Tourism and Sport, as well as other organisations, are involved in providing this annual funding to local authorities.

The local government fund, LGF, accounts for 2016 give details of the operation of the fund in 2016. The income sources to the fund that year totalled over €1.9 billion made up of motor tax of €1.049 billion, local property tax, LPT, receipts of €463 million and a payment from the Exchequer of €397 million.

The main payments from the LGF in 2016 included LPT payments to local authorities of €453 million, a payment of €349 million to the Department of Transport, Tourism and Sport for works on non-national roads and for public transport infrastructure, a payment to the Exchequer of €318 million and a payment of €652 million as subvention to Irish Water.

As the committee is aware, from January 2018, responsibility for motor tax transferred to the Department of Transport, Tourism and Sport, with consequential implications for the local government fund. In particular, motor tax proceeds are now paid directly into the Exchequer rather than into the fund, which is now primarily a means of channelling LPT revenues to local authorities.

Funding for Irish Water is now routed through my Department's Vote and funding for roads and public transport, formerly routed through the fund, is now channelled through the Vote of the Department of Transport, Tourism and Sport. All the changes result in much greater transparency in terms of the various flows of funds involved.

In terms of accountability, as the committee is aware, under the existing policy and legislative framework, the Local Government Audit Service, LGAS, provides statutorily independent scrutiny of the financial stewardship of local authorities and other local bodies. The LGAS audits local government bodies in accordance with a

statutory code of audit practice, thereby fostering the highest standards of financial management and public accountability.

Where the annual audit has been completed by the local government auditor, the local authority is required to furnish a copy of the audited financial statement and any associated statutory audit report to every member of the local authority for their consideration at the next practicable council meeting. In addition, the audit committee of the relevant local authority will review any audited financial statement, auditor’s report or auditor’s special report in regard to the authority and will assess any actions taken within that authority in response to either a statement or report, and will report to that authority on its findings.

Scrutiny arrangements for local government were also enhanced in recent years with the establishment of the NOAC, the National Oversight and Audit Commission. The NOAC scrutinises local government performance in fulfilling national, regional and local mandates, scrutinises value for money where State funds are channelled

through local government and supports the development of best practice and enhanced efficiency in the performance of local government functions.

The committee has recently received at its request an update from the NOAC on its work programme. I forwarded that to the committee with my letter of 14 February.

The NOAC chair appeared with others before the Joint Committee on Housing, Planning and Local Government last November for a discussion on local government finance issues.

I and my colleagues will be happy to respond to questions or issues relating to the Department that emerge in the course of the committee’s work this morning.