Ms Niamh Larkin:

I would like to thank the joint committee for the invitation to attend this meeting today, to discuss the report on the overview of the work of the Local Government Audit Service for the year ended 31 December 2020. I am joined by my colleague, Mr Richard Murphy.

The Local Government Audit Service, LGAS, performs the independent, external audit of local government, as established by the Minister for Housing, Local Government and Heritage. The LGAS audits the annual financial statements of local authorities, including regional authorities, motor taxation offices and other bodies. The Minister for Housing, Local Government and Heritage appoints auditors, known as local government auditors, to carry out or assist in the carrying out of audits of local authorities and other bodies.

All local government auditor staff are qualified accountants and are recruited following open public competitions. Each local government auditor is assigned an audit district under warrant of authority from the director of audit. Local government auditors are independent of the Department when discharging their professional functions. This independence is protected in legislation in accordance with section 116(2) of the Local Government Act, 2001.

The Local Government Act, 2001 sets out the primary duties of the local government auditor as follows:

In the course of the audit of accounts of the local authority or other body, the local government auditor shall carry out such audit tests as he or she considers appropriate in order to be satisfied as to: (a) whether the annual financial statement is prepared in accordance with section 108 or with the accounting requirements otherwise applicable to the body concerned,

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

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

There are a number of outputs from the audit. Following the audit, each local government auditor issues an audit opinion, an audit report and a management letter to the chief executive of the local authority.

It is the local government auditor’s main statutory duty, following completion of the financial audit, to give his or her independent audit opinion on the annual financial statements of the audited body, as to whether it presents fairly the financial position of the audited body and of its income and expenditure for the period under audit.

In addition to the audit opinion, it is custom and practice to issue statutory audit reports covering any matter or matters which the auditor considers should be reported. The chief executive of a local authority is required to respond to this report and his or her comments shall be included, if of material significance, as part of the final report. This procedure has enhanced public scrutiny of local government as management responses to address the issues raised at audit now form part of the published audit reports. In accordance with international standards in auditing, an auditor may issue a management letter drawing attention to any weaknesses in financial procedures or internal controls or both identified during audit and make appropriate recommendations.

This report provides an annual overview of the work of the Local Government Audit Service in delivering on its statutory remit of providing the external audit of local government, in accordance with sections 114 to 126, inclusive, of the Local Government Act 2001, as amended by the Local Government Reform Act 2014. The report is divided into three sections. Section 1 provides detail on the background of the Local Government Audit Service, the legislation under which we operate and the various obligations we have. It also looks forward to our future priorities. Details regarding the various relationships the Local Government Audit Service has with other bodies, including local authorities, their audit committees, the National Oversight and Audit Commission, NOAC, and the Office of the Comptroller and Auditor General are set out. The relationships and interdependencies with our various stakeholders are also noted. The role played by the value for money unit in the LGAS, the reports issued during the year and ongoing are highlighted.

Section 2 provides a high-level independent summary of the financial performance of the local authorities and their financial position at the year-end. The primary sources of information for this section are the local authority audited financial statements and their annual audit reports. As with previous years, the annual report explores the sources of funding for local government and looks at the various supports received, including the rates waiver scheme, restart grant schemes and loss of income from goods and services and increased Covid-19 related expenditure. Details of the main sources of both revenue and capital income and expenditure together with historic data are set out in the report in order that comparisons can be made. The value of assets of local authorities and the liabilities that they face in both the short and long term are detailed along with comparisons.

Section 3 summarises the audit opinions and the findings from the audit reports issued. The purpose of an audit report is to highlight issues noted during the annual statutory audit. However, it is equally important to recognise the continued progress made by some local authorities in these areas, especially during challenging times. Therefore if improvements are noted in audit reports, these are referred to in this section also. Auditors have continued to note improvement in the collection yields in the area of housing rents and housing loans. The steps taken by some local authorities in improving their budgetary controls and reducing revenue deficits over the last number of years has also been commented on in some reports. Other areas where improvements were noted by auditors as part of their annual audit reports included capital balances, fixed asset management, procurement, and governance. However, issues or findings that appeared in the 2020 audit reports which were consistent with prior years included asset management, unfunded balances, interest-only or rolled-up interest loans, development contributions, procurement and understaffed internal audit functions. The reporting of these issues individually to local authorities and cumulatively in this report is important, as it allows us to highlight the recurrent sectoral issues.

The findings included in the overview report are not an exhaustive list of all findings but a summary of the main areas. The audit reports for each local authority deal with the findings in detail. I hope the overview report gives an insight into the work carried out annually by the Local Government Audit Service and I look forward to discussing it with the committee in detail.