John Gormley (Dublin South East, Green Party)

Expenditure by local authorities is projected to reach €9.5 billion in 2007 and it is vital that the oversight of financial management and control systems in these bodies reflects best practice. Section 5 of the Local Government (Business Improvement Districts) Act 2006, which replaced the provisions in the Local Government Act 2001, provides a framework for the establishment by local authorities of audit committees with an appropriate structure and remit.

Earlier this year, all city and county councils were asked to set up audit committees and were provided with guidance on their role, functions and membership. I am pleased that progress in their establishment has been good. Some 15 city and county councils have set up audit committees while arrangements for their establishment elsewhere are being finalised.

The new audit committees will continue the ongoing modernisation of the finance function of local authorities. Improvements already in place include the change to full accrual accounting, the professionalisation of the finance function and a greater emphasis on risk management. A new costing system for local authorities will be implemented next year to ensure that services provided by the authorities are costed on a consistent basis.

The functions of an audit committee under the new provisions are to review financial and budgetary reporting practices and procedures within a local authority, foster the development of best practice in the internal audit function, review auditors' reports and special reports and assess follow-up action by management, assess and promote efficiency and value for money, review risk management systems and make such recommendations to the authority as the committee considers appropriate in respect of these matters. An audit committee will have an independent role in advising the local authority, but it will not have executive functions.

The new provisions allow for the inclusion of outside expert membership. They should generally have five members, including at least three external members and up to two serving or retired councillors. The chair of the committee will be selected by its members. In line with best practice, this will be one of the external members.

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