Dick Roche (Wicklow, Fianna Fail)

I welcome the opportunity to discuss this important legislation introduced in the Seanad by my colleague, Minister of State, Deputy Bat O'Keeffe, in June 2006. Senators present for that debate will recall that the main purpose of the Bill is to introduce a statutory basis for the operation of the business improvement district schemes in Ireland. I will now address the amendments made in the Dáil last week.

Group 1, which comprises amendments Nos. 1, 2 and 3, provides for the enhancement of the role of audit committees in local authorities and for the inclusion of outside expertise membership on such committees. Given the close relationship between local government and Seanad Éireann I have no doubt Senators will be particularly interested in this.

Local authorities are now spending in excess of €9 billion per annum on their current and capital programmes, a significant sum which has grown dramatically in recently years. The reality is that this level of expenditure requires an enhanced financial management system. I am keen to enhance the existing financial management and audit control systems in local authorities to ensure we obtain full value for this level of expenditure and, particularly, to ensure the principles of transparency and accountability are fully observed.

It is interesting to note, having spoken during the past two years to councillors from all sides, that one of the most common complaints is the difficulty in dealing with the complex issue of local finance. In light of developments in corporate governance since the introduction of the Local Government Act 2001, I consider it is appropriate, therefore, that we examine the issue of audit committees. I considered in particular that the remit and composition of the audit committees, which could have been established under section 122 of the Act, was far too narrow. Most councillors and people with experience in councils would agree with me on this.

Under this legislation, the remit of audit committee was limited to considering the local authority's audited financial statement and the auditor's report or special report. Councils were not obliged to establish such committees. The extraordinary reality is that very few local authorities have audit committees, an adjudication I take to be councillors' value or lack of value of existing structures. The amendment, therefore, replaces section 122 of the Local Government Act 2001 and sets out in broad terms the functions of an audit committee, namely, to review the financial and budgetary reporting practises and procedures within a local authority, to foster the development of best practice in the internal audit function, to review any auditor's report or auditor's special report and to assess the follow-up actions by management, to assess and promote efficiency and value for money, to assist in the review of risk management systems and to make such recommendations as the committee considers appropriate in regard to the above matters.

Senators who have been members of local authorities will realise this will bring real value to councillors and will give them a real opportunity of making a strong input in terms of the control and efficiency of the management and finances of local authorities. In addition, the new provisions contain an enabling provision under which I am empowered to set out the regulations and detail in regard to membership of the audit committees, the holding of meetings, reporting by an audit committee, performance and functions of the audit committees and procedures to be followed in regard to that performance. Under the current provisions, membership of audit committees is confined to council members and does not allow councillors to have, for example, outside assistance or expertise. Best practice and development in corporate governance in the public and private sector strongly support the inclusion of people outside the system to assist the audit system. It is a reality that one cannot be a judge in one's own case. Therefore, it is a reality that the best one can do is assist the local councils in this regard by bringing in somebody with the required expertise and knowledge.

In recent years local government has made significant progress in the area of value for money, as acknowledged in the Indecon report. Many initiatives are in place in the local government sector to support efficiency and value for money, including the new financial management systems, five-year multi-annual investment programmes and value for money auditing of expenditure and e-enactment. The local authorities are not behind the door when it comes to introducing innovations. I recently attended the launch of an accounting system for a number of local authorities in Wexford, which was the best I have ever seen and I suggest that the world of business should consider it. Local authorities have been good in this regard.

The Department is working with local authorities on the development of a costing system for the local government sector. This will deliver enhanced management information, especially on unit costs, and will facilitate local authorities in assessing their full unit costs over time. It will be greatly helpful to local authority members in making comparisons between local authorities. In the wider public service, local authorities were the first to introduce financial management systems based on accrual accounting principles. The reporting by local authorities on performance in 42 different service indicators is another indication that the local government sector is willing to step up to the plate and bat.

The Government's drive to pursue a value for money agenda across the public service will be assisted by the introduction of a stronger audit function in local authorities. Most important is the real interest that local authority members have. People who are serious about local government and ensuring we have efficiency will be greatly assisted by this change. Amendments Nos. 1 and 2 are consequential on the introduction of the enhanced audit provision and I recommend the amendments to the House.