Councils in crisis shun call to slash spending
Published 13/02/2012 | 05:00
A RAFT of councils are ignoring government warnings to cut their costs and stop borrowing from the banks as they plunge deeper into the red.
Most local authorities are now relying on overdrafts and bank loans to meet day-to-day expenses, the Irish Independent has learned.
This is despite the councils being ordered to reduce their costs and borrowings three years ago -- a directive that has been widely ignored.
And while the councils themselves are owed more than €500m in unpaid levies, rates and water charges, a series of audits reveals a litany of waste and poor financial management within the local authorities.
The cash crisis means further cutbacks to local services are inevitable.
The audits found three councils are in dire financial straits, while 18 of the 24 whose accounts were examined are running a deficit or are overdrawn.
Environment Minister Phil Hogan is under pressure to act to rein in free-spending councils, and could take the drastic option of appointing an outside expert to some.
These experts would move to cut costs and reduce borrowings where the council has failed to act.
Despite the crisis, councils are continuing to haemorrhage cash. Rules on public sector pay are being flouted, lucrative contracts are being awarded without being advertised and millions continue to be owed in uncollected rates and levies.
The audits show that although some local authorities -- including Fingal, Cork County and Dublin City -- have reduced their costs, the vast majority are running a deficit or are overdrawn.
The Irish Independent has learnt that three councils -- Louth, Offaly and Sligo -- spent more than they took in during 2010. The financial position of seven councils -- Sligo; Offaly; Wicklow; Galway County; Limerick; Leitrim and Kilkenny -- deteriorated despite warnings from the department to get their budgets to balance.
Many councils effectively ignored an order given in February 2009 by the Department of the Environment to maintain "strict control" on their budgets and take "corrective action" if necessary.
Auditors are now expressing serious concern about the financial state of three specific authorities -- Sligo, Mayo and Donegal.
"The main issue affecting Sligo County Council is its critical financial position and its inability to meet its present obligations," auditors warn.
The problems are so acute in Sligo, which has a deficit of €9.9m -- up from €7.5m a year previously -- that Mr Hogan last week met councillors to discuss the problem.
He has the power under the Local Government Act to appoint an "authorised person" to investigate the funding crisis, and it is understood that this is being seriously considered.
The audit reports show the scale of waste and inefficiency across the sector. They also show that while councils are owed more than €500m in unpaid charges, few are willing to admit that they will never be able to recoup the debt, and continue to factor it into their budgets.
A trawl of the published audits also reveals:
- Lucrative contracts worth millions of euro are not being advertised to get the best price on the market, but are being awarded without a tendering process.
- Councils continue to pay lucrative special rates to staff.
- Some 32 staff in Galway City Council are owed more than a full year's annual leave.
- Councils are being forced to sell houses at a loss.
- Assets are not being insured, including vital infrastructure like water treatment plants.
The Department of the Environment has told councils every year since February 2009 to review all aspects of their spending and keep a tight control on their finances.
City and county councils have seen their funding from central government slashed in recent years. In 2008, at the height of the boom, they received almost €1bn in funding, which has fallen to €651m for 2012.