Friday 23 March 2018

'Weak' financial controls in local authority system

Wasteful spending and poor levels of collection for rates highlighted

John Spillane on stage during Cork Rebel Week 2013
John Spillane on stage during Cork Rebel Week 2013
Paul Melia

Paul Melia

MAJOR issues including "weak" financial controls, failure to seek best value for money, and over-spending on capital projects have been identified across the local authority system.

A series of damning reports from the Department of the Environment show that almost half of all councils have overrun their annual budgets, with additional spending approved by councillors in the run-up to last summer's local and European elections.

And the Local Government Auditor has also warned that governance in one of the country's biggest councils is "not operating at the level required of a large public organisation".

An official audit says there is a "long overdue" need for improvements in Cork City Council, and that the senior management team should have a "clear vision" of how to control and oversee its spending.

But problems of wasteful spending, cost-overruns, failure to control budgets and poor collection rates for water, rates and housing loans are endemic across the entire local authority system.

The details are contained in audit reports obtained by the Irish Independent, which were conducted by officials based in the Department of the Environment.

Among the issues identified include "inadequacies" in how council property, including land and buildings, is recorded; failure to tender for major capital works and services to achieve best value for money; capital projects being completed without the necessary funding being in place; and a lack of internal audit functions to oversee spending.

A number of capital projects identified by the Irish Independent were expected to cost €93m, but additional claims totalling €23m have been submitted due to cost overruns. Most are in dispute.

While Cork City Council has been identified as having a number of governance issues, which the council rejects, saying its system is "fit for purpose", the auditor also raises concerns about the finances of other local authorities including Louth, where the deficit is rising year-on-year.

It warns Sligo County Council that it must prepare "realistic achievable budgets" which will need to be "carefully monitored and implemented", noting that in 47 areas of spending, expenditure was 120pc above approved limits.

The reports also say:

There are "significant levels" of non-compliance with public tendering rules in certain local authorities.

A total of 14 of the 32 councils for which audits are available exceeded their annual budgets in 2013, the most recent year for which figures are available.

In many cases, the overspending was approved by councillors in the months leading up to the local elections in May 2014.

Among the main concerns highlighted include capital projects going over-budget, failure to control day-to-day spending despite many councils being in a precarious financial position, and a lack of internal audit staff to oversee spending.

Other issues include delays in preparing annual financial statements, despite councils being required to have them completed by April 1 each year.

These reports are used by auditors to investigate spending, and delays suggest "serious governance issues" in a number of local authorities involved.

The auditors also highlight lucrative contracts being awarded without going to tender in a variety of instances.

In some cases, the number of companies invited to submit quotes was less than the recommended level, with serious procurement issues identified.

Certain councils have also purchased land without seeking independent valuations and have increased overdrafts and other lending to pay down long-term borrowings.

In some cases, money borrowed for capital projects have not been used. However, the loans are incurring repayment costs.

Overall, the auditor warns that "strict budgetary controls" need to be implemented across most councils. In Louth, the deficit is increasing year-on-year - in 2011 it stood at €243,000, which rose to €872,000 in 2013.

Some councils have been highlighted as operating within budgets, and recorded surpluses in 2013.

Controls in Galway City are "operating effectively"; Kilkenny has reduced its accumulated deficit to €140,000 while Roscommon operates a "prudent" control of its finances.

Many of the councils insist that reforms of the local government system, which involved the abolition of town and borough councils and amalgamation of larger local authorities, resulted in a significant extra workload which meant staff were not in a position to oversee spending to the levels required.

In addition, some spending was "unforeseen", including early retirement schemes which had to be funded.

Loans are being serviced in many other councils on an interest-only basis, meaning the capital amount is not being repaid.

Offaly County Council said repaying loans would be "difficult" given its "already stretched budgetary situation".

Irish Independent

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