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Wednesday 18 July 2018

Watchdog warns over debts as councils go into the red

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Paul Melia

Paul Melia

Four in every 10 local authorities are operating in the red and reliant on overdrafts or bank borrowings to make ends meet.

A report from local authority spending watchdog the Local Government Auditor says while most city and county councils have "controlled their spending" and reduced debt, 13 of the 31 councils have accumulated long-term losses, with one - Sligo County Council - carrying a deficit of almost €24m.

The 'Overview of the Work of the Local Government Audit Service' report comes after the Irish Independent this week revealed councils were owed more than €400m in unpaid commercial rates, housing loans and housing rents.

There has been an improvement in collection yields and other financial matters, but issues remain in relation to recording the assets each council owns, dealing with interest-only loans, procurement and "poorly staffed internal audit functions".

It also says some councils are failing to file annual accounts by a March 31 deadline, despite it "reflecting poorly" on the council and adding to the risk of "undermining" its financial management arrangements.

The report says more than one-third of local authority revenue comes from rates, which increased to €1.468bn in 2016. Grants and subsidies, largely from central government, rose to €1.1bn, the highest level since 2011.

"The majority of the increase can be attributed to additional funding for capital projects, predominately in the area of housing," the auditor said.

Total revenue across the 31 councils was €4.3bn in 2016, which included €175m in development contributions paid by builders to fund essential services including roads.

The same year, councils spent just over €4bn of which €1.4bn was on capital expenditure including housing and roads. Local authority overall debt has fallen by €183m to €3.858bn.

"Local authorities continue to manage their finances, with 30 out of 31 recording a surplus for the year," the report says, adding: "Closing cumulative revenue balances in the 31 local authorities range from a deficit of €23.8m (in Sligo County Council) to a surplus of €26.1m (in Dublin City)." Nine local authorities have deficit balances of more than €2m.

Collection

The report also notes local authorities control assets valued at €88bn, including roads and land. Housing stock is valued at €21.6bn and land assets at €2.6bn. Councils spent €52m in 2016 acquiring sites.

On income collection, some €297m is owed in unpaid commercial rates, with average collection rates at 84pc, ranging from a low of 68pc in Donegal to a high of 96pc in Fingal.

If all councils collected the average, an additional €40.3m would be collected.

Arrears of housing rents stand at €72.9m, up €5.6m year on year, with average collection rates of 85pc albeit with a low of 71pc in Louth and a high of 97pc in Tipperary. If all collected the average, an additional €16.3m would be collected.

On housing loans, arrears stand at €38.3m. The lowest collection rate stands at 47pc in Kildare, to a high of 100pc in Fingal. If the average of 71pc was collected across the board an additional €7.8m in income would be generated.

Irish Independent

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