Many councils struggling to pay for vital services
SOME LOCAL authorities are in serious financial difficulty and struggling to collect enough income from rates to pay for vital services such as roads, water and housing, according to local government auditors.
Audits by the Department of the Environment’s local government audit service for 2010 show that a reduction in the level of income from rates is affecting almost every local authority.
The results highlight the urgency facing local authorities and the Department of the Environment in collecting funds from new charges and levies such as the household tax and septic tank levy.
Despite the challenging economic conditions, some local authorities such as Cork County County, Dublin City Council and Fingal County Council managed to reduce expenditure significantly and record healthy surpluses.
However, many councils were unable to cut costs enough to avoid significant deficits.
Sligo County Council was among the worst hit during 2010. Its deficit increased by one-third to just under €10 million, which auditors described as a “very serious matter for the council”.
“The main issue affecting Sligo County Council is its critical financial position and its inability to meet its present obligations, without increasing its loan approval on an ongoing basis,” auditors said.
In response, the council’s manager said the Croke Park agreement had tied it into commitments that it was not able to afford.
Auditors said Sligo County Council needed to prepare a “complete review of all its activities”, and should develop realistic projected income levels to assist management in operating on a reduced income.
The reports also highlight concern over the financial standing of Donegal County Council. Its closing deficit was €12.7 million at the end of 2010.
Auditors found collection yields fell for rates (down from 71 per cent to 64 per cent) and commercial water charges (from 40 per cent to 36 per cent). This was a “serious matter for the council and should be urgently addressed”.
The report also found that Donegal County Council did not pay salaries in accordance with national guidelines, in some instances. Instead, they were paid “Donegal rates”.
If all staff had been paid normal rates, the wage bill would have been €9.9 million. Instead, it was €11.3 million. The local authority manager explained that the basis for the increased payment arose from a Labour Court ruling.
Clare County Council’s income was also badly hit during 2010. Its deficit was €1.7 million, with arrears totalling €18.6 million. It had one of the poorest records for the collection of rates.
“All legal resources available to the council must be applied in order to secure payments of the sums due,” auditors said. “More resources should be assigned to the collection of this debt.”
In contrast, Cork County Council recorded a significant surplus of €17 million. While it also experienced a fall-off in income from rates, it cut back on public spending significantly. In fact, auditors said arrears for rates increased by €6.6 million during 2010 and had increased by almost 300 per cent since 2008. In commercial water rates, just €6.5 million of the €15 million that was due had been collected up to June 2011.
The council said it was having “ongoing difficulties identifying to whom water was supplied”, as well as problems with a “substantial number of historical accounts”.
Dublin City Council also managed a surplus (€15 million), even though income from rates fell significantly. Its arrears rose – from €44 million to €63 million. Similarly, Fingal County Council recorded a healthy surplus (€17.6 million), though auditors also expressed concern at a fall-off in the level of collection from rates.
CASH-STRAPPED: COUNCILS WITH DEFICITS
Auditors have expressed concern at debts facing the local authority. Collection yields from rates and commercial water charges have declined significantly. Auditors say this is a “serious matter for the council and should be urgently addressed”. The proportion of paid rates fell from 71 per cent to 64 per cent and of commercial water charges dropped from 40 per cent to 36 per cent.
The main issue facing the local authority is its “critical financial position and its inability to meet its present obligations”. Its deficit increased by one-third between 2009 and 2010. Auditors say it needs to prepare a complete review of all its activities and to adjust to “operating under reduced income levels”.
The level of payments for rates is “far from satisfactory”, with total arrears of €18.6 million. Auditors say a continuing rise in these arrears is a cause for concern and say “all legal resources available must be applied” to secure payment of sums due. In the area of water rates, for example, only 33 per cent had paid at the end of 2010.
Auditors say the local authority’s accumulated deficit increased substantially in 2010 and should be closely monitored. The level of debt for unpaid rates has increased from €2.3 million to €3.8 million.
With the exception of housing rents, collections from all other rates declined. While this is linked to the economic downturn, auditors say it is a “serious matter for the council” and should be addressed. Rates arrears have increased from €4 million in 2009 to €5 million in 2010.
While accounts recorded a surplus, a significant overall deficit of €8.3 million remains. While the proportion of people paying rates was 85-90 per cent, the proportion paying commercial water rates was just 40 per cent.
Source: Local Government audit reports for 2010