Local Government Audit Service Activity Report · • Revenue Income and Expenditure Account • Capital Programme • Balance Sheet Further financial data, including revenue collection

Local Government Audit Service

Activity Report

February 2014

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© Department of the Environment, Community and Local Government 2014

The website of the Department of the Environment, Community and Local Government is the primary means of publishing reports of the Local Government Audit Service. Should any errors arise, they will be corrected and noted in the report published at http://www.environ.ie/en/Publications/LocalGovernment/AuditService/

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Contents

Page

Foreword 4

Introduction 5

Financial Overview 7

Revenue Income and Expenditure Account 8

Capital Programme 11

Balance Sheet 14

Local Government Auditors’ Reports 16

Value for Money (VFM) Audit 22

Motor Taxation Audits 24

Local Government Management Agency - Household Charge 24

Change in Local Government: Implications for the Local Government Audit Service 25

External Relationships 27

Appendix 1 General Revenue Balances 28

Appendix 2 Rates Collection 29

Appendix 3 Housing Rents Collection 31

Appendix 4 Commercial Water Collection 33

Appendix 5 Housing Loans Collection 35

Appendix 6 Non-Mortgage Loans 37

Appendix 7 Mortgage Loans 38

Appendix 8 Main Issues from Audit Reports 39

Appendix 9 The Local Government Audit Service 132

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Foreword This report sets out the work of the Local Government Audit Service (LGAS) in delivering on its

statutory remit as prescribed in the Local Government Act, 2001. The content of the report is

based on the main issues contained in the local government auditors’ statutory reports made to

the elected members of the city and county councils on the audits of the annual financial

statements for 2012. The relevant extracts from these reports are detailed in Appendix 8.

Local government is in the process of significant consolidation of its functions following the

enactment of the Local Government Reform Act, 2014, which provides for the:

• merger of town and borough councils with their respective county councils

• amalgamation of Limerick City and County, Waterford City and County and South and North

Tipperary County Councils.

The local authorities are also engaging with Irish Water on the transfer to it of related assets and

liabilities. It is important to note, in addition that local authorities have reduced their staff

numbers significantly over the last four years.

These are major challenges for the sector to deliver due, in the main, to the tight timeframe for

implementation. The financial impact of these fundamental changes will only become apparent

following the preparation of the councils draft annual financial statements for 2014. Management

should have in place additional reporting / oversight arrangements on the activities of the

merging authorities as and from January to May 2014.

The finance functions in local authorities must be adequately supported to deliver the significant

demands in this area in 2014, including the timely completion of the draft annual financial

statements for 2013. The LGAS will also have to meet these challenges in the delivery of its

professional financial/regularity and value for money audit work and in supporting the audit

committees.

My thanks to management and staff in the local authorities for the assistance given to external

audit. Well done to all the team in the LGAS for a tremendous year’s work. The support

provided by the Department’s legal advisor, ICT and local government division is also much

appreciated.

__________________________________

Noel O’Connell

Director of Audit

Local Government Audit Service

February 2014

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Introduction Local Government Audit is the independent external audit service for local government, as established by the Minister for the Environment, Community and Local Government. Local Government Auditors are appointed by the Minister, following open public competitions, and are all qualified accountants. The LGAS, in its role of providing an independent scrutiny of the financial stewardship of local authorities, has continued to develop its policies and procedures to meet the requirements of the Code of Audit Practice and to take account of the principles which underpin public sector audit. The report provides an overview of local authority finances drawing on the results of audit and the engagement with local authorities through the audit process. Appendix 8 to the report provides details of individual issues raised with authorities and the responses received from the respective County or City Managers. Actions taken on foot of responses received will be followed up in subsequent audits. Further information on the organisation and role of the LGAS is included in Appendix 9. The Local Government Act, 2001 sets out the primary duties of the auditor as follows: “In the course of the audit of accounts of the local authority or other body, the local government auditor shall carry out such audit tests as he or she considers appropriate in order to be satisfied as to: (a) whether the annual financial statement is prepared in accordance with section 107 or with the accounting requirements otherwise applicable to the body concerned, (b) whether the annual financial statement presents fairly the financial position of the authority or other body and of its income and expenditure for the period in question, (c) whether the transactions of the audited body conform with the statutory or other authorisation under which they purport to have been carried out.” In discharging their responsibilities, local government auditors must take account of matters arising from previous audit reports and management letters. Auditors should also:

• Plan the audit and allocate resources to achieve a balance of work between the various aspects of the audit, having due regard to availability of resources, and carry out cyclical reviews of financial systems

• Take a broad and analytical view of the audit work based on an assessment of the risk of material error in the annual financial statement

• Ensure that the audit, as one of its aims, assists members and management of the audited body

• Perform the audit in a professional manner and conclude it without undue delay

• Develop, with the Director of Audit, measures to ensure a standard audit approach. The principal issues which have been identified in the 2012 audit reports on the city and county councils include:

• Revenue Collection Performance

• Unfunded Capital Balances

• Financial Position

• Procurement Procedures

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• Fixed Assets

• Development Contributions

• Loans Payable

• Local Authority Companies

• Internal Audit More details on these matters are included later in this report, with all the main issues, reported by the local government auditors, listed by local authority in Appendix 8.

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Financial Overview The following is a review of some of the significant financial data included in the audited annual financial statements of the 34 city and county councils for the year ended 31 December 2012. The inclusion of data for previous years allows for comparisons / trends. The financial data referred to in this review are classified under the headings shown below:

• Revenue Income and Expenditure Account

• Capital Programme

• Balance Sheet

Further financial data, including revenue collection accounts, are also referred to under the main issues included in the local government auditors’ reports. More detailed information by individual city and county council is also included in the following appendices.

Appendices 1.General Revenue Balances 2.Rates Collection 3.Housing Rents Collection 4.Commercial Water Collection 5.Housing Loans Collection 6.Non-Mortgage Loans 7.Mortgage Loans

The main findings from a review of the city and county councils’ annual financial statements for 2012 are as follows:

• Reduction in annual revenue expenditure of €675m (14%) over the last five years

• Reduction in annual capital expenditure of €4,343m (71%) over the last five years

• Long term borrowings (excluding voluntary housing loans) of €3,698m

• Housing loans owed to local authorities of €1,336m

• Unfunded capital balances of €539m

• Increasing levels of arrears in rates, housing rents and housing loans

• Deteriorating financial position in a number of local authorities

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Revenue Income and Expenditure Account The closing revenue balances in the 34 city and county councils totalled €3m at the end of 2012, compared with €23.4m (2011), €18.7m (2010), €8.9m (2009) and €6.9m (2008). It is noted that eight county councils had debit / unfavourable balances on their revenue account in excess of €2m at 31 December 2012 A list of the individual balances for each of the last four years is shown in Appendix 1. The revenue income and expenditure account includes the day-to-day running costs of the local authority and includes payroll, operational, administration, establishment and financial expenditure. Income includes grants and subsidies as well as charges for the provision of goods and services, including commercial rates. The chart below shows the level of revenue income and expenditure for 2012 with comparative figures for the previous four years.1

All amounts shown are €m

It can be seen from the above that the expenditure and income for 2012 showed a further decrease on the previous year from its peak in 2008. Expenditure A breakdown of the revenue expenditure for 2012, with comparative figure for 2008, 2009, 2010 and 2011, is as follows2.

1 All figures shown relate to city and county councils only


2008 2009 2010 2011 2012

Expenditure 4,720 4,464 4,405 4,345 4,045

Income 4,841 4,667 4,628 4,529 4,176

0

1,000

2,000

3,000

4,000

5,000

6,000

€m

Revenue Income and Expenditure 2008 - 2012

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2008 2009 2010 2011 2012

€m €m €m €m €m

Housing & Building 711 663 645 687 673

Roads Transportation & Safety 1,057 848 868 872 794

Water Services 732 743 722 722 721

Development Management 309 285 255 241 235

Environmental Services 901 848 769 730 670

Recreation & Amenity 394 368 336 332 328

Agriculture, Educn, Hlth & Welfare 335 399 429 369 196

Miscellaneous Services 281 310 381 392 428

4,720 4,464 4,405 4,345 4,045

The revenue expenditure for 2012, analysed over the various divisions, is shown in the chart below.

Income The main sources of revenue income for the major local authorities, as included in the annual financial statements for 2012, with comparative figures for 2008, 2009, 2010 and 2011 are as follows:3


Housing &

Building

17%

Roads

Transportation

& Safety

20%

Water Services

18%

Development

Management

6%

Environmental

Services

16%

Recreation &

Amenity

8%

Agriculture,

Education,

Health &

Welfare

5%

Miscellaneous

Services

10%

Revenue Expenditure 2012

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2008 2009 2010 2011 2012

€m €m €m €m €m

Income from Goods and Services 1,289 1,203 1,104 1,105 1,000

Income from Grants and Subsidies 1,155 1,106 1,191 1,165 912

Contributions from other authorities 220 212 228 185 217

Local Gov Fund - Gen Purpose Grant 917 764 694 646 582

Pension Related Deduction 0 69 82 80 76

Rates 1,193 1,240 1,253 1,272 1,314

County Charge 67 73 76 76 75

4,841 4,667 4,628 4,529 4,176

*Note: Rates Income is shown before the write-off of irrecoverable rates (See Appendix 2)

The analysis of revenue income for 2012 is included in the chart below.

Income from

Goods and

Services

24%

Income from

Grants and

Subsidies

22%

Contributions

from other

authorities

5%

Local Gov Fund

- Gen Purpose

Grant

14%

Pension

Related

Deduction

2%

Rates

31%

County Charge

2%

Revenue Income 2012

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Capital Programme The Local Government Act, 2001 requires City and County Managers to prepare and submit to the elected members a report indicating the programme of capital projects proposed by the local authority for the forthcoming and following two years. The capital programme includes expenditure on the acquisition of fixed assets, infrastructure projects, work-in-progress and preliminary expenses. Total capital funding and expenditure for 2012, with comparative figures for 2008, 2009, 2010 and 2011 is shown below. 4

All amounts above are €m

Expenditure The further reduction in capital expenditure in 2012, when compared to previous years, is a reflection of the decrease in economic activity generally and in particular the reduced investment in infrastructure projects in the local government sector.


2008 2009 2010 2011 2012

Expenditure 6,134 4,143 2,839 2,121 1,791

Funding 5,584 4,099 2,898 2,516 1,805

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

€m

Capital Funding and Expenditure 2008 - 2012

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2008 2009 2010 2011 2012

€m €m €m €m €m

Payment to Contractors 3,425 2,144 1,369 933 969

Purchase of Land 530 484 308 174 110

Purchase of Other Assets 481 300 194 111 53

Professional & Consultancy Fees 353 275 188 155 119

Other 1,274 893 735 703 487

Transfers to Revenue 71 47 45 45 53

6,134 4,143 2,839 2,121 1,791

An analysis of the 2012 capital expenditure is shown in the chart below.

Payment to

Contractors

54%

Purchase of

Land

6%

Purchase of

Other Assets

3%

Professional &

Consultancy

Fees

7%

Other

27%

Transfers to

Revenue

3%

Capital Expenditure 2012

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Funding There was also a reduction in capital funding as shown in the tables below.5

2008 2009 2010 2011 2012

€m €m €m €m €m

Grants 3,499 2,811 1,938 1,447 1,187

Borrowings 555 487 292 561 279

Development Contributions 460 158 117 135 45

Property Disposals 299 120 58 52 31

Other 606 352 323 188 154

Transfers from Revenue 165 171 170 133 109

5,584 4,099 2,898 2,516 1,805

Approximately fifty-eight per cent of capital funding is derived from government grants, illustrating the dependence on central government funding for infrastructure projects. The proportion of funding from the various sources for 2012 is illustrated in the following chart.


Grants

66%

Borrowings

15%

Development

Contributions

2%

Property

Disposals

2%

Other

9%

Transfers from

Revenue

6%

Sources of Capital Funding 2012

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Balance Sheet The annual financial statements of a local authority include a balance sheet, which is a statement of the assets, liabilities and reserves of the local authority at the end of the financial year. The following is a summary of the balance sheets for the city and county councils for 2012, with previous years for comparison purposes.6

2008 2009 2010 2011 2012

€m €m €m €m €m

Fixed Assets 85,455 87,465 90,393 91,380 91,777

Work in Progress and Preliminary Expenses

8,068 7,576 5,536 4,452 3,493

Long Term Debtors 3,068 3,060 3,027 2,837 2,676

Currents Assets 2,803 2,585 2,613 2,019 1,992

Current Liabilities (1,646) (1,467) (1,407) (1,196) (1,148)

Long Term Liabilities (4,857) (5,064) (5,076) (5,016) (4,974)

Net Assets 92,891 94,155 95,086 94,476 93,816

Capitalisation Account 85,455 87,465 90,393 91,380 91,777

Income - Work in Progress 7,687 7,290 5,407 4,362 3,378

Specific Revenue Balance 74 74 70 106 105

General Revenue Balance 7 9 19 23 3

Other Balances (332) (683) (803) (1,395) (1,447)

Total Reserves 92,891 94,155 95,086 94,476 93,816

An analysis of the fixed assets as at 31 December 2012, with comparative figures for 2011 and 2010, by asset type is shown in the table below.

Net Book Value 2010

Net Book Value 2011

Net Book Value 2012

€m €m €m

Land 2,238 2,274 2,244

Parks 66 65 64

Housing 17,933 18,078 18,053

Buildings 4,033 4,183 4,281

Plant and Machinery 108 99 85

Computers etc 30 24 18

Heritage 397 403 404

Roads 54,310 55,133 55,378

Water and Sewerage 11,278 11,121 11,250

90,393 91,380 91,777

Valuation of Fixed Assets Fixed Assets were included in the annual financial statements for the first time in 2003. Assets held at that date were valued in accordance with guidelines issued from the Department, using a number of valuation models. All assets purchased and constructed since 2003 are included at cost. A major revaluation of local authority land, housing and building assets will need to be undertaken once market conditions allow.


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Loans Payable The totals of loans payable by city and county councils, categorised by type, at the end of 2012 are shown below.7

2012

€m

Non-Mortgage Loans 2,364

Mortgage Loans 1,334

Voluntary Housing Loans 1,109

Total Loans Payable 4,807

Non-mortgage loans include loans for the purchase / construction of assets, bridging finance and loans for other purposes. The repayment of principal and interest on these loans are generally funded from the revenue account. An analysis of non-mortgage loan balances by city and county council for the last three years is shown in Appendix 6. Mortgage loans are annuity type loans from financial institutions which are used as funding for equivalent annuity loans issued to customers. The repayments on these loans are funded by the corresponding repayments from the borrowers. It is important that the profile of these loans is matched to the customer loan book to avoid any impact on cash flow. A comparison of mortgage loans payable and receivable by city and county council at the end of 2012 is included in Appendix 7. Voluntary housing loans relate to expenditure on the construction of houses for external social agencies, which is recouped in full from the Department. The balances on these loans are offset by an equivalent amount included in the long term debtors in the balance sheet.


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Local Government Auditors’ Reports Extracts of the main issues highlighted in the local government auditors’ statutory reports for 2012, including the managers’ responses, are detailed in Appendix 8. Revenue Collection Performance The collection of the main sources of revenue income, as included in the appendices to the annual financial statements, is regularly referred to in the local government audit reports. Poor collection performance, increasing levels of arrears and the level of bad debts provisions are among the matters included. A summary of the arrears and the collection percentage for each of the main sources is shown below.8

Arrears at 31/12/2012


% Collected 2012

% Collected 2011

€m €m

Rates 356 323 76% 78%

Housing Rents 56 53 83% 84%

Commercial Water 139 149 56% 55%

Housing Loans 37 31 71% 75%

Rates The rates collection performance of each city and county council is shown in Appendix 2 and the following comments are noted:

• There was a significant increase of €33m or 10% in arrears from €323m in the previous year

to €356m in 2012;

• Write-offs of rates amounted to €143m in 2012 compared to €91m in 2011; and

• The percentage collected for each city and county council ranged from the lowest of 55% to

the highest of 92%; with an overall percentage collection of 76%.

Auditors’ comments in their audit reports related mainly to the falling yields in the area, the increasing arrears and the level of write-off and bad debt provision. The need to strengthen the monitoring and follow-up of arrears was also referred to. Management’s responses referred to the efforts being made in this regard and the economic difficulties faced by many ratepayers.


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Housing Rents Housing rents collection summaries for each city and county council are included in Appendix 3 and the following is noted:

• Arrears of rents increased from €53m in 2011 to €56m in 2012;

• Write-offs amounted to €1.9m in 2012 compared to €1.5m in 2011; and



Increases in housing rents arrears, poor collection performance and the level of provisions for bad and doubtful debts were among the matters referred to in auditors’ reports. Management responses referred to the actions being taken to address these issues. Commercial Water Collection summaries for commercial water charges are included in Appendix 4. The following are noted from these schedules:

• Arrears of commercial water charges decreased from €149m in 2011 to €139m in 2012;

• Write-offs amounted to €16m in 2012 compared to €21m in 2011; and



Matters referred to in auditors’ reports included the level and age of arrears, the amount provided as provision for bad and doubtful debts and the non-accrual of charges for the final quarter of 2012 in some local authorities. Management responses referred to the actions being taken to improve collection and the reasons for the high level of arrears. Housing Loans Housing loans collection summaries are included in Appendix 5 and a number of relevant comments are included below:

• Arrears of housing loans increased from €31m in 2011 to €37m in 2012;

• Write-offs amounted to €400k in 2012 compared to €643k in 2011; and



Local government auditors’ comments, in their audit reports, included the increasing arrears, the level of bad debt provisions, shortfalls arising on surrendered and/or repossessed houses and the introduction of the Mortgage Arrears Resolution Process (MARP) for managing arrears cases.

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Unfunded Capital Balances Note 11 in the Annual Financial Statements (AFS) includes totals for unfunded balances and these are split between project balances (i.e. those relating to completed assets) and other non-project balances. Unfunded balances are defined as those where a source of funding has not yet been identified. These unfunded balances are regularly referred to in the auditors’ reports and totals for the city and county councils are shown below.9

2008 2009 2010 2011 2012 €m €m €m €m €m Unfunded Balances (416) (442) (637) (579) (539)

Possible sources of funding identified in management responses to auditors’ reports include the following:

• Future development levies;

• Transfers from revenue account;

• Sales of related assets; and

• Amounts to be recouped from the Department.

It is important that these balances be monitored and where the funding status changes that the accounting systems be properly amended. Financial Position The financial position of local authorities is reflected in the revenue account balances and the balance sheets in the annual financial statements. A list of the closing general revenue balances for city and county councils for the last five years (2008 – 2012) is shown in Appendix 1. Six local authorities have significant debit balances (over €5m) on the revenue account at the end of 2012. Two local authorities in particular, Donegal County Council and Sligo County Council, have significant debit balances (€17m and €15m respectively), which have deteriorated over a number of years. While the circumstances of individual local authorities varied, some of the factors identified by management as contributing to the financial difficulties were as follows:

• The current economic climate and its impact on revenue collection performance;

• Reductions in Local Government Fund payments to local authorities;

• The impact of retirement gratuity payments on current expenditure; and

• The increased burden of loan charges.


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Proposed actions identified by management in their responses to auditors’ reports included the following:

• Strict financial and budgetary control;

• Savings to be achieved through greater efficiency and staff reductions; and

• Planned phased reduction of deficits over a number of years.

Procurement Procedures While local authorities endeavour to comply with procurement guidelines, auditors have identified instances of non-compliance. These usually involved the lack of proper tendering procedures being followed for particular contracts for goods or services. The adequacy of local authorities’ own procurement guidelines and plans was also raised in a number of cases. The lack of purchase order discipline was also identified as a contributing factor to non-compliance with procurement procedures. A number of city and county councils responded by referring to the appointment of a procurement officer or a dedicated procurement unit as a means of addressing the issues raised. The work of the Office of Government Procurement (OGP) and other initiatives in the local government sector should also be of assistance in ensuring compliance with guidelines and also achieving savings across local authorities. Fixed Assets Issues raised in relation to fixed assets included the inadequacy of registers of lands and buildings and problems with the title and ownership of assets. Inconsistencies between fixed asset registers and property registers were also highlighted in a number of cases. Some authorities had on-going projects to bring property records up to date. It is clear that, in whatever form they are kept, property registers (i.e. land and buildings) must be kept updated and a clear link must exist between the register(s) and the fixed assets in the financial management systems. Development Contributions Auditors raised concerns relating to development contributions including the need for close monitoring and site inspections of developments not yet commenced or partially completed. The accounting treatment for short and long term debtors and the phasing of payments were referred to. The downturn in the construction sector has meant that many planned developments did not commence and others were only partially developed. These potential contributions are reflected in long term debtors and deferred income and in some cases may never generate income for the local authorities. Short term debtors i.e. those regarded as currently collectable at the end of 2012 amounted to €360m with a corresponding provision for bad and doubtful debts of €232m, representing 64% of the debtors balance.

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Loans Payable Loans payable by local authorities were referred to in a number of audit reports. In particular the existence of substantial loans in respect of land purchases where the interest had been rolled up over a number of years was noted. Some local authorities had already converted or were about to convert these loans to annuity loans and this would create an additional financial burden on the revenue account. Original plans to use or sell the related land were referred to by management. Changes in relation to the Land Aggregation Scheme, which had been seen as a possible means of resolving this issue, were also quoted in management responses. During 2012 changes were made to the Land Aggregation Scheme as set out in Circular Housing 24/2012, which resulted in the following:

• Land loans that have matured or are due to mature in 2012 must be repaid or converted to

annuity loans;

• The Department will recoup principal and interest repayments to local authorities once the

transfer under LAGS is completed.

The main change from previous years is that the loans will remain in the accounts of the local authorities and the repayments will be due by them. This scheme was discontinued in 2013. Local Authority Companies The relationship between local authorities and local authority companies was referred to by a number of auditors and their main concerns related to accumulated losses, guarantees and financial commitments. The accounting treatment of local authority companies was also referred to and it is clear that there are many inconsistencies across the sector A review of the treatment of local authority companies carried out by the LGAS revealed the following:

• Of the 34 city and county councils, 28 have an interest in 139 companies;

• 101 of the companies are limited by guarantee and 38 have a share capital;

• Six local authorities involved their internal audit unit in the oversight of some or all of their

subsidiaries; and

• Approximately one third of city and county councils do not disclose their interest in

associated companies in Note 3 to the AFS (Debtors).

This area has been identified as a priority in the current review of the accounting code of practice to ensure consistency of disclosure and accounting treatment in the future.

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Accounting for Local Authority Staff Pension and Gratuity Costs The Code of Practice and Accounting Regulations for local authorities provides for the accounting treatment of staff pensions as follows: “Similar to government departments, pension payments are treated as current expenditure. Pension contributions from employees are treated as part of current receipts. The accounts may not reflect the true cost of pensions or the future potential liabilities and local authorities should include a statement outlining their policy in the notes to the AFS.” From 2009 an additional pension related deduction was introduced for all public sector employees and income from this source is included in the income and expenditure account of local authorities in the annual financial statements. Deductions from payroll for this contribution in the city and county councils amounted to €76m in 2012. In addition, normal staff pension contributions, as disclosed in the annual financial statements of the city and county councils, amounted to €56m in 2012. These amounts are not ring-fenced to meet future pension liabilities in the accounts of local authorities. The requirements of current accounting standards relating to pensions, and their applicability to local authorities, are reviewed by the Department’s general accounts working group. However there are no immediate plans to change the accounting treatment of pensions and pension liabilities. The local authorities’ deferred liabilities for pensions has not been computed or reported on in the annual financial statements of local authorities. Pension costs, including the cost of gratuities for staff retiring in the current year, included in the annual financial statements of all city and county councils amounted to €289m in 2012.

Internal Audit The lack of an adequately resourced internal audit function in a number of local authorities was referred to in audit reports. Two local authorities (Sligo and Mayo County Councils) had no internal audit function in operation in 2012; while two others employed an external service provider for this purpose. The vital importance of this function particularly for the operation of an effective audit committee is clear. A number of authorities recognised their shortcomings and indicated their intention to tender for external providers of this service.

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Value for Money (VFM) Audit Value for money (VFM) audit has long been recognised as an important addition to normal financial audit. VFM reviews provide a means to assist local government at authority and sectoral level to learn from best practice and enhance their effectiveness and efficiency. It also provides the Department with useful insights into the operation of specific policy areas. It is very important that VFM reports are fully utilised by authorities. The follow-up to VFM reports is an area that is being actioned by the audit service. It is the responsibility of local authority management to ensure that value for money is achieved by establishing and maintaining sound arrangements, including procedures for planning, appraisal, authorisation and control of resources. The Local Government (Financial Provisions) Act 1997 widened the role of the local government auditors. Under the Act, auditors are empowered to examine economy and efficiency in the use of resources and the adequacy of management systems to appraise the effectiveness of their own organisations. The Unit carries out VFM studies on local authority operations, with a view to identifying best practice and recommending ways of improving existing procedures, practices and systems and thereby promoting efficiency and cost effectiveness. The VFM audit unit of the LGAS currently consists of a central research team, staffed by a principal local government auditor and a local government auditor, together with further audit days provided by assistant auditors at district level. A VFM audit consultative committee representing the main stakeholders, and chaired by the Director of Audit, has been established. It has an advisory role in the selection of VFM projects and in reviewing the quality of draft reports before publication. The committee met four times in 2013. Also, an advisory group is established for each VFM study, comprising representatives from local authorities, the Department and/or individuals with expertise in a particular field.

The work of the VFM Unit has mainly focused on undertaking national studies on single-issue topics and publishing reports thereon. The Unit has produced 28 national reports to date. A report on the Management of Sickness Absence in Local Authorities was published in November 2013. This report was prepared and produced with the support and input from local authorities, following on from the Public Service Reform Plan (2011) which included an action plan on sick leave in the public service The report makes recommendations on ways of improving existing procedures, practices and systems and includes full reporting of sickness absence costs and performance against sectoral targets for efficiency and cost effectiveness savings nationally.

The Unit has broadened its sphere of activity by preparing and issuing progress reports on the implementation, by local authorities, of the recommendations contained in the national reports issued by the Unit. Five progress reports have been issued to date. In 2013 the Unit issued two progress reports, Progress Report No. 4 - Progress Report on the implementation of the recommendations contained in VFM Report No. 26 (Development Contributions) and Progress Report No. 5 - Progress Report on the implementation of the recommendations contained in VFM Report No. 27 (Management and Maintenance of Vacant Dwellings in Local Authorities) The website of the Department is the primary means of publishing reports of the VFM Unit and national reports and progress reports issued by the Unit can be downloaded at http://www.environ.ie/en/Publications/LocalGovernment/AuditService/

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The Unit also carried out compliance spot-checks of capital investment programmes funded by the Department and undertaken by local authorities. The spot-check of capital projects was to ensure compliance with guidelines issued by the Department of Finance for the appraisal and management of capital expenditure proposals in the public sector. These guidelines required Departments and Agencies under their auspices to carry out independent spot-checks and reviews and report annually to the Department of Finance on capital investment programmes covered by the guidelines. The Unit fulfilled the requirement that the compliance spot-checks should be carried out by officials/persons who are independent of those directly involved in the appraisal, management and the delivery of the projects. The LGAS took over this work from consultants who previously carried out this work. The Unit has completed and issued four reports to the Department on the compliance spot-check of capital projects. A report on the Spot-Checks of Capital Projects funded by the Department and undertaken by local authorities which were either in progress or completed during 2012 was Issued to the Department in November 2013.

24

Motor Taxation Audits 29 local authorities operate motor taxation offices. Authorised officers, in these motor tax offices, are responsible for the issue of vehicle, driving and other licences and certificates to the public, on behalf of the Department of Transport, Tourism and Sport and the Road Safety Authority. Monies collected are transferred to the Local Government Fund administered by the Department and allocations are made from this fund to finance local authority activities. The audit of these local motor taxation offices includes an examination of a sample of licensing transactions to ensure that they have been properly accounted for in the financial and stock control records of the licensing authorities. The amount collected by these offices in 2012 was €521m. The motor tax on-line service which collected an additional €533m is located in the Driver and Vehicle Computer Services Division of the Department of Transport and is not subject to audit by the LGAS. Local Government Management Agency - Household Charge The Local Government Management Agency was charged with collecting the household charge, which was an annual charge of €100 per property, introduced by the Local Government (Household Charge) Act, 2011, payable by owners of residential property. It was a matter for owners of residential properties to pay the household charge on or after 1 January 2012. Under the household charge legislation – owners of residential properties were required to make a declaration of liability and to pay the household charge by 31 March 2012. No invoices for the household charge were issued – the charge was on a self-declaration basis. The amount collected in 2012 was €114m. From 1 July 2013 any outstanding household charge liability was increased to €200 and added to the local property tax (LPT) due on the property. In effect the household charge arrears were converted into LPT for collection through the LPT system by the Revenue Commissioners.

25

Change in Local Government: Implications for the Local Government Audit Service A number of fundamental changes currently being introduced will have a significant impact on the structures and the business of local authorities and will also present significant challenges to the LGAS. These initiatives are driven by the need for improved efficiency and effectiveness in the sector and are at varying stages of implementation. These developments include the following:

• Merger / amalgamation of local authorities

• Irish Water

• Increased engagement with Audit Committees

• Establishment of National Oversight and Audit Commission

• Local Government Efficiency Implementation

Mergers and Unifications of Local Authorities The Local Government Reform Act, 2014 contains provisions for the dissolution of town councils and the merger of other authorities. The most immediate impact on the LGAS will be transfer of all financial data and transactions from the town councils to the county councils during 2014 and the preparation of a combined AFS for 2014. The maintenance of audit trail and the accessibility to accounts history and transactions will be of vital importance to audit and developments in this regard will be monitored in the course of the 2013 audits. Irish Water The transfer of responsibilities for water services from local authorities to Irish Water will have an immediate impact on the work of the LGAS. Balances on the accounts of local authorities at 31 December 2013, including fixed assets, debtors, loans payable, reserve and capital projects will be reviewed by the local government auditors in 2014. This review is to ensure that the amounts identified by the local authorities for transfer are in agreement with the amounts stated in the audited financial statements for 2013. Engagement with Audit Committee The 2014 Act also provides for increased engagement by the auditor with local authority audit committees. Audit Committees are required to review any audited financial statement, auditor’s report or auditor’s special report in relation to the local authority and assess any actions taken within that authority by its chief executive in response to such a statement or report and to report to that authority on its findings. The local government auditor will attend a meeting of the audit committee to present his or her report and clarify such issues as may be necessary in relation to the content of the report. Under the new legislation Audit Committees will be required to report to the elected members at their next practicable meeting following the Audit Committee’s meeting with the auditor. The Act also provides for the Minister to make regulations relating to the membership of Audit Committees and the performance of their functions. National Oversight and Audit Commission (NOAC) The establishment of NOAC is provided for in the 2014 Act and its functions are set out in section 126C and include the following:

• to scrutinise the performance of local authorities

26

• to support the development and enhancement of best practice

• to oversee how national policy in relation to local government is implemented

• to monitor and evaluate the implementation of public service reform

• to prepare reports to the Minister

This committee, in the course of carrying out its remit, can take account of the reports prepared by the LGAS. The LGAS will have engagement with this committee in the future which may impact on the national value for money work currently undertaken. Local Government Efficiency Implementation Following on from the efficiency review an implementation group was established and this has resulted in the City and County Managers’ Association (CCMA), through its Programme Management Office (PMO), identifying means of achieving efficiencies identified. This involves a wide range of initiatives across the local government sector. The developments that will have the most immediate impact on the work of LGAS include the planned sharing of services across local authorities e.g. payroll, procurement and accounts payable. This will require review of our audit approach to these areas as the proposed changes are implemented. Revision of the Accounting Code of Practice The Accounting Code of Practice sets out the principles and practices of accounting required to prepare an Annual Financial Statement and has been amended a number of times since it was first published. The General Accounts Working Group (GAWG) is responsible for developing new accounting policies, providing guidance on implementation, reviewing existing policies requiring amendment and addressing all issues relating to accounting policies. The LGAS is represented on this group and has been closely involved in the consultation process to identify matters to be addressed in the current revision of the code. The objective of the work currently being undertaken is to ensure, in so far as is practicable, that the code reflects generally accepted accounting principles and in particular “The Financial Reporting Standard applicable in the UK and Ireland” (FRS 102). Implementation of revisions to the code will be on a phased basis and the LGAS is fully committed to assisting in this process at national and local level.

27

External relationships The LGAS has, over many years, developed relationships with a number of external bodies. These include the following: Comptroller and Auditor General (C&AG): Copies of all LGAS reports are made available to the C&AG as part of his audit of the Department. There has been continued co-operation between the two offices in a number of areas including professional training and development, value for money, financial audit methodology and approach, standards development and quality assurance. Northern Ireland Audit Office, Audit Scotland and Wales Audit Office: Staff from the LGAS have met their counterparts in the Northern Ireland Audit Office, Audit Scotland and Wales Audit Office on a number of occasions over the years and in recent times discussed audit approach and VFM matters. Representatives of these bodies have also attended the LGAS annual conference. The European Organisation of Regional Audit Institutions (EURORAI): The LGAS has been a member of this organisation for many years, which provides useful contact with other European Regional Audit Bodies. Working Groups and Committees: The LGAS continues to be represented on a number of the Department’s working groups and committees, which included the following:

• General Accounts Working Group;

• Finance and Business Committee; and

• Rent Supplement Review – Financial Control Working Group.

28

Appendix 1 General Revenue Balances

2008 2009 2010 2011 2012

County Councils € € € € €

Carlow (98,888) (122,100) (112,109) (22,033) (56,634)

Cavan 1,660,062 1,661,261 1,661,920 1,662,375 1,662,575

Clare (1,774,045) (1,856,538) (1,743,845) (1,791,517) (1,719,342)

Cork 17,150,638 15,156,723 17,140,327 18,337,539 14,001,103

Donegal (12,998,286) (12,893,134) (12,704,598) (12,303,342) (17,103,244)

Dun Laoghaire Rathdown 8,981,377 8,993,933 9,109,481 9,500,465 9,601,932

Fingal 15,366,860 17,448,786 17,650,808 17,673,622 17,476,010

Galway (1,149,537) (1,272,551) (1,383,882) (1,402,328) (1,896,307)

Kerry 1,756,037 1,889,034 2,526,148 2,813,213 2,952,728

Kildare (5,653,544) (4,885,744) (3,913,254) (2,998,447) (2,747,146)

Kilkenny 59,433 (35,333) (52,636) (602,062) (154,325)

Laois (529,372) (521,605) (519,501) (499,963) (494,536)

Leitrim (60,731) (88,264) (123,121) (117,645) (1,479,205)

Limerick 70,449 81,220 276,281 (384,924) (549,283)

Longford 505,178 (842,399) (595,892) (432,357) (301,044)

Louth 1,720,511 1,670,221 1,685,363 1,442,127 717,540

Mayo (3,513,410) (3,049,924) (2,747,647) (2,507,781) (3,133,354)

Meath (9,613,934) (9,304,735) (8,329,809) (6,856,234) (6,753,881)

Monaghan (1,503,720) (1,064,263) (672,400) (79,086) (473,567)

North Tipperary (245,463) 25,026 109,937 155,913 161,952

Offaly (332,082) (484,669) (1,899,146) (4,071,703) (5,372,433)

Roscommon 31,082 (322,505) 72,909 99,816 110,589

Sligo (4,285,151) (7,518,111) (9,981,616) (12,954,069) (15,409,269)

South Dublin 12,418,975 12,070,177 12,083,109 12,093,402 12,095,146

South Tipperary 3,092,261 2,940,207 2,963,171 2,966,708 2,969,020

Waterford (6,916,777) (6,933,807) (6,916,907) (6,907,082) (6,901,042)

Westmeath (2,911,003) (2,796,050) (2,046,872) (1,870,066) (1,816,710)

Wexford (6,791,385) (6,381,643) (6,365,810) (6,329,683) (6,465,889)

Wicklow (1,733,353) (1,997,736) (2,092,176) (2,039,008) (1,995,146)

City Councils

Cork City 251,417 317,023 400,584 458,945 549,743

Dublin City 4,326,015 9,765,759 15,384,124 20,113,211 16,186,509

Galway City 32,682 (525,870) (67,743) 44,603 61,283

Limerick City 178,404 260,192 317,825 497,471 526,299

Waterford City (517,189) (447,887) (354,932) (305,390) (1,182,124)

6,973,510 8,934,695 18,758,091 23,384,690 3,067,948

29

Local Authority Arrears at 01/01/2012

Accrued Write Off & Waivers

Total for Collection

Collected Arrears at 31/12/2012

2012 %

2011 %

County Councils € € € € € €

Carlow 1,786,167 5,982,868 134,181 7,634,854 5,349,312 2,285,542 70% 74%

Cavan 2,984,249 11,170,539 1,627,509 12,527,279 8,915,787 3,611,492 71% 75%

Clare 9,035,914 36,323,230 476,011 44,883,133 35,068,727 9,814,406 78% 79%

Cork 22,150,038 113,655,375 9,840,621 125,964,792 99,581,705 26,383,087 79% 82%

Donegal 11,423,119 21,331,713 6,097,753 26,657,079 16,510,243 10,146,836 62% 57%

Dun Laoghaire Rathdown 24,037,110 86,392,172 8,945,801 101,483,481 76,485,950 24,997,531 75% 76%

Fingal 19,559,007 121,495,756 7,351,122 133,703,641 111,170,882 22,532,759 83% 85%

Galway 6,916,668 23,840,912 4,115,859 26,641,721 18,304,926 8,336,795 69% 72%

Kerry 3,925,561 21,906,913 3,351,757 22,480,717 18,545,649 3,935,068 82% 82%

Kildare 10,277,940 46,928,784 10,489,942 46,716,782 34,090,122 12,626,660 73% 77%

Kilkenny 1,431,453 12,097,364 1,963,479 11,565,338 9,828,562 1,736,776 85% 88%

Laois 2,631,900 12,048,656 2,446,495 12,234,061 9,049,045 3,185,016 74% 77%

Leitrim 1,359,714 4,838,734 649,020 5,549,428 3,551,524 1,997,904 64% 72%

Limerick 3,519,828 28,807,773 4,173,574 28,154,027 22,979,998 5,174,029 82% 87%

Longford 874,867 4,718,199 882,658 4,710,408 3,857,521 852,887 82% 81%

Louth 4,024,409 8,130,503 972,640 11,182,272 6,140,069 5,042,203 55% 59%

Mayo 2,263,495 14,778,314 3,416,224 13,625,585 10,901,201 2,724,384 80% 84%

Meath 4,598,986 25,242,305 3,027,261 26,814,030 21,203,158 5,610,872 79% 82%

Monaghan 1,885,836 6,488,790 1,120,614 7,254,012 4,963,050 2,290,962 68% 73%

North Tipperary 1,407,278 7,071,819 562,351 7,916,746 6,100,916 1,815,830 77% 81%

Offaly 578,719 8,979,440 1,837,326 7,720,833 7,136,574 584,259 92% 92%

Roscommon 2,298,871 11,223,586 2,407,413 11,115,044 8,716,625 2,398,419 78% 79%

Sligo 1,777,124 5,209,631 724,061 6,262,694 3,855,428 2,407,266 62% 68%

South Dublin 38,615,603 122,641,598 6,001,550 155,255,651 115,315,419 39,940,232 74% 74%

South Tipperary 1,354,757 8,582,258 756,724 9,180,291 7,787,094 1,393,197 85% 84%

Waterford 2,888,518 7,551,177 1,595,087 8,844,608 5,840,764 3,003,844 66% 67%

Westmeath 1,963,926 8,584,496 393,787 10,154,635 7,988,816 2,165,819 79% 80%

Wexford 6,854,643 18,672,534 1,735,247 23,791,930 16,117,998 7,673,932 68% 69%

Wicklow 4,915,276 17,579,633 3,314,451 19,180,458 13,700,820 5,479,638 71% 74%

Appendix 2 Rates Collection

30


Accrued Write Off Total for Collection


2012% 2011%

City Councils € € € € € €

Cork City 15,094,514 65,475,997 4,817,014 75,753,497 57,194,781 18,558,716 76% 79%

Dublin City 73,910,422 341,260,508 36,849,042 378,321,888 302,023,257 76,298,631 80% 80%

Galway City 16,435,314 34,830,055 5,707,531 45,557,838 28,436,509 17,121,329 62% 62%

Limerick City 16,949,206 30,468,252 4,511,846 42,905,612 23,763,117 19,142,495 55% 59%

Waterford City 3,765,417 18,696,956 809,418 21,652,955 16,984,756 4,668,199 78% 81%

Total City and County Councils 323,495,849 1,313,006,840 143,105,369 1,493,397,320 1,137,460,305 355,937,015 76% 78%

Appendix 2 Rates Collection

31

` Local Authority





2012 %

2011 %


Carlow 319,399 3,314,438 41,025 3,592,812 3,302,155 290,657 92% 91%

Cavan 620,202 3,182,973 71,965 3,731,210 2,975,610 755,600 80% 82%

Clare 816,566 4,290,380 357 5,106,589 4,192,333 914,256 82% 83%

Cork 829,099 11,118,709 64,752 11,883,056 10,941,862 941,194 92% 93%

Donegal 1,085,157 8,598,423 43,377 9,640,203 8,525,073 1,115,130 88% 89%

Dun Laoghaire Rathdown 3,150,292 12,386,021 35,966 15,500,347 12,179,152 3,321,195 79% 80%

Fingal 2,055,860 14,299,399 23,096 16,332,163 14,484,395 1,847,768 89% 87%

Galway 597,475 5,900,574 4,240 6,493,809 5,780,778 713,031 89% 91%

Kerry 136,791 6,432,040 17,880 6,550,951 6,406,634 144,317 98% 98%

Kildare 1,596,948 6,933,437 212,332 8,318,053 6,878,844 1,439,209 83% 80%

Kilkenny 734,611 4,898,892 41,632 5,591,871 4,900,921 690,950 88% 86%

Laois 281,823 4,700,455 15,165 4,967,113 4,693,001 274,112 94% 94%

Leitrim 145,522 2,022,887 3,518 2,164,891 1,965,560 199,331 91% 93%

Limerick 677,260 6,157,007 52,501 6,781,766 5,961,838 819,928 88% 90%

Longford 605,786 4,205,326 5,955 4,805,157 4,201,820 603,337 87% 88%

Louth 547,641 2,752,530 8,096 3,292,075 2,652,630 639,445 81% 83%

Mayo 976,121 4,377,123 47,491 5,305,753 4,226,979 1,078,774 80% 81%

Meath 1,119,610 7,019,756 103,664 8,035,702 7,010,087 1,025,615 87% 86%

Monaghan 127,591 3,302,586 671 3,429,506 3,283,712 145,794 96% 96%

North Tipperary 76,345 2,851,455 3,111 2,924,689 2,881,404 43,285 99% 97%

Offaly 273,534 3,158,387 9,588 3,422,333 3,080,026 342,307 90% 92%

Roscommon 372,587 3,879,476 30,208 4,221,855 3,774,308 447,547 89% 91%

Sligo 440,197 2,903,459 8,697 3,334,959 2,731,139 603,820 82% 86%

South Dublin 7,011,799 21,395,254 89,354 28,317,699 21,011,125 7,306,574 74% 75%

South Tipperary 446,664 3,185,066 13,748 3,617,982 3,180,044 437,938 88% 87%

Waterford 548,873 2,951,705 6,694 3,493,884 2,873,685 620,199 82% 83%

Westmeath 405,700 3,895,156 50,028 4,250,828 3,888,730 362,098 91% 91%

Wexford 666,182 8,371,753 13,445 9,024,490 8,222,184 802,306 91% 92%

Wicklow 565,603 6,542,710 33,173 7,075,140 6,398,815 676,325 90% 91%

Appendix 3 Housing Rents Collection

32





2012 %

2011 %


Cork City 2,297,061 19,122,093 42,678 21,376,476 18,620,258 2,756,218 87% 89%

Dublin City 19,503,595 72,700,739 715,534 91,488,800 70,883,896 20,604,904 77% 79%

Galway City 2,278,822 7,458,308 59,274 9,677,856 7,345,665 2,332,191 76% 76%

Limerick City 558,591 7,875,713 56,569 8,377,735 7,705,798 671,937 92% 93%

Waterford City 1,382,517 7,128,253 39,556 8,471,214 6,952,319 1,518,895 82% 82%

Total City and County Councils 53,251,824 289,312,483 1,965,340 340,598,967 284,112,780 56,486,187 83% 84%

Appendix 3 Housing Rents Collection

33





2012 %

2011 %


Carlow 521,329 820,508 62,233 1,279,604 768,384 511,220 *60% 54%

Cavan 1,791,690 1,969,968 456,131 3,305,527 1,561,117 1,744,410 47% 50%

Clare 10,508,851 6,099,003 385,278 16,222,576 8,036,365 8,186,211 *50% 41%

Cork 13,942,939 17,539,842 753,275 30,729,506 18,157,302 12,572,204 59% 60%

Donegal 11,755,606 7,742,998 1,836,854 17,661,750 6,372,486 11,289,264 36% 32%

Dun Laoghaire Rathdown 8,117,993 5,501,007 1,113,132 12,505,868 6,215,476 6,290,392 50% 44%

Fingal 6,080,449 14,044,748 856,561 19,268,636 12,204,984 7,063,652 63% 68%

Galway 4,166,580 3,637,516 0 7,804,096 3,721,161 4,082,935 48% 53%

Kerry 2,186,719 6,726,195 96,111 8,816,803 6,833,335 1,983,468 *78% 77%

Kildare 6,369,975 8,355,265 183,696 14,541,544 7,345,075 7,196,469 51% 58%

Kilkenny 1,432,227 3,533,360 670,429 4,295,158 3,513,424 781,734 *82% 75%

Laois 1,545,032 1,858,127 197,702 3,205,457 1,830,253 1,375,204 57% 55%

Leitrim 1,078,679 960,115 153,898 1,884,896 514,447 1,370,449 27% 37%

Limerick 2,015,989 7,339,747 744,926 8,610,810 6,696,396 1,914,414 *78% 77%

Longford 1,217,484 1,670,417 138,993 2,748,908 1,685,954 1,062,954 61% 59%

Louth 6,958,471 5,206,234 369,620 11,795,085 6,354,892 5,440,193 54% 40%

Mayo 5,240,523 4,844,142 34,788 10,049,877 5,009,898 5,039,979 50% 55%

Meath 4,300,220 3,953,008 1,015,154 7,238,074 3,655,204 3,582,870 50% 47%

Monaghan 940,279 1,557,101 36,111 2,461,269 1,366,456 1,094,813 56% 66%

North Tipperary 1,929,501 2,441,994 103,275 4,268,220 2,466,161 1,802,059 *58% 59%

Offaly 2,112,195 2,060,219 557,233 3,615,181 2,414,347 1,200,834 67% 58%

Roscommon 2,124,367 2,767,725 52,967 4,839,125 2,079,167 2,759,958 *43% 51%

Sligo 3,337,601 2,680,157 0 6,017,758 2,998,897 3,018,861 *50% 47%

South Dublin 7,559,241 8,013,923 480,415 15,092,749 6,916,261 8,176,488 46% 53%

South Tipperary 595,989 2,554,501 300,778 2,849,712 2,355,032 494,680 *83% 82%

Waterford 1,531,602 1,379,893 84,092 2,827,403 1,460,576 1,366,827 *52% 50%

Westmeath 3,119,646 1,827,651 497,021 4,450,276 2,140,635 2,309,641 48% 38%

Wexford 8,099,988 4,455,348 188,895 12,366,441 4,009,778 8,356,663 32% 39%

Wicklow 2,140,819 1,650,315 179,509 3,611,625 1,399,785 2,211,840 39% 42%

Appendix 4 Commercial Water Collection

34


Accrued Write Off& Waivers



2012 %

2011 %


Cork City 1,668,496 6,249,555 414,923 7,503,128 6,130,324 1,372,804 *82% 79%

Dublin City 17,243,779 25,642,054 3,092,515 39,793,318 23,822,545 15,970,773 60% 57%

Galway City 2,762,103 3,980,049 215,858 6,526,294 3,827,689 2,698,605 59% 58%

Limerick City 2,992,936 6,756,909 790,604 8,959,241 6,135,935 2,823,306 68% 67%

Waterford City 1,945,317 3,716,894 228,195 5,434,016 4,005,544 1,428,472 74% 66%

Total City and County Councils 149,334,615 179,536,488 16,291,172 312,579,931 174,005,285 138,574,646 56% 55%

*Note: These debtors do not include an accrual for charges not invoiced by 31 December 2012

Appendix 4 Commercial Water Collection

35





2012 %

2011 %


Carlow 170,809 699,730 0 870,539 626,221 244,318 72% 80%

Cavan 138,401 552,048 0 690,449 513,633 176,816 74% 82%

Clare 543,432 1,201,475 16,244 1,728,663 1,041,948 686,715 60% 67%

Cork 2,893,725 6,553,001 4,450 9,442,276 5,790,655 3,651,621 61% 70%

Donegal 789,617 2,411,939 34 3,201,522 2,148,381 1,053,141 67% 75%

Dun Laoghaire Rathdown 496,202 1,452,802 0 1,949,004 1,253,265 695,739 64% 73%

Fingal 868,544 12,207,580 0 13,076,124 11,832,827 1,243,297 90% 94%

Galway 545,047 2,472,704 0 3,017,751 2,347,768 669,983 78% 83%

Kerry 157,189 1,342,591 10,991 1,488,789 1,309,734 179,055 88% 91%

Kildare 2,795,390 3,630,594 51,480 6,374,504 3,134,362 3,240,142 49% 57%

Kilkenny 827,935 2,015,295 2,096 2,841,134 1,904,666 936,468 67% 73%

Laois 933,761 3,804,022 187,225 4,550,558 3,464,325 1,086,233 76% 81%

Leitrim 78,980 201,661 770 279,871 183,299 96,572 65% 71%

Limerick 335,243 1,149,607 7,606 1,477,244 1,108,787 368,457 75% 78%

Longford 305,558 1,057,305 0 1,362,863 917,423 445,440 67% 77%

Louth 183,328 237,739 5 421,062 226,930 194,132 54% 59%

Mayo 1,522,522 3,046,625 981 4,568,166 2,776,655 1,791,511 61% 66%

Meath 251,539 1,319,233 34,554 1,536,218 1,190,402 345,816 77% 84%

Monaghan 158,610 911,398 0 1,070,008 902,342 167,666 84% 86%

North Tipperary 200,674 530,365 10,034 721,005 559,027 161,978 78% 73%

Offaly 386,101 643,025 0 1,029,126 609,558 419,568 59% 63%

Roscommon 259,391 311,351 22,819 547,923 272,133 275,790 50% 57%

Sligo 587,589 849,613 -1,226 1,438,428 734,504 703,924 51% 57%

South Dublin -5,287 5,431,078 0 5,425,791 5,341,876 83,915 98% 100%

South Tipperary 314,540 951,861 1,647 1,264,754 889,871 374,883 70% 75%

Waterford 345,729 1,112,565 0 1,458,294 939,547 518,747 64% 76%

Westmeath 2,210,744 1,736,600 5,288 3,942,056 1,855,631 2,086,425 47% 48%

Wexford 481,240 4,045,093 0 4,526,333 3,787,421 738,912 84% 89%

Wicklow 479,064 1,385,814 1,695 1,863,183 1,387,622 475,561 74% 75%

Appendix 5 Housing Loans Collection

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Accrued Write Off& Waivers



2012 %

2011 %


Cork City 675,256 3,022,885 0 3,698,141 2,800,417 897,724 76% 82%

Dublin City 8,735,965 23,434,050 0 32,170,015 21,905,845 10,264,170 68% 71%

Galway City 575,153 1,524,613 0 2,099,766 1,511,130 588,636 72% 72%

Limerick City 208,095 765,482 44,238 929,339 736,096 193,243 79% 80%

Waterford City 1,078,667 2,007,722 0 3,086,389 1,635,859 1,450,530 53% 63%

Total City and County Councils 30,528,753 94,019,466 400,931 124,147,288 87,640,160 36,507,128 71% 75%

Appendix 5 Housing Loans Collection

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2010 2011 2012

Local Authority € € €

County Councils

Carlow 13,600,406 20,409,208 20,473,597

Cavan 9,622,705 12,319,463 12,841,514

Clare 96,148,526 90,439,708 102,955,796

Cork 354,668,309 327,794,986 344,583,219

Donegal 51,891,902 76,879,443 95,833,070

Dun Laoghaire Rathdown 62,871,300 70,138,554 65,505,208

Fingal 190,005,215 214,655,631 209,872,613

Galway 73,604,637 80,855,958 75,926,829

Kerry 63,697,526 63,667,186 63,564,017

Kildare 73,419,285 60,461,482 58,077,213

Kilkenny 15,334,583 13,948,685 12,518,849

Laois 24,813,487 21,894,209 22,075,949

Leitrim 9,947,655 9,304,686 8,617,182

Limerick 48,200,869 41,084,806 40,856,260

Longford 16,462,374 15,625,955 14,785,306

Louth 16,599,687 16,552,076 16,504,049

Mayo 65,691,781 61,710,767 82,705,379

Meath 61,236,204 57,550,760 56,360,210

Monaghan 11,586,126 10,256,688 9,273,496

North Tipperary 19,780,173 15,929,253 15,344,080

Offaly 38,026,751 36,549,308 34,698,514

Roscommon 10,553,275 11,539,208 23,955,209

Sligo 55,262,549 48,529,150 57,105,985

South Dublin 84,598,412 69,998,309 70,087,123

South Tipperary 22,557,583 22,409,035 23,265,841

Waterford 28,679,149 29,617,777 33,760,761

Westmeath 76,975,492 75,522,540 74,843,252

Wexford 100,139,916 95,457,013 92,237,372

Wicklow 57,938,602 68,725,937 83,257,908

City Councils

Cork City 119,951,084 115,493,876 113,362,322

Dublin City 315,565,758 299,598,757 307,078,825

Galway City 78,562,245 70,318,369 71,733,367

Limerick City 12,545,653 10,918,870 9,665,163

Waterford City 43,102,424 41,187,309 40,088,604

Total City and County Councils 2,323,641,644 2,277,344,962 2,363,814,082

Appendix 6 Non-Mortgage Loans

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2012 Mortgage Loans Payable including

Rented Equity €

Mortgage Loans Receivable including

Rented Equity €

Local Authority

County Councils

Carlow 8,833,254 9,122,457

Cavan 6,106,117 7,141,207

Clare 14,432,007 15,185,419

Cork 97,582,387 100,741,195

Donegal 34,965,820 35,050,348

Dun Laoghaire Rathdown 29,320,731 16,219,216

Fingal 168,182,598 168,397,020

Galway 28,594,560 29,063,371

Kerry 15,306,121 16,513,847

Kildare 47,926,220 55,868,348

Kilkenny 33,708,307 32,708,880

Laois 70,528,865 67,905,011

Leitrim 1,471,088 2,090,099

Limerick 12,076,260 13,210,138

Longford 11,423,433 14,380,792

Louth 3,530,862 2,824,406

Mayo 35,674,923 36,529,548

Meath 19,108,961 20,361,191

Monaghan 15,029,987 13,825,356

North Tipperary 8,308,117 7,766,824

Offaly 7,981,731 7,288,994

Roscommon 2,910,758 2,799,272

Sligo 13,282,355 13,159,138

South Dublin 67,807,259 66,977,058

South Tipperary 11,976,660 11,857,614

Waterford 15,048,922 15,033,650

Westmeath 32,349,330 32,538,237

Wexford 50,750,643 53,051,515

Wicklow 28,270,897 19,972,363

City Councils

Cork City 34,148,538 34,514,943

Dublin City 341,483,450 350,485,538

Galway City 21,931,393 18,981,705

Limerick City 7,723,978 8,850,653

Waterford City 36,267,544 36,046,708

Total City and County Councils 1,334,044,076 1,336,462,061

Appendix 7 Mortgage Loans

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Appendix 8 - Main Issues from Audit Reports (Full Reports published on DECLG website)

Authority Subject Main Issues from Audit Reports Manager’s Responses

Carlow County Council

Loans Payable At the end of 2012, the Council owed €48m in the form of medium to long term loans. Details of these loans are disclosed in Note 8 on page 19 of the AFS. Land loans continue to accrue ‘rolled up’ interest. It was anticipated that these loans would have been redeemed within a seven year period; however, the change in government policy regarding house construction has made this unlikely. €2.8m of these loans are now maturing and the Council will now incur significant loan repayments. There is a further €3.7m of land loans with ‘rolled up’ interest maturing in the next three years. The Council needs to take the appropriate steps to redeem these loans where possible and minimise future loan repayments.

Circular H9/2001 sets out the funding arrangements, by way of loan from the HFA, in respect of the purchase of land for social housing purpose by local authorities. In 2001, the national focus was on the delivery of social housing units via capital construction. The loans advanced were not repayable for the first seven years with interest being rolled up for that period and recouped as part of the scheme costs once they had commenced. It was clear that capital construction projects for social housing schemes would no longer be funded on the lands that had been purchased. In order to address the issue of maturing loans on lands nationally, the Department of Environment, Community and Local Government (the Department) introduced a land aggregation scheme in 2010 (Circular 18/2010 - September 2010). This was subsequently replaced by a revised scheme in 2012 (Circular 24/12 - June 2012). Under these schemes the Department recouped the full outstanding capital balance (including the rolled up interest), or, recouped loan charges to the local authority who in turn transferred the lands to the Housing Sustainable Communities Ltd. Applications can only be made on maturing loans and an initial application was made in 2010 for three parcels of land amounting to €2.07m. This amount has been approved by the Department. A further application for €1.4m was made in respect of loans maturing in 2012 under the second scheme. A further circular (Circular 35/2013) has informed councils of the discontinuance of the land aggregation scheme and it appears that the Council will have to carry the cost of land loans maturing in the future. This is unexpected and not in accordance with the terms at the time of

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purchase. This will have a major impact on the finances of the Council into the future.

Revenue Collection Performance

Rates arrears were €2.285m in 2012, which shows a marked increase year on year. Arrears have increased by 28% reflecting the challenging economic climate. Housing loans arrears were €244,318 in 2012 (€170,809, 2011) showing an increase of 43% in the arrears this year when compared with 2011. I note that the MARP (Mortgage Arrears Resolution Process) was introduced in October 2012. While the yield for commercial water shows an increase of 6%, it does not include the October to December 2012 billing. The last quarter was billed in January 2013 for €161,508 and is not included in the arrears and the AFS. The collection of money outstanding to the Council needs to be strictly monitored.

Revenue collection in all areas is challenging, especially commercial rates, water charges and housing loans. The increase in arrears reflects the changed economic circumstances of our customers. The guidelines to assist in dealing with mortgage arrears, the “Mortgage Arrears Resolution Process” (MARP) introduced nationally on the 1 October 2012 are being implemented. The Council will enter arrangements with its customers to discharge accounts on an instalment basis, but where such arrangements are broken, or where customers will not actively engage with the Council to discharge their liabilities, the Council initiates appropriate legal action to recover the amounts due. Responsibility for the collection of commercial water charges is to be transferred to Irish Water from January 2014.

Carlow Arts Centre

Carlow County Council and Carlow Town Council own this company. The audited accounts of this company for the year ended 31 December 2012 were made available in the course of my audit. Carlow local authorities had combined loans of approximately €13.8m in this company in 2011. In 2012 €3m of these loans were converted to €3m ordinary shares at €1 per share in the company, leaving a balance of €10.8m in loans, which has been secured as a charge against the company’s property.

Carlow Arts Centre plays a key role and is a focal point in Carlow’s Tourism, Arts and Cultural development. It is acknowledged as being a major attraction at both regional and national level. Public arts centres by their nature are not self-financing and require an operating subvention. In 2013 Carlow local authorities made provision in their annual budgets for a subvention of €585,000. By comparison the net cost of the library service in 2013 is € 1.387 million. The operating losses incurred by Carlow Arts Centre are predominately due to depreciation charges, which are a non-cash expense, and accordingly will not present a cash deficit. The annual completion date for the Carlow Arts Centre Ltd account’s is 30

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Carlow Arts Centre made an operating loss of €530,171 in 2012 and accumulated losses amounting to €1,209,678 as at 31 December 2012. The local authorities provided revenue support in the sum of €568,137 in 2012 and this support is being increased by €90,000 in 2013. The continued operation of the company is highly dependent on on-going support from the local authorities. It must be noted that the Net Assets are stated at €1.79m in Carlow Arts Centre’s audited accounts. The audited accounts were not available until September 2013. Carlow County Council is not required to consolidate its accounts and as a result, the subsidiary’s financial losses are not reflected in the Council's accounts except by way of disclosure in Appendix 8 to the AFS.

September and accordingly the accounts are not available on the completion date for the Council’s Annual Financial Statement. Appendix 8 in the Annual Financial Statement reflects the latest available accounts filed for Carlow Arts Centre Ltd. The operations of the Carlow Arts Centre are closely monitored by the board of directors, which includes a number of external directors who bring a wide range of expertise to the Centre.

Development Contributions

Arising from previous audits, Carlow County Council undertook a detailed review and inspection of large housing developments relating to its long term development contributions payable. Following from this review, the Council’s long term development contributions, which was previously disclosed in the accounts in 2011 as €11.6m has been reduced by €9.7m to €1.9m. Development contributions continue to be monitored very closely.

In line with the prudence concept the assessed value of debtors which were attributable to the areas of developments where no construction had taken place were treated in the accounts as deferred income and therefore the reduction of the € 9.7m had no material effect. The Council is pursuing outstanding development contributions including active engagement with developers, financial institutions, liquidators and receivers.

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Voluntary Housing Projects

There are currently four voluntary housing projects dating back to 1999 where final accounts remain outstanding. It is noted that several requests have been made in accordance with departmental guidelines to obtain tender documents and final accounts from the voluntary associations. This raises serious questions as to the voluntary associations’ procedures in relation to procurement, administration and management of these schemes. The Local Government Value for Money unit also identified that there was a lack of local authority oversight /involvement in the implementation stage of projects and a lack of compliance with procurement. It is incumbent on the local authority that voluntary housing projects be closely monitored to ensure that they comply with departmental guidelines.

There are four projects managed by the voluntary sector where final accounts are outstanding. There are 27 schemes throughout the County in recent years. The Housing Section will endeavour to ensure that the voluntary organisations finalise all of these accounts in 2014. The Council has due regard to both the Department’s guidelines for voluntary schemes as set out in Circular VCH 02/2008, and to the Department of Finance guidelines for appraisal and management capital projects (February 2005).

Cavan County Council

Unfunded Capital Balances

At the end of 2012 there were debit balances totalling €13.5m in the capital account. Funding has yet to be identified for €5.0m of this.

The overall position is satisfactory. The main element of the unfunded balances relates to land and buildings and will be funded from the disposal of these assets when market/economic conditions improve in the foreseeable future.


The declining collection yields continue to be a serious issue for the Council. There was a 23% increase in the write off of rates in 2012 of €1.6m (€1.3m in 2011), while there was a 31%

The current economic environment is placing serious financial challenges across the Council’s customer base. The commercial sector is facing significant pressure due to a downturn in economic activity. Similarly, the domestic sector is under pressure to meet current day to day expenses. The Council is working earnestly to manage this situation and works closely

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increase in the write off of commercial water debtors of €379k (€289k in 2011). Arrears continued to increase on quite a number of rent accounts as the amount of rent paid does not cover the actual weekly rent charge. There were significant arrears balances on a number of housing loan accounts at the end of 2012. Of the total of 156 loan accounts at the end of 2012, 84 of these (54%) were carrying arrears greater than 3 months old. Arrears for commercial water amounted to €1.7m at the end of 2012. €671k (38%) of this amount relates to arrears outstanding from prior years. It is paramount that adequate resources are dedicated to the pursuing for payment of all arrears due. More decisive action needs to be taken in respect of accounts where the arrears continue to increase. Standard procedures with regard to the follow up of arrears should be implemented in the Council. Consideration might also be given to the setting up of a credit control unit for the purpose of pursuing all outstanding debt.

with all customers concerned.

Completion of Draft AFS

The draft annual financial statement was not presented until 8 May 2013. This resulted in an

Systems, procedures and training will be put in place to ensure the timely preparation of the draft AFS 2013.

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overrun of time taken to complete this audit. The late production of the AFS can impact on the conduct of the audit and on the service that the external audit provides to the local authority. In accordance with the Department of the Environment, Community and Local Government’s (the Department) Accounting Code of Practice, the Council’s draft annual financial statement should be prepared by the 1st of April of the following year.

Landfill Fines

Between February 2007 and September 2009 the Environmental Protection Agency (EPA) carried out a number of site inspections at the landfill site at Corranure. As a result the EPA instituted 30 counts of failure to comply with the conditions of its waste licence. At Cavan Circuit Court in November 2012 Cavan County Council was fined €260k and instructed to pay costs of €20k to the EPA as a result of this non-compliance. The fine of €260k has not been paid to date. In addition to these costs, the Council paid in excess of €123k in respect of legal and professional fees associated with this matter.

The prosecution related to a period when Cavan County Council operated the landfill and also a period when a waste management company, through a concession agreement with the County Council, operated the facility. The Waste Management Act 1996 provides for penalties of €12m and/or ten years imprisonment for convictions on indictment. The penalty imposed by the court relates to the time when only Cavan County Council operated the facility. The court imposed a separate penalty on the waste management company. The engagement of legal and professional experts was necessary to defend the case.

Procurement Procedures

Payments totalling €796k were made in 2012 to the consultant engaged on the Cavan Sewerage Scheme. This consultant was appointed by the Council in 2004.

The payments made to the consultant engaged on the Cavan Sewerage Scheme related to the finalisation of the preliminary report, tender documents associated with the engagement of contractors on the scheme

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The tender file containing details of the process taken to procure these consultancy services was not available at audit. Total costs charged by the consultant to the Council at the end of 2012 in relation to this scheme amounted to €2.7m. In 2012 a total of €700k was paid to an electrical contractor engaged by the Council for the provision of services associated with waste management. Recommended public procurement practice was not adhered to with regard to the procurement of this contractor in that it was not advertised through the e-tenders process. In 2012 the Council purchased a number of items of plant and machinery consisting of a tractor and seventeen motor vehicles at a cost of €289k. However, public procurement guidelines were not followed with regard to these acquisitions, as the purchase of these items should have been processed through e-tenders. It was highlighted at the previous audit that there was no general procurement procedures manual in the Council. I note that this manual has recently been completed and I welcome this development. It is important that this manual is made available and utilised by all staff involved in the procurement process.

and coordination of site investigations. The final account on this scheme is currently with the Department of the Environment, Community and Local Government. Payment of this final account to the Council by the Department is imminent. The services provided by the electrical contractor in respect of waste management were of a specialised nature, where certification in the management and control of landfill gas systems was required. The works were required to rectify non-compliance with EPA licences and was of an urgent nature. Due to the time pressures involved, a single local contractor was engaged to complete his work. It was completed satisfactorily and costs were deemed appropriate. Since these works were completed, procurement of an electrical contractor for all such future projects has been arranged through the e-tender process. While it is accepted that public procurement guidelines were not complied with in relation to the acquisition of the items of plant and machinery, quotations were received from four different suppliers for the supply of the motor vehicles. The purchase of these was then split between each of these suppliers. In future, the Council will comply with recommended public procurement practice with regard to such purchases.

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Clare County Council

Loans Payable The Council’s long term borrowings increased during the year by €11.039m to €128m. Previous audit reports referred to adverse balances on a number of completed capital projects that required financing arrangements to be put in place to fund such balances where no other funding sources were available. During 2012 the Council borrowed €24.8m, which included the funding of these deficit balances. There are loans drawn down by Council relating to land acquisition costs on various housing projects on a rolled-up interest basis. The accumulated balances at the end of 2012 on these loans were €6.933m. Should any of these loans not be financed as part of the Land Aggregation Scheme in the future, then any future funding of loan charges will have to be financed through the revenue account.

Capital projects are often funded by a combination of funding sources including; grant funding, development contributions and loan funding. During 2012, when a number of capital projects were completed, the Council’s contribution to the funding of the projects was drawn as loans. The repayment of these loans will be provided for in future budgets. It is expected that the establishment of Irish Water will substantially reduce the Council’s loan obligations related to water infrastructure. The housing department continues to engage with relevant agencies in relation to the Land Aggregation Scheme in order to address the future cost of the funding of the land acquired historically for the provision of future housing.

Grant Drawdowns

The deferred income total of €4.981m includes €1.814m relating to state grant funding drawn down on group water schemes in previous years and which has not been expended by the Council at the year end. I have requested that agreement be reached with the grant aiding authority concerned on the application of this credit balance. The work input of the current administrative staff on this issue is commendable. This matter will be further reviewed at the next audit.

The Water Services Section of the Council continues to engage with the departmental section concerned in relation to this funding source and has recently reached agreement for part of the application of this credit balance. Engagement will continue in order to finalise the remaining portion of the balance concerned.

Affordable Housing

A twenty two housing unit scheme at Glaise na Rinne in Shannon, comprising of sixteen affordable and six

The auditor’s comments in relation to the completion of this final reconciliation are noted. Once all units on this development are sold the

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Scheme step-down units, was completed in September 2012. This project initially started in 2009 but difficulties were encountered during the course of construction where two separate contractors failed to complete the contract because of financial difficulties and a third contractor had to be appointed to complete the project. I am informed that negotiations are currently on-going with the bondsman with regard to the expenditure incurred in excess of the contract value. Total expenditure of €5.094m has been incurred by the Council on this project up to the end of 2012. This is to be funded by a combination of income sources such as Departmental grants, sale proceeds of houses, bonds income, Part V funds and a site subsidy. In addition to these income sources a loan of €2.8m was borrowed for the project. At the end of 2012 a debit balance of €609k remains on this project after loan funding is applied. Should the application of the aforementioned income sources not match the final overall cost of construction, management will have to put in place funding arrangements in order to eliminate any potential shortfall that may arise. This matter will be further reviewed at the next audit.

reconciliation outlined will be completed and available for review at the next audit.

Revenue Collection

Housing Loans The collection yield declined by a further 7% when

The Council is very aware of the difficulties being experienced by ratepayers and customers due to the difficult economic environment, and

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Performance compared to the previous year’s total and is reflected in the increased arrears of €687k at the year end. The Council has 398 active housing loan accounts. There are 229 accounts in arrears, with 195 of these in excess of 3 months. The 30 highest accounts in arrears are recorded at €373k and account for 54% of total arrears. It is noted that 25 of these account holders in arrears are making regular repayments but cannot afford the monthly instalments. This authority is now implementing the Mortgage Arrears Resolution Process (MARP). The outcome of this process will determine what exposure, if any, the Council may have with regard to negative equity. This matter will be further reviewed at the next audit.

engages with customers who are having difficulties with a view to achieving an acceptable resolution of the issues involved. The level of arrears in all income sources continues to be a priority area of focus for this authority. This involves meeting customers to discuss issues, securing payment plan agreements with these customers, monitoring these agreements and exploring alternative options. Legal action may become necessary in certain circumstances.

Unfinished Housing Estates

The changes introduced in planning legislation during 2008 allowed developers of unfinished housing estates, the majority of home-owners on the estates or the management companies set up therein to require local authorities to take such estates in charge, being one hundred and forty two such estates in the county at 6 May 2013. Compliance with the aforementioned legal requirements could result in significant future expenditure being incurred by this Council in bringing these estates up to the required standards. In addition to the foregoing there are insurance bonds to the value of €2.387m issued by the Irish Bank

The Planning section of the Council has completed considerable work in this area and continues to engage with the Department on this matter.

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Resolution Corporation to various local authorities in County Clare. The financial impact on the funding of these bonds cannot be determined at the close of this audit.

Acting Allowances

The issue of acting allowances paid to staff has been raised at previous audits. Payment of these allowances in 2012 amounted to €509k (and €509k in 2011). The Council is still in discussion with the Department on this matter, as the approval to such payments must be in accordance with Circular LGP (P) 13/09 Staff Moratorium. As approval has still not been received management should consider all options available to it including the cessation of such payments until the formal sanction has been received.

A detailed report has been provided to the Auditor in relation to this area and the on-going engagement with the Department that the Human Resources section is involved in. The auditor will be updated further in this regard at the time of the next audit.

Cork City Council

Loans Payable At 31 December 2012, the Council owed €176m (2011 €181m) in medium to long-term loans (note 8 to the AFS refers). The year-end figure included €37m that was owed to the Housing Finance Agency (HFA) in respect of loans taken out in recent years to purchase seven separate parcels of land for housing development. Until recently all of the related nine loans had terms of seven years with interest being rolled up annually and capitalised to the principal amount. The loans have now been converted to annuity with repayments of both principal and interest commencing in 2013. The Council is

Discussions are on-going with the Housing and Sustainable Communities Limited (HSC) in relation to land holdings, acquired for housing purposes that may transfer to the Land Aggregation Scheme. This scheme is under review at present and no transfers have occurred to date. Department of the Environment, Community and Local Government’s (the Department) circular letter 26/2012 converting the associated loans to 25 year annuity loans as they matured and requiring local authorities to bear the cost of any interest/capital payments that arise before the transfer of the lands will place significant burden of approximately €2m per annum on Cork City Council. The City Council has outstanding loans of €37m in respect of affordable housing schemes and 113 unsold properties most of which have been

50


currently required to fund the monthly instalments (estimated at approximately €2m in a full year) from its own resources. In addition, the Council owed the HFA a further €37m on affordable housing loans at the end of 2012. These loans were originally obtained to fund the acquisition of housing units for sale under the affordable housing scheme. There were 113 of these properties unsold at the year-end, of which 85 were transferred under temporary letting schemes at that date. The funding shortfall in respect of the unsold affordable housing units was calculated at over €27m as at June 2013. The current obligations to fund both the land and affordable housing loan repayments will continue to put significant pressure on the Council’s financial position unless additional sources of funding are identified.

temporarily transferred to social leasing, to the Rental Accommodation Scheme or to temporary convenience lettings. Efforts are continuing to resolve the funding shortfall.


There was a favourable balance of €14m on the capital account at 31 December 2012. However, there were significant deficits, totalling €56m, being carried on a number of schemes at that date that were classified as unfunded. The schemes with the largest unfunded deficits remain Docklands Bridge (€5.1m) and Marina Park Development (€4.6m). The main concentration of

Balances on the capital account are reviewed regularly with particular emphasis on funding sources. Expenditure on housing construction (approximately €42m deficit) was incurred on the understanding that it would for the main part be recouped from Central Government. The housing directorate continue to engage with the Department and the matter will be kept under review.

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unfunded balances remains within the housing directorate where there were accumulated deficits of €42m covering a large number of housing schemes. I have been advised that there is little expectation of any additional external funding to finance the majority of these debit balances. As there has been no significant movement on these deficit balances over the past two to three years, management needs to devise a strategy that would reduce and eventually eliminate the shortfalls.


Commercial Rates The collection levels further declined in 2012 with arrears increasing to €18.5m at the year end. A provision for bad debts of €10.7m has been made representing almost 58% of the total book debt as at 31 December 2012. Housing Rents There was a further reduction in collection levels in this category during 2012 with arrears at the end of the year increasing to €2.7m. A provision for bad debts of €1.3m has been made representing almost 50% of the total book debt as at 31 December 2012. Commercial Water The collection levels for 2012 recorded an increase of 3% on the levels achieved in 2011 with arrears reducing to €1.4m as at 31 December 2012. The improved collection levels are attributable to the issuing of invoices on a more timely basis as well as

The collection of income is increasingly difficult in the present economic climate and every effort is made to secure the Council’s income. Initiatives continue to be undertaken to strengthen debt collection measures and processes. A Mortgage Arrears Resolution Process has been implemented to assist borrowers in difficulty with their housing loans.

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more regular reviews of arrears cases. I note that the charges raised in respect of December 2012 have not been included in the AFS as the relevant amounts were included in invoices that did not issue until 2013. In line with accounting protocol all income earned in the year should be recorded in that year’s AFS. Procedures should be put in place to ensure that the AFS for 2013 includes all relevant income earned to the end of the year. Housing Loans Housing loans collections deteriorated by 6% in the year when compared to the returns achieved in 2011 with arrears at 31 December 2012 amounting to €936k, an increase in the year of over €200k. At the year-end date there were 161 accounts with accumulated balances of €731k that were more than six months in arrears.

Theft of Parking Discs and Refuse Tags

As previously reported, the civil case instigated by the Council against the distributor of parking discs and domestic refuse tags concluded in 2011. The Council was successful in obtaining judgment in the High Court in the sum of €924,757. A criminal investigation was also instigated and this concluded in 2013 with a custodial sentence being imposed on the distributor. Prior to the judgment being delivered, the Council received a payment of €25,000 from the defendant. The High Court ruling was referred to the Cork County

No response received from Manager

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Sheriff for seizure of goods but was returned in January 2012 marked “nulla bona”. The Council accordingly instituted enforcement proceedings for payment of the judgment debt by instalments in the District Court. In September 2012, an instalment order in the sum of €100 per month was granted but I note that no payments have yet been received by the Council. As the judgment allows the Council to seek a variation of the order and to “retest the debtor”, I have recommended that this would be regularly examined. At the time of the original investigation the Council commissioned independent legal and financial advisors to examine the circumstances of the theft. The subsequent reports that issued referred to significant deficiencies in the manner in which the contract for the distribution of the parking discs was managed by the Council. I note that no contract was ever executed in respect of the distribution of domestic refuse tags. The Council is no longer in the domestic refuse business and the distribution of parking discs is now administered internally. During the audit, I reviewed the adequacy of the internal controls applied in respect of the parking discs area and I am satisfied that it is now being managed effectively.

Park-by Phone Contract

The park-by-phone service is currently outsourced to a private company without a formal contract with the Council being in place. A contract was drafted in 2008

The Park by phone service is provided by a private company which was engaged in December 2008 following a tender process. The tender envisaged the service being retendered at five yearly intervals. In response

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between the Council and the company (the purpose of which was to engage the company to collect cash generated from the park-by-phone service on the Council’s behalf) to last for three years ending December 2011. I note, however, that the document was never signed. I reviewed this area again during the current audit and have again identified internal control deficiencies particularly in respect of the verification of cash collections. The Council continues to rely on this service provider to produce financial data on the income generated without subjecting these underlying records to any independent scrutiny. The arrangement with the company provides for the cash collections to be transmitted to the Council monthly in arrears. I note that a significant portion of the amounts collected (€201k) by the company in respect of the six month period from January to June 2012 was not paid over to the Council until 2013. The payments were made in piecemeal amounts and only finally paid in full in September 2013. The amount that was due to the Council at the 2012 year end, totalling €165k, has not been included in the AFS. As stated at paragraph 6.4 above, all income earned in the year should be recorded in that year’s AFS. The Council is currently pursuing the formal re-tender of the service.

to the control weaknesses identified, the Council engaged a private firm in July 2012 to assist in the setting up and procurement of a new service. The tenders for the new service provider were published in May 2013 and a number of tenders have been received. The assessment of tenders is being completed with a view to contracting and rolling out a new service in the coming months. Transitional arrangements have also been set out and agreed with the current service provider. Park by phone currently accounts for approximately 5% of parking related income. It is anticipated that this will increase further in the years ahead.

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The matters highlighted during audit need to be addressed as a matter of urgency to ensure that all amounts due to the Council are properly and accurately recorded in the accounts, receipted on a timely basis and are authenticated by reference to contracts that were approved following the application of proper tendering procedures.

Cork County Council


The favourable balance on the capital account increased to €58.3m at year end. Previous audits have identified the need to review and where appropriate offset and consolidate favourable and deficit balances on capital schemes across all service divisions. Many of the significant balances that remain to be addressed in respect of housing, roads and water treatment arose from allocated but, as yet, unspent planning contributions. I acknowledge that a review of the favourable balances is on-going. However, management needs to progress the reallocation of reserves to fund deficit balances. A funding plan for deficit balances remaining after the reallocations have been made has also to be put in place as some of the larger favourable balances are ring-fenced for particular purposes including insurance, plant replacement and other purposes identified by the Members. Significant deficits also remained to be funded on waste management along with other less significant

The overall improvement in the capital account balance is reported in the audit report. This reflects the sustained management priority assigned to the control and management of the capital account over the last three years. The offset and consolidation of balances referred to by the auditor will continue to be addressed over time.

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balances on other service divisions.


Housing Loans Arrears have effectively doubled in the last three years with long term arrears increasing significantly. At year end 269 loan accounts were more than one year overdue and accounted for €3.4m of the arrears. At audit, I estimated a total (capital and revenue) exposure of approximately €27.3m. This presents a significant funding challenge as only the revenue portion of the arrears have been provided for. At the last audit, I highlighted a deficit balance in respect of previously repossessed houses. In 2012, the Department of the Environment, Community and Local Government (The Department) contributed €1m towards this deficit. At year end, a balance of over €239,000 remained to be funded in addition to a number of repossessions awaiting transfer from the loan book. The Council also provided €821,000, from its own resources to fund a shortfall on repayments to the HFA arising from the increasing housing loan arrears.

The deterioration in the Council’s housing loan arrears mirrors that of the general mortgage deterioration across the economy. In addition the Council, as a housing authority, needs to have regard to its wider objective in responding to and managing housing needs.

Donegal County Council

Financial Position

There was a debit balance of €17.103m (€12.303m in 2011) on the income and expenditure account at the end of 2012 Long term loans payable by the Council amounted to

The outturn of the 2012 Local Government Fund was €1.016m less than that originally budgeted for resulting in a reduction in the amount of €1.016m in income from adopted budget. This has been mitigated by efficiency savings in the organisation.

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€170m at the end of 2012. Interest charges and repayment of principal on loans drawn down to finance unfunded capital loan balances, amounted to €2.324m in 2012. In 2013 these loans will be repaid on an interest only basis. It is estimated that interest charges on these loans will amount to € 1.322m in 2013.

The general revenue debit balance has increased by €4.8m in 2012. The net increase is primarily attributable to under-realisation of water charges accrual (€1.292m), net write off of rates in excess of provision (€1.790m) and under realised external chargeability for staff and projects (€2.859m).Savings have been made to offset some of these additional costs. A sustained effort has been employed by Donegal County Council over the past three years in particular to reduce its cost base including its recurring and fixed costs. This effort has seen significant reductions in, for example, staff headcount (approximately 34% since 2008) and a near proportionate reduction in recurring payroll costs. The upfront costs associated with the proportion of the headcount reduction arising from incentivised and early retirement schemes are significant. For instance, the cumulative lump sum (gratuity) costs incurred by Donegal County Council in the years 2008 to end 2012 are approximately €9.8 million. This cost is reflected (largely as a once off) in the cumulative revenue debit balance as at 31 December 2012. In addition to the above and as acknowledged in this and previous reports the significant accumulated unfunded debit capital balance (approximately €48.6 million) as at 31 December 2010 has been addressed by way of a term loan. 2012 has been the first year in which a substantive amount of the repayments associated with this necessary funding arose. While this has an immediate effect of increasing the Council’s annual related loan charges it will be partly mitigated in the short to medium term as other substantial portions of the Council’s loan book mature. The increase in long term loans payable in 2012 is accounted for primarily by a further draw down of the unfunded capital balances loan (€13m), new borrowings for water services (€9.4m) less annual repayments (€8.4m).

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The income available to the Council (which as a predominantly rural county has a very high dependency on Central Government Funds) has experienced a dramatic reduction beyond the averages experienced elsewhere in the country. This dramatic reduction happened with the onset of the collapse in the economy generally and occurred at a pace way beyond the response capacity available (even with the most aggressive implementation) to a large public sector organisation with very significant fixed costs at a time when investment had been made in and commitments contracted in an effort to prioritise the provision of essential local services and enabling infrastructure. Further response is included in my response at number six below detailing some of the main (and some unique) causes driving the stepped reduction in local revenues and the challenges faced when trying to work with businesses and debtors to maintain the collection of this revenue. As a direct response to this challenge the Council has in place since 2011 a dedicated debt management team. The success of this approach is reflected in improved cash collections from a narrower base during 2012. Given the financial challenges that the Council was faced with in preparing the 2013 budget, the Council made an agreement with the HFA to pay interest only on a portion of the loan book. This amounts to €2.368m and includes the interest for the unfunded capital balances loan draw down in 2012. It should be noted that a substantial (€49.4 m) of the Councils non-mortgage loan book is in the area of water services capital. The Council anticipates the funding of this element of the loan book will transfer to Irish Water. It is planned to meet with the HFA in July 2013 to review timelines for re-instatement of full repayments.

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While the above paragraph sets some context and sets out some of the actions taken to date the Council remains committed to dealing with the accumulated deficit in a systematic and planned manner. This approach will be progressed in line with an on-going engagement with the relevant sections of the Department of the Environment, Community and Local Government (the Department).

Fixed Assets A review of the Council’s registers of lands and buildings indicates that they have not been properly maintained. Historic cost adjustments to assets under the ownership of Donegal County Council were identified and included in the 2012 accounts amounting to €1.532m. Significant additional work remains to be carried out here to identify all historic assets. A review of the land asset register identified that whereas individual sections maintain land registers, there is no overall integrated register for Donegal County Council. Controls and procedures need to be strengthened in this area, including ensuring the proper registration of title of all assets. A formal review of the current use of the lands is on-going as part of a physical inspection of these assets.

An asset management group has been focused on this area for some time and a dedicated resource is assigned to work on this and liaise with the steering group and the services as necessary. Arrangements will be made to draw together the content of the land registers held by the respective working areas of the Council into a single reference document. With regard to the historical cost adjustments, the Council capitalises assets when they come into operational use. At that point, the final financial cost can only be best estimated. Additional costs accrue to the job post this date and only on the final closure of the expenditure code can a final asset value be determined, resulting in the adjustments reflected here.


Deviations from procurement and tendering procedures were noted during the course of the audit. Specifically it was noted that:

The Head of Finance has assembled a group of relevant personnel in finance to further examine the current practices in the purchase to pay cycle with a view to streamlining the process and providing training to the

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Retrospective approval was received for approximately 23,000 purchase requests (21,000 in 2011), after the goods and services had already been received. This represents 66% (53% in 2011) of all purchase orders raised in the Council, and represents a significant breach of purchasing procedures. Controls and procedures in this area should be reviewed as a matter of urgency. It is strongly suggested that the Council consider as a matter of urgency the application of central invoice matching as an aid in this regard. In most instances tendering procedures were found to be appropriate. However a small number of instances were noted when deviations from appropriate tendering and purchasing procedures were not adequately adhered to. This does not represent best practice and needs to be reviewed. Legal services were only tendered for in limited instances such as on some roads projects, but general legal services have not been tendered for. This is at variance with department guidance on this matter.

users and approvers involved. It is targeted to increase compliance rates substantially before year end as a result of this action. The Council had made preparations with a view to going to tender for legal services some 18 months ago. However, following the initiation of a National review of this area which has now led to draft proposals for shared services in this area the local initiative was put on hold. The Council awaits the conclusion of the shared service proposal in this regard.


Year-end development contribution debtors recorded in the AFS amounted to €4.792m. This relates to long term debtors of €4.133m and short term debtors of €659k. The Council recorded receipts of €407k relating

A full reconciliation of all development charges has commenced and will be completed in 2013. The pursuit of cases where there is non-compliance with conditions has been prioritised by the enforcement team within development management. Priority cases will be followed up under the

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to these debtors, up to the 31 May 2013. A review of the development contribution system identified a number of significant weaknesses: • Monies received in accordance with planning records have not been reconciled to monies recorded on the financial system since June 2011 • No system was in place in 2012 to recognise or identify unauthorised developments • Court action has never been proceeded with in relation to non-payment of development contributions • A reconciliation between monies received from development contributions and monies allocated to various projects has not been performed.

appropriate mechanisms provided for in part eight of the Planning and Development Acts.

Local Authority Companies

Letterkenny Theatre Management Company Limited In a letter dated 20 May 2013, Donegal County Council has confirmed that it is committed to the on-going provision of any necessary financial support to maintain the above company in continuing to manage the theatre facility and run its programmes therein up to 2023. Department guidance states that a local authority shall not encumber its own assets or revenues to secure any guarantee or indemnity as given above without the consent of the Minister for Finance. Donegal County Council should seek retrospective approval for the above guarantee. The Council should review its relationship with all other

The Council is wholly mindful of its obligations in this regard and has not consciously given an underwriting contrary to guidelines. The letter referred to will be reviewed and if necessary further clarification will be given to the company in question. The utilisation of companies at arm’s length to progress various initiatives has been, in the view of the Council, wholly successful and is a vehicle, used prudently and responsibly, as has been the case in Donegal County Council that can maximise the available resources and reflect value for money whilst delivering services of benefit.

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companies that it has an interest in.

Dublin City Council


As recommended in previous audits, site inspections on large developments were conducted and as a result a number of adjustments were made to the outstanding balances. These adjustments were made without management approval as set out by the Council’s own procedures. The absence of manager’s orders signifies a weakness in the corporate governance in this area. A complete review and sign-off by an appropriate staff member of all development contribution accounts is required. This should be followed by the introduction of an improved system of monitoring actual developments, introduction of a proper sign off procedure for adjustments and a verification process of all closing balances at year-end.

A new procedure is now in place where all adjustments are authorised by way of Manager’s Order. A new sign-off procedure is now in place whereby monthly manual reconciliations between APAS and Oracle are signed off by the Administrative Officer of the Development Contributions section and the Senior Accountant of the Planning Department prior to final sign-off by the Planning Department’s Executive Manager. Within the Planning Department additional staffing resources have been dedicated to the on-going monitoring of developments and new procedures are now in place where site inspections take place bi-monthly and outstanding debt reviewed on foot of information obtained. A manual annual reconciliation is carried out at year end.

Thermal Treatment Plant

The delays in the commencement of construction work on this project have been referred to in previous audit reports and the uncertainty surrounding the contract has been a matter of some concern. The Council has recently published a notice in the European Journal of their intention to sign a revised contract without returning to full procurement and expect construction to commence in early 2014.

A final outcome from the European Commission is awaited on State Aid and Procurement complaints lodged with them over the past 18 months. The outcome is anticipated by the year-end. Negotiations on a revised Project Agreement are at a very advanced stage and it is anticipated that, subject to the approval of the European Commission, as mentioned above, a revised Project Agreement should be signed in early 2014 with a view to construction recommencing on site.

Pyrite in Council Properties

The Council’s housing and residential services department have identified owned developments that contain pyrite.

The housing and residential services department of the Council has identified its developments that contain pyrite. Discussions are on-going with the contractors who built these developments with a view to having

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• One of the developments, an older person’s complex, has been remediated. The funding for these remediation works at this location was provided by the Department through the annual Social Housing Investment Programme, as the original contractor had gone into liquidation. • Pyrite remediation work is also underway at a traveller accommodation scheme which is being co-funded by the Department and Dublin City Council. The Council is in discussions with the contractor who built this development with a view to recovering the costs of the remediation work. • Works will start later this year on an affordable housing development the funding for which will be borne initially by the Council but recouped in time through the Pyrite Levy Fund under the control of the Pyrite Resolution Board. • A number of other City Council developments that contain pyrite have also been identified and discussions are on-going with contractors with a view to having the necessary remediation works carried out.

remedial works undertaken to remove the pyrite.

Priory Hall The Council has incurred substantial costs to date, including the costs of excess rents incurred by tenants of the complex and the full cost of alternative

The Supreme Court appeal is due to be heard in October. Until such time as the issue has been determined by the Supreme Court, Dublin City Council must continue to pay the accommodation costs of the evacuated

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accommodation for owner occupiers. Additional costs in respect of maintenance and security of the apartment complex have also been incurred. Total costs incurred to the end of 2012 amounted to approximately €2.38m.

residents. The resolution process, which is being overseen by retired Justice Finnegan is on-going. In the meantime in an effort to resolve matters outstanding, the government has launched a new initiative, in which the Council is fully participating.


Domestic Refuse Arrears As referred to in my previous audit report, the sale of the domestic waste collection service means that there were no current domestic refuse charges raised by the Council in 2012. Under the agreement for the sale, the waste operator is responsible for the collection of the arrears outstanding from December 2011 and, of the original €13m outstanding, €2m was collected, €2m was written-off and a balance of €9m remains outstanding at the end of 2012. In the circumstances, it is unlikely that much of these arrears will be collected.

The agreement reached for the transfer of the Waste Collection Service to Greyhound provided that Greyhound would collect the quarter 4 of 2011 waste management charge together with outstanding arrears on behalf of the City Council. In consultation with the City Council, Greyhound has recently engaged the services of a professional debt collection company to assist in the recovery of the outstanding charges. It is the intention of the City Council to review the arrangement so that all waste management debts can be vigorously pursued.

Dun Laoghaire Rathdown County Council

Fixed Assets The Council’s land holding is stated in Note 1 to the AFS at a value of €149.59m. The Council is in the process of introducing a comprehensive property register called the Property Interest Register (PIR). This system will record the location, holding, tenure, burdens and easements, price paid and location of title documents. The Council has not yet completed the reconciliation of the land included in the PIR system with the value of the land reported in the AFS.

The Property Interest Register is an on-going project. The Register when completed will be a record of the property interests held by the Council. Acquisitions of land are currently being input, checked and updated on the system. Once they are up to date the recording of disposals will commence. The values in the P.I.R. relate to the purchase price while only land assets in the Council’s land bank with a value in excess of €10,000 are included in the general ledger and as such the values in PIR will not match those in the general ledger.

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The important work in this area will be kept under review at audit.

Ballyogan Baling Station

The Ballyogan Bailing Station, which is within the environs of the Ballyogan Recycling Park and operated for a period of five years from 2004 to 2009, is now non-operational and the system has been dismantled. The building which housed the bailing station is now empty. The main works contract, which commenced in 2002, involved the construction of a bailing facility of approximately 3,500 sq. metres plus extensive site work and facilities. The construction of the Ballyogan Recycling Park was funded by a loan of €36m. The outstanding balance on this loan as at 31 December 2012 was €15.6m. Related plant and associated equipment consisted of two bailers costing €5.3m, were acquired in 2003. These were sold in 2012, and after taking account of depreciation, resulted in a loss on disposal of €859k. Included in fixed assets in Note 1 of the AFS, under the heading of buildings is an asset described as “Ballyogan Recycling Park Stage 1”, valued at €32m.

The Ballyogan Bailing Station is a regional facility, funded jointly by Dún Laoghaire-Rathdown County Council (DLRCO), Dublin City Council (DCC) and South Dublin County Council (SDCC). It is an EPA licensed Water Transfer Station, and baled waste specifically for transfer to the regional landfill at Arthurstown, Co. Kildare. Waste tonnages collected by DLRCC were significantly reduced following the entry of private operators into the DLRCC waste market. As a cost saving measure with effect from May 2009, household waste collected by the Council’s vehicles, was directed to the bailing station at Ballymount in SDCC and the bailing of waste ceased at the Ballyogan facility. The Council ceased to provide a household waste service from the end of July 2010. Arthurstown landfill is now closed and the balers have been removed to allow the building to be used as a general waste transfer station.


Commercial Rates The collection yield for rates of 75% for 2012 is after a write off of €8.94m. The collection yield has been

The collection performance in respect of commercial rates had deteriorated significantly over the last number of years coinciding with the very

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declining steadily since 2007 when it was 95%. Included in Note 5 of the AFS is a bad debts provision of €17.4m in respect of rates, which is 69% of the closing arrears balance of €25m. The income has also declined due to the revaluation of properties within the county. During audit a sample representing 20% (€5m) of the total arrears was selected for examination. The findings established that of the sample examined: • 34% related to vacant properties • 30% were subsequently struck off in 2013 •17% related to businesses in administration, receivership or liquidation • 11% where arrangements to clear the arrears were agreed • 8% were still being pursued for the arrears. Housing Rents The housing department keep the rents records on a system called OHMS. The figures on this system are not reconciled with those on the general ledger. At the end of 2012 the arrears balance on OHMS was €3.32m and in the general ledger it was €2.79m, which is a difference of €530k. This difference should be

significant deterioration in the economic climate. In recognition of the collection difficulties additional resources and effort have been dedicated by the Council to stabilising the collection performance, together with the introduction of new initiatives and the updating of collection processes and procedures following review, and the success of those efforts is evidenced by the stabilisation of the collection performance. The collection percentage achieved in 2012 was 75.34% which represents a deterioration of less than 1% on the 2011 collection performance which given the very difficult economic environment in which businesses operate is considered reasonable and in keeping with national norms. A major objective of the Council in 2012 was the stabilisation of our collection performance in respect of commercial rates and that has been achieved. The write off of €8,945,801 is comprised of a number of individual items. Of the total figure, €3.86m is in respect of the strike off of rates on vacant properties. A further €3.29m of the overall write off figure is attributable to decisions of the Valuation Tribunal in respect of valuation appeals referred to that body arising from the general revaluation of commercial properties which was undertaken in this county. Decisions of the Tribunal received in 2012 had retrospective effect to 1 January 2011 and the cost to the Council in 2012 was €3.29m reflecting the very unfavourable outcome of the revaluation process

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reconciled. During audit a sample representing 8% (€285k) of the total arrears was selected for examination. The findings established that of the sample examined: • 27% were in or pending Court Hearings • 22% had pre legal action letters or warnings issued • 20% were cases in dispute • 16% were where the tenant had vacated the house • 11% were where the tenant was in dialogue with the Tenancy Sustainment Officer • 4% were currently on arrangement to pay Housing Loans The collection yield for housing loans deteriorated dramatically over the last number of years to 64.3% in 2012. The arrears outstanding increased from €496,202 to €695,739. The provision for bad debts in respect of housing loans in 2012 was only €39k, and needs to be increased. The Council issued new loans to the value of €1.6m in 2012. During audit a sample representing 40% (€335k) of the total arrears was selected for examination. The findings established that of the sample examined: • 79% were being dealt with under the Mortgage Arrears Resolution Process (MARP) • 21% having gone through legal proceedings the Council had repossessed the property

A large proportion of the Council's arrears relate to the more recently issued Shared Ownership Loans which have average instalments of €870 per month. Where reductions in household income occur due to unemployment etc. the repercussions are likely to be manifested in reduced loan repayments. For example, Shared Ownership Loans account for 25% of the Council's loan book but make up 82% of the total arrears. The Council has adhered to the Code of Conduct for Local Authorities which is based on the Central Bank's Code of Conduct, and more recently to the updated guidance from the Department of the Environment, Community and Local Government in August 2012 for dealing with loan arrears which incorporates a Mortgage Arrears Resolution Process. The Council is managing loan arrears under the processes and procedures under MARP and arrangements are being negotiated with borrowers as far as possible to arrange payment of arrears. Repossessions are always the last resort but legal proceedings were on-going in one case in 2012.

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Commercial Water Charges The collection yield for commercial water showed an increase in recent years, to 50%, after a write off of €1.11m. The bad debts provision included in Note 5 to the AFS in respect of commercial water charges is €3.2m, which is 51% of the closing arrears balance of €6.29m. During audit a sample representing 36% (€2.24m) of the total arrears was selected for examination. The findings established that of the sample examined: • 53% were amounts in dispute • 18% were still being pursued • 15% were in respect of an IDA site, and were not yet allocated to the individual users • 14% were paying or had made agreements to pay

Over the last four years the Council has seen a continuous improvement in its collection yield in respect of non-domestic water charges increasing from a collection yield of 39% in 2009 to 50% in 2012. The collection yield in 2012 shows an improvement of 6% over the collection yield of 44% achieved in 2011. Furthermore, when account is taken of the amount charged back to 2012, for which invoices only issued in February 2013 and for which businesses had no opportunity to make any payment in respect of this invoiced amount during 2012, and when this amount is excluded from the 2012 collectable figure then the 2012 collection performance increases by a percentage of 10%. The collection performance for 2012 then increases to 60%.

Fingal County Council

Fixed Assets The value of fixed assets after accounting for depreciation decreased by €49m during 2012. The main items contributing to this reduction were the disposal of 60 acres of land at Hampton under the Land Aggregation Scheme and the depreciation for the year on fixed assets. The Council has included 285 houses as fixed assets at an estimated value of €56m. These houses have been built for some time. The final accounts have not yet been completed on these projects and are long overdue. These projects need to be finalised and the

Houses (285) included as fixed assets at an estimated value of €56m At the close of the 2011 AFS there were 592 units included as fixed assets at an estimated values of €117.2m. Substantial progress was made during 2012 in balancing schemes, reducing the number of units with estimated values to 285 at 31 December 2012. Work is on-going in relation to the valuation of these units and the intention is to have them valued by the 31 December 2013. It should be noted that one development (Dun Saithne) accounts for 212 of these remaining units and this development is currently in the final stages of the balancing process. Buildings not included in the Fixed Asset Register While the assets referred to were not included in the Financial Management

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funding for any outstanding balances agreed. In my review of property sales, I noted a number of buildings, which were not recorded in the Council’s fixed asset register on Agresso. I recommend that reconciliations be performed between the fixed asset register and the Council’s property register. I would also recommend that a comparison be carried out with the Council’s schedule of insurances. The Council first recorded lands on its financial system in 2003 and all of its land holdings were entered as one balance at a value of €225m. There now remains a balance of €171m on these land holdings at 31 December 2012. The Council was unable to provide me with a schedule of the parcels of land remaining and their respective values making up this value. The Council needs to address this deficiency in its recording of lands.

System they are included on the Property Register as prescribed. The auditor’s recommendations are noted and a review of the reconciliation processes that may be required between the various systems referred to, will be undertaken as soon as possible. Land Assets The exercise of recording lands on the fixed asset register in 2003 was undertaken and completed in accordance with guidelines received from the Department of the Environment, Community and Local Government (the Department) at that time. A Schedule of the parcels of lands remaining at the 31st December 2012 with a value of €171m has now been completed.


I have identified approximately €97.5m of unfunded capital balances relating to land and buildings, these include:- Projects Lands Tubber Cross €27m Stephenstown Industrial Estate €23.1m Lands Balheary, Swords €16.6m Lands Hacketstown Skerries €7.75m Lands at Dunsink €7.6m

Following a review of capital balances the following unfunded projects referred to above will now be funded from existing capital resources: Strawberry Beds – Shackleton Mill €5.1m Lands at Dunsink €7.6m Lands at St. Catherine’s FCC €7.5m In addition, we have part funded the following:- Stephenstown Industrial Estate €8.0m

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Lands St Catherine’s FCC €7.5m Strawberry Beds –Shackleton Mill €5.1m Bremore Port €2.8m As long term funding has not been put in place for these projects, this absence of a structured long term funding source may cause cash flow problems in the future.

The remaining unfunded balances, amounting to €69.25m, relates to acquisition costs of industrial and housing lands. These lands represent a valuable asset to the Council. The lands are strategically located so that the Council will be in a position to avail of an upturn in the economy enabling a swift response to economic development. The debit balances on these accounts will be funded from the eventual sales of these and other lands in Council ownership, when market conditions improve. Balances on the capital account are reviewed on a regular basis with a particular emphasis on funding sources.

Housing Loans The Council does not operate an integrated housing loans accounting system. The loans accounting module (Cygnus) is a stand-alone system which requires journals to reflect the postings in its financial systems. The collection account summary in Cygnus was not properly reconciled with the amounts reflected in its financial system. Errors noted included: • Debtor prepayments of €1.1m not properly reflected in the AFS • Difference between receipts in both systems of €67k I have requested the Council to review its reconciliation processes to ensure that all differences are properly accounted for. I have also requested that the necessary corrections be made to the 2013 accounts.

A comprehensive review of the reconciliation process is being undertaken at present to deal with the issues raised.

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The Council’s purchasing guidelines were last updated in July 2006. In the intervening period changes have made to EU and national procurement procedures, which should have been reflected in amendments to the Council’s guidelines. The Council’s Corporate Procurement Plan also expired in 2011. I recommend that these two documents be updated. In my review of 2012 invoice payments, I noted numerous incidents where the Council did not comply with Department of Finance “Public Procurement Guidelines”. The Council needs to incorporate into its purchasing / payments cycle a system of compliance checking, to ensure adherence to prescribed procedures. I would also request that consideration be given to the appointment of a Procurement Officer. The work undertaken annually by the Internal Audit Unit should also include a review of procurement/tendering procedures.

The Council’s purchasing guidelines referred to comprise a Procedural Manual on the Agresso “Purchase to Pay Cycle”. While the document was originally drawn up in 2006, the Finance Department has an extensive training programme for Agresso users together with a help desk to deal with specific issues as they arise. Training notes are reviewed and updated on an on-going basis and are made available to all staff through our internal “Connections” communication system. The Purchasing Requirements and Guidelines document is currently being updated and will be available to all staff in the coming months. Compliance checks are inbuilt into the purchase to pay cycle and these will be re-enforced in the updated purchasing guidelines document. The Council’s procurement limits are set out in Managers Order Reference F/237/2006. Guidance in relation to changing EU thresholds is also provided. This Order is currently being updated and will be made available to all staff in the coming months. The Council’s Corporate Procurement Plan will be reviewed and updated as soon as possible. The Council is anxious to create a post of Procurement Officer and initiated a recruitment process in this respect earlier this year. Unfortunately, it was not possible to fill the post. It is the Council’s intention to reapply to the Department for sanction to create and fill the post as soon as possible. The internal audit function will carry out an annual review of the procurement and tendering procedures.


As highlighted in the previous audit report, the Council is recording proposed offsets of €46m as part of its

Work on development levy offsets has not been advanced. Clarification from the Revenue Commissioners is still awaited with regard to the taxation

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closing debtors’ figure of €102m at 31 December 2012. The Council has made little progress in advancing these proposed offsets since the previous audit. The Council is awaiting clarification from Revenue on the question of any potential tax liability that could arise prior to the granting of an offset. It should be noted that the developers in many of these instances have completed development works for the Council and as a result are not being actively pursued for the levies covered by the proposed offsets. In the absence of an agreement, the Council charge for the full development levies when a commencement notice is received in respect of a development. In my review of a sample of development debtors totalling €20.9m, I noted that only €2.5m (16.9%) was due, based on the proportion of the total development work that had been completed on site. I would recommend greater use of phasing agreements with developers in order to ensure a more realistic debtors figure. The Council did not apply the wholesale price index to development charges in accordance with the Development Contribution Scheme 2010-2017. This was as a result of a decision by management and endorsed by the Council.

treatment in relation to reverse charge VAT and relevant contract tax for development levy offsets. As indicated by the auditor, it is the Council’s policy to issue invoices for the full amount of the applicable levy on receipt of commencement notices. As a result, substantial invoices are recorded as outstanding, albeit work may take years to complete, and in more recent years, large scale developments are suspended and may never be completed. A review of our payment agreements with developers to reflect progress of the schemes on the ground is currently underway.

Galway City Fixed Assets I have concerns regarding the adequacy of the Work has been on-going on this project since 2009 and progress has been

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Council registration of the property assets owned by Galway City Council and the inadequate manner in which fixed assets are recorded in the books of the Council. To ensure the Council proactively manages its property portfolio as outlined in the Value for Money Audit Report No. 9, the Council needs to allocate adequate resources to address this issue. It is clear from the lack of progress in relation to the assets highlighted since the 2009 audit report that the current system whereby individual sections manage their own property portfolio is not working. Where adequate records of assets owned are not held, or where asset records are incomplete, there is a risk that assets may be inadequately insured or may be lost to the authority. The requested review of all of the Council’s assets and the associated asset records, including the registration of title, needs to be carried out prior to the next audit.

made to date. In 2011/ 2012, the fixed asset register was reconciled to the housing database and the insurance register. A database of art works was developed and this is currently being reconciled to the insurance and asset registers. The registration of title to assets is on-going and the Council is currently examining proposals regarding centralising the management of the property portfolio.

Bridging Finance

At the end of 2012 the Council had HFA bridging finance for 41 loans amounting to €12.3 million (down from 52 loans valued at €16.7 million at the end of 2011). These loans relate to affordable houses, which had previously been sold. These remaining HFA loans need to be repaid.

The Council has reduced its mortgage-funding gap by a further €1.3m to date in 2013. The Council is acutely aware of the outstanding bridging finance loans and have reduced the outstanding amount significantly over the past four years. Repayment of this finance is prioritised and the outstanding amount has been reduced by a further €1.4m to date this year.

Unfunded While the number of active capital balances at the end The review of the capital balances and, in particular, the housing balances

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Capital Balances

of 2012 remained high at 294, it has reduced significantly in the year. However 75% of the remaining balances relate to housing projects. A complete review of the Council’s housing capital balances is on-going and should be available prior to the end of 2013. Once this exercise has been completed, the Council should request the approval of the Department of the Environment, Community and Local Government (the Department) to offset remaining positive balances against existing unfunded capital balances, where possible. A figure of €12.8 million of unfunded capital balances was identified in Note 11 of the AFS at the end of 2012. Following the completion of the review and the clearing of old balances by offset etc. as outlined above, the Council should be in a position to accurately quantify the remaining unfunded capital balances. The Council will then need to identify funding sources for these balances. Any balances for which there is no alternative funding source will need to be reflected in future revenue budgets approved by the Council.

are on-going and it is anticipated that this will be concluded by year-end. Provisions have been made in the revenue budget since 2011 towards funding of adverse capital balances and it is anticipated that similar provisions will be made in subsequent budgets.


Commercial Water Charges While showing slight improvements over the last number of years in collection yields, 59% is not a satisfactory level of collection for commercial water charges.

Collection of all income sources and particularly rates income is impacted adversely by the current economic climate. A number of businesses have agreed extended payment plans and other businesses have unfortunately liquidated with amounts outstanding to the Council. Galway City Council continues to pursue customers through the legal process in the event of

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The commercial water debtor at the year-end was €2.7 million. A review of the arrears found that €1 million was over a year old of which €110k was over six years old. The agent charged with responsibility for billing and collecting these debts, does not seem to be actively pursuing those debtors, which it classifies as “old” i.e. over a year old. Arrangements need to be put in place to ensure that either the Council or the agent is routinely following up such debts. The doubt over the collectability of debtors over a year old is reflected in the Council’s substantial bad debt provision, which I examined and deemed adequate.

non-payment of amounts owing. Commercial water charges are collected by an agent and the year on year collection percentage has improved. The total amount collected in 2012 as a percentage of invoices raised in respect of that period was 96%. The Council is liaising with its agent in pursuit of the older arrears.


Since the Mutton Island Waste Water facility was officially opened in April 2004, no tender has been awarded to date in relation to the on-going operational and maintenance contract, which is currently costing the Council approximately €2.7 million per annum. Instead the original mechanical and electrical works contractor was given an interim contract to operate and maintain the plant, pending the appointment of a private service provider. This interim contract applies to date. To achieve cost savings and to ensure the Council complies with procurement regulations, a contract needs to be put in place.

Galway City Council is in general compliance with procurement regulations and has been actively seeking to award a contract for the operation and maintenance of the Mutton Island Waste Water Treatment Plant for some time. While the formal procurement process commenced in May 2004 with the posting of an advertisement seeking expressions of interest from suitably qualified private service providers to operate and maintain the plant for a 20 year period, the process was delayed for reasons that were not envisaged and were outside the control of Galway City Council. In the first instance, an operational assessment of the plant identified the need for an upgrade to meet the increasing demands of the city population. It was decided to include a design and build upgrade of the plant within the operation and maintenance contract, resulting in a necessary change to the

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procurement process and consequent delay. The second delay in 2008 was a consequence of the introduction of Discharge Licensing Regulations. The regulations required the submission of an application for a Waste Water Discharge License to the EPA, which was not granted until April 2010. Having re-advertised again in August 2011, Galway City Council was advised by the Department to modify the pre-qualification documentation and place a further advertisement. On the 6 December 2011, Galway City Council again re-advertised for applicants to pre-qualify for the contract and, following a two-stage pass – fail / qualitative assessment, five applicants were selected to progress to tender stage. Invitations to tender and tender documentations were issued on 18 July 2012. The tender process was completed from Galway City Council's perspective in 2013 when, following the receipt of the report on tender, it was referred to the Department for approval on 2 May 2013.

Galway County Council

Financial Position

A detailed financial review is set out on pages 3 and 4 of the AFS. As explained in this review the provision for irrecoverable rates was €2.2m more than budgeted. In addition the Local Government Fund was reduced mid-year by €790k, due to the failure of the Council to achieve a 65% collection percentage on the household charge. The overall result for 2012 was a deficit of €494k. The variations between the financial statement and the budget are set out in note 17 on page 23 of the AFS. The cumulative deficit at the end of 2012 has

The Council continues to be conscious of the need for financial restraint to address the deficit that exists at 31 December 2012. We continue to implement strict financial controls with regular reporting to both management and Councillors. We would note that the position in 2012 was exacerbated by the reduction in the Local Government Fund of €790K in mid-year, together with a challenging environment in relation to income collection.

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increased to €1.9m. The Council will need to implement strict budgetary controls to ensure that the cumulative deficit is reduced and that budgeted expenditure and income targets are achieved.

Affordable Housing

As was outlined in previous audit reports, the construction of affordable housing units are financed by way of bridging loans and these bridging loans are then funded from the sale of the units. The Council’s balance on bridging loans at the end of 2012 was €1.8m (€3.5m in 2011). As at the 31 December 2012, the Council had 50 affordable houses for sale (63 at the end of 2011) of which 18 (41 at the end of 2011) were occupied by tenants, without having legal contracts signed. The deficit on the capital account in respect of affordable housing balances is €4m at the end of 2012. The difference of €2.2m between the bridging loans and the capital account deficit on affordables is being funded through the current account at present. A funding source needs to be identified for the unsold affordables or provision needs to be made to fund them from the revenue account over the next few years.

The Council continues to explore the options available to it to address the unfunded balance on affordable housing including a possible sale to a voluntary body, inclusion in a “rent to buy” scheme and other potential sources of funding.

Revenue Collection

The collection yield on rates has continued to show a decline with a reduction from 72% in 2011 to 69% in

The current economic environment is placing serious financial challenges across our customer base. The commercial sector is facing significant

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Performance 2012. Although it is clear that this slippage is as a result of the downturn in the economy, nevertheless there are some individual accounts that require attention. Arrears of rates at the end of 2012 amounted to €8.3m, an increase of €1.4m over the 2011 position. Housing rents and annuities have shown a 2% reduction in the collection yield. The yield on housing loans has decreased by 5%. This is the fifth year in a row that housing loan yields have decreased. Arrears of rents and annuities now stand at €710k while arrears of loans are €670k. Galway County Council has an adequate bad debts provision for both rents and loans. Water collection yields at 48% remain very weak. Old uncollectable debts of approx. €1m should be written off in 2013. Commercial water charge debtors amounted to €4.1m as at 31 December 2012 down slightly from €4.2m in 2011.

pressure due to the down turn in economic activity and similarly the domestic sector is under pressure to meet day to day expenses. The Council has a formal debt collection policy in place and is working closely with all its customers to maximise income levels. As part of the transfer of the water function to Irish Water a full review of water arrears will be carried out in 2013.


Included in the accounts are debtors of €17.4m in respect of development levies. Amounts of €1.9m are shown under current debtors for planning contributions and a further amount of €15.5m has been included under long term debtors and deferred income. A bad debts provision of €0.5m has been provided for the current debtors.

Galway County Council has implemented the Department of the Environment, Community and Local Government’s guidelines in relation to development contributions which has meant that where development has commenced the charge levied on the development is raised as a debtor, however it also recognises that where only the initial phase of a development has commenced the remaining charge is shown as deferred income. A review of the largest debtors will be completed in 2013.

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As was stated in last year’s report, the long term debtor represents amounts that are not due for collection within the next twelve months. A review of this €15.5m would indicate that a very large portion of it is doubtful. Amounts totalling approximately €10m are based on developments where it is not certain that the developments have commenced. Another €4m is with the Council’s law agent for court action, while other issues arise in respect of debts that may now be statute barred or where the original levy was incorrect. All of these areas need to be thoroughly investigated and proper collectable debts established for inclusion in future accounts. I would ask that this exercise would be completed in ti e for the 2013 AFS so that accurate and reliable figures can be reported on. In 2012 development contributions amounting to €3.5m (€5.5m in 2011) were used to finance various works and balances on completed schemes. Development contributions are accounted for in the capital account and do not affect the revenue deficit or surplus for the year.


A new corporate procurement plan was drawn up by Galway County Council in 2012. Fuel cards were introduced for all Council vehicles, and the Council availed of the National contract for the supply of energy which was negotiated by the National

Galway County Council endeavours at all times to comply with the relevant procurement requirements. However a challenge has impeded the progression of the tender implementation in relation to sludge. The transfer of responsibilities to Irish Water from January 2014 will have an impact on the procurement arrangements.

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Procurement Service. Galway County Council also participated in combined regional procurement tenders during the year. During 2012 the Council spent €1.2m in sludge removal between a number of suppliers. No proper tendering process was conducted for the provision of this service. In 2011 the Council had undertaken a tendering process for sludge removal but one of the unsuccessful tenderers challenged the process used. This matter remains unresolved. One emergency case was noted where a service was tendered for on e-tenders even though it exceeded the EU procurement threshold and should therefore have been advertised in the EU journal. A number of other smaller items and services were also purchased during the year without complying with the Council’s own procedures governing quotes and tenders. The various procurement rules as laid out by the EU, National and Council regulations or guidelines should be complied with in all cases.

Fire Service Debtors

Invoicing of fire charges is processed on a separate system (FSI) which was not integrated with the Council’s main accounting system in 2012.

We are continuing to review the arrears recorded on the FSI system which as previously noted we believe to be overstated. Unfortunately a shortage of staff resources in 2012 has hampered this exercise and we will continue

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According to the FSI system there were debtors of €2.5m at the end of 2012. These debtors have not been recognised in the accounts. Resources should be allocated to improve the collection of fire service income. A review should be undertaken to verify the accuracy and collectability of these debtors.

with the process in 2013.

Kerry County Council

Fixed Assets As part of my 2012 audit the following matters were identified and need to be addressed by the Council; • Five land holdings where title in the County Council’s name has not been fully completed to date, • One water services project where the land title is still in the name of a Town Council, • A car park valued at €649k included in the land assets since 2003, which is not owned by the Council, • A previous audit report made reference to the fact that certain land holdings were valued at €1 each as a nominal holding in the asset register. At the conclusion of this audit fifty such holdings have been identified. I have requested that independent valuations on these assets be established and that the necessary accounting adjustments be incorporated in future annual financial statements.

In 2013, a programme has been put in place by the Water Services Department working towards establishing title history on all lands associated with its water services network and plants in association with the establishment of Irish Water. Given the historical nature of some of the original purchase agreements establishing title history will in some cases be difficult. In these instances the original purchase agreements will establish proof of ownership. The non-water service lands mentioned are unregistered historic lands, however, these are fully under the control of the local authority. • In relation to the former Tralee Town Council lands, the Local Government Act, 2001 (Part 9, Chapter 5) made provision for the full consolidation of water supply and waste water treatment and related functions at County Council level from the 1st January 2004. Section 83 (4) specifically deals with property transfer “ all property, real and personal, which immediately before such commencement was vested in a town sanitary authority and was used solely for the purposes of the water functions shall, unless the relevant county council and town sanitary authority otherwise agree, stand vested in the county council without any conveyance or assignment”.

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• In relation to the car park mentioned above, the total net book value of fixed assets was €3,464m at the end of 2012, of which this car park represented €649k. As was recommended in previous audit reports, title verification was prioritised by the Council on housing lands in recent years. This car park will be removed from the asset register in 2013 and a review has commenced on all car parks listed as Kerry County Council assets. • With reference to the land holdings valued at €1, the majority of these assets were added originally in 2003 in an attempt to capture all local authority land holdings in accordance with the 2003 Guidelines on Valuation of Historical Assets. Small land holdings such as green areas were assigned nominal valuations accordingly pending full review of title as were fixed assets with values of less than €5,000. These will also be reviewed, due to the volume and nature of the task, the accounting adjustments may be incorporated in the annual financial statements over a number of years.

Refundable Deposits

The refundable deposits amounting to €2.147m in the balance sheet relates to projects dating back over many years. I have recommended to the County Manager that a review of the current status on these balances be undertaken and, where such projects have been properly completed then refunds should be made by the County Council. Such repayments should not be processed until the finance section has confirmed that such customers do not owe any monies to the Council from the provision of other services. This matter will be further reviewed at the next audit.

The Council has a number of cash bonds which remain on hands. The planning section has recently undertaken an examination of various developments of single houses where we hold a deposit and are currently assessing the reports of same prepared by the investigating officer. If satisfied with the completed development, a refund of the bond will be recommended. Over the last number of years some developers have opted to replace insurance bonds with cash deposits where the amount is minor. Also the growth in wind farm developments has also resulted in an increase in our cash deposit balance. In both these cases where developments are completed substantially in compliance with the permission granted, a refund is arranged.

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Plant & Materials Account

During 2012 the losses incurred in the operation of the plant and material account increased by €279k (or 131% on the previous year’s loss) and is reflected in the end of year deficit balance of €492k. The significant increase in the machinery losses in 2012 €0.340m is a matter of concern and management should review and implement procedures to eliminate this deficit.

The general decline in roads grants to the Council in recent years is one of the contributory factors in the increase in losses. A report on this matter is being prepared by the roads department for consideration by senior management outlining the financial considerations and the options available to deal with same.

Kildare County Council


Rates In the year under audit there was a further deterioration in the collection yield for rates with a corresponding increase in the arrears by €2.4 million to €12.6 million. A detailed review should be carried out of the rates debtors to ensure that the bad debts provision reflects the current economic circumstances. Housing Loans The collection yield decreased by 8% in 2012. Attention needs to be given to this matter in particular loans in arrears for greater than six months.

The fall in rates and housing loans collection is a reflection of the current difficult economic climate. Every effort is being made to recover the amounts owed to the Council in all cases. A review of bad debt provisions will be carried out as part of the preparation of the 2013 Annual Financial Statements.

Kilkenny County Council

Land Lease The Council, in partnership with another public organisation, signed an agreement in 2007 with a private development company to lease land to facilitate the construction of a major commercial retail outlet in Kilkenny. The lease agreement originally provided for the payment of a minimum annual rent of €434k later adjusted down in accordance with the

The comments made are noted and the Council has been actively seeking payment of this amount owed. The Council will also be seeking to revert back to the original terms of the lease agreement whereby the other public company bills the development company in full and upon receipt of same forwards to the Council its half share. A meeting to revert back is being organised currently between the Council and the other public company. It should also be noted that the development company has restarted paying

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provisions of the agreement to €386k. The Council is entitled to a half share equating to €193k annually. The capital value of the future lease income was valued by the Council at €3.1m and has been included in the Balance Sheet since 2010. A clause in the lease agreement provides for the other public company to receive payment of the annual lease instalments in full and upon receipt to forward the Council its half share. In a departure from this clause the Council commenced invoicing the development company for its half share separately from January 2012. The Council has not received payment of any of the invoices issued since that date nor has there been any amount received from the other public company. I note that the arrears at August 2013 amounted to €289k. A full review of the Council’s current legal position with regard to the provisions of the lease agreement should be immediately undertaken. A review should also be carried out as to the appropriateness of including the capitalised valuation of future lease income in the Balance Sheet.

outstanding invoices. The capitalised value of the lease income will be adjusted in 2013 to reflect the commercial reality.

Fixed Assets An exercise to compile a composite land and property register was commenced in 2012 but I note that it is still not completed. There were land holdings disposed

The comments made are noted, and water services assets will be prioritised for review by year end 2013.

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of during the year under review that were previously not included in the financial management system and accordingly were not part of the fixed asset register. It is important that the work on updating the register is completed without further delay, particularly in view of the expected transfer of assets to the new public body, Irish Water.


There was a favourable balance recorded on the capital account of over €15m as at 31 December 2012, a reduction of just under €3.5m on the previous year. Included in the year end figure were two accounts with significant debit balances as follows; New County Hall Library €4.8m Machinery Yard €1.0m The Council has designated all capital projects as funded but I have been advised that there are currently no resources available to fund the above balances. Consequently both of these projects should be reclassified as unfunded in the accounts. A full review of all capital schemes should be carried out and where there are currently no funds available to fund the individual debit balances they should be classified as unfunded.

The Council, as part of the capital budget process, has set aside funding on an annual basis to fund the new County Hall Library and will continue to do so until the debit balance is eliminated. The machinery yard income is being funded by rental income which is being actively pursued. The comments made are noted and the appropriate CAPREV flags will be assigned to the capital schemes, though this re-classification does not change the total capital balance position.

Revenue Housing Loans The Council is aware of the particular difficulties in collecting its housing

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Collection Performance

Despite the good returns in the other income collection categories, housing loans deteriorated by 6% in the year when compared to the returns achieved in 2011 with arrears at 31 December 2012 amounting to €936k, an increase in the year of over €100k. At the year-end date there were 145 accounts with accumulated balances of €736k that were more than six months in arrears.

loans which reflects the broader difficulties facing lending institutions in the private sector. In response to this issue we have set up a specific Housing Arrears Unit within the finance function seeking to address this problem. This action has been recognised as a best practice template by the Department for other local authorities around the country. We have thus far engaged 83 account holders in the MARP process and are optimistic that the pattern of increasing housing loan balances will be arrested and hopefully reversed.


I carried out an examination of procurement compliance during the current audit concentrating on expenditure incurred by the Council’s main directorates. I noted that there were a significant number of contracts that were not tendered in accordance with national and / or EU regulations and guidelines. The Council’s own procurement unit also carried out a review of purchasing across the directorates with several contracts, amounting to a total spend in 2012 of €3.4m, being identified where no competitive processes were applied. I highlighted, following my examination of procurement compliance, a further €0.2m that was paid in 2012, to one supplier in respect of JCB hire charges, without recourse to formal tendering procedures. I have recommended that corrective action be

The Council is, and has been, proactive in the procurement area. Our Procurement Unit, which consists of a staff of two, has been operational since September 2010 and is involved in directing and controlling all procurement spend. Initially the Unit’s concentration has been on analysing the big spend items and the biggest suppliers. The unit’s objectives are to ensure that a proper procurement process has been completed and that the Council/Borough achieves savings/efficiencies where possible on its procurement activities. Part of the Procurement Unit’s work programme for 2013 was to identify areas by directorate that needed to be procured differently, from both a compliance and value for money points of view. Service areas have already been advised of the areas they need to focus on and are tasked with addressing any outstanding issues identified by the Procurement Unit’s review as part of their work schedule. We note the significant effort that will be required to address some of these issues as many of the outstanding areas are challenging and time consuming to resolve. The Council will run tender competitions itself; make use of regional competitions; or use existing or future national competitions run by the National Procurement Service or LA Quotes, if these are deemed appropriate.

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implemented immediately to ensure that the Council is fully compliant with all relevant national and EU procurement regulations and guidelines.

It should be noted that the JCB hire from one supplier referred to was addressed by the Council by way of a mini competition in Feb 2013 using LA-Quotes.


Kilkenny Local Authorities Leisure Complex Limited This company oversees the day-to-day management of the Watershed Leisure Centre and is jointly owned by the Council and the Borough Council. The Council’s investment in the company was impaired by €6.3m in 2012 following the conversion of the loans issued to the company by both Councils to ordinary shares and the exceptional write-down in the value of the property held by the company. As recommended at the previous audit, the Council’s portion of the loan conversion, amounting to €7.1m, was accounted for in the revenue account and was partly funded by a reserve from the capital account of €5.6m. The remaining balance of €1.5m was transferred to capital where it remains to be funded. The audited accounts for the year ended 31 December 2012 recorded a surplus for the year of €10,428 before depreciation. After accounting for depreciation charges of €878,996 the accumulated revenue losses increased to €13.4m at the balance sheet date. These

The comments made are noted and the Council will make the necessary adjustments in the AFS 2013. Kilkenny Local Authorities Leisure Complex Ltd, trading as the Watershed, is directed to operate on a breakeven/profit making basis before depreciation and has been so operating since the beginning of 2011. This is an outstanding result for a leisure complex and compares favourably with comparable facilities across the country during a time of discretionary income constraints. The Council does not subsidise the operational costs of the leisure centre which is exceptional for a facility of this nature. The depreciation cost of the facility was an upfront infrastructural investment by both Kilkenny Local Authorities for the people of Kilkenny which is being provided for on the capital and revenue budgets of both local authorities. It has been agreed, with effect from 2013, that the Watershed will pay an annual charge of €5k to the Council as per the lease agreement. The CEO of the Watershed remains optimistic that the annual budget for 2013 will be met and surpassed.

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losses were offset by the issue in 2011 of 100 €1 ordinary shares, acquired in equal proportion by both the Council and the Borough Council for a total premium of €14.2m. The premium on the issued share price was paid by both Councils at a time when the company was carrying significant accumulated revenue losses. The company’s auditors include an emphasis of matter paragraph in their 2012 audit report in which it was noted that there existed a material uncertainty that cast doubt upon the company’s ability to continue as a going concern. I note from an examination of the company’s most recent management accounts (May 2013) that trading conditions remain difficult. The accumulated losses incurred by the company will continue to impact on the Council resources unless further remedial action is implemented. The land on which the leisure centre was built is owned by the Council and a lease agreement was entered into in 2007 that provides for the company to pay an annual charge of €5k. I note that while the company’s accounts have included this charge since the date of the agreement, the Council has not yet accounted for this source of income. The Council’s 2012 AFS has not been adjusted for the reduction in the value of the investment as a result of

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the operating loss recorded by the company in 2012.

Laois County Council

Financial Position

The Council will need to continue to implement strict budgetary controls to ensure that the accumulated deficit, which stands at €495k at the end of 2012, is reduced over the coming years. The balance has only been reduced by €35k over the last five years.

The debit balance on the revenue account at the beginning of 2004 was €1,287,476. Substantial progress has been made in reducing this balance in very difficult times over the past few years.


The collection yields for 2012 show a decrease for rates and housing loans of 3% and 5% respectively. While the return from commercial water charges shows an increase of 2% the yield continues to be very unsatisfactory. There has been a significant increase in the arrears in relation to rates and housing loans. The Council wrote off €2.45m in respect of rates, €197k in respect of commercial water charges and €187k in respect of housing loans in 2012. Housing Loans The arrears in this area are a matter of concern. It is noted that 30% of housing loans are in arrears for more than three months with outstanding balances amounting to €1.125m.

Invoices totalling €420,906 were issued after the year end for water/waste water for the year ended 31 December 2012. They represent 23% of the accrual for 2012. The arrears in rates and housing loans are a reflection of the financial situation businesses and mortgage holders are in. €1.736m of the rates write-off refers to vacant properties. The amount written off in respect of housing loans will be recovered from the Mortgage Arrears Resolution Process (MARP) fund. Every effort has been made to assist those in arrears with their mortgages through the MARP. This has resulted in an increase in arrears at the end of 2012.

Surrendered / 27 houses were surrendered by tenants or The amount of €2.177m will be recovered from the MARP fund and the sale

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Repossessed Houses

repossessed by the Council in the period 2009 to 2012. The Council realised a net deficit on the surrenders/repossessions, which amounted to €2.418m at 31 December 2012. The net deficit currently stands at €2.177m due to receipts in 2013 from the sale of surrendered/repossessed houses.

of dwellings. €1.288m will be received from the MARP fund before the end of 2013.


A review of capital assets unfunded (CAU) was carried out as part of the audit. The total debit balance for CAU projects at the year-end was €9.3m. The breakdown by programme group is as follows: CAU Debit Balances at 31 December 2012 Programme Group €m Housing 3.54 Road Transportation and Safety 2.52 Development Incentives and Controls 3.20 Miscellaneous Services 0.04 The housing balance includes an amount of €2.418m in respect of surrendered/repossessed houses. There has been very little movement on the remaining project balances over the last couple of years.

Approximately €2.4m of the housing balance will be funded from the MARP fund and the sale of dwellings, thereby reducing the balance of €9.3m to €6.9m. €2.52m of the balance will be funded by development contributions with the remaining balance to be funded in due course from the sale of machinery, sites/land at a number of locations in the County.

Leitrim County Council

Financial Position

The Council recorded a deterioration of €1.36m in the general revenue balance during 2012. It is imperative that strict budgetary controls be implemented to eliminate this deficit.

While Leitrim County Council has continued to implement a programme of monitoring and review of expenditure to ensure that budgetary limits are not exceeded, the cumulative effect of externally imposed costs and cuts resulted in a deficit of €1.36m for 2012. The increase in the deficit can be attributed to the following uncontrollable once-off items:

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• During 2012, the Council was obliged to make once-off gratuity payments to staff retiring under the ‘Retirements Under Grace Period Scheme 2012’ amounting to €1.064m • Also as a consequence of the unforeseen number of employees availing of this scheme, the budgeted pension related deduction rebate was adversely affected to the tune of €65k • A reduction of €291k in the Local Government Fund. As required by Section 104 of the Local Government Act, 2001 the Council noted the AFS for 2012 and approved the over/under expenditure of the budget on various service divisions. Details of over / under expenditures on the revenue account are contained in note 17 of the AFS.


Commercial Water The collection yield for commercial water charges at year end was only 27% with arrears amounting to €1.37m. The Council has made a provision of €421k for bad debts in relation to water charges.

Commercial Water Charge collection has proven to be particularly difficult in recent years, this can be attributed to a number of factors including; • A large number (circa.180) of group water schemes (GWS) supplied from the public mains in Leitrim. GWS account for 52% of the total arrears, with 43% of total arrears accounted for by just 10 schemes • One commercial debtor accounts for 10% of the total arrears • Excessive usage and leakages in a number of agricultural and GWS connections • The economic downturn • A number of GWS have agreed payment plans in place and a number of cases were referred to specialist debt recovery solicitors and are currently going through the courts • It is envisaged that by the end of 2013 that a number of GWS will be taken over and transferred to Irish Water in 2014.

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Commercial Rates A bad debt provision of €113k (6%) has been provided for against commercial rates arrears of almost €2m. I consider this provision inadequate and recommend that it be reviewed in advance of the completion of the 2013 AFS.

The importance of increasing the commercial rates bad debt provision for 2013 is acknowledged and every effort will be made to do so in 2013. This is very much dependent on the Council being able to afford this in 2013, and the aim would be to build this incrementally over the next number of years.

Planning Bonds and Refundable Deposits

The Council has refundable cash deposits of €3.5m associated with developments not taken in charge, however there is no schedule linking these developments with the cash deposits held. Also in a number of cases, insurance bonds which were provided prior to the commencement of the development have expired. The estimated value of these expired bonds at the date of audit was €500k. I have recommended on previous audits that a current schedule of refundable deposits be maintained by the Council providing details of the development to which the deposit relates. Proper controls also need to be in place to monitor the expiry dates of insurance bonds, to ensure that they remain valid and are extended/ replaced where necessary.

The Planning Department maintains a register of all planning bonds held by the Council, which is monitored on a regular basis. When bonds are nearing their expiry dates, developers are requested to either maintain the bond until the estate is taken in charge, or submit a refundable cash deposit in-lieu of the bond. However it has become increasingly evident that bond providers are no longer willing to put new bonds in place or to extend existing ones. While some developers submit a cash deposit in lieu of a bond, this is becoming increasing difficult to collect. Cash deposits are required to be lodged prior to the commencement of the development, but many developers now try to negotiate a cash lodgement per unit rather than for the entire development. The Council will endeavour to have all planning refundable deposits held at 31 December 2013, reconciled with the corresponding planning records prior to the completion of the 2013 AFS and subject to adequate resources being made available.

Limerick City Council

Limerick Regeneration

The cumulative project costs of the Limerick Regeneration Programme were €180m to December

The Council continued to progress the regeneration programme with the acquisition of key strategic sites in 2012 and 2013, funding of social

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2012. The Limerick Regeneration Agencies, which were set up to oversee the regeneration of the Northside and Southside of Limerick, were formally dissolved in July 2012. The functions of the Agencies were transferred to the Council in 2012, along with their assets, liabilities and undertakings, and have been reflected in the 2012 AFS.

intervention measures and the commencement of the refurbishment of the regeneration areas. A key milestone was achieved in early 2013 with the completion of the first new build scheme of 34 units at Cliona Park, Moyross with up to 100 units to be completed by the end of the year. A new 10-year Framework Implementation Plan was launched in September 2013 for the regeneration areas. The plan will also dovetail with the Limerick 2030 Economic Plan which is designed to revitalise the city and county wide economy.


The collection yields in respect of rates continued to decrease in 2012, with arrears increasing by €2.2m to €19.1m at the year end. A significant bad debt provision of €14.5m has been provided against these debtors in the accounts. Commercial water charges arrears of €2.8m remain high, with a significant level of these arrears being brought forward from previous years. The collection yields for housing loans and rents and annuities also decreased in 2012, with arrears of €0.2m and €0.7m respectively.

The collection yields particularly in the area of rates are disappointing. Due to the difficult economic climate payment of all revenue sources have become more difficult; however the Council is striving to improve its collection for 2013. Every effort is made to meet with customers and agree payment plans. Training is being provided to accounts receivable staff in order to streamline procedures and establish best practice. In certain cases, legal recovery of the debt is being pursued where customers have failed to agree or not adhered to previously agreed payment plans.


Grove Island Leisure Centre The Council became the sole owner of Grove Island Leisure Centre in 2012; however, the assets and liabilities of the company are not reflected in the Council’s 2012 AFS. The share capital value of the company (50 shares valued at €1 each) has been incorporated under the “associated companies” heading in Note 3 of the AFS. The most recent draft accounts available show liabilities in excess of assets

Limerick City Council confirms that it will not seek repayment of the unsecured interest free loan of €2.9m that it is owed by the company at the year end, for a minimum of twelve months from the date of signing off on the 2011 financial statements. The Council has also confirmed that it will pay all loan charges on behalf of the company as they fall due during this period. In 2013, a new management agreement was entered in to for the operation and management of the Grove Island complex.

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of €8m at 31 December 2011. An emphasis of matter paragraph is included by the company’s auditors in their draft report, in relation to the ability of the company to continue as a going concern without the financial support of Limerick City Council. The Council has confirmed that it will provide the necessary financial support to the company to ensure that it can continue to meet its liabilities as they fall due until November 2014.

Insurance Fund Shortfall

Limerick City Council operates an insurance excess of €127k with claims under this excess paid directly by the Council. The insurance fund set up to meet future employer and public insurance claims operates on a cash basis. The fund had reserves of €1.96m at 31 December 2012, however it was estimated that claims notified to the Council, but not resolved at December 2012 were approximately €6.9m. These claims will have to be funded from the Council’s own resources. This matter has been referred to in the Statement of Accounting Policies and Note 11 in the AFS.

In 2013, the Council’s insurers agreed to provide full cover for employer and public liability insurance. Limerick City Council is currently in negotiations with its insurers regarding the legacy issues.


During the course of the audit, a number of instances of non-compliance with relevant national and EU procurement regulations and guidelines were identified and referred to the Council for review. I also noted deviations from the Council’s own purchasing policy

Limerick City Council endeavours to comply at all times with appropriate local, national and EU guidelines and regulations in relation to the procurement of works, supplies and services, unless emergency works dictate otherwise. A Procurement Officer was appointed in 2013, and part of the role is to provide guidance and information on public procurement

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and procedures, with several instances of retrospective approval for purchase orders after receipt of the goods and services. The Council needs to introduce a checking function to ensure adherence to prescribed procedures.

rules. In-house training was provided to 40 key staff in 2013 and this training focussed on the correct procedures to be used for both national and EU value procurements. The training allowed staff the opportunity to ask specific questions and seek clarification in relation to their particular areas of work. Work has commenced on the preparation of a procurement procedures document and this will be completed early in 2014.

Limerick County Council

Financial Position

The Council recorded a deficit for the year of (€164k) and the cumulative deficit is (€549k).The Council must ensure that the revenue account balance does not deteriorate further.

The Council implements strict budgetary controls and continually strives to ensure that the revenue account does not record a deficit. During 2012 there was exceptional expenditure incurred for operating costs in the landfill as a result of leachate disposal, lump sum costs and water supply costs due to the pollution of the Deel river.


The major debit balances on capital account at 31 December 2012 were as follows: • Castleconnell Sewerage Scheme €2m • Other Water and Sewerage Schemes €5.5m • Mungret Civic Amenity Project €1.8m • Gortadromma Landfill Development €2.6m

Castleconnell Sewerage Scheme The Council replied to the Department of the Environment, Community and Local Government (the Department) after submitting a final account in February 2011. Payment of outstanding monies is now due. Other Water & Sewerage Schemes The Council has now submitted to the Department the final account in respect of Pallaskenry/Kildimo Water SS, Castleconnell S.L.I. and G.W.S Design Build Operate. Reports are being compiled for Fedamore Sewerage Scheme, Croagh Sewerage Scheme and Southern Ring Water Main.Consideration is being given to the raising of a loan for Kilmallock Sewerage Scheme and Mungret Sewerage Scheme. Mungret Civic Amenity Scheme There has been Council and Departmental approval to draw down a loan for the Civic Amenity Site to clear the debit balance.

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Gortadromma Landfill Development This debit balance will be funded from the aftercare fund and also the income generated from the gas to energy project which is expected to break even in 2013.


I note that the collection yields for rates, housing loans and housing rents have deteriorated this year. Rate arrears were approximately €5.2m, water arrears €1.9m, housing rents €819k and housing loans €368k. All revenue collections require close monitoring to ensure that the arrears do not increase further. The provision for bad debts will require further review at the end of 2013.

Limerick County Council set-up a Debt Management Unit in 2012 to focus resources and expertise on collection of the main income headings. Monitoring and maximising all collection accounts is given the highest priority particularly in light of the difficult economic climate that currently exists. The provision for doubtful / bad debts is constantly under review and adjusted as required. This will be done as part of preparation of the AFS for 2013.

Longford County Council


The collection yields for 2012 show an increase for rates of 1% and a decrease for housing loans of 10%. While the return from commercial water charges shows an increase of 2% the yield continues to be very unsatisfactory. The Council wrote off €882k in respect of rates and €139k in respect of commercial water charges in 2012. Housing Loans The Council has 389 housing loan accounts. There are 220 accounts in arrears, with 125 of these in arrears in excess of 3 months. There are 35 customers whose individual arrears balance exceeds €5000. Housing

Rates and rent collections have been maintained despite a very difficult economic climate. Water collections have improved as old accounts have been resolved and dealt with. The legislative situation renders collections more difficult where domestic connections are involved which is often the case in rural areas. It is anticipated that this aspect will be resolved with the establishment of Irish Water. Loan arrears have become a critical issue in line with the deteriorating economic climate and the provision for bad debts has been increased accordingly. Longford County Council commenced implementation of the Mortgage Arrears Resolution Process (MARP) in October 2012 and has

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loan arrears amounted to €445k at 31 December 2012, which is an increase of €140k on the figure at the end of 2011.

been making contact with and engaging with arrears cases. This process is on-going and it is anticipated that a resolution of a number of serious arrears cases will take place during 2013.


Longford Pool Construction Ltd Longford Pool Construction Limited is a company jointly owned by Longford County Council and Longford Town Council. The company operates a swimming pool, sports hall and gymnasium. The latest published accounts for the company are for the year ended 31 December 2011. Turnover dropped by 4.1% compared to 2010. The accounts show a loss for the year of €146,561 and an accumulated loss of €703,899. The Company has received grants totalling €3.8m and has an outstanding loan of €1.298m from Longford County Council. The grants are being amortised in the accounts over 20 years. In order to address the difficulties being experienced by the company the directors have embarked on a programme of restructuring to restore the company to profitability. The company’s auditors have stated in an emphasis of matter in their audit report that Longford County Council has agreed that it will provide cash as required by the company and it has further confirmed that it will not seek repayment of the loan balance of €1.298m during the coming year. Based on that support the directors consider it appropriate that the financial statements be prepared on a going concern basis and therefore the financial statements do not

Despite the cost saving measures already put in place the company’s financial performance has been adversely affected by significant increases in energy prices. As a result of this a new and more efficient wood pellet heating system was put in place in late 2012 and the benefits of this are being seen during 2013. A new management structure is also to be put in place before the end of 2013.

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include adjustments that would result if the company was unable to continue as a going concern.


Development levies are disclosed in the AFS on an accruals basis. The total amount outstanding at 31 December 2012 was €3.58m and was classified in the balance sheet as follows: Current debt (Note 5 to the AFS) €2.2m Long Term debt (Note 3 to the AFS) €1.38m The amount of development levies collected during 2012 was €167,775 (€239,130 in 2011). The Council has included a provision for bad debts for development levies of €1.945m which is included in the overall provision for bad debts in Note 5 to the AFS.

The collection of development levies has proved particularly difficult due to the collapse of the property market. The Council has entered into instalment agreements with a number of debtors to facilitate the collection of these charges. It should also be noted that debtors cannot be taken out of the system while a planning permission is still live even if the works have not proceeded. The bad debts provision is maintained at a high level in recognition of the difficult collection environment.

Louth County Council


Note 11 of the AFS includes the following debit balances that the Council has to finance; Port Access Northern Cross Route €2.38m Alterations to Dundalk Gaol €2.39m Land at Mullavalley, Louth Village €5.13m Land at Kilkerly €1.10m Land at Dunleer €7.93m Total €18.93m


As highlighted in the Local Government Audit Service’s Activity Report for 2011, Louth County Council’s rates collection yield of 59% was the second

Collection of local authority charges continues to be very difficult in the current economic environment. We have implemented a new collection system and are actively pursuing all monies outstanding to the council. The

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lowest collection performance of the 34 main local authorities. In the year under audit there was a further deterioration in the collection yield for rates with a corresponding increase in the arrears to €5 million. The Council has increased the bad debt provision for rates from €529k to €779k. This is a serious matter for the Council to address. A detail review should be carried out of the rates debtors to ensure that the bad debt provision reflects the current economic circumstances.

bad debt provision will be reviewed in detail again at year end and adjusted in line with our findings.

Mayo County Council

Financial Position

The cumulative deficit at the end of 2012 of €3.1m is a cause for concern. No provision was made in the budgets for 2012 or 2013 to take account of the accumulated deficit coming forward. Surpluses had been recorded in the years 2008 to 2011, which reduced the deficit by €1.4m, but in 2012 a deficit of €625k has been incurred resulting in the overall deficit increasing again to €3.1m. It should also be borne in mind that the Council has loans of approximately €82m, which have to be serviced from the revenue account. Strict budgetary controls will need to be implemented to ensure this deficit is eliminated over the coming years. The Council has approved expenditure in excess of the budget on the various service divisions as set out in note 17 on page 22 of the AFS.

The Council, has recorded a deficit of €625k on its revenue account in 2012 The increase in the accumulated debit balance is disappointing in light of the fact that the Council had made significant progress in reducing this accumulated debit balance, with a reduction of €1.4 million in the previous four years. We will be taking all reasonable steps to ensure that the accumulated deficit on the revenue account is reduced in the short to medium term.

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Collection yields in respect of all the revenue collection accounts remain weak. Arrears overall at the end of 2012 were €10.6m (€10m in 2011) despite write offs of €3.5m in the year. The percentage collection of 50% (55% in 2011) for commercial water charges remains problematic. Every effort should be made to reduce arrears including the withdrawal of the service and the use of legal remedies where appropriate. Bad debts provisions also need to be reviewed on an annual basis. The bad debts provision had been reduced slightly in the 2012 accounts to €7.5m. Due to the continuing drop in collection percentages a substantial increase in the overall provision is required in 2013.

It is acknowledged that 2012 was an exceptionally challenging year, not only for the Council but also for many of our customers and we continue to work with them in a manner commensurate with their particular financial capacity at any given time. The increases in arrears are a reflection of the difficulties facing both businesses and individuals in the current economic climate. We will continue with the policy of engaging proactively with all of our customers, with a view to, over time reducing the level of arrears. In limited instances, where no reasonable steps are being taken to pay outstanding debts, we will continue to take appropriate court action to pursue these debts. The Council will review its bad debts provisions for 2013.

Internal Audit The internal audit unit was effectively disbanded in June of 2011. In addition the internal checker retired in February 2012 and while one staff member continued to carry out some checking duties in 2012, the function was greatly diminished. Internal audit and internal check are critical management controls in ensuring that the activities of the Council are properly carried out. Given the size

The Council tendered for the provision of internal audit services and have appointed a firm of auditors to carry out this function. A work programme, which was also approved by the Audit Committee, has been agreed with this firm and they commenced work on a number of reports in 2013.

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and complexity of the business of a local authority it is difficult to understand how these positions remained unfilled for all of 2012. This has impacted adversely on my work as the external auditor of the Council. This weakening of the control environment and governance procedures of the Council is a cause for concern and needs to be addressed. The Council’s Audit Committee cannot function effectively without the support of internal audit.

Meath County Council

Financial Position

The debit balance of €6.75m on the revenue account is cause for concern. No provision was made in the budget to take account of the debit balance on the revenue account. Good progress was made on reducing the debit balance in the years 2008 to 2011 but as shown above only a small surplus of €0.11m has been recorded for the year 2012. The Council will need to implement strict budgetary controls to ensure this adverse balance is eliminated over the coming years.

Over the past seven years Meath County Council has reported consecutive surpluses resulting in the cumulative deficit being reduced by €4m (37%) since its peak of €10.8m in 2005. The 2012 results, which resulted in a surplus in the revenue account of €0.11m, represent the continued focus on cost reduction through efficiency, rationalisation and value for money together with a policy of maximising income particularly in the context of mid-year adjustments to the Local Government Fund. This policy of continual financial monitoring and budgetary control will remain in place to ensure that corporate strategic financial objectives are achieved.


Included in the unfunded balances in note 11 in the AFS of €11m is a debit balance of €10.8m in respect of the Tiphead Closure Account. The funding of this debit balance has been the subject of discussions between the Council and the Department of the

The capital unfunded balances of €11.7m include the cost related to the closure of the Basketstown Tiphead. The Basketstown landfill was the first in the country to be remediated and the cost (€10.8m) was fully borne by Meath County Council. The remediation work, which was directed under EU legislation, placed an enormous cost burden on Meath County Council.

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Environment, Community and Local Government (the Department) over a number of years, but no source of funding has been identified. Arrangements need to be put in place to fund this debit balance.

A number of requests for funding have been made to the Department. Over the past seven years Meath County Council has reduced the unfunded balances from a high of €43m in 2005 to €11.7m in 2012, a reduction of 73%. The adverse balances are mainly historical in nature. All new capital projects go through a capital appraisal process. This process identifies the funding available in advance of the commencement of any new project.

Internal Audit The Council’s internal audit comprises one member of staff. The internal auditor prepared twelve reports during 2012, and also carried out other governance work. Internal Audit operates with the direct authority of senior management and under the general supervision and guidance of the county manager and the audit committee.

The function of internal audit is to assist and advise management by objectively examining, evaluating and reporting on the adequacy of internal controls. A draft internal audit plan is prepared for each year using the criteria for risk based auditing set out in the internal audit guidelines for local authorities (VFM Report 21). The plan prioritises the audit work to be carried out in terms of the risks identified in the Council’s risk register. The draft plan is reviewed and assessed by the Audit Committee as recommended in circular Fin 11/2007 and is subsequently approved by the County Manager and the Head of Finance. The audit committee also monitors the implementation of the internal audit plan on a quarterly basis and includes an assessment of the performance of internal audit as part of its annual report that is presented to the Council.


The accounting treatment of the associate companies in note 11 and note 3 in the AFS is inconsistent with the accounting policy on associate companies as stated on page 7 of the AFS. The intention of the Council was to state the initial value of the investment as the fixed assets of the

The observation in relation to the accounting policy is noted and accepted and in future more explanatory information will be provided within the statement of accounting policies number 16 “Interest in Local Authority Companies”. The valuation of the two associated companies, Meath Arts Centre Ltd and Trim Sports and Leisure Centre Ltd, based on their respective 2012

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companies plus the current net assets. In subsequent years the value would be calculated by taking this initial valuation plus or minus the movement on the revenue account. The long term creditors were not taken into account in the initial valuation on the grounds that Meath County Council is the long term creditor. The movement on the revenue account has not been included in the value of the investment since 2010. The Council must ensure that proper corporate governance arrangements are in place in its subsidiary and associate companies.

accounts is €23,262,201. This is slightly different than the stated valuation of €23,208,404. An adjustment to reflect this, which has no effect in the Council’s revenue account, will be made in 2013.

Monaghan County Council

Financial Position

During 2012 the deficit on the general revenue balance increased by €394k. It is imperative that tight financial controls are implemented to ensure that the Council operates within budget.

The increase in the deficit is attributable to the reduction in the Local Government Fund allocation for 2012 amounting to €535,376.


At the end of 2012 there were debit balances of €16.9m on capital projects, of which funding has yet to be identified for €4.4m. There are credit balances totalling €1.3m on a number of capital projects which are classified as completed and included in fixed assets in the accounts. The Council should carry out a review of these credit balances to establish how they arose and take the necessary action to address them.

Unfunded debit balances are reviewed on an on-going basis and when possible provision is made in the annual budget to provide for the phased reduction of these balances. Balances relating to water and waste water projects will be addressed in the transfer of assets to Irish Water. A review of credit balances on all projects classified as completed and included in fixed assets will be undertaken. €927k of the credit balance referred to relates to a project carried out in two phases and there is a significant debit balance recorded on a separate cost centre. These balances will be matched against each other on completion of the project.

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The decline in the collection yield for rates continues to be a cause for concern. In 2012 rates arrears totalled €2.313m (€1.899m in 2011). Rates totalling €1.1m were written off in 2012. There was a significant decrease of 10%, compared to the previous year, in the collection yield for commercial water at 56%. At the end of 2012 arrears totalled €1.1m (€951k in 2011). Of this amount, €241k (22%) relates to arrears outstanding from previous years. Consideration might be given to the setting up of a single credit control unit for the purpose of pursuing all outstanding debts. This would allow the sharing of payment history in respect of individual customers.

The decline in collection yields for rates is directly attributable to the current financial difficulties facing many commercial enterprises at present. All accounts in arrears are being actively pursued with a number of files currently with the Council’s solicitors. Payment plans have also been agreed in many cases in order to ensure collection while at the same time easing the cash flow pressure on the businesses concerned. The majority of the rates write off amounting to €1.1m was anticipated and an amount of €1m was provided in the 2012 Budget for rates write offs. The setting up of a single credit control unit will be examined when the full impact of the unification of local authorities and the transition to Irish Water is known.

Annual Financial Statements

The draft annual financial statement was not made available to audit until 22 May 2013. The late production of the AFS can impact adversely on the conduct of the audit and on the service that the external audit provides to the local authority. In accordance with the Department of the Environment, Community and Local Government’s (the Department) Accounting Code of Practice, the Council’s draft annual financial statement should be prepared by the 1st of April of the following year.

The Council will endeavour to have the Draft Annual Financial Statement completed by the 31st March in compliance with the Accounting Code of Practice in future.

Procurement Procurement procedures were not properly Prices for bulk fuel were advertised locally in 2012. However, the e-tenders

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Procedures implemented in the following cases in that the e-tenders process was not utilised: • Payments of €414k for the supply of fuel oil • Payments of €110k for the provision of compacting services at the landfill site • Payments of €247k for the transportation of leachate from the landfill • Payments of €254k for the provision of pollution control services.

process was utilised in 2013 via the Local Authorities Quotes Framework and is now used for all purchases of bulk fuels. Regarding the provision of compacting services at the Scotch Corner landfill site, quotations were originally sought back in August 2009 from three plant hire companies who supplied compacting services. The current landfill compactor contractor was subsequently chosen as the tender price submitted, which included labour and fuel, was significantly cheaper than the tender price submitted by the other contractors. An additional advantage was that the successful contractor was locally based and was able to provide replacement plant at very short notice which is particularly important to ensure best practice at the landfill site and to help ensure compliance with our EPA waste license. With regard to the transportation of leachate, a local contractor who provides a very reliable and efficient service had been engaged to transport leachate from the Council’s landfill at Scotch Corner for a number of years. Having a local contractor is critical as storm events may require the provision of additional plant at very short notice. In October 2012 a tender procedure was formally initiated using e-tenders process. The existing contractor who had been carrying out the service was, following the tender assessment deemed to have submitted the most economically advantageous tender and subsequently was awarded the leachate haulage contract in February 2013. Payments made relating to the provision of pollution control services were associated with the removal and subsequent treatment of diesel laundering sludge that had been illegally dumped in the county. No formal tender procedure had been in place prior to 2012. However, the Council, along

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with the County Councils of Louth, Meath and Cavan, initiated a tender process using the e-tenders website in June 2012. Following a comprehensive tender assessment, the preferred waste contractor was subsequently appointed in December 2012.

North Tipperary County Council


The major debit balances on capital account at 31 December 2012 were as follows: • Advance land Acquisition Housing €892k • Voluntary housing €457k - this will be funded by bank borrowings. • SLI Kiltillane €320,000 • Waste Water schemes €1.5m • Roscrea Swimming Pool €1m - will be funded by state grants and development contributions. • Lough Derg Amenity Project €600k - will be funded by development contributions and revenue account transfers. • Landfill capital balances loan charges €954k will be funded from revenue account transfers.

We continue to follow up on the adverse balances on the capital account and have made provision in the revenue account in 2012 and in our 2013 budget where alternative funding is not identified.


I note that the collection yields for rates and commercial water have deteriorated again this year. Rate arrears were approximately €1.8m, water arrears €1.8m and housing loans €162k. All revenue collections require close monitoring to ensure that substantial arrears are not accumulated. The provision for bad debts for rates and water charges increased to €1.9m in 2012 and will need to be reviewed again next

All sources of income and collection levels are monitored on a monthly basis. Collection levels for both rents and housing loans have increased over 2011 levels with a reduction in both water and rates collection levels. As outlined in previous years this Council is actively engaging with customers and continue to put in place payment plans where possible. The provision for bad debts is reviewed each year end.

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year.

Offaly County Council

Financial Position

It is noted that the material accumulated deficit on the revenue account has deteriorated further in 2012. Reducing this significant deficit must be a priority for the Council.

The elected members have approved a provision of €660k in the 2013 Offaly County Council’s budget towards reducing the accumulated deficit and resolved to amortise the accumulated deficit over ten years.

Balance Sheet The balance sheet figures as originally presented to the members have been reduced by €3m to reflect a correction in the overstatement of government debtors. Additions to fixed assets in 2012 included €1.4m in respect of the purchase of 33.6 acres of land from Coillte.

This is a compensating difference caused by a coding error. The effect on net assets is nil.

Land Valuation Land holdings have been valued at €47.27m in the accounts. A detailed review of the actual land holdings and their valuations should be carried out immediately and a correction made to the balance sheet in 2013 for any overstatement.

This will be included in our work programme.

Roscommon County Council

Fixed Assets The increase in the value of the fixed assets is primarily due to the transfer of €9 million of housing assets from work in progress during 2012. All of these housing assets had been completed in prior years. As reported in previous years’ audit reports, the Council has commenced transferring all land assets from manual registers into a computerised (GIS)

I propose to review the current processes in place and prepare an action plan during 2014 to address the issues raised. The review will take account of the transfer of assets with a net book value of €209.9 million to Irish Water, which is the most important issue currently facing the local government sector. Consideration will also be given to the implementation of a new Financial Management System, Agresso 5.6, which is due to take place during 2014 and as a pilot site Roscommon County Council will play a leading role in ensuring the system meets the requirements of the sector

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format. The Council has made very little progress in this area from the position outlined in the 2011 audit report. I have concerns regarding the adequacy of the registration of the property assets owned by Roscommon County Council and the inadequate manner in which fixed assets are recorded in the books of the Council. There are virtually no folio references for individual assets recorded in the Fixed Asset Register. Folio references are vital to vouch the asset’s registration of title. As a result I requested folio references for a sample of assets from the relevant sections, only 50% of which were supplied in the course of the audit. To ensure that the Council proactively manages its property portfolio as outlined in the Value for Money Audit Report No. 9, the Council needs to allocate adequate resources to address this issue. Where adequate records of assets owned are not held, or where asset records are incomplete, there is a risk that assets may be inadequately insured or may be lost to the authority. A review of all of the Council’s assets and the associated asset records, including the registration of title, needs to be carried out as a matter of priority.

as a whole. The review will require involvement of the County Solicitor who will be able to provide essential knowledge in relation to the County Council’s assets portfolio. Any plan will need to take account of the resources available and the current reform agenda within the local government sector which is unprecedented.

Revenue Commercial Water Charges

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The commercial water collection yield declined again in 2012, which represents a fall of 14% within a three year period. 43% is a most unsatisfactory level of collection. The debtors at year end have increased to €2.8 million, with €1.3 million over a year old. The agent charged with responsibility for billing and collecting debts, does not actively pursue debtors which are over a year in arrears. Arrangements need to be put in place to ensure that these debtors are properly followed up. While there is considerable doubt over the collectability of debtors over a year old, the Council’s bad debt provision of €0.6 million does not adequately reflect this. I have received assurance that the provision will be substantially increased for the 2013 AFS. Rates The rates debtors at the year-end were €2.4 million, which represented an increase of €0.1 million, despite write offs of €2.4 million in the year. 81 debtor accounts representing arrears of €800k were on payment plans. In addition, over the three years 2010 – 2012 the Council has instigated legal action against 474 debtors at a cost to the Council in excess of €300k. Despite these actions, the rate debtors continue to increase, placing a burden on the Council’s cash flow. In the context of the increasing level of rate debtors, I

The bad debt provision will be increased to approximately €1.5m as part the 2013 AFS process. The detailed analysis of debtors will be undertaken with Veolia during January 2014 as part of the transfer of collectable debt to Irish Water. The level of collectable debt will then need to be agreed with Irish Water for which Roscommon County Council will be compensated. The balance of €2.4m is deemed to be collectable by the local authority, as all bad debt is written off as part of the AFS process. Due to this process a decision was taken in the past not to increase the bad debt provision. The situation was further compounded by the need to meet central government targets in relation to financial management, whilst at the same time ensuring services were delivered to a high quality. Though the County Council finds itself having to meet conflicting demands it will increase the current bad debt provision as part of the 2013 AFS.

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deem the current bad debt provision of €91k to be inadequate. The Council has undertaken to substantially increase this provision as part of the 2013 AFS. Housing Loans There was a further €75k decrease in the value of housing loans collected during 2012, which resulted in a 7% decline in the collection yield to 50%. This represents a very poor level of collection. As highlighted consistently in recent audit reports, this is an area that requires increased resources to ensure loans are being monitored and pursued on a timely basis. I understand that these resources have been applied in 2013 along with the Mortgage Arrears Resolution Process (MARP). I am satisfied that the bad debt provision in relation to these debts was adequate.

The County Council welcome the fact that the current level of bad debt provision is adequate. At the same time the County Council is disappointed with the poor collection yield. However the following must be taken into consideration: • the County Council is a sub-prime lender and gave loans to clients who had already been refused finance by at least two financial institutions • the arrears relate to a small volume of cases, which are high in value • resources were directed to the collection of the Household Charge at the request of Central Government. The County Council recently implemented the MARP process and will follow these guidelines, which ultimately could lead to people losing their homes.


Publishing of Purchase Orders Circular Fin 07 / 2012 dated 28 June 2012 from the Department, advised local authorities that they were required, under the Public Service Reform Plan to publish every purchase order over €20,000 online by the end of 2012. To date, the Council has not met this requirement and arrangements need to be put in place to rectify this position.

The County Council will publish every purchase order, back dated to January 2013, in December 2013.

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Corporate Procurement Plan The Council’s Corporate Procurement Plan 2010 – 2012 remains on the Council’s intranet site, despite now being ten months out of date. This Plan does not reflect the provisions of the Department of Finance Circular 10/10, which causes a conflict with other procurement information available to staff through the same intranet site. I understand that a replacement plan has been prepared but has not been adopted by the Council to date. This position needs to be rectified as a matter of priority to ensure staff members are referencing accurate data in relation to procurement. Three instances were noted in the course of the audit where staff did not apply the provisions of the above-mentioned circular. This resulted in contracts worth in excess of €100k being awarded without being advertised on the e-Tender website. Procurement Officer In the course of the audit, I noted a number of breaches of procurement guidelines, including contracts not properly advertised and expenditure not tendered in line with national guidelines. The Procurement Officer has recently been assigned to other duties and has not been replaced. This is a vital function both for providing advice and for ensuring compliance with procurement policies by staff

The new Corporate Procurement Plan will be introduced by the Management team in quarter 1 of 2014. The above circular should have been fully applied and further training will be provided to all staff to avoid such a situation arising again. The contracts in question related to works on unfinished housing estates, for which funding needed to be spent within a tight timeframe as stipulated by the Department. In the three instances highlighted, three tenders were received for each contract, before awarding contracts to local suppliers to make estates safe. The resourcing of the Procurement Section will be reviewed during 2014, taking account of national considerations and the requirements of the Office of Government Procurement (OGP). The local government sector has to contribute €58.5m of savings over the next three years, out of the €500m identified as the total for the public sector as a whole and Roscommon will play its part in meeting this target. Contract overruns occur in construction projects and it is important that employees have the discretion within the framework of guidelines to

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members. To date the resources of the procurement section have not facilitated the monitoring function to be carried out and I recommend that resources should be allocated to permit this to happen. I reviewed a number of contracts awarded to see if the payments to suppliers matched the tendered prices. I found price overruns in relation to nine out of thirteen contracts completed. Two of these contracts, worth €400k had exceeded the tendered price by over 50%. EU Directive 2004 / 18 Article 31(4) permits additional works worth up to 50% of the original tender to be awarded to contractors for public works / services contracts. However, it is clear that the use of this provision should be the exception to the rule and should not be regular practice. Although the contracts referred to above do not meet EU levels, the application of EU rules in such instances would be considered best practice. Procurement Database In previous audit reports, I recommended the implementation of a central log of tenders. The Council’s I.T. Unit designed and rolled out a computerised system with effect from 1 January 2013. Training was given in relation to this new system and the requirement to use it was highlighted on the Council’s intranet site. When reviewed, as part of the current audit, it transpires that this system is not being utilised, with only three tenders to date having been

exercise their professional judgement to make decisions as to whether additional work is warranted and is value for money. I am satisfied the contracts noted above met this criteria and saved the taxpayer money in the long term. As indicated by the Auditor, it should be noted that all guidelines currently in place were followed, as the contracts checked and tested did not fall within the scope of EU levels. I can confirm that the procurement database will be populated and brought up to date by 31 January 2014.

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recorded on it. As a result, there is still no single list of tenders received by the Council and the non-use of this newly developed database represents a breach of the Council’s own procurement policy. I believe that current practices also represent a considerable weakness in the Council’s procurement system.

Internal Audit Due to the reduced internal audit function with effect from May 2011, there were only two internal audit reports completed in the year. This was further compounded by the internal auditor leaving the Council’s employment in November 2012. This further weakening of the control environment and governance procedures of the Council are a cause for concern and needs to be addressed. The Council’s Audit Committee cannot function effectively without the support of internal audit.

I have already highlighted the need to allocate and manage resources available to me based upon the requirements of the citizens of Roscommon and the reform agenda of central government. I place great importance on the role of Internal Audit as I believe it provides a level of comfort and confidence in relation to governance procedures and areas of risk for both Members and Management of the Council. As a result the County Council will tender for an Internal Audit service, which will be managed by the Financial\Management Accountant.

Sligo County Council

Financial Position

The deficit on the Council’s revenue account increased by 19% in 2012 to €15.409m. This is a very serious matter for the Council to address. In addition I am expressing concern in relation to the inadequacy of the bad debt provision. The following matters are of significant concern in respect of the Council’s finances: • There was a debit balance of €15.409m (€12.954m in 2011) on the income and expenditure account at the

The accounts for 2012 have resulted in a deficit of expenditure over income of €2.455m. The Council’s deficit at the beginning of 2012 was €12.95m for which the loan of €7.5m received in November 2012 was applied. The 2012 accounts now show the cumulative revenue account deficit at 31st December 2012 of €15,409,270. The loan of €7.5m has been accounted for in the balance sheet and the results for the year have not been affected by the loan in 2012. Each year there will be a provision for a debit balance in the budget of the revenue account equivalent to the principal repayments over the life of the

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end of 2012; • Long term debt amounted to €79m at 31 December 2012 (€73m at 31 December 2011). The Council’s financial position as outlined above has deteriorated significantly during the course of 2012. Management needs to prepare a complete review of all its activities. Capital Debt Capital debt amounted to €79m at the 31 December 2012. Capital debt includes a €7.5m loan, which the Council borrowed in 2012 to fund its revenue deficit. It also includes a €15m loan, which the Council borrowed in 2010 to partially finance unfunded capital balances. Both of these loans are now interest only loans. The projected interest charge on these loans in 2013 will be €430k .These charges will have to be revenue funded and will have an impact on the preparation of future budgets.

loan. The loan will accordingly reduce and the revenue account shall report a profit equivalent to the principal repaid on the loan, thus reducing the cumulative deficit by €7.5m over the term of the loan. The total loans outstanding by the council at the end of 2012 amount to €79.4m. Of these approximately €30m are mortgage or housing related loans that are fully funded by borrowers/voluntary housing groups etc. The balance (non-mortgage debt) that falls to be funded from the Council’s own resources amounted to €49.6m. These outstanding loan amounts represents expenditure on assets and infrastructure works such as land purchases, offices and buildings, water and waste-water facilities, fire stations, libraries, car parks, piers and harbours, burial grounds, parks etc. Approximately €19m of the €49.6m will be taken off the Council’s books on the transfer of the water services programme to Irish Water.

Budget Process The Council needs to ensure that it prepares its annual budget in a proper and meaningful way that covers all the financial targets of the local authority. It then needs to enhance its financial management procedures to ensure that it delivers these targets within budgetary guidelines. A number of specific issues were noted in

The 2012 breakeven position as presented in the financial appraisal included the assumption of €4m in income through effective savings arising from redeployment or voluntary transfer opportunities, and from a significant voluntary redundancy package. Because of the exceptional nature of these matters it was decided to show the financial impact as income rather than for the €4m to be reduced from budgeted payroll

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relation to the budgetary process: • The 2012 annual budget was prepared on the assumption that €4m in income would be saved in 2012 as a result of redeployment/voluntary transfer opportunities. There was no evidence at the time of budget preparation to suggest that these savings would occur in 2012. These savings were subsequently not achieved. • A revision to the 2012 budget was presented to the Council in April 2012, identifying reductions in budgetary expenditure in excess of €1m. • An independent financial appraisal was conducted of Sligo County Council by a firm of external consultants and was presented to the Council’s members in August 2012. This financial appraisal included an assumption that the Council would break even in 2012, based on the 2012 balanced budget presented by management to the external consultants. This assumption was incorrect as the Council has a reported deficit in excess of €2.45m.

charges across all divisions. During 2012, members were informed of the projected end of year outturn to be approximately a €2.5m deficit by effectively eliminating all discretionary spending, other than that required to retain services at levels that ensure compliance with statutory obligations.


Collection yields have decreased significantly for rates and housing loans .Actual rates arrears have increased from €1.777m in 2011 to €2.407m in 2012, which is an increase of €630k. Housing loan arrears have increased by €116k to €704k. The Council established a centralised Income collection unit for a number of collection areas in October 2012, as

The rising levels of arrears are directly linked to the severity of the recession and the inability of our customers to pay during the current economic crisis. Payment plans are in place with those customers who are experiencing difficulties, but these arrangements require continuous monitoring and follow up. Loan arrears are monitored and managed under the Mortgage Arrears

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uniform collection procedures and processes did not exist in Sligo County Council. The Council should consider extending the remit of this collection unit to cover all Income collection areas. Bad Debts Provision I previously reported that in my opinion the deficit was understated as the bad debt provision was inadequate. I recommended that the bad debt provision be reviewed as part of the preparation of the 2012 accounts. This has not happened. In 2012 the bad debt provision for commercial water charges amounted to €500k which is 17% of these water debtors. The bad debt provision for rates amounted to €360k being 15% of these debtors. The Council should conduct a review of the bad debt provision in relation to other debtors as it does not appear to be adequate either.

Resolution Process (MARP). The rates collection team work on a one-to-one basis with struggling businesses to tailor payment plans to try to meet their needs and have adopted a practical and supportive approach as much as possible. Until such time as deduction at source arrangements for those customers who are in receipt of income, grants, subsidies or other state financed payments, are put in place nationally, the level of improvement that can be achieved for increased income yields across all income streams will be limited. The revenue account has not been able to absorb any further increase in the bad debt provision due to the deficit position the Council operates within, and the practice year on year has been for write-off’s to be charged to the revenue account where amounts are directly identified as uncollectable. The 2014 budget figure for bad debts will be increased to reflect a more realistic position.

Legal Costs Sligo County Council was involved in a legal case with

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the owners of Lissadell House concerning public rights of way over their property. In a judgement delivered on the 11 November 2013, the Supreme Court ruled in favour of the owners of Lissadell. An order as to legal costs has yet to be made by the Court, which will have a significant impact on the finances of the Council.

South Dublin County Council


Rates The rates collection percentage was 74 % in 2012, similar to that in 2011. There has been a significant decline in the collection percentage in recent years. The arrears at 31 December 2012 were €39.9m (2011 €38.6m) and a significant bad debts provision has been made against these debtors in the accounts. Rents and Annuities The collection percentage for housing rents remains weak and declined further to 74% in 2012. The arrears at 31 December 2012 rose to €7.3m (2011 €7m).

The collection of commercial rates income stabilised in 2012 following a period of deterioration coinciding with the recent economic downturn. The Council prioritises the early collection of income and is committed to vigorous follow up and pursuit of debt. Accounts are closely monitored and early contact is made with debtors to encourage them to avail of a suitable payment scheme so that debt does not accumulate. A legal debt collection process is initiated if ratepayers do not respond to requests for payment. The Council continues its efforts to concentrate on reducing arrears and improving rent and annuity collection levels. Arrears have been reduced to date in 2013. Of the number of accounts that are in arrears (6,680), 3,562 owe less than €500. There are currently 4,104 tenant accounts in debit where arrangements have been negotiated for clearing their arrears. There are a total of 3,085 accounts in credit. A business process improvement exercise was recently undertaken on the rent assessment and rent collection processes within the rents unit which has resulted in a restructuring of rent teams who now have responsibility for assessment and monitoring of rent accounts.

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Housing Loans Mortgage loan accounts in arrears over 90 days totalled 149 (12.6% of total loans) with a revenue balance outstanding of €486,692. Loan accounts with arrears in excess of €5,000 account for 50% of this balance. The comparable figures for 2011 were 136 loan accounts (11.5% of total loans) with a revenue balance outstanding of €363,442. The arrears position has deteriorated over the year.

A new Rent Assessment Module is now functional and is enabling more efficient assessment of rent due. Similarly a new Rent Account Monitoring System is under development and is scheduled to be functional in September 2013. This will facilitate the early monitoring of tenants’ rent accounts and immediate follow up and earlier pursuit of tenants where payment as due is not received. It is anticipated that the restructuring and new systems put in place will have a positive impact on our rental income collection levels. In terms of breaches of agreements reached as at 31 July, 2013 there have been 3 evictions for non-payment of rent, and 72 Notices to Quit have also issued in 2013. The Council also provides a tenancy sustainment service. The increasing mortgage arrears problem is not isolated or unique to Council loans and recent figures released by the Central Bank indicate an on-going increase in the number of mortgage accounts in arrears nationally. The Mortgage Arrears Resolution Process (MARP) was formally introduced in Housing Authorities on 1 October 2012 and the appropriate formal structures were put in place for dealing with mortgage arrears at that time. This provides a formal process for how the Council must treat its borrowers who currently are in, or facing mortgage arrears. Applicants to qualify for a local authority loan must submit confirmation of inadequate loan offers from two financial institutions. The Council is cognisant that each arrears case is unique and needs to be considered on

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its own merits. The table hereunder outlines details of the formal MARP arrangements that have been put in place since October 2012.

Invited to MARP

MARP Applications Received

Approved Being assessed

Refused

133 76 46 9 21

There are also a further 89 accounts that are on an arrangement to pay their arrears, these are arrangements made outside of the MARP. Repossession of homes is a last resort and the Council continues to make every effort to tackle the problem to the benefit of both the borrower and Council. However, to date in 2013 the Council has had to repossess a further two properties and it is intended, pending the current state of the property market, to sell these properties and clear any remaining residual balances in the manner recently prescribed by the Department.


The capital account includes a significant number of old capital debit balances that have shown little movement in recent years and are being carried forward. These balances need to be reduced and they should be closely monitored.

Capital balances are monitored through the year to ensure grant claims and recoupments are prepared and submitted as early as possible. Capital account balances and capital debtors are also reviewed at regular intervals through the year to identify new sources of funding and to follow up any delayed payments. The Council has engaged with the Department of the Environment, Community, and Local Government (the Department), the National Roads Authority and the Department of Transport, Tourism and Sport about on-going and completed schemes as part of this review process so that issues that affect outstanding balances can be resolved without delay.

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The range of other sources of income for capital projects can include internal capital receipts, revenue budget, development contributions, borrowings and income from disposal of assets. All such sources of income are regularly examined in the context of funding capital balances.

South Tipperary County Council

Fixed Assets The Council has made good progress in reconciling its fixed asset register with the property interest register. The Internal Auditor completed a review of the Council’s property management and issued a report in December 2012. In this report a number of worthwhile recommendations were made, which the Council is in the process of implementing. The exercise of checking and recording details of all titles to properties and lands needs to be completed. At previous audits I highlighted the needs to maintain a register of leases covering land and buildings; this register has not yet been prepared.

I agree that good progress has been made in reconciling the fixed asset register with the property interest register. This progress will be maintained by implementing the recommendations made in the Internal Auditor’s report. I will be asking the Internal Auditor to follow up on these recommendations. I will also follow up on the preparation of a register of leases covering lands and buildings.

Water Pricing The Council also did not comply with Circular Fin 06/2008 in relation to the creation of a specific reserve “Marginal Cost Water Pricing” from which loan repayments would be financed. During 2012 the Council funded €125,329 of loan repayments relating to a new sludge dryer from development charges.


During the course of my review of non-pay expenditure I noted a number of payments relating to services, goods and contracts that had not been tendered in

Following the appointment of a Procurement Officer, a review of the section was carried out and it is intended to strengthen the role of the Procurement Officer and oversight of compliance with relevant regulations.

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accordance with Department of Finance “Public Procurement Guidelines” and the Council’s own procurement guidelines. The Directors of Services need to take responsibility for ensuring compliance by their Directorates with these regulations. The Council appointed a Procurement Officer in 2012; I recommend that the Procurement Office role be extended to include oversight of compliance with the relevant regulations.

Unfinished Estates

The Council’s list of unfinished estates can be categorised as follows:

The Council is unable quantify the potential cost of remedial works that may be required in respect of

Number of Estates

Number of Units Occupied

Number of Units Vacant

Number of Units Partially Completed

Bonds In Place

15 549 94 71

Bonds Expired

6 287 67 53

Bond Called In

1 1 7 0

No Bonds

4 1 5 47

Total 26 838 173 171

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these estates until they are completed or taken in charge by the Council. It should however be noted that the above figures do not include the old completed estates where the Council has not yet taken them in charge.

Waterford City Council

Financial Position

Net Current Liabilities The net current liabilities increased to €18.3m. The Council’s net current liability position has steadily worsened over the last number of years mainly due to unfunded capital works. At year end the bank overdraft amounted to €5m. However, for much of the year the Council’s operational overdraft was significantly higher and at times almost reached the approved limit of €19m. Related bank overdraft costs in the region of €600,000 were incurred during the year.

The Council is monitoring the financial position with a view to implementing improvement. This has to be in the context of the amalgamation of the Waterford local authorities in the coming year.

Loans Payable The Council’s long term borrowings of €96.5m at 31 December 2012, were categorised in the AFS as:

2012

2011

€m

€m

Assets Loans (Purchase and Construction)

30.3 31.4

Bridging Loans 9.6 9.6

The bridging loan will be resolved following the receipt of related grant funding for completed housing schemes and by loan refinancing.

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Housing Loans (Mortgage / Shared

Ownership / Voluntary) 56.6 59.0

Land purchase loans on a rolled up interest basis reduced to €4.4m following the receipt of Capital Assistance Funding for development of John’s College by a voluntary housing body. New borrowing amounted to €2m, to fund house purchase loans issued to individuals during the year. The Council remains reliant on bridging loans for financing Social Leasing Schemes and capital works. Refinancing of the short term bridging loans needs to be addressed as they have been in place for a number of years.


Overall arrears on the collection accounts increased to €9.06m after bad debt write off of €1.24m. Rates accounted for over half the arrears and mainly comprised the retail, services and hospitality sectors. While I acknowledge the difficulties encountered by the Council in the current economic climate management needs to ensure that more proactive action is taken in respect of increasing arrears on the main collection accounts and in ensuring a more effective and timely response to customers who do not observe repayment agreements.

Collection of income across all categories continues to be extremely difficult. The Council is continually reviewing all collections and is proactively engaging with customers to resolving their repayment difficulties in order to improve collections. It is envisaged that significant additional resources will be committed to this area in the new amalgamated authority.

Waterford County Council

Financial Position

The Council has a significant revenue deficit of €6.9m at the 31 December 2012, which needs to be financed. Provision has not been made to finance this deficit

The Council achieved a small surplus in 2012 and has reduced its revenue deficit by over €0.5m since 2006. The Council remains committed to reducing the revenue deficit until the adverse balance is cleared. The pace

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through the Council’s annual budgets. This is a serious financial matter for the council to address.

at which this is achieved will be dictated by budgetary and economic circumstances and also the implications of the pending amalgamation of Waterford Local Authorities.


Debit balances in the capital account, where funding has not yet been sourced, amounted to approximately €6.36m. An exercise needs to be undertaken to reflect unfunded balances correctly in Note 11 to the AFS and ensure that the funding is provided for.

Unfunded capital balances have been reduced from €11m approx. in 2011 to €6.36m in 2012. In addition development contributions are to be applied to some projects thus further reducing the unfunded balances. The auditor’s comments in relation to Note 11 and future funding provisions are noted.


The collection yields have deteriorated further this year. There are a significant number of accounts in arrears across all collection areas. Procedures need to be formalised to collect these arrears. Policies concerning write-offs need to be clarified. The Council needs to set fixed time intervals for taking certain actions and this needs to be monitored very closely for all debtors. This area needs to be adequately resourced. It is recommended that in light of the amalgamation of Waterford County Council and Waterford City Council, a project team representing both local authorities should be established, to formulate a strategy to address this area. The last quarter’s consumption for commercial water charges billed in March 2013 amounting to approximately €458k, is not included in the above

The Council is fully committed to the follow up and collection of arrears. The Council plans as part of the amalgamation with Waterford City and Dungarvan Town Council to set up a dedicated unit in 2014 to focus on arrears and collection issues. In the interim, the Council is setting up cross functional steering groups to address the collection issues and it is expected that there will be a marked improvement in collection levels next year. Policies and procedures in debt collection and credit management are being reviewed and unified as part of the amalgamation project and it is hoped that this work will be completed by mid-2014.

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table, however, the amount is included in other debtors in Note 5 of the AFS.

County Charges

At year-end 2012, the balance due on the county charge to Waterford County Council from Dungarvan Town Council was approximately €3.97m. The non-payment of this amount could have a further serious impact on the Council’s revenue deficit of €6.9m.

The balance due on the county charge at December 31, 2012 is payable in full and it is hoped that there will be a considerable reduction in this balance by the end of 2013.

Unfinished Estates

It is noted that there were nine developments where the developers bonds have expired or were never in place. The estimated cost of remedial works to these nine developments is €156k. Provision needs to be made for this from the revenue account.

The Council has established an Estates Unit within the Planning Department whose role includes working closely with resident groups, developers, NAMA, receivers, security providers and banks to try to bring all unfinished estates to a satisfactory standard. Regarding the 9 estates listed, the Estates Unit has conducted inspections on all of these estates and initiated stakeholder negotiations and will continue to progress same until a satisfactory solution is delivered - one which enhances the quality of the development for the residents and reduces any financial exposure to the Council. Each of the relevant estates will be kept under review in 2014. Subject to the Council’s overall financial position, pre and post-merger, revenue funding will be provided where necessary, for works required to bring such estates to taking in charge standards in the medium term. Other potential funding mechanisms including funding from future housing capital programme may be used.

Westmeath Loans Payable Total loans payable at year end was €107.2m, being Non-Mortgage Loans: These borrowings have been planned, approved,

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County Council

non-mortgage loans of €76.2m and mortgage loans of €31m. The annual finance cost of non-mortgage loans in 2012 increased to €4m (€3.4m: 2011). The increase is mainly due to the loan for the county building changing from an interest only basis to annuity. The Council needs to closely monitor the level of its loan borrowing. The annual finance cost of mortgage loans in 2012 was €2.5m (2011: €2.8m). Mortgage loans should be self-financing, however due to weakness in collection from borrowers the funding gap between the Council’s payments to lenders and receipts from loan account holders in 2012 was €650k (2011: €800k). The Housing Finance Agency has agreed to lower its repayment schedule in line with the Council’s own payment arrangement with its account holders.

and utilised in a prudent fashion to achieve the stated objectives of the Council. Included in these borrowings are projects representative of the investment necessary for the development of Mullingar as a Gateway Town consistent with national policy e.g. Mullingar Sewerage Improvement Scheme. It should be noted that: • Current annual loan repayments of €1.1m on loans to fund our headquarters are substantially offset by the savings in personnel, rent, communications, and other costs through the rationalisation afforded by this development. In addition rent of offices is currently generating income of €100,000 p.a. which is projected at €150,000 for 2014. • €12.6m of these borrowings are in respect of unsold affordable housing. All of these houses are occupied and the interest on the borrowings is being funded through the Government’s leasing scheme. • €20.1m of these borrowings are in respect of water services infrastructure. Our understanding is that these borrowings will transfer to Irish Water with effect from January 1st 2014. • Principal repayments were made on non-mortgage loans of €1.9m during 2012. Mortgage Loans: The Department of the Environment, Community and Local Government (the Department) is engaged with the sector to identify solutions to problems arising from the issue of mortgage arrears. The funding gap referred to above is one of the issues which have arisen in recent years. The Housing Finance Agency has agreed to lower its repayment schedule, initially for a three year period, so as to align repayments from our mortgagees with repayments due to it.

Revenue Housing Loans We are well aware that housing loan arrears present a very significant

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The collection yield at year end was 47% with arrears of €2.1m. The bad debt provision decreased by €570k to €1.1m because the Council anticipates it will receive funding from the Mortgage Arrears Resolution Process (MARP) fund to cover losses on house repossessions. Of the 9 houses repossessed since 2010, seven been brought back into social stock, one sold and one is currently on sale. There are losses of €334k in the capital account at the year-end arising from repossessions. 54% of the total 467 active loan accounts at the year-end had revenue arrears over three months old. The Council has agreed payment plans with 160 account holders under MARP. The revenue and capital balances on debtor accounts over three months in arrears were €2.2m and €15m respectively.

challenge to this organisation and indeed present an on-going serious financial risk. This area has received and continues to receive significant attention from the management and staff of the Council. This Council has been engaged, with others, in assisting the Department to develop guidance in the area of mortgage arrears in general and the development of a Mortgage Arrears Resolution Process (MARP) in particular. The MARP has assisted local authorities in dealing with customers who fall within this category in a fair, transparent and consistent manner. The establishment of a MARP fund, arising from the work completed in this area, will assist in covering losses arising from repossession and voluntary surrender. In addition this Council, in tandem with one other, has successfully piloted the Mortgage-to-Rent scheme for the local authority sector.

Internal Audit I recommended in previous years that the internal audit function review the rental accommodation scheme after weaknesses in operational controls and lack of reconciliations were noted. Internal audit completed this report and it has been agreed that the Housing Department will commence a root and branch examination of all files up-to December 2011 to ensure recoupments from the Department and payments to landlords were correct. It is important for the Council to maintain a permanent

Work arising from the Internal Audit review of the Rental Accommodation Scheme is on-going. Good progress has been made to date and in particular operational controls and systems are working well since late 2011. The internal audit function is staffed on a permanent basis by a professionally qualified accountant. When faced with a temporary absence, albeit for a number of months, it was our firm view that it was not feasible to seek to appoint an appropriately experienced and qualified person for this temporary period. This view was based on:

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internal audit function to support the work of the audit committee.

• The nature and challenges of the position;

• The moratorium on recruitment:

o the fact that a substantial number of vacancies arising from the

retirement of personnel in recent years have not been filled;

o the fact that a number of fixed term contracts have not been

renewed;

• The fact that the position of financial accountant was filled permanently

in February 2013. This staff member will support the work of the audit

committee in the interim.

Wexford County Council

Financial Position

The deficit on the Council’s income and expenditure account was €6.5m at 31 December 2012. Reducing this large deficit must be a priority for the Council. It was noted that the Council has addressed the €1.4m gratuities issue raised in the 2011 audit.

The Council continues to be very conscious of the need for financial constraint in order to address the accumulated reported deficit. Since 2009 reductions have been reported in the deficit despite the difficult financial environment experienced during these years. The deficit reported in 2012 is disappointing but in light of an unexpected cut in the general government grant in quarter three this can be considered a reasonable result for the financial year. The Council will, in as far as possible, continue to promote efficient spending to facilitate reduction of the reported deficit but realistically there is no real prospect of any significant improvement in the position in the short to medium term. Work completed by the in-house Efficiency Review Group which was established in 2009 has led to significant savings and efficiencies across many spending areas of the local authority and management acknowledge the contribution of this group and the co-operation of all staff in implementing the identified efficiencies which have assisted in protecting the financial position of the Council during that period. The work of the

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efficiency group is on-going in terms of sustaining the efficiencies going forward and seeking other opportunities for added efficiencies.

County Council Headquarters

In November 2010 the main contractor on this project went into liquidation and the Council took over the managing of the completion of the project, which involved managing all the individual contracts. The building has since been completed with costs to the end of 2012 amounting to €60m. This project has been part funded by a €50m loan, resulting in a debit balance of €10m at 31 December 2012. The tender for the building contract was for €41m (including VAT). The final outturn on the project after allowing for substitute contracts and remediation of defects on the original build was €47m. This resulted in an overrun of €6m on the original contract. The balance of the expenditure on this project is made up of other direct costs and design fees. The main contractor had a performance bond and the Council has been engaging with the holder of this bond with a view to recouping its costs.

The cost overruns referred to here can be largely attributed to the situation that presented itself when the main contractor on the project went into liquidation. A performance bond is in place since the commencement of the project and the Council is currently finalising negotiations with the Bondsman in respect of the additional costs incurred by the Council as a direct result of the liquidation. While the Council will be making every effort to maximise the recoupment of costs through this source, it is most likely that there will be funding deficit remaining following the completion of this exercise. Preliminary arrangements are in place for the funding of any such debit project and this will be formally agreed once the final debit on this project is known.


During the audit a number of projects with debit balances amounting to €24m were identified. €14.2m of these related to public sanitary services schemes. These projects are either completed and/or awaiting final accounts or funding decisions from the Council

A large portion of the debit balances referred to in this comment relate to projects where there are on-going discussions with Government Departments in terms of finalising grant claims and maximising income from this source. Once this process is complete the Council will be in a position to clear the remaining debit balances.

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and/or the Department of the Environment, Community and Local Government (the Department). The funding positions on all these projects needs to be finalised and the debit balances cleared. Further schemes with balances of €4.3m are being funded by an annual contribution from the revenue account.

Commercial Water Charges The commercial water charges collection yield decreased from 39% to 32%, arrears increased from €8.1m to €8.4m at 31 December 2012. The bad debt provision was €2.5m, being 30% of outstanding amounts. The Council needs to keep this provision under review and continue to follow-up the outstanding accounts.

The single biggest factor impacting on the deterioration of the collection level in 2012 can be attributed to the requirement to accrue water charges for water consumed to 31st December 2012 but only billed early in 2013. In addition, the continuing anomalies in consumption patterns generated during the water metering programme, mainly attributed to water leakages in the network uncovered by the meter readings, while much improved continue to impact on the level of arrears reported. It is also relevant to note that significant progress has been made in reducing the arrears outstanding figure in respect of this debtor area over the past three to four years.

Wicklow County Council

Financial Position

As shown above a small surplus of €43,860 has been recorded for the year and this decreased the closing deficit to €2m at the year end. The Council will need to continue to implement strict budgetary controls to ensure that this deficit is reduced over the coming years.

Wicklow County Council recorded a small surplus of €43,860 on the Income and Expenditure Account for the year ended 31 December 2012. The Council is aware of the need to maintain this progress and endeavours to continue the reduction in the overall revenue deficit. A provision of €60,000 for deficit reduction is again included in the 2013 annual budget. However our ability to reduce the deficit will continue to be subject to expenditure and income trends arising from the economic fortunes of the country. In addition income from other sources, including pension related deduction, specific grants continue to decrease, with local income sources also suffering reductions as a consequence of the economic climate. This

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has and will require difficult decisions to be taken to reduce costs and present a balanced account. In addition strict budgetary controls will be maintained to ensure that this deficit is reduced over the coming years.


Rates There has been a further decrease in the collection percentage for rates to 71% in 2012 from 74% in 2011 and this resulted in an increase in the arrears to €5.5m at 31 December 2012 (2011 €4.9m). A significant portion of this balance is over twelve months old and the bad debts provision which has remained unchanged in 2012 needs to be reviewed to ensure that it is adequate. Commercial Water Charges The commercial water charges collection percentage decreased to 39% in 2012 from 42% in the previous year. The amount accrued for commercial water charges in 2012 was €1.5m (2010 €1.6m) and the amount collected in the year was €1.4m (2011 €1.5m). The low collection percentage is mainly due to the high level of arrears being brought forward from previous years. The arrears at 31 December 2012 of €2.2m (2011 €2.1m) were high and the bad debts provision which remained unchanged in 2012, should be reviewed and increased where necessary.

The continuing economic difficulties are having a significant negative effect on the collection performance for both commercial and non-commercial debtors. The Council is acutely aware of the consequences of a reduced collection on both cash flow and future collection capacity. Wicklow County Council is committed to intensifying debt management practices to reduce these arrears, with existing procedures being reviewed and improvements being introduced. The roll-out in 2013 of the MARP procedures (Mortgage Arrears Resolution Process) has provided stronger options for earlier interventions on loan arrears. For all major income sources an array of methods up to and including court action are and will continue to be used to maximise debt collection across the major revenue sources. As part of the sub-County/Municipal Reorganisation Wicklow County Council will establish a strengthened and central debtor management section in 2014. This will facilitate the development of debt management expertise and deliver consistent, effective debt management policy and practice across all income sources in the local authority.

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Appendix 9 – The Local Government Audit Service Introduction The LGAS provides independent scrutiny of the financial stewardship of local authorities. Its role is to:

• Carry out audits of local authorities and other bodies in accordance with its Code of Practice, thereby fostering the highest standards of financial stewardship, governance and public accountability;

• Promote the achievement of value for money in local authorities by undertaking Value for Money (VFM) studies and publishing reports thereon.

The Minister for the Environment, Community and Local Government appoints auditors, known as local government auditors, to carry out or assist in the carrying out of audits of local and other bodies. The Local Government Audit Service (LGAS) audits the accounts of city and county councils, including regional authorities, motor taxation offices and other bodies. The total number of bodies currently under its remit is 178. The Director of Audit is the organisational head of the service. This post is a statutory position and the main functions, as prescribed in section 116 of the Local Government Act, 2001 are to: a) Organise, direct and allocate resources within the LGAS; b) Assign audits of local authorities and other bodies to Local Government Auditors; c) Provide such advice and assistance as the Minister may, from time to time, require for the

purposes of maintaining a Code of Audit Practice; d) Direct the Local Government Value for Money Unit established by section 14 of the Local

Government (Financial Provisions) Act 1997, and to ensure that the work of the unit is incorporated into local government audit practice.

Each local government auditor is assigned an audit district under warrant of authority from the Director of Audit. Local government auditors are independent of the Department when discharging their professional functions. This independence is protected in legislation in accordance with section 116(2) of the Local Government Act, 2001. Audit districts comprise a number of audits grouped, as far as possible, in convenient geographical areas, and these districts are further grouped into four regions, Western, Southern and two Eastern. Principal auditors lead in the regional organisation and supervision of audits. In addition they have direct responsibility for the major audits in their region. One principal auditor has responsibility for managing the Value for Money Unit.

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Staff Resources The following is the current audit staff numbers in the LGAS.

All audit staff are professionally qualified accountants and have for many years been recruited externally, having worked in industry, professional accounting practices, public sector bodies, and this mix of skills enhances the organisation. Local Government Audit Framework The statutory audit of local government is provided for in sections 114 to 126 of the Local Government Act, 2001. Audits are carried out in accordance with a prescribed Code of Audit Practice, which covers:

• Purpose of audit

• Powers and duties of auditors

• The audit approach

• Outputs from audit

• Public accountability. The LGAS is committed to the on-going improvement of its financial audit procedures. This involves the development of audit guidelines on many aspects of the audit process and the implementation of an electronic working papers system (TeamMate). Some of the features of the TeamMate software as implemented by the LGAS are:

• Risk Assessment module

• Standard format of audit files

• Standard audit tests

• Improved tracking of matters arising at audit

• Guidance notes for audit staff

• Audit file and data encryption

• Centralised retention of audit files. This system has been fully implemented in the LGAS, with auditors now using this software on all audits. It is intended to further develop and improve the standard audit approach, including the use of TeamMate, on an on-going basis. All electronic audit working papers on the

Staff Grades Complement Current No.

Director of Audit 1 1

Principal Local Government Auditors 7 6

Local Government Auditors 20 16

Assistant Auditors 14 10

Total 42 33

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TeamMate system are automatically encrypted. In order to mitigate the risk of the loss of sensitive client data, all audit data for 2012 audits is held on a centralised database.

Outputs from Audit Audit Opinion Auditors are required to give an audit opinion on the annual financial statements of local authorities and other audited bodies. This opinion is the culmination of the auditor’s work on reviewing the audited body’s transactions as reported in the annual financial statement. The auditor expresses an opinion as to whether the annual financial statement presents fairly, in accordance with the Code of Practice and Accounting Regulations the financial position of the body at the year-end (31 December) and of its income and expenditure for the year then ended. Audit Reports In addition to the audit opinion, it is custom and practice to issue statutory audit reports on the major audits covering any matter or matters which the auditor considers should be reported. The manager of a local authority is required to respond to this report and his/her comments may be included as part of the final report. This procedure has enhanced public scrutiny of local government as management responses, to address the issues raised at audit, now form part of the published audit reports. Management Letters In accordance with professional audit practice, an auditor may issue a management letter drawing attention to any weaknesses in financial procedures and / or controls identified during audit, and make appropriate recommendations. A management letter may incorporate audit memoranda already issued to functional officers and line managers during the audit. Management letters, issued in respect of city and county councils in the course of the 2012 audits, referred to accounting and financial control issues identified in the course of audit tests carried out. Progress by management on the implementation of recommendations will be reviewed at the 2013 audits.

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Audit Work Programme The financial statements of local authorities are prepared to 31 December each year. Due to the time lag between the end of the financial year and the finalisation of the draft accounts, the work cycle of the audit service runs from April to the following March e.g. all audits for the year ended 31 December 2012 are to be completed by 31 March 2014. Priority is given to the city and county council audits, which were all completed in 2013.

Audit Remit The following bodies are subject to local government audit:

Status of Body Number

City Councils 5

County Councils 29

Borough Councils 5

Town Councils 75

Regional Authorities 8

Regional Assemblies 2

Motor Taxation Offices 29

Miscellaneous 25

Total 178

Documents

Local Government Audit Service Activity Report · • Revenue Income and Expenditure Account • Capital Programme • Balance Sheet Further financial data, including revenue collection