Local Government Finance
In terms of Local Government Finance, the Department is focused on the financial well-being and effective financial management and accountability of local authorities and the promotion of value for money principles in the sector.
Capital expenditure is expenditure that results in the creation of an asset beyond the year in which that asset is provided e.g. houses, swimming pool, library etc. It is financed largely by State grants with the balance being funded from development levies and borrowings and own internal resources and property sales. In the case of some projects (e.g. local authority offices) they may be funded entirely by local authority own resources and borrowing.
The local authority Chief Executive prepares and submits 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.
The Annual Financial Statement (AFS) of a local authority provides details of Capital Account Income and Expenditure and overall Capital Balance.
A local authority’s annual budget represents current expenditure (sometimes referred to as revenue expenditure) which covers the day-to-day running of the local authority (including staff salaries, housing maintenance, pensions, operational costs etc.). The annual budget is adopted by the elected council at its budget meeting.
The Local Government Act 2001, as amended by the Local Government Reform Act 2014, provides the legislative basis for the local authority budget process. The budget is developed in a phased process involving input from the Chief Executive, the Municipal District members and the Corporate Policy Group. It is a matter for each local authority to determine its own spending priorities in the context of the annual budgetary process having regard to both locally identified needs and available resources. The elected members of a local authority have direct responsibility in law for all reserved functions of the authority, which includes adopting the annual budget, and are democratically accountable for all expenditure by the local authority.
Individual local authority budgets are available from the council’s finance section and are generally published on the authorities’ website. Consolidated annual budget data for all local authorities, compiled by the Department is available at Local Authority Budgets.
Current expenditure is funded from a variety of sources, as set out below, although the specific contribution of income from the different sources may vary between authorities.
Charges for goods and services
Local authorities have powers to charge for services which they provide, for example, housing rents, waste charges, parking charges, planning application fees. In most cases the charge or fee is set locally although certain charges or fees are fixed at national level.
Local authorities are under a statutory obligation to levy rates on any property used for commercial purposes, in accordance with the details entered in the valuation lists prepared by the independent Commissioner of Valuation under the Valuation Act 2001.
The levying and collection of rates are matters for each individual local authority. The Annual Rate on Valuation (ARV), which is applied to the valuation of each property, determined by the Valuation Office, to obtain the amount payable in rates, is decided by the elected members of each local authority in their annual budget and its determination is a reserved function of a local authority.
Specific state grants
Specific grants are paid to local authorities by various government departments in respect of particular services and schemes, for example housing and road maintenance.
Local Government Fund
The Local Government Fund (LGF) is a special central fund which was established in 1999 under the Local Government Act 1998. The profile of income and expenditure of the Local Government Fund has undergone significant changes in recent years. Income, which historically comprised motor tax income along with some payments from the Exchequer, is now made up of motor tax, income from the Exchequer and, since 2014, Local Property Tax.
The Government decides the expenditure from the Local Government Fund each year as part of the budgetary process. In recent years, expenditure from the Local Government Fund includes:
- Payments to the Department of Transport, Tourism and Sport for non-national roads and public infrastructure
- A subvention to Irish Water
- Local Property Tax allocations to local authorities
- Funding for certain local government initiatives
- Payment to the Exchequer.
Local Property Tax
The Finance (Local Property Tax) Acts require the Minister for Finance to pay an amount equivalent to the Local Property Tax (LPT) that was collected, including any interest paid during the year, from the Central Fund into the Local Government Fund, from 2014.
Local Property Tax allocations paid from the Local Government Fund help fund essential local services such as, public parks; libraries; open spaces and leisure amenities; planning and development; fire and emergency services; maintenance and cleaning of streets and street lighting – all benefitting citizens directly.
In accordance with Government decisions, 80% of LPT is retained locally in 2015 and 2016 to fund vital public services. The remaining 20% is re-distributed to provide additional funding to certain local authorities that have lower property tax bases due to the variance in property values across the State.
Effective from 1 July 2014, local authorities may vary the rate of Local Property Tax (LPT) in their administrative area for the following year by up to 15% of the basic rate of the Tax. The decision to vary must be taken by resolution of the Council and must be notified to the Revenue Commissioners by 30 September in order to apply for the following year.
Annual Financial Statements
Each local authority is required to prepare an Annual Financial Statement (AFS) by the end of March following the year end and to publish it by the end of June.
These financial statements undergo an independent audit by the Local Government Audit Service of the Department.
When all Audits are complete, the Department publishes a consolidated Annual Financial Statement publication compiled from the Audited Financial Statements published by each local authority.
Queries in relation to the individual statements should be directed to the relevant local authority.