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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. The impact of local government on the social and economic life of the country both as providers of service and purchasers of goods and services is very substantial. For example in 2007 local authorities spent some €10 billion, about 45% of which consisted of current expenditure and 55% of capital expenditure. Capital and current expenditure are funded in different ways, as outlined below.

Capital Expenditure
Capital expenditure differs significantly from current expenditure in that it is expenditure that results in the creation of an asset beyond the year in which that asset is provided. Examples would include construction of local authority houses, road construction, provision of water and sewerage facilities, library and swimming pool facilities. Capital expenditure 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.

Current Expenditure
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 of treatment plants etc.). The annual budget is adopted by the elected council at its budget meeting. Further information on the budgetary process and the control exercised by the council is provided in the paragraphs under. 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.

Sources of Income for Current Expenditure 2007

Charges for Goods and Services (31.2%)
Rates (26.4%)
Government Grants and Subsidies (22.4%)
Local Government Fund – General Purpose Grant (20%)

Charges for Goods and Services
Local authorities have powers to charge for services which they provide, for example, commercial water charges, 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.

Rates
Rates, as well as charges for goods and services, are local sources of income over which local authorities have a considerable measure of control, while specific and general purpose grants are paid annually to local authorities by the State. Rates are levied annually by county, city, borough and certain town councils. Each of these authorities has exclusive rating jurisdiction within its own area. Some town councils are not themselves rating authorities and there is an additional charge to the county rate levied on such towns to meet the expenses of the town council. As a general rule, rates are levied on the occupiers of commercial property. The valuation of such property for rating purposes is carried out by a central government agency, the Valuation Office, with a right of appeal to a Valuation Tribunal. Each year the level of the rate (known as the Annual Rate on Valuation or ARV) is determined by the elected council as part of the budgetary process. The annual rates bill for a commercial premises is calculated by applying this ARV to the valuation of the property concerned. (See Key Financial Data/Charts under for detailed information on local authority ARVs).

Specific State Grants
Specific State grants are paid to local authorities in respect of specific services/schemes, for example higher education grants, road maintenance grants, etc by a number of government departments.

Local Government Fund - General Purpose Grant
The Local Government Fund (LGF) is a special central fund which was established in 1999 under the Local Government Act 1998. It is financed by the full proceeds of motor tax and an Exchequer contribution. The Fund provides local authorities with the finance for general discretionary funding of their day-to-day activities and for non-national roads, and funding for certain local government initiatives. It has put local authority financing on a sound footing and has facilitated the provision of better quality services locally. In 2008, the General-Purpose Grant totalling €999m to local authorities is some 5.4% above the 2007 allocation and is some 128% greater than the 1999 allocation. (See Key Financial Data/Charts under for detailed information on general purpose and non-national road allocations to local authorities).

Local Authority Budget and Financial Affairs
Please see publication - L.A Budget and Financial Affairs in publications area to the right of your screen.

Audit of Local Authorities
The accounts of local authorities, both current and capital, are audited by local government auditors who are independent in the performance of their functions and are under the general control of a Director of Audit. Local authority staff and elected members have a statutory duty to co-operate with them. An auditor may disallow illegal or unfounded payments, surcharge such payments on the persons responsible whether on members or the manager, and charge on the person the amount of any loss or deficiency incurred through misconduct or negligence.

Following receipt by the local authority of the audited AFS and any auditor’s report, the manager must submit both for consideration by the elected council. The Code of Audit Practice, which is applied by local government auditors in the audit of financial statements, is available from the Local Government Audit publications area of this site.

Value for Money
A Value for Money (V.F.M.) Unit was established in the Local Government Audit Section of the Department of the Environment, Heritage and Local Government in 1993. A total of twenty-four reports covering a broad area of local authority activities have been issued to date promoting efficiency and cost effectiveness in local authorities. Where appropriate, the implementation of the recommendations contained in the reports are monitored at the annual audit of the individual local authority annual financial statements. (See Local Government Audit Service publications on this site for recent VFM reports).

Financial Management Systems/Accounting Code of Practice
New financial management systems have been implemented in all local authorities in recent years. These new systems are based on up-to-date and best accounting principles and replaced the outdated cash-based system of accounting in local authorities. The new financial management systems give local authorities greater financial control and analysis of their expenditure programmes and provides enhanced management information, which will assist local authorities in developing and implementing further value for money initiatives. In addition, the creation of posts of financial/management accountant have strengthened the finance function in local authorities. An Accounting Code of Practice has been issued by the Department under section 107 of the Local Government Act 2001. This Code sets out the accounting polices, concepts and bases underpinning local authority annual financial statements and is available from the publications area across.

Costing of Local Authority Services

The Department and local authorities are building on the new financial management systems in local authorities by the introduction of a new standardised costing system incorporating a new structure of reporting local authority expenditure and income. This costing system will deliver enhanced management information particularly in relation to unit costs and will facilitate the comparison of local authority costs over time and in comparing costs with other local authorities. All city and county councils will have converted to the new structure in 2008 with remaining town councils converting to the new structure in 2009.

Review of Local Government Financing
A comprehensive review of local government financing was completed and published in March, 2006. The review was carried out by Indecon International Economic Consultants in association with the institute of Local Government Studies and is available from the publications area of this site across.

Commission on Taxation
A Commission on Taxation was established on 14 February, 2008 to review the structure, efficiency and appropriateness of the Irish taxation system. The work of the Commission is being conducted in the context of the commitments on economic competitiveness and on taxation contained in the Programme for Government:

to keep the overall tax burden low and implement further changes to enhance the rewards of work while increasing the fairness of the tax system,
to ensure that our regulatory framework remains flexible, proportionate, and up to date,
to introduce measures to further lower carbon emissions and to phase in on a revenue neutral basis appropriate fiscal measures including a carbon levy over the lifetime of the Government, and
the guarantee that the 12.5% corporation tax rate will remain.

One of the Commission’s tasks will be to consider and make recommendations on options for the future financing of local government. Submissions may be made to the Commission on Taxation by 23 May 2008.

Business Improvement Districts Schemes
The Local Government (Business Improvement Districts) Act 2006, enacted on the 24 December 2006, provides the legal framework for the operation of Business Improvement District Schemes (BIDS) in Ireland. The Business Improvement Districts provisions of the Act came into force on the 24 April 2007. S.I. No. 165 Local Government (Business Improvement Districts) Act 2006 (Commencement) Order 2007 commenced these provisions.

A Business Improvement District Scheme (BIDS) is an organisational and financing mechanism, with a legal basis, through which businesses can, on a self-help basis, develop and implement initiatives, in defined areas, to improve those areas for the betterment of the trading environment in which they operate.

Essentially, in a BID scheme, a group of businesses come together and decide firstly that they want enhanced services or a wider range of services, or new facilities or activities in an area. Secondly, these businesses decide that they are willing to pay for such services, facilities or activities. A specially established BID company is charged with responsibility for implementing the provisions of the BID scheme. The local authority plays a key role in any such company. In addition, the local authority collects the annual BID contributions that fund the scheme.

Summary of BIDS Provisions
BID Proposal
A person wishing to undertake a business improvement district scheme must submit a proposal to the local authority for approval.

Consultation on a BID Proposal
A key to the ultimate success of any BID proposal will be the extent to which there is meaningful engagement with the public and business community in an area. The Act sets out a framework for such comprehensive consultation. In the first instance, a BID proposal submitted to a local authority must be made available for public inspection and comment.

Ratepayer Plebiscite
The Act provides for the holding of a plebiscite to determine the level of support among ratepayers in the area. The plebiscite will be organised by the local authority. In the BID plebiscite, each business will have one vote. A majority of the ratepayers who vote in a plebiscite must vote in favour before a local authority can approve a BID scheme. S.I. No 166 of 2007 Local Government (Business Improvement Districts Ratepayer Plebiscite) Regulations 2007 governing the holding of the ratepayer plebiscite were made by the Minister for the Environment, Heritage and Local Government on 24th April 2007.

BID Company
A BID company will be responsible for implementing and managing a BID scheme.

BID Contribution Levy
The BID company adopts a budget which sets out an estimated income and expenditure for the forthcoming year. The amount of the levy on any individual business is determined by the rateable valuation of that business and the income necessary to be raised in the BID area. The local authority collects a BID contribution levy from each business in the BIDS area on behalf of the BID company.

Community Fund/Community Initiative Scheme
An elected council may, by resolution, establish a separate ‘community fund’ to support specific community initiatives such as amenity, recreational, environmental or community development projects of benefit to the area concerned. Contributions to the community fund may be made by local voluntary, business or community groups, and may be raised by the local authority by way of a community initiative scheme. It is a matter for the elected members to decide whether to adopt a community initiative scheme, following a process of local consultation. Such a scheme is based on the payment of an annual contribution by each household for a specified number of years towards a particular community initiative of benefit to the local community. Details of the project, the amount of the annual contribution, waiver arrangements, the period for which it is operable and the area to which it applies must be set out in the scheme (sections 109 – 110 of the Local Government Act 2001 refer).

Local Authority Key Financial Data

Local Government Fund General Purpose Grant Payments 1997-2009 and Allocations 2010 (xls, 49 kb)

Local Government Fund General Purpose Grant Allocation % Increase 2010 Over Previous Years (xls, 55 kb)

1997-2009 Local Authority Annual Rates on Valuation (ARVs) (xls, 40 kb)

Net Effective Valuation 1994-20068 (xls, 49 kb)

Local Authority Current Expenditure and Income by Programme Group 2007 (xls, 16 kb)

Development Contribution Income 1994- 2005 (xls, 22 kb)

Click here to access the Local Authority Housing Programme Statistics