Mr. Seamus McCarthy:

The 2020 appropriation account for Vote 34 - housing, local government and heritage - records gross expenditure of €5.27 billion. The appropriation account is presented under five programme headings. The largest by value are the housing programme, the water services programme and the programme to support local government. The surplus at the year end was €226.5 million. Of this, €214 million related to unspent allocations in respect of planned capital investments, which were carried forward to 2021.

I issued a clear audit opinion in respect of the account. I drew attention, however, to a note in the account that discloses payment of a fine to the European Commission arising from a judgment of the European Court of Justice in November 2019. The case concerned the failure to ensure that a retrospective environmental impact assessment was carried out in respect of a wind farm constructed in County Galway. The fine imposed comprises a €5 million lump-sum payment plus a daily fine of €15,000 while the infringement continues, plus legal costs. The amount paid to the Commission in 2020 totalled €7.745 million, and a further liability of €2.745 million was accrued by the end of 2020. The daily fine was ongoing at the time we were completing the audit of the account and we estimated that it could result in a potential further liability of €5.5 million in respect of 2021. I also drew attention to the disclosure in the statement on internal financial control in respect of three non-compliant procurement contracts operated by the Department during the year.

The Local Government Fund is managed by the Department separately from the Vote. The fund comprises mainly the proceeds of the local property tax, LPT, and a transfer from the Vote. In 2020, LPT receipts into the fund amounted to €482 million. This was up marginally from the level of LPT receipts in 2019. The transfer to the fund from the Vote in 2020 amounted to €1.1 billion. This was up €871 million, or 470%, year on year. The increase was to cover the cost of the Covid-related commercial rates waiver and of certain additional supports to local authorities. The fund expenditure in 2020 amounted to €1.5 billion. The bulk of this was accounted for by transfers to local authorities. At end December 2020, the fund's reserves stood at just under €140 million.

I issued a clear audit opinion also in relation to the fund account.

Due to the complex ways that central government funds flow to individual local authorities, chapter 3 is compiled each year to present an overview of the level and purpose of the funding provided. In 2020, total funding to local authorities from central government sources was €6.08 billion, an increase of 46% on the €4.17 billion provided in 2019.

I turn now to chapter 8, which deals with oversight of the housing assistance payment, HAP. The HAP scheme, while funded by the Department, is operated by the local authorities. As members are aware, the scheme aims to cater for households with a long-term housing need in a unified system of support. There has been a steady increase in the number of households receiving support under the scheme. In 2020, the Department spent almost €465 million on HAP, supporting nearly 60,000 tenants at an average annual cost of €7,800 per tenancy supported. The cost to the Exchequer is net of rent contributions collected from tenants.

The examination found that while market rental costs were increasing, the maximum rents payable by the State under HAP had not been revised since 2017. Some tenants make top-up payments to cover any difference between the rent payable to the landlord and the maximum rent payable by the State. A review carried out by the Department of Public Expenditure and Reform found that around 28% of HAP tenants were making top-up payments to landlords in the first half of 2019. The examination found that no more recent data were available on the extent of these payments, and that such top-up payments were not routinely tracked by the Department. The HAP scheme also has an objective to improve regulation of the private tenancy sector, which is met by the legal requirements for local authorities to inspect HAP properties. The examination found that the Department did not have information on the proportion of proposed HAP tenancies actually inspected or on the results of those inspections.

The report makes several recommendations for improvement in the Department’s oversight and management of HAP, including monitoring the effectiveness of HAP, which the Department has accepted. The Accounting Officer will be in a position to provide an update on any progress made regarding their implementation.