Mr. Seamus McCarthy:

The 2021 appropriation account for Vote 34, Housing, Local Government and Heritage, records gross expenditure of €5.143 billion. The appropriation account is presented under six programme headings. The largest by value are the housing programme, water services programme and the programme to support local government, which together account for 95% of the gross expenditure under the Vote.

The surplus of the amount provided over the net amount applied in the year was €392 million. Of this, €276 million related to unspent 2021 capital allocations was carried forward to 2022. Just under €117 million was liable for surrender back to the Exchequer.

I issued a clear audit opinion in respect of the appropriation account. However, I drew attention 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, ECJ, in November 2019. The case concerned Ireland’s 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 by the court comprises a €5 million lump sum payment paid in 2020 plus a daily fine of €15,000 while the infringement continues, plus legal costs. By end 2021, the Department had paid fines totalling €13.2 million and a further liability of €3.5 million had accrued. The daily fine continued to be incurred into 2022. The Accounting Officer will be able to provide an update in that regard.

The Local Government Fund is managed by the Department and accounted for separately from the Vote. The fund comprises mainly Exchequer funding from Vote 34 and the proceeds of local property tax. In 2021, local property tax receipts into the fund amounted to €550 million. This was up marginally from the level of receipts in 2020. The transfer to the fund from the Vote in 2021 amounted to €699 million. This was down €357 million, or 34% year on year, due to a decline in the cost of the Covid-related commercial rates waiver. The fund expenditure in 2021 amounted to €1.23 billion. At end December 2021, the fund’s reserves stood at just over €159 million. Again, I issued a clear audit opinion in respect of the fund account.

Because of the complex ways that central government funds flow to individual local authorities, my office compiles a report each year to present an overview of the level and purposes of the funding provided. In 2021, funding to local authorities from central government sources amounted to a total of €5.77 billion; a decrease of approximately 5% on the €6.08 billion provided in 2020. More than 90% of the central government funding for local authorities came from three sources, namely, Vote 34 - the Local Government Fund and Vote 31 - Transport. Of the total of €5.77 billion central government funding, €2.8 billion was provided to local authorities for housing and regeneration. A further €1.3 billion was provided to local authorities for transport investment.

The committee previously considered the issue of reallocation of voted funds that was not in compliance with the procedures set out in public financial procedures, as outlined in chapter 4. One of the cases referred to in the chapter relates to Vote 34.

In summary, the Department of Housing, Local Government and Heritage reallocated €446 million of 2021 voted funds from subheads where there was underspending to facilitate additional spending in other subheads.

Public financial procedures state that the prior approval of the Department of Public Expenditure and Reform should always be obtained when a reallocation of voted funds is proposed. The Department of Housing, Local Government and Heritage did not have the required prior approval from the Department of Public Expenditure and Reform for €314 million of the transfers during 2021. Subsequently, in July 2022, the Department of Public Expenditure and Reform provided formal sanction for the transfers.

Included in the total reallocated was €310 million to increase the level of Vote funding for the Local Government Fund. This represented an increase of 79% over the Estimate provision amount approved by Dáil Éireann. The Department of Public Expenditure and Reform guidelines indicate that the better approach to transferring the funding would have been to use the Supplementary Estimate process.

Members will recall from last week that I introduced chapter 7, the Housing Agency's revolving acquisitions fund. The money in the fund originated from Vote 34. In brief, our examination found that, even by the revised target date of the end of 2021, there was a significant shortfall in the delivery of residential units through the fund. The examination also found that at the end of 2021, the cash balance of the acquisitions fund was €37.7 million, representing around half of the total fund value. This is indicative of under-utilisation of the fund's resources.