Mr. Seamus McCarthy:

Local authorities receive a substantial part of their annual funding from a wide range of central government Departments and agencies. As the stream of funds to local authorities is so complex, I report annually on the funds flow, drawing attention to the broad purposes for which the funding is provided.

Figure 3.1 in the chapter outlines the funding flows for 2020, indicating that the total funding provided amounted to around €6.1 billion. Almost two thirds of the transfer was issued from the Department of Housing, Local Government and Heritage, either from its Vote or from the Local Government Fund. Just under 18% of the funding issued directly or indirectly from the Vote for Transport, while a further 12% issued from the Vote for Enterprise, Trade and Employment, via Enterprise Ireland. The remaining 5% of the funding issued from a wide variety of sources.

Members should note that the relative percentages for 2020 reflected the significant impacts of special Covid-19 related funding. Stripping out that exceptional funding, the two main funders of the local authorities are the Department of Housing, Local Government and Heritage and the Department of Transport. In 2020, central government funding represented about two thirds of the total expenditure incurred by local authorities. This was significantly up on the situation in 2019, when about half of local authority expenditure was covered by transfers from central government.

The Department of Housing, Local Government and Heritage oversees the operation of the local government system, providing the policy framework within which local authorities work and deliver services to communities. It also sets the governance and assurance framework within which financial reporting by local authorities is undertaken and performance by local authorities is assessed and reported on.

The financial statements of each local authority are audited by the Local Government Audit Service, which is part of the Department but operates independently. Following each audit, the audit opinion and any matters arising from the audit are reported to the relevant local authority. A copy of each audit report is sent to the Minister for Housing, Local Government and Heritage. The audit service also carries out value for money audits of local authority operations, the results of which are reported to the Minister, and produces an activity report each year, highlighting both sectoral and authority-specific issues. All of the audit service's reports are published on the Department's website. The submission of the service’s reports to the Minister provides an opportunity for the Department to identify any emerging concerns across the sector or any outstanding concerns in individual local authorities that warrant follow-up.

The National Oversight and Audit Commission is a statutory body established in July 2014 to strengthen the oversight and scrutiny of the local government sector. It exercises this scrutiny by means of both overview and thematic reviews and, where warranted, may hold oral hearings on matters within its remit. It publishes an annual performance indicator report, providing comparative information in respect of local authorities across a broad range of services. Since 2017, it has been engaged in a programme of review of the performance of individual local authorities and has published reports arising from that process in respect of 17 local authorities. The commission publishes its reports on its website. Expenditure in respect of the activities of the commission activities is borne on the Local Government Fund. Although the Department provides accommodation and secretarial support, the operations of the commission are independent of the Department, as provided for by law.