Finance & Audit

Plans and Budgets

Local authorities must prepare financial plans annually in accordance with guidelines laid down by the Department.  They must prepare annual finance statements at the close of each year.

There are provisions for making of regulations in relation to the form of accounts, budgets, procedures and other related financial matter.  The rules are prescribed by statutory instrument and codes of practice published by the Department.

The annual published budget is prepared before each financial year.  It is drawn up by the manager in consultation with the corporate policy group.  It is then presented to the elected members at a budget meeting. They elected members may require the manager to submit financial statements in any matter.

There is provision for consideration and adoption of the local authority budget at the annual budget meeting. The requisite procedures are set out. There must be advance public notice and the budget must be available for inspection by the public. The annual rate on valuation (formerly the rate in the pound) is decided at the meeting which adopts the local authority budget.

There are limits on exceeding the budgetary provisions. There are exceptions for limited cases and emergency. Any excess must be brought to the notice of the elected member.

The adoption of the budget is a reserved function to the elected members.  However a budget must be adopted.  The local authority elected members may vary the manager’s proposed budget.

If the budget has not been adopted, the local authority is empowered to use monies and liabilities in that financial year for particular functions in accordance with the immediate preceding year’s budget to one-third of that total.  The  Minister may increase the relevant percentage.

Surcharge

Common Law cases hold  that Local Governments bodies owe a fiduciary duty to their ratepayers.  It is arguable that ratepayers can take action to restrain expenditure which might be in breach of duty in  breach of the fiduciary duty.

Local authority elected members may be personally surcharged, where they unlawful expend money. The auditors may surcharge payments which are contrary to law or have no legal basis.

Where proposals arise at local authority meetings, which involve illlegal payments or loss, the manager or other officials must inform the elected members. Elected members who are present and vote for it may be liable to surcharge.

Surcharge  applies in relation to reserved functions and in relation to functions where the councillors direct the manager to perform in a particular manner. There is provision for application to the High Court to challenge the validity of a surcharge.

Even if the High Court permits the surcharge, an application may be made to the Minister who may remit the charge if he is of  the opinion that would be fair and reasonable to do so in the circumstances. Alternatively, the person concerned may request the Minister to enquire into the legality of the auditor’s basis for surcharge.

Financial Procedures

The local financial year is defined. Local authorities must maintain a local fund consisting of such accounts as may be necessary. The monies received are paid into the local fund and monies paid out must be authorised as below:
local authorities may make appropriate banking arrangements for the management of their money.

Authorisation procedures apply to the payment of money. Generally, the manager or a nominated employee must authorise payment. Payments must be counter authorised by another nominated person.

There were formerly provisions in respect of payments by Town Councils, County Councils in respect of activities carried out by the County Councils for the Town Councils. Similarly, there were provisions for the payment of expenses of the Town Councils which were not rating authorities which were payable by the county concerned.

Audit

Local authorities must keep proper books of account in accordance with accounting practices and codes as issued by the Department.

An annual financial statement must be prepared by a local authority in accordance with the code of practice and must be submitted to the elected members and the auditor.

The auditor must review financial statements and opine on whether they fairly present the financial position, income and expenditure for the relevant period concerned in accordance with the applicable accounting principles.

The local government auditor must also consider whether the functions have been carried out  in accordance with statutory authorisation.  The auditors may review the efficiency and  arrangements in relation to expenditure of money.

The auditor’s opinion may be qualified where there is  some limitation on the scope of the examination or if the auditor disagrees with the treatment of the matters in the financial statement.  The auditors must specify the nature of the circumstances giving rise for the qualification.

The auditor may report on matters coming to his attention during the audit.  He must consult with the managers or chief officers in relation to the matters to be referred to and report and must consider and  record their  comment as are relevant to the matter concerned.

The local authority may establish an audit committee, which meets in public to consider the audited financial statements. There is provision for an extraordinary audit following information disclosed in an auditor’s report or otherwise. Audit functions may be reassigned to a different auditors where required.

Local authority must pay the department prescribed audit fees. If required by the department, the Director of Audit shall make arrangements for local government auditors to certify claims and make returns in respect of grants, subsidies and other monies due to a local authority or other body of State or public authority.

LG Audit Service

The Local government audit service is established by local government’s legislation.  The conduct and management of functions by local authority.  The service is based within the Department of the Environment.

The service is divided into local audit districts on geographical basis.  There are a number of district auditors and a director of audit.

Local government auditors must be accountants, and must be independent in the performance of their functions.  They must act with due care and skill.

The local Government Audit Service is continued by the 2014 Act and a director of audit is appointed. And local government auditors are independent in the performance of their functions.

A code of audit practice may be issued by the Minister following consultation with the Director of Audit. Regulations may be made in relation to audit procedures and criteria to be applied by the local government auditors in audit.

The local government auditor has a right to access to all information. Local authority auditors have wide powers of access to all books, contracts, deeds, plans, et cetera as are necessary to perform their functions. Local authorities must cooperate with them fully in all respects. Failure to do so constitutes an offence.

The auditors are to issue an audit opinion and report on the annual financial statement. The manager is to submit the financial statements to the elected members. The auditor may arrange to address the authority.

Value for Money Unit

There is a central local value for money units within the Department of Environment consisting of local government auditors and departmental officials. They are to to study systems, practices and procedures to enable to make recommendations on the improvement of the management, efficiency and effectiveness of local authorities.

The Minister may request the unit to carry out a study of  the systems, practices and procedures including systems carried out outside the State which they consider will enable them to make recommendations in relation to measures to secure the provision of local authorities services in a more economic, efficient and effective manner and improve the manner in which local authorities are managed.

Each local authority shall provide personnel or other persons, as is required for carrying out functions and such other information or such information, records and documents that the unit may reasonably require.  The unit shall report to the Minister the  results of the study and shall have regard to such results in making recommendations.  The Minister shall publish any reports or recommendations made.

Local Government Auditor & Value

Local government auditors may carry out an audit to ascertain whether the local authorities receive value for money in  its expenditure or in the  disposal of assets.

The  local government auditor may in the course of an audit of accounts of a local authority or at any time carry out examinations he considers appropriate in relation to value for money.  This includes reports for the purpose of ascertaining whether and to what extent the resources of the local authority have been used economically and efficiently and whether the sale of assets disposed of, have been effected on the most favourable terms reasonably obtainable.

A local Government auditor may in carrying out examinations, make such comparisons including comparisons of systems, procedures and practices as he considers appropriate. He  may examine the extent to which the local authority has implemented the recommendations made by the Minister or the unit above and to the extent that those recommendations have been  or are being implemented by the local authority. He may examine measures taken by it for such purposes.7