Northern Ireland’s Local Government Auditor has today (Friday 15 December 2023) published a report summarising the findings of her audits of local councils during 2020-21 and 2021-22.
Colette Kane’s report highlights the impact of the COVID-19 pandemic on both council finances and operations. It notes that, in 2020-21, total local government income exceeded total expenditure for the first time since the formation of the new council structures in 2015. This was mostly a consequence of the pandemic response, which saw both a reduction in expenditure levels by councils, and significant (but short-term) additional financial support to councils from central government. However, in 2021-22, while expenditure levels remained lower than pre-pandemic, a drop in income meant that the local government sector was again in a position of overall expenditure (£1.07 billion) exceeding income (£1.056 billion).
The report also notes that, during 2020-21 and 2021-22, the value of repayments made by councils against their existing debt was greater than the value of new borrowing. As a result, the value of outstanding debt across councils fell by £99.3 million (17%) over the two-year period, although there was significant variance between councils in terms of both overall levels of debts and levels of expenditure used to service this debt. There was also an increase in the value of useable reserves held by councils, from £266 million at the end of 2019-20 to £462.8 million at the end of 2021-22.
The report acknowledges the economic environment has changed significantly since 2021-22. Factors such as inflation and the rising cost of living have left the local government sector facing uncertainty over future funding levels and expenditure pressures.
Local Government Auditor Colette Kane commented:
“Councils must always balance the cost of delivering services with the level of income they are able to generate. In the current economic environment, this is difficult. Decisions that have potentially significant medium and long-term implications are having to be made with little clarity about how those implications can or will be managed in future. We have already seen several councils raising domestic rates in response to these challenges.”
“A clearer picture of councils’ financial position will emerge from the audit of the 2022-23 financial statements and I will have more to say on this in my next report. However, it is clear that robust financial planning is more essential than ever. I have highlighted a number of important considerations for councils moving forward. These include how best to utilise existing reserves to maximise value for ratepayers or, conversely, how to build financial resilience where levels of reserves deplete due to a reduction in income.”
“The adaptability and flexibility displayed by the local government sector in responding to the pandemic will continue to be needed if councils are to innovate and embrace change and new opportunities.”
Some of the other findings noted in the 2023 report include:
- During 2020-21, there was a significant increase in the value of suspected frauds reported by councils (£92,000, versus £5,000 in 2019-20). The value of suspected frauds then fell significantly during 2021-22 to a value more consistent although still slightly higher than the value in 2019-20 at £9,400.
- Staff costs continue to account for slightly less than 40 per cent of total expenditure, with the rate at individual councils tending to be relatively close to this general rate.
- Following a notable reduction in staff absence levels during 2020-21, the post pandemic work scape saw councils record their highest average sickness percentage against the previous five years (an average of 15.8 days in 21-22)
The Local Government Auditor’s 2024 report, summarising findings from audit work during 2022-23, is expected to publish by Spring 2024.