LOCAL GOVERNMENT AUDIT SERVICE

Statutory Audit Report

to the

Members of County Council

for the

Year Ended 31 December 2012

CONTENTS

Paragraph

Introduction 1

Main Issues 2

Financial Performance 3

Financial Standing 4

Capital Account 5

Major Revenue Collections 6

Specific Matters 7-10

Auditor’s Report To The Members of Limerick County Council

1. Introduction

1.1 I have completed the statutory audit of the accounts of Limerick County Council for the year ended 31 December 2012. My audit opinion on the Annual Financial Statement (AFS) of the Council, which is unqualified, is stated on page 3 of the AFS.

1.2 This report is issued in accordance with Section 120 of the Local Government Act, 2001.

2. Main Issues

Attention is drawn to the following main issues in this report • Financial performance deterioration in revenue balance (paragraph 3.1) • Major debit balances on capital account (paragraph 5.4). • Revenue collections (paragraph 6.1).

3. Financial Performance

3.1 The Income and Expenditure Account with comparative figures for the previous year may be summarised as follows:

2012 2011 €000 €000 Expenditure 104,259 108,912 Income 108,259 114,816 Surplus for Year before Transfers 4,000 5904 Transfers from / (to) Reserves (4,164) (6565) Overall Surplus /(Deficit) for Year (164 ) (661) Opening Balance at 1 st January ( 385) 276 Closing Balance at 31 st December (549) (385)

The Council recorded a deficit for the year of (€164k) and the cumulative deficit is (€549k).The Council must ensure that the revenue account balance does not deteriorate further.

Manager’s Response

The Council implements strict budgetary controls and continually strives to ensure that the revenue account does not record a deficit. During 2012 there was exceptional expenditure incurred for operating costs in the landfill as a result of leachate disposal, lump sum costs and water supply costs due to the pollution of the Deel river.

3.2 Transfers from / (to) Reserves The net transfer from / (to) reserves was €4.2m, and included €464k for landfill aftercare ,surplus on operation of RAS €296k and €4m to the loan repayment reserve. 1

4. Financial Standing

4.1 The Balance Sheet shows net assets of €2,794m at 31 December 2012, consisting of the following:

2012 2011 €000 €000 Fixed Assets 2,781,367 2,772,813 Work In Progress and Preliminary Expenses 33,687 56,886 Long Term Debtors 26,252 27,027 Net Current Assets 14,610 8,661 Long Term Creditors (61,37 3) (61,446 )

Net Assets 2,794,543 2,803,941

Represented by:

Capitalisation Account 2,781,367 2,772,813 Income WIP 35,194 57,319 Specific Revenue Balance 385 385 General Revenue Balance (549) (385) Other Balances (21,854) (26,191)

2,794,543 2,803,941

5. Capital Account

5.1 The capital account records income and expenditure in respect of the acquisition and provision of assets related to services provided by the Council. It has been de-aggregated with the various accounts included under relevant account headings in the Balance Sheet.

5.2 A summary of the transactions on the capital account, with comparative figures for 2011 is as follows:

2012 2011 €000 €000 Expenditure (Including Transfers) 31,086 35,496 Income (Including Transfers) 36,457 30,184 Outturn for the year 5,371 (5312) Opening Balance Favourable /(Adverse) 14,395 19,707 Closing Balance Favourable /(Adverse) 19,766 14,395

5.3 Capital expenditure in 2012 mainly included expenditure on roads and infrastructure of €16.4m, water and sewerage network of €6.4m, housing of €2.7m,and environment €2.2m.

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5.4 The major debit balances on capital account at 31 December 2012 were as follows:

• Sewerage Scheme €2m • Other Water and Sewerage Schemes €5.5m • Mungret Civic Amenity Project €1.8m • Gortadromma Landfill Development €2.6m

Manager’s Response

Castleconnell Sewerage Scheme

The Council replied to the Department of the Environment, Community and Local Government (the Department) after submitting a final ac- count in February 2011. Payment of outstanding monies is now due.

Other Water & Sewerage Schemes

The Council has now submitted to the Department the final account in respect of Pallaskenry/Kildimo Water SS, Castleconnell S.L.I. and G.W.S Design Build Operate. Reports are being compiled for Fe- damore Sewerage Scheme, Croagh Sewerage Scheme and South- ern Ring Water Main .Consideration is being given to the raising of a loan for Sewerage Scheme and Mungret Sewerage Scheme.

Mungret Civic Amenity Scheme There has been Council and Departmental approval to draw down a loan for the Civic Amenity Site to clear the debit balance.

Gortadromma Landfill Development This debit balance will be funded from the aftercare fund and also the income generated from the gas to energy project which is expected to break even in 2013.

6. Summary of Major Revenue Collections

6.1 The percentage yields from the main revenue collection accounts were as follows:

2012 2011

Rates 82% 87% Housing Rents and Annuities 88% 90% Housing Loans 75% 78% Commercial Water Charges 78% 77%

I note that the collection yields for rates,housing loans and housing rents have deteriorated this year. Rate arrears were approximately

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€5.2m, water arrears €1.9m, housing rents €819k and housing loans €368k. All revenue collections require close monitoring to ensure that the arrears do not increase further. The provision for bad debts will require further review at the end of 2013.

Manager’s Response

Limerick County Council set-up a Debt Management Unit in 2012 to focus resources and expertise on collection of the main income head- ings. Monitoring and maximising all collection accounts is given the highest priority particularly in light of the difficult economic climate that currently exists.The provision for doubtful / bad debts is constantly under review and adjusted as required. This will be done as part of preparation of the AFS for 2013.

7. Voluntary Housing Project

I mentioned in my last report that €1.7m was advanced to Cluid for the provision of twelve houses on foot of Quantity Surveyor’s recommendation.These houses remain uncompleted.

8. Roads Project N21 Killarney Pole to Barnagh

This project commenced in 2012 and the contract amount was €4.1m. The contractor has been paid €4.3m to date and has submit- ted a number of claims totalling €1.827m . All the claims have been referred to Conciliation, however the formal conciliation process has been suspended pending ongoing negotiations on the claims between the contractor and the employers representative. The project became operational in December 2012.

9. Mungret Sewerage Scheme

The contract was for €1.44m and additional claims were submitted by the contractor.The final all in cost settlement reached in 2013 was €1.9m.

10. Development Contributions

Debtors in respect of development contributions at the year end are stated at €28.5m. The provision for bad debts is €27.8m and the major part of the provision is in respect of developments that have not commenced .

11. Acknowledgement

I wish to record my appreciation of the co-operation and assistance received from the staff at all levels during the course of the audit.

______L.J.Gavin Local Government Auditor 31 st October 2013

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