On behalf of the Association of Local Government Audit Offices, De Kruijf, together with 110 audit offices, investigated why the multi-year budget often results in deficits, while the annual accounts show windfalls. The audit offices have a statutory duty to check whether 138 local authorities spend public money 'sensibly, economically and carefully'. Audit offices of provinces and regional water authorities also participated in the study. De Kruijf: 'Windfalls can arise because, for one reason or another, less money has actually been spent than planned or because more money has become available than planned. Less money may also be spent because something turns out to be cheaper than expected'.
Under-spending by local authorities: Researchers warn that budgeting needs to be improved and made more realistic
For years, local authorities have been struggling with structural financial deficits. Nevertheless, research by public administration expert Johan de Kruijf shows that local authorities have money left over at the end of the year. On the one hand, this is because 'unexpected additional funds' are received from central government, and on the other hand because local authorities spend less than budgeted. The allocation of resources is one of the most important tasks of councils, provincial councils and general administrations.
Four causes of discrepancy
The discrepancy has four causes, according to the conclusion of the Radboud University study 'Schipperen tussen Crises en Ambitie'. One of those causes is that the government repeatedly comes up with extra billions throughout the year. This money is useful, but it comes too late to be spent in the same year. De Kruijf: "The energy allowance is an example of this. Households with low incomes and high energy bills were eligible for an allowance in 2023. The government provided that money in 2022, but municipalities were only allowed to spend it from October 2023 onwards. Due to accounting rules, this resulted in a windfall in 2022, and because the money could not be spent until so late in 2023, it had not been spent by the end of that year."
However, the study also shows where local authorities can make budgetary adjustments:
- Municipalities are too optimistic about filling vacancies. These costs are budgeted for while there is a staff shortage and the ageing population is having a major impact on civil servants.
- They are also optimistic about large housing projects, road construction or sewer replacement, where money is set aside for setbacks or delays. These may be (partly) foreseeable in advance;
- Pessimism prevails when it comes to municipal taxes, which are structurally underestimated.
Help with budgeting
The research helps elected representatives to budget more effectively and to make only those difficult choices that are really necessary when discussing the budget. De Kruijf: "During budget discussions, there is almost always pressure to cut back on local services, while in hindsight it turns out that this was much less necessary."
New insights
According to De Kruijf, the finding that there were windfalls is not surprising. After all, it was the reason for conducting the research. What is new is that there is a pattern whereby the role of central government in windfalls has increased in recent years. The research also shows that, in the case of interim budget changes, insufficient attention is paid to the question of whether local authorities can actually still spend the money within the year.
The audit offices that participated in the study will soon begin drafting individual audit office letters for their representatives. These letters will contain the findings on underspending in their municipality, regional water authorities or province.
Contact information
More information? Please contact Johan de Kruijf.
- Contact
- Dr J.A.M. de Kruijf (Johan)
- Organizational unit
- Nijmegen School of Management, Institute for Management Research, Public Administration