One third of €713m owed to State will never be paid

The State was owed €713m in development contributions by the end of 2011, but local authorities had to provide for the likelihood that more than a third of that total would never be paid.

Correspondence sent to the Oireachtas Public Accounts Committee by the Department of the Environment shows that total bad or “doubtful” debt provision up to Dec 2011, the latest year for which fully audited figures are available, was €250m.

The department said local authorities create a bad debt provision “to recognise the possibility that some of the short-term debtors due may not be collectable”.

In order to identify “current debtors” for the year, the department subtracted €288m owed by long-term debtors — those in local agreements to phase the payment of development contributions — from the overall total. That left €425m in “current debt”.

In almost all the councils, the “bad debt” total made up a significant percentage of the overall “current debt”.

Limerick County Council’s total for current debtors was €37.92m. Of that, almost €37m was described as bad debt. Dun Laoghaire/Rathdown County Council’s total current debt was €45.51m, of which €42.51m was bad debt.

The highest debt level, €115m, was in Fingal County Council. Bad debt accounted for almost €50m of that total.

The Department of the Environment insisted the monies classified as bad debt would not automatically be written off but remain under that category for a number of years. It said every time a local authority realises it is unlikely to recover its debt from a receivable, it must write off the bad debt from its books.

“This ensures that the entity’s assets (ie receivables) are not stated above the amount it can reasonably expect to recover, which is in line with the concept of prudence,” a spokesman said.

“For example, if a liquidator is called in respect of a developer who owes a local authority development contributions and notifies the local authority that they will only be paying preferential creditors, in these circumstances the local authority may write off the debt.”

The figures released to the PAC also show that up to the end of 2011, almost €5bn in loans was owed to local authorities, €900m of it owed to Dublin City Council alone.

A number of the councils had sizeable overdrafts, the biggest being almost €14.5m for Mayo County Council.

Fianna Fáil environment spokesman Barry Cowen called for greater detail on the make-up of the €250m bad debt total.