The Swedish Agency for Public Management
Meny

Municipal co-financing of public infrastructure and higher education (2014:8)

The government has tasked Statskontoret to survey the extent of municipal co-financing of public infrastructure and higher education. The commission also includes proposing how the state can continue to monitor developments in this area (Fi2013/3356).

The survey has been expanded to include some of EU funds and programmes and a cultural interaction model in the area of culture.

Common to the areas being investigated and surveyed in this report are that the municipal financing of these is optional, and they are also co-financed, or fully financed by the state.

Municipal co-financing

Municipal co-financing of government operations means that municipalities or county council finance sections of an investment or operations of a responsible organisation of the state. The concept of co-financing is used in some cases independent of mandatorship, including when it comes to financing made under the common framework or financing models that EU funds and programmes and the cultural interaction model.

The agency of municipalities and county councils to co-finance in a number of state and other areas was expanded and clarified in 2009 through Chapter 2 of the Act (2009:47) on certain municipal powers. The new rules give municipalities the option, but not the obligation, to award contributions. New opportunities for municipalities to co-finance government activities have been added after 2009.

Survey

Statskontoret has surveyed the areas mentioned above. In this survey, Statskontoret makes no analysis about the conditions that might be considered to affect the willingness and ability of municipalities to co-finance.

State infrastructure

In conjunction with the State Infrastructure Plan 2010-2021 the option of private and public stakeholders to co-finance was introduced. Municipal co-financing in the area relates to investments and takes place through financial contributions or through other contributions. Municipalities can, for example, assume responsibility for implementing and financing measures at government facilities.

Statskontoret has surveyed the municipal sector's planned co-financing of named investments, i.e. investments that usually cost more than SEK 50 million. Over the period April 2010 to 2013, the Swedish Transport Administration had contribution income from the municipal sector totalling SEK 4.1 billion. Of these appropriations, SEK 3.2 billion (78 per cent) related to named investments and SEK 0.9 billion (22 per cent) unnamed investments.

The planned co-financing of the municipal sector's named objects in 2013 and later amount to SEK 9.4 billion. This figure relates to both contracted and intention-declared co-financing. The agreed co-financing is legally binding, and the intention-declared co-financing is an expression of intent. Of this figure, 29 per cent relates to roads, 19 per cent to road and rail, 50 per cent to railways and 2 per cent to maritime.

How the municipalities and county councils report contributions to national infrastructure

Financial support to another responsible organisation's activity or investment is normally classified as a contribution and should be expensed in the contributor's income statement. For contributions to the national infrastructure, municipalities can also choose to spread the cost over several years.

In 2012, there were 46 municipalities that chose to allocate financing over several years, that is, they recognised the contributions to the national infrastructure as an asset in the balance sheet. Overall, the cost of these contributions totalled SEK 1.2 billion. Most of the municipalities use 25 years as the period for resolution. However, according to our sources, at least 63 municipalities have had expenditure for contributions for state infrastructure that they have opted to directly recognise in their income statements.

Among the county councils, five of the 20 have opted to allocate their contributions for national infrastructure over several years, totalling SEK 1.2 billion. In addition to these county councils, at least two municipalities have had expenditure for contributions for infrastructure that they have opted to directly recognise in their income statements.

Four county councils indicate the period for the resolution of the contributions for national infrastructure in their annual reports. All have stated 25 years.

Advances

Advances mean that municipalities and county councils are initially responsible for the investment costs through a loan to the state, in return for the state reimbursing these funds without interest when the funds become available. A common reason for the advances is that co-financiers want to bring forward a government investment that is relevant to them.

At the turn of 2012/13, 31 municipalities and 5 county councils had ongoing advances totalling SEK 1.4 billion. Their total costs for advances in one year were estimated at SEK 59.5 million in interest costs (or foregone interest income).

Municipalities' ongoing advances totalled SEK 495 million, of which 84 per cent was for roads and 16 per cent for railways.

The five county councils ongoing advances at year-end totalled SEK 921 million. Of these, 38 per cent related to roads and 62 per cent to railways.

Higher education

Contribution income from the municipal sector for universities have increased continuously from SEK 365 million in 2009 to SEK 481 million in 2012. The bulk of the contribution income, as well as the increase in appropriation proceeds, related to the research level. Contribution income at the basic and advanced levels were relatively constant over the period, albeit with a decrease between 2011 and 2012, from SEK 49 to SEK 34 million.

Of the 15 county councils that responded to Statskontoret's questionnaire, ten (67 per cent) stated that they had incurred costs for contributions for higher education. Of the municipalities that responded, 14 per cent said they had incurred such expenses. County councils had higher costs for these contributions than the municipalities.

EU funds and programmes

The co-financing of EU funds and programmes vary from that of the infrastructure and higher education fields, mainly through them not relating to co-financing of another responsible organisation's activities. The co-financing of EU funds falls under a common framework instead.

The co-financing of the municipal sector varies between the funds and programmes that are surveyed here. During the 2007-2013 programme period, the municipal sector decided on the following co-financing:

  • Regional fund: the equivalent of over SEK 3.1 billion, of which 88 per cent was cash and 12 per cent contributions other than money, such as labour, equipment and premises.
  • Cross-border cooperation: EUR 43 million (approximately SEK 300 million) of which 40 per cent was in cash and 60 per cent contributions other than money.
  • The social fund: SEK 1.8 billion of which 25 per cent was in cash, 19 per cent other than cash and 56 per cent were 'participant payments'.
  • Leader in the Rural Development Programme: about SEK 600 million.

The majority of municipalities (247) and all 21 county councils or cooperative bodies co-financed the regional fund. Significantly fewer municipalities (127), county councils (7) and cooperative bodies (2) co-financed the cross-border cooperation. The Social Fund was co-financed by the 123 municipalities, and in virtually all county councils and collaborative bodies. For the Leader in the Rural Development Programme, no data is available on the co-financing of individual municipalities and county councils.

Cultural interaction model

The cultural interaction model is planned to provide the regional and local levels a more evident influence on how cultural policies are implemented. The new model for the allocation of state contributions for regional cultural activities has been introduced gradually since 2011. It is more about municipal and national co-financing within the context of a common financing model rather than municipal co-financing of government operations.

In 2012, 16 counties were included in the culture interaction model and a further four counties adopted the model in 2013. It has now been introduced in all counties except in Stockholm.

Financing of the municipality sector in this area is reported at a county level, individual municipality contributions in the counties are therefore not visible. For county councils this amounted to SEK 1.5 billion in 2012 and for municipalities to SEK 797 million. Of the participating counties, Västra Götaland accounted for the largest financing at approximately SEK 813 million in 2012.

There is also co-financing by municipals and county councils of state cultural activities. As far as we have been able to assess, this co-financing occurs to a relatively small extent.

How co-financing can be monitored in the future

Statskontoret has reviewed a series of data sources that may be relevant to elucidate the municipal co-financing. In some cases it is possible to measure the co-financing of municipalities and county councils in the form of financial contributions on the cost side of municipalities and on the income side of the government agencies' accounts. In some cases, there are also compilations or databases of contracts entered into or approved co-financing.

It is possible to distinguish between different levels of ambition for what should be monitored. How comprehensive and detailed the information should be that is collected, should be considered against the benefits that the information provides in relation to the cost or effort required to collect it.

It is the government who is best placed to judge what information is needed in controlling and monitoring issues related to municipal joint and co-financing. Statskontoret has therefore chosen not to submit proposals on the monitoring system that should be selected. We consider instead what might be appropriate and capable of being monitored continuously over the short and longer term, and what is relevant to monitor depending on the level of detail required.

State infrastructure

Statskontoret believes that the municipal co-financing of public infrastructure in the short term can be monitored based on the Swedish Transport Administration's data. Based on this data, it is possible to discern the extent of the co-financing for individual municipalities and county councils and based on the purpose. The data is also possible to refer to for the years in which the contribution income was given and it therefore provides a better basis for comparison between municipalities and between county councils than the data in Financial Statements (FS). However, even in the short term the Swedish Transport Administration's accounting needs to be developed to ensure, among other things, that co-financing of unnamed investments can be monitored for individual municipalities and county councils. Today, the Swedish Transport Administration only monitors named investments.

In case the government considers it appropriate to retrieve more detailed information about this co-financing, Statskontoret believes that the Swedish Transport Administration data is the most relevant. Municipal co-financing of public infrastructure is relatively large compared to the co-financing of other surveyed areas. Statskontoret has therefore determined that there will be a need to monitor the co-financing in a more in-depth manner in this area in the future. Through the Swedish Transport Administration's system, co-financing can be linked to the purposes, down to an object level. The Swedish Transport Administration also has knowledge of other facts which are relevant to each individual object, such as areas of responsibility between the state and municipalities, annual contribution income and planned co-financing also by means other than cash. Statskontoret believes that the Swedish Transport Administration will benefit from developing such a system in its own operations. However, it will not be possible for the Swedish Transport Administration to monitor the co-financing that municipalities an county councils may provide through another organisation.

Statskontoret also believes that it is relevant to develop the Financial Statements, parallel with the Swedish Transport Administration's system. FS is the only source of information on which municipalities co-finance national infrastructure projects through another organisation, such as county public transport and local transport operators. The costs reported in the FS are also important in monitoring how the co-financing of municipalities may affect their ability to satisfy the balance requirement.

Higher education

Statskontoret believes that the total co-financing of municipalities of higher education can be monitored in the short term through the University Chancellor Office collecting data on contribution income per institution. However, it is not possible to account for this information for individual municipalities and county councils. The distribution of co-financing between institutions provides a partial picture of which regions the contributions come from. Our investigation indicates that the contributions from both county councils and municipalities are usually targeted at higher education institutions in the region.

If the government has a need for regular information on individual municipalities and county council co-financing, then the municipal financial statements can be developed for monitoring the municipal co-financing. However, this requires that accounts for this are introduced in municipalities and county council base account plans.

If the government finds it appropriate to obtain more detailed information of this co-financing, for example, about the objectives and purpose, Statskontoret considers that such information can be collected in special surveys targeted at municipalities and county councils or at universities and colleges.

EU funds and programmes and the cultural interaction model

With the availability of EU funds within EU's funds and programmes being subject to national co-financing, the system has been developed to monitor this. The municipal co-financing within the framework of EU funds and programmes is monitored today by the agencies that manage the programmes. Statskontoret believes that the data that is currently available on the regional structure fund and for cross-border cooperation, complies with government requirements. For the Social Fund, reporting can be developed, in addition to approved co-financing, to also include payments made. If the government believes that additional information is needed to comply with the municipal co-financing in these areas, Statskontoret considers that this should be developed as part of the administering agencies' existing systems.

For the Rural Development Programme there is no corresponding monitoring system. Statskontoret believes that if the government wants to monitor co-financing in this area, a monitoring system should be developed by the administering agency, the Swedish Board of Agriculture, in the longer term.

Municipal financing of the culture interaction model is compiled by Region Skåne and reported by the Cultural Board. Regional and municipal financing is reported at a county level. If the government wants to monitor co-financing for individual municipalities, this should be a relatively short term project, to be registered in the Culture database of each county.