Action should be taken against local councils that do not bother replying to Audit Office concerns about their finances, the Auditor General said on Wednesday.
He made his call in the annual review of local councils by the National Audit Office (NAO).
The office complained that 11 councils had not responded to letters it had sent them, raising a series of concerns about the way their finances were being managed.
“A significant 16% of local councils did not even bother to reply to our concerns. Such an irresponsible attitude renders the considerable public funds being incurred on the auditing of local councils, as stipulated by law, a sheer waste of taxpayers’ monies,” the NAO said.
Action should be taken to punish those councils which “totally ignore” its findings and recommendations, the office insisted.
Fifty-four local councils and three regional committees together with the Local Councils' Association delivered their audited financial statements by the established deadline of April 30, 2019.
Qrendi local council and the Gozo regional committee, the NAO said, had completely ignored its calls.
The NAO said that due to a lack of documentation, it was unable to express an opinion on the financial statements presented by the Vittoriosa, Kalkara and Valletta councils.
Eleven councils in the red
Eleven local councils were found to be in the red after they recorded a negative working capital, indicating that they will not be able to meet their financial obligations.
These were Birkirkara, Għasri, Kalkara, Kerċem, Pietà, Victoria, San Lawrenz, Sannat, Valletta, Żebbuġ (Gozo), Żebbuġ (Malta).
The report largely attributes this situation to a change in the depreciation method used in national accounting from 2017 to 2018.
With the exception of two councils, Kalkara and Valletta, all had sufficient reserves to make up for the reported deficit.
The negative financial situation in the two councils in question, the report adds, is “definitely not acceptable”.
The report found that while a rise of 4% in total revenue generated by local councils had occurred over the preceding year, this was mainly the result of an increase in funds allocated by central government.
The positive trend was outweighed by a considerable increase in expenditure incurred across all local government, which the NAO said had “soared” by 37%; from a total of €39.6 million in 2017 to €54.3 million in 2018.
“This has drastically impacted the sector’s overall operating result which changed from a profit of €4 million recorded in the previous year to a loss of €8.8 million for the current year,” the NAO report reads.
Being responsible for aspects of everyday life, coupled with the fact that over 80% of their revenue is attributed to public funding by means of a Government allocation, renders local councils’ financial management subject to high-level community interest and accountability, the report reads.