Stewardship of public funds is a crucial responsibility of local council officials. Managing public funds brings with it responsibilities that are not less onerous than those of the management of a business organisation that holds itself accountable to private shareholders. The community of a locality served by a local council expects good value for the tax money it contributes to the running of their local government.
The National Audit Office has just published its Report on the Workings of Local Government for 2021. The headline conclusion of this report is that only 30 per cent of the councils submitted their audited accounts by the established deadline of the end of June.
This may seem a minor technical shortcoming as the logistics of preparing annual accounts are often disrupted by delays in the input needed from auditors and council officials. But the auditor general, Charles Deguara, described the situation as “alarming” and a serious cause for concern. An end-of-June deadline is reasonable.
This lack of compliance should not be taken lightly by the government department that oversees the governance of local councils.
The auditor general notes with satisfaction “the efforts on the part of the administration to ensure that the local councils of Malta and Gozo are given the necessary support to achieve their goals”.
We often hear about abusive practices in employing persons of trust by the central government on criteria that are often based more on loyalty to the party in government rather than on competence and merit. So, at least, it is encouraging that local councils that fulfil their responsibilities with full commitment to citizens’ interests are not denied the support needed from the central government.
The 2021 report makes some valid recommendations on how local councils can give better value for the taxpayers’ money they spend. The first recommendation is that the councils must ensure that their financial information is reliable as this assists them in planning their services and finances effectively and efficiently.
Local councils should not only ensure that they follow the rules of good management, for instance by preparing good quality financial reports on time. They also need to ensure that the money spent addresses effectively the more urgent needs of the community they serve.
The auditor general argues that “local councils are expected to put their governance and financial stewardship responsibilities high on their agenda”.
An essential part of any financial audit is preparing a management letter that identifies the weaknesses that management needs to address to improve the governance of local councils.
Ignoring the recommendations of the local government auditor exposes local government processes to unnecessary risks to the detriment of the community and taxpayers.
The sound advice of the auditor general in this regard is that councils identify suitable means intended to fix the root causes of the identified weaknesses, “thereby minimising the possibility of reoccurrence”.
Good local government governance depends on various elements that must be present simultaneously.
These include good financial reporting processes, competent officials solely motivated by the common good for the community they serve and support from the central government with resources and effective oversight.
The auditor general’s most incisive comment is: “Poor commitment to address shortcomings and act on audit recommendations signifies a sense of irresponsibility and weak governance within local councils.”
The central government must hold defaulting councils to account. This is an effective way to ensure public funds are used solely in the community’s interest.