The Valletta and Victoria local councils are in dire financial straits, the National Audit Office (NAO) has found.
In an audit report published on Tuesday, the Auditor General said the negative financial situation of the two councils “totally unacceptable” and needs prompt remedial action to plug the financing gap.
The NAO had particular criticism about the “absence of accountability” at the Valletta local council, which saw the Auditor General issue what is known as a disclaimer of opinion on its accounts for the eighth year in a row.
Such a disclaimer is issued when an auditor is unable to even gather enough financial records and documentation on which to base an audit opinion.
The NAO found fines recorded in the Valletta council’s accounts were understated when compared to those generated by the master local enforcement system figures.
'Misstated' liablities
A lack of “proper accounting” led the council’s end of year liabilities for 2020 to be “misstated”.
Testing also revealed a “significant number” of other misstatements due to a lack of proper accounting and reconciliation of receivables and accrued income.
“No practicable procedures could be carried out to determine the exact amount of misstatement within the receivables recognised by the council”, the NAO said.
By the end of December, Valletta’s net current liabilities stood at €390,928.
These liabilities mean that for the council to continue operating as a going concern, it will have to depend on further sources of funds other than the annual government allocation, the collection of debts due and the continued support of its creditor and cash savings in subsequent years.
On Malta’s sister island, the Victoria council was found to have negative working capital of €234,338.
Although other local councils incurred losses last year, it is the Valletta and Victoria local councils’ lack of reserves to cover these losses that prompted alarm at the NAO.
Much like Valletta, the Kalkara local council was singled out for its shoddy accounting.
'Significant doubts' over Kalkara finances
This lack of proper accounting records saw the Kalkara council being issued with its fifth disclaimer of opinion by the NAO in a row.
Issues were identified with the council’s documentation to support certain transactions, as well as “significant doubt” over its ability to meet its financial commitments as they fall due due to its liabilities exceeding assets by €149,329.
On a general note, the Auditor General said the late submission of audited statements by the “majority” of the 74 local authorities hampered the NAO’s ability to do its job.
“Suffice it to state that only the local councils association and 11 councils submitted the audited financial statements on time, whilst those of nine local councils did not even reach this office by the time this report was concluded”, the Auditor General said.
The Auditor General said that given the substantial €48 million financial allowance to local and regional councils, all local authorities must ensure their commitment to be fully accountable and transparent in their spending.