A recent audit has found that 17 local councils risk not meeting their financial obligations because they owe more money than they expect to collect.
The councils registered a negative working capital in 2011 and the amounts ranged from €241 in Kalkara to €786,717 in Birkirkara. For 10 of the councils, last year’s results reversed the previous year’s positive balance.
The audit was carried out by the National Audit Office for its annual analysis of public accounts, which was recently submitted to Parliament.
By registering a negative working capital the councils “may encounter difficulties in meeting their obligations when due”, the NAO said.
Working capital is the difference between the size of the council kitty – including money owed to it and cash in hand – and payments owed by the council to other entities. A council with a negative working capital is running at a loss.
The situation in Vittoriosa, Birkirkara, Rabat and Żebbuġ in Malta continued to worsen year on year.
The NAO said liquidity in the Birkirkara council was worsening “even further” from one financial year to another. The council exceeded its expenditure on capital projects, administration and operations by €1.3 million.
“The council had to finance additional expenses, which it was not planning for in the first place,” the NAO said.
Vittoriosa registered a negative working capital of more than €214,000 after a minimal increase in current assets was outweighed by a considerable increase in liabilities.
Mġarr was the only council to improve its working capital, turning a negative €61,000 in 2010 to a positive balance of €70,000 last year.
On the other hand, for the second year running local government auditors could not express an opinion on the financial statements presented by the Mosta council. The council’s financial statements were not in accordance with international standards, in breach of audit procedures, the NAO said.
On a general note there were another 61 council audits, from the 68, that came with some exceptions because of some form of default in their financial statements.
Councils in the red*
Birkirkara - €786,717
Żebbuġ (Malta) - €271,298
Vittoriosa - €214,589
Birżebbuġa - €168,425
Rabat - €154,737
Nadur - €118,259
Mdina - €83,557
Dingli - €61,982
Cospicua - €61,783
Attard - €59,435
Valletta - €51,197
San Ġwann - €50,569
Lija - €40,854
Victoria - €39,258
Qormi - €29,075
Paola - €15,870
Kalkara - €241
*Negative working capital: source NAO