Ten local councils could soon face serious difficulties if their financial position did not improve, a new Auditor General report has found.
According to the NAO, 10 councils had reported a negative working capital, a precarious financial situation when an entity's financial liabilities exceed its assets.
The report found a “notable improvement” was registered in the number of local councils that reported a negative working capital, which decreased from 17 since 2016. Furthermore, though still in the negative, all of the respective Local Councils, with one exception, managed to strengthen their financial liquidity position.
The 10 local councils are Birgu, Birkirkara, Kalkara, Kerċem, Mdina, Nadur, Victoria, San Lawrenz, Sannat and Xagħra.
The NAO report, tabled in Parliament on Monday evening, also found that another 13 local councils registered a Financial Situation Indicator below the established benchmark of 10 per cent.
Meanwhile, the local councils of Qrendi, St Paul’s Bay and Valletta, as well as the Gozo Regional Committee had not submitted their accounts by the final day of review in September, despite the deadline for submissions having expired six months earlier.
The NAO said 53 local councils and three Regional Committees, managed to deliver by the first deadline.
Another 11 audited financial statements of local councils and one in respect of a regional committee were submitted late by the end of May, while one local council and the Local Councils Association delayed their submission even further, the report found.
The report also found that although the nine joint committees were expected to be wound up by no later than a year after the setting up of the new regional committees back in 2011, to-date there was still no indication that this process had begun.
The NAO said that a number of concerns and weaknesses prevailed from previous years and required attention.
The major concerns:
Due to the various shortcomings encountered, Local Government Auditors could not express an opinion on the financial statements of three Local Councils: Birgu, Kalkara and Mosta, as well as the Northern Regional Committee.
The audit reports of another 39 Local Councils, two Regional Committees and that of the Local Councils Association, were qualified with an ‘Except For’ audit opinion.
Ten Local Councils recorded a negative working capital in the Statement of Financial Position.
Thirteen Local Councils registered a Financial Situation Indicator below the established benchmark of 10 per cent.
Seven Local Councils and three Regional Committees registered a deficit in the Statement of Comprehensive Income.
Only 45 Local Councils and one Regional Committee sent their response to the management letter within the stipulated deadline.
The main weaknesses encountered during the audits included:
Accounting records were not properly updated, resulting in the financial statements not giving a true and fair view of the actual financial situation.
Procurement not carried out in line with pertinent regulations.
Anomalies in the way Councils insured their assets notwithstanding specific guidelines issued by the Department on the nature of insurance cover.
Council’s obligation to upload on their websites certain statutory documentation, including minutes, schedules of payment, quarterly returns, annual budget as well as the three-year business plan, was not always complied with.
See the full report here.