The keeping of financial records at four local councils was so bad that Local Government Auditors could not even express an opinion, the National Audit Office said. The four local councils are Birgu, Kirkop, Mosta and Qrendi.
The NAO yesterday published its report on the Workings of Local Government for 2015. It said that by mid-October 2016, being the ultimate deadline set by the office, the audited financial statements of Għaxaq, San Lawrenz and Valletta Local Councils, as well as the Gozo and Northern Regional Committees were still not submitted despite that these should have been received by 29 April 2016.
53 local councils, three regional committees as well as the Local Councils Association had managed to deliver their accounts by the original deadline. Another six audited financial statements reached the National Audit Office by end of May 2016, while the remaining six Councils kept delaying their submission up to the ultimate deadline.
Following a review of the financial statements, as well as the relative management letters prepared by Local Government Auditors for Local Councils, Regional Committees and the Local Councils Association, it was noted that a number of concerns and weaknesses prevailed from previous years.
Apart from the terrible bookkeeping at the abovementioned councils, the NAO found that the audit reports of another 43 Local Councils, three Regional Committees, as well as that of the Local Councils Association, were qualified with an ‘Except For’ audit opinion.
Twenty-three Local Councils (2014: 22 Local Councils and one Regional Committee) recorded a negative working capital in the Statement of Financial Position.
Twenty-eight Local Councils (2014: 31) registered a Financial Situation Indicator below the established benchmark of 10%.
Twenty-four Local Councils (2014: 27), as well as the Central Regional Committee (2014: 2), registered a deficit in the Statement of Comprehensive Income.
Only 46 Local Councils (2014: 32) and two Regional Committees (2014: 2) sent their response to the management letter within the stipulated deadline as set by Article 8(2) of the Local Councils (Audit) Regulations, 1993.
A number of major weaknesses were encountered during the audits. These included accounting records that were not properly updated, with the result that the financial statements drawn up do not reflect a true and fair view of the actual financial situation.
Other issues included income and expenditure accounted for on cash rather than accruals basis and payments made not substantiated by a proper fiscal receipt addressed to the Council.
The NAO people also found cases of petty cash expenditure that was supported solely by unitemised cash register chits, and cases where a Fixed Asset Register was either not maintained at all, or was not in line with best practice, thus hindering the monitoring and control expected to be exerted by Local Councils over fixed assets.
It also found cases of procurement that was not carried out in line with pertinent regulations, that the budgeted amount for certain categories of expenditure was exceeded.
“Notwithstanding that more than five years have elapsed since the responsibility for the administration of the Local Enforcement System was shifted on to the five Regional Committees on 1 September 2011, the liquidation process of the nine Joint Committees has still not yet initiated.
Although these were expected to be wound up after one year following the setup of the Regional Committees, to date the National Audit Office still has no indication that such process officially commenced.
Moreover, for the fourth consecutive year, the National Audit Office did not receive the audited financial statements from any of the nine Joint Committees.
Furthermore, the Central and the Northern Joint Committees also failed to file the financial statements for the year ended 31 December 2011, with the latter not even submitting those covering the preceding year. This Office reiterates that such situation is unacceptable.”