24 local councils ended the year 2020 with a deficit, while the capital cities of both Malta and Gozo were found to be in a most alarming financial state, the National Audit Office said in a report on Tuesday.
22 out of the 24 local councils which incurred a deficit during the year had sufficient reserves to make up for that same deficit, the NAO said.
The exceptions to this are the local councils of Valletta and Rabat (Gozo), which do not have the required reserves to cover for the deficit that they have clocked.
“This Office considers the negative financial situation of these two Councils as totally unacceptable and for which prompt remedial action for redress is required,” the NAO said in its report.
Auditor General Charles Deguara presented the Speaker of the House of Representatives Anġlu Farrugia the Annual Report on the workings of Local Government for the year 2020.
The National Audit Office said that it acknowledged that this year was quite challenging, due essentially to delayed submissions of the Councils’ audited financial statements.
Some of the delays were triggered by the industrial action undertaken by the Executive Secretaries earlier this year; in many cases, this led the audit process practically coming to a standstill and it was difficult for the Local Government Auditors to reschedule the respective audits, resulting in further delays.
In fact, the audited accounts of nine Local Councils, were not submitted to the Auditor General by the end of the third week of November 2021, being the latest possible deadline set by the National Audit Office to analyse the financial statements.
“Although throughout the years the Local Government Division and other pertinent stakeholders have invested considerable efforts to enhance good governance across all Local Authorities, the continuous increase in the number of shortcomings identified during the audit process denoted that corrective action taken by the latter to address root causes was not sufficient to bring about the desired changes,” the NAO said in a statement.
Prevailing issues related to inadequate management of fixed assets, procurement not in line with standing regulations, non-adherence to statutory reporting requirements and accounting issues that were not always duly addressed, it continued.
Other concerns included a lack of substantiating documentation, resulting in the respective Local Government Auditor not expressing an opinion on the financial statements as presented by Kalkara and Valletta Local Councils.
The audit reports of another 43 Local Authorities were qualified with an ‘Except For’ audit opinion, meaning that certain areas could not be audited due to insufficient evidence.
10 Local Councils had an Emphasis of Matter paragraph in the auditor’s report, highlighting a material uncertainty related to going concern, implying that they might not be able to meet their financial obligations as they fall due.
24 Local Councils ended the year under review with a deficit and/or negative retained earnings, and 10 Local Authorities failed to submit their response to the management letter by the time this report was concluded.