‘Local councils get an ‘F’ in accounting from NAO’, read a Times of Malta headline on December 5. Have local councils really hit the pits?
Had this statement been made by certain state authorities that are embroiled in Malta’s governance deficit, I would have ignored them. But the National Audit Office happens to be one of the most upright and credible institutions in Malta, and I know Auditor General Charles Deguara to be a man of integrity.
Indeed, the NAO report on local councils’ performance in 2015 makes various claims which are very difficult to ignore.
For example, it transpires that the Vittoriosa, Kirkop, Mosta and Qrendi local councils accounts lacked documentation, were improperly recorded, missing key components and sometimes contained conflicting figures. Effectively, this prohibited the NAO from analysing their performance. Surely, this is not something such local councils should be proud of.
Three other local councils – Valletta, Għaxaq and San Lawrenz, and the Gozo and northern regional committees were unable to provide audited financial statements by the original deadline.
The NAO also stated that around one-third of the 66 local councils had negative working capital and registered a deficit, which is similar to the situation in previous years.
The report also questions various expenditure line-items of different local councils.
While I have no doubt that the NAO is justified in making certain queries, I also think that the public should be made aware of pertinent characteristics and changes concerning local council finance.
For example, local councils spend quite some money on professional services for architects, accountants, lawyers, contract managers and the like, which are vital for smooth functioning. Similarly, increases in employees’ salaries are often justified by statutory increases in the cost of living adjustment or by the engagement of new staff which, in turn is governed by public service procedures.
Councils effectively have no authority over wardens and make very little money from the system
Besides, some councils face costs which often have more to do with lack of civic pride. This includes vandalism and unruly waste disposal which tends to increase during the tourist season as well as damage to infrastructure by some contractors.
On a positive note, the NAO notes that central government has committed itself to follow up the issues raised in the report.
In the meantime, in October 2015 the wardens system was centralised under government control, with 10 per cent worth of contraventions paid at council premises being allocated to the respective councils. In my view, this is hurting councils doubly. Councils effectively have no authority over wardens and make very little money from the system.
At the same time, the total allocation for local councils has now increased to €45 million, an increase of €4 from the previous year. Yet, many councils are still underfunded when one considers their responsibilities; and various new council schemes are subject to government approval. This type of centralisation may increase councils’ accountability, but it can also result in temptations for favouritism and in too much power in the hands of ministers.
Another change concerns the national reform programme, which has national targets that are to be met by 2020. Regional committees and respective local councils are part of the plan in matters relating to economic, social and cultural policy, and plans have to be submitted by March 24, 2017.
I think that a change which is really needed to help improve council financial performance is more subsidiarity and decentralisation. In this regard, why shouldn’t councils be able to generate their own revenue on specific local needs such as non-residential parking and enforcement? A measure which can easily be carried out in this regard concerns the devolution of public car parks and other public properties.
The former remain under the remit of parkers employed by government, some of whom ask car drivers for ‘donations’ when parking. Wouldn’t it be better to have such money collected by councils and used for infrastructure, embellishment and other local needs?
Having increased local council responsibility for their revenue can help make them move away from dependency on ministerial decisions. Some councils might still mismanage their finance, but others may device novel ways of generating much needed funds to cover local needs. The public can then grade local councils and councilors in subsequent local elections.