Local Councils, cleaning the financial mess



The National Audit Office, last December, published an unprecedented  report entitled “Report by the Auditor General on the workings of Local Government”. The 294 page document examines the financial statements pertaining to financial year 2013 and lists various shortcomings in the financial administration of local government.

During 2013, thirty seven of the local councils registered a deficit, whilst some councils did not follow the required procurement procedures. Some of these faults have their root cause in the fact that local councillors  are not trained adequately to handle their responsibilities. They require training, both before they contest an election  as well as after the election itself. They need to be made more aware of their responsibilities. Training of our local councillors (and more so mayors) is undoubtedly not an easy task. It is, in fact, quite a challenge.

There were also a number of policy decisions which, over the years, have not made matters any easier. Understandably, the Local Government Auditors do not examine the matter in any depth, as it falls outside their brief.

A case in point is the Public Private Partnership launched through Memo 45/2010 issued by the Department of Local Government on 22 March 2010. This initiative started off on a positive note. Government then decided  to attend to the issue of dilapidated roads, thereby tackling one of the major complaints in all localities.

Various funds were made available to local councils for this purpose. Additionally part of  the statutory allocation received by local councils annually was ring-fenced such that it was only usable for road works. These funds, according to Parliamentary Question 30314, replied to by the then Prime Minister Lawrence Gonzi on 21 November  2011, amounted to a total of €15 million and were made available to the  47 local councils which had expressed their interest and submitted the required application.

The problem however, was that Government only funded  30% of the expenses directly. The remaining 70 per cent of the required funds had to be disbursed by local councils from their own resources. These included savings made from road maintenance costs, which were justifiably rerouted to fund the resurfacing exercise.

The bottom line however, was that what should have been a central government responsibility in its entirety was shifted onto local councils, with central government only  footing 30 per cent of the bill when it should have forked out the remaining 70 too. Whilst at face value, a 30 per cent subvention may seem substantial, in reality, it was not.  Local councils were desperate to improve the state of the roads in their localities and most of them did not think twice about accepting government’s offer to carry out substantial road works in 2010 and 2011 and spreading the payment of their bills over 8 years, in line, with what was provided for in Memo 45/2010. It is this state of affairs that has led to the financial mess that a number of local councils find themselves in currently.  In fact, the National Audit Office reports that:  “during the 2013 financial year, 37 local councils registered a deficit.”

The point to be made is: is it ethical to place local councils in this position, such that councillors in 47 localities made budgetary commitments of local council finances for a period of 8 years? Councillors elected after 2011 in these 47 localities still had their statutory responsibilities but the financial resources  enabling them to honour their responsibilities were severely depleted. This is  governance at its worst, made worse only by the fact that it was officially sanctioned by the government of the day.

Local councils have very little resources to work with.  The minute budgetary increase voted by Parliament for the current financial year is obviously welcome, but in no way does it compensate for the exponential increase in costs incurred by local councils throughout the past years.

Its fine to insist that local ouncils should ensure that those providing them with services deal properly with their employees. However, to be in a better position to ensure that contractors utilising labour subject to precarious employment conditions are not engaged by local councils it stands to reason that local councils must be able to offer attractive rates of pay.  Otherwise, it will be more of the same procurement exercises, leading to the acceptance of the cheapest bidder.  The cheapest bidder, more often than not, is able to submit the lowest  bid due to its low labour costs.

Local councils have very clear and specific responsibilities. They can only shoulder them if councillors are properly trained and the councils adequately funded.


published in The Malta Independent on Sunday – 15 February 2015

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