Local councils ignoring NAO recommendations, ‘unacceptable’ says Auditor General

Local councils have implemented just 26% of over 1,500 recommendations by local government auditors

Auditor General Charles Deguara (right) with Speaker Anglu Farrugia
Auditor General Charles Deguara (right) with Speaker Anglu Farrugia

Only 26% of 1,500 recommendations presented to local councils by Local Government Auditors were implemented in 2018.

The statistic was revealed in a report on the workings of local government by Auditor General Charles Deguara, presented to the House of Representatives on Wednesday.

54 local councils and three regional committees together with the Local Councils Association had delivered the audited financial statements by the established deadline of 30 April 2019. Only the audited accounts of the Qrendi local council and the Gozo regional committee were not presented by the deadline. “Unfortunately, this marks the fifth consecutive year that the Gozo Regional Committee failed to meet the respective deadlines. Such situation is unacceptable to the NAO and necessary action is to be taken accordingly by the pertinent authorities,” the report said.

The report blamed local councils for lack of responsibility, after a staggering 71% of recommendations presented by the auditors were not acted upon. From the 1,500 recommendations, 26% were implemented, while only 3% were only partly implemented.

The report also states how as in previous years, most of the highlighted issues in the 2017 management letters had to be reported once again. “The significant internal control weaknesses leave the Councils exposed to several risks and errors,” the report says.

Among the most common weaknesses flagged by the report was the departure of local councils from applicable rules and regulations. The most prevalent issues include statutory documentation not uploaded on the Councils’ websites within the stipulated timeframe.

Issues concerning meetings were also highlighted by the report, with meetings lasting over three hours, time lapse between meetings exceeding the five-week interval and meetings not being held due to lack of quorum.

Schedules of payments lacking important details, including a complete list of cheque numbers, amounts paid and invoice details were reported. Accounting errors, including cut-off procedures being incorrectly applied, were cited by the report. “This resulted in omitted or inaccurate figures of income and expenditure as well as transactions recorded in the wrong accounting period, posted in the wrong nominal account or completely omitted from the books of account,” the report said.

A number of payable balances were also left long-standing. “Creditors’ balances as per Councils’ books did not always reconcile to the respective amount as per confirmation reply from suppliers,” the report said.

Income issues were also flagged, as these were not always covered by an agreement, hindering auditors from ascertaining the correctness of the amounts as recorded in the book of account. “Income figures did not always tally to the respective supporting documentation provided for audit purposes and when manual records were maintained, there was no proper audit trail,” the report stated.

The report concluded by presenting a number of recommendations, with local authorities encouraged to take prompt actions to address the suggestions put forward by the NAO.

Councils were advised to perform the required reconciliations for both receivable and payable balances. “This would verify the accuracy and completeness of such balances as recorded in the books of account and show an accurate picture of the financial position as at year-end,” the report stated.

It was also advised to attest the adequacy of internal controls to safe guard cash and bank balances. “Councils should deposit any money in hand on a timely basis, thereby minimising the risk of theft and fraudulent activity and by carrying out effective bank reconciliations,” the report said.

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