37 councils in the red

More than half of local councils in Malta are in the red, up substantially by five from 32 in 2012 to 37 in 2013, in a sign that local government in Malta is either over-spending or not being voted enough money for its needs.

The fact is that not only did more than half of local councils finish 2013 with a deficit, but a further 25 councils face liquidity problems due to a negative working capital balance. According to the report this could imply that councils may encounter difficulties in meeting their obligations when due.

A report by the auditor general reveals that 37 local councils registered a deficit in 2013 and 25 councils a negative working capital balance and may face a liquidity problem in the future.

There are 68 local councils in Malta.

Councils registered revenue of €38 million in 2013, €31 million of which came from the government allocation to councils. 

13 councils have registered their third consecutive deficit since 2011.

St Paul’s Bay faces a record €439,969 deficit. The auditor notes that from year to year, the financial position of this council is deteriorating. 

“The €439,969 deficit reported during the year under review is nearly six times higher than that of €63,855 reported in the preceding year,” is the telling comment. 

Among the main expenditure increases were patching works (€125,766), refuse collection (€92,099), handymen and works monitor service (€69,988), repairs to public property (€43,482) and salaries (€37,741).

The Zebbug (Malta) council faces the greatest liquidity problems. In 2013 the council’s current liabilities exceeded current assets by €1,362,696. Zebbug also registered the second highest deficit.

Birkirkara has also seen its negative working capital shoot up from €792,930 in 2012 to   €985,032 in 2013 even if it saw its deficit decline from €95,543 to €46,610.

Although the council has cut operations and maintenance costs, as well as the administration expenses by €127,154 and €6,687 respectively, it still ended the financial year with a deficit. This was mainly due to a decrease in revenue received by the council, especially that from the Law Enforcement System (LES). The council’s wage bill increased due to the employment of three additional officers in 2013.

The capital Valletta’s council also saw a deteriorating financial situation over the preceding year. 

Whilst administration and other expenditure decreased by €68,808, the decrease was out-weighed by increases of €141,840 in operations and maintenance costs. In addition, increases in Local Enforcement Income (€5,467) and Funds received from Central Government (€1,817) were not sufficient to offset the drop of €107,942 registered in the general income generated by the council, which has further contributed to the loss of €215,972 suffered in the current financial year.

Sliema, which had registered a profit of €316,031 in 2012, ended 2013 with a loss of €214,181. In 2013 the council spent €147,530 more on the repair of roads and street pavements. Sliema does not face any liquidity problems.

10 councils which had a deficit in 2012 registered a surplus in 2013. The greatest change in fortunes was seen in Mosta, where a €214,677 deficit was turned into a  €173,061 surplus.