The National Audit Office has found that eighteen Local Councils recorded a negative working capital in the Statement of Financial Position, including in Gozo.

Victoria and Nadur were among five Local Councils with over 100% increase in negative working capital – The NAO Report noted they already had “negative working capital that has worsened further during the year, signalling ongoing financial strain, requiring immediate corrective measures.” The other three are Mosta, Dingli and Attard.

The Report also found that Zebbug Local Council had up to a 60% increase in negative working capital.

Gharb Local Council had “demonstrated improvement in its negative working capital position.”

The Auditor General, Charles Deguara, has presented to the Speaker of the House of Representatives, Anglu Farrugia, the annual report on the workings of Local Government for the year 2024.

The Office said that a total of fifty-nine Local Councils, six Regional Councils and the Local Councils’ Association submitted their audited accounts to the National Audit Office (NAO) by end October 2025. Those pertaining to nine Local Councils, were not submitted by the time the Report was finalised.

The NAO acknowledged positively that all Local Authorities submitted their replies to the Management Letters by the end of October 2025. “However, the fact that certain shortcomings continue to be flagged year on year, remains a matter of concern,” it said.

Furthermore, the NAO said that “compliance audits carried out by this Office at Mellieha, Nadur and Xghajra Local Councils revealed several issues, primarily related to non-compliance with procurement regulations.”

The NAO warned that “the repeated occurrence of weaknesses such as accounting errors, inadequate management of fixed assets, and improper management of accounts payable indicates that underlying issues are still not being effectively addressed.”

The NAO therefore reiterated the need to “strengthen oversight mechanisms, invest in staff training, and implement timely corrective actions to improve internal controls.”

The NAO also emphasised the importance of maintaining timely and complete documentation, together with a stronger commitment to resolving internal control gaps. Enhanced collaboration among all stakeholders will not only improve service delivery within local communities but will also promote sound governance and strengthen accountability, it said.

Other concerns identified during the review included:

a) the audit reports of thirty-seven Councils were qualified with an ‘Except For’ audit opinion; meaning that certain areas could not be audited due to insufficient supporting evidence;

b) nine Local Councils had an Emphasis of Matter paragraph in the auditor’s report, highlighting a material uncertainty related to the going concern, implying that the respective Councils might not be able to meet their financial obligations as they fall due;

c) An audit opinion could not be expressed on the Financial Statements of another Local Council due to the various shortcomings encountered.

d) Thirty-three Local Councils, two Regional Councils as well as the Local Councils’ Association, registered a deficit in the Statement of Comprehensive Income.

The NAO explained that this report analyses in further detail the respective shortcomings, identifying their underlying causes, and outlining recommendations to address them.

To view the report (.pdf) please click here.

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