The Birkirkara council stands accused of running up an “exorbitant financial imbalance” by the Director of Local Government in an e-mail warning the mayor of his illegalities.
Sent last week, the department warned mayor Michael Fenech Adami that it was unacceptable that instead of reducing last year’s deficit, he “increased it considerably” and requested him to send all the council’s financial documents by 29 August: i.e., last Friday.
The mayor has been ordered to stop incurring any expenses that were not his council’s direct legal responsibility, and to stick exclusively to honouring contractual obligations until the financial situation is brought back to normal.
“I’m also drawing your attention so that the council does not commit itself to capital projects,” the director warns.
“The department is requesting you to send an action plan outlining the measures to be taken by your council to eliminate this imbalance and get it back to the 10% balance as required by law,” the director of local government wrote.
In fact, the council registered a €295,753 imbalance on its latest financial statements.
Among the contracts topping the expenses, the council has engaged Polidano Group in its mega contracts for construction works and supply of materials.
For the works in Gnien l-Istazzjon alone, Polidano was paid €114,773. Polidano will also be paid a total of €143,444 for road works, while Attard Bros. will get €291,720 for “general paving repairs” and new paving works.
Fenech Adami however defended himself, claiming the deficit “is all practically due to money owed” to the council. The mayor claimed the council was owed €93,174 (Lm40,000) by the Housing Authority for an urban regeneration project conducted as far back as six years ago.
The mayor also denied that he was under pressure from the department to regularise the financial situation.
“No, there is no pressure at all,” he said. “I have not been approached on the issue. The department is fully aware of the situation and we have no problems there.”
The mayor was also requested to send the council’s balance sheet showing the financial situation at the end of July, including all invoices, list of creditors and the list of commitments entered into by the council that were not reflected on the balance.
Parliamentary Secretary Chris Said, who is responsible for local councils, told MaltaToday that the council will be required to send monthly accounts instead of quarterly reports in line with department procedures.
“Monthly accounts are sent until the deficit is stabilised and until then, no capital expenditure is to be made until the accounts are brought again into balance,” the junior minister said.
“The department shall also be following the council minutes in order to check on whether there is any planning on expenditure that would not be allowed while these procedures are in action. Such expenditure would include that of parties or other activities. The most drastic action that could be taken is that of dissolving the council in case the deficit is never resolved, but this would be the last resort.”
In the auditors’ notes to the council’s financial statements ended in March 2007, it is noted that the council was dependent on further sources of funds other than the annual financial allocation by central government, on the collection of debts due to the council and on the continued support of the council’s creditors.
“Any adverse change in either of these assumptions above would not let the council able to meet its financial obligations as they fall due without curtailing its future commitments,” the auditors’ note observed.