Internal control on record keeping in Maltese local councils

Abstract

Purpose: This study seeks to examine the internal control system present over accounting records in Maltese Local Councils, which records are critical to uphold accountability. Maltese Local Councils are entrusted with functions and responsibilities delegated from the Central Government. Under this agency relationship, funds are allocated with expectations as to how they are to be used in the discharge of the delegated functions and responsibilities. Specifically, this research focuses on control activities, information and communication, and monitoring, related to record keeping in Maltese Local Councils. Design: A qualitative research methodology was used consisting of semi-structured interviews with Executive Secretaries and with two high ranking officials from the Department for Local Government. Findings: A main deficiency over record keeping that concern control activities is the lack of accounting knowledge possessed by Executive Secretaries which limits the extent by which Executive Secretaries can exercise control over the accounting function. This paves the way for other weaknesses. Another major problematic area is that of fixed assets, because the majority of Local Councils do not have an updated fixed assets register, prohibiting essential safeguards over fixed assets. The information and communication system between the Department for Local Government and Local Councils over accounting records also leaves much to be desired. It can also be said that monitoring over record keeping is practically inexistent, with absolute reliance being placed on the annual audit report. The lack of man-power within the Department for Local Government is a major contributor to the issues regarding the information and communication system and monitoring. Conclusion: Internal control over record keeping in Maltese Local Councils needs to be strengthened. However, this may require increased political commitment. Subsequently, improved financial accountability needs to be in place if Maltese Local Councils are to be entrusted with higher profile responsibilities. Value: With internal control and record keeping featuring prominently in the NAO audit reports over the last years, this study seeks to identify the underlying problems and puts forward certain suggestions for improvement.