The expenditure trends of Maltese local councils from 2015 to 2018 : an analysis

Abstract

Purpose: The overall aim of this study is to analyse the suitability of the central government’s annual financial allocation in comparison with the local councils’ actual expenditure, that is, to determine whether local councils spend in line with the central government’s annual financial allocation. This study will also seek to analyse the budget’s role within the financial management of Maltese local councils and to examine the spending patterns of local councils.

Design: The researcher adopted a qualitative research approach using documentary analysis and semi-structured interviews. The in-depth study focuses on three local councils with different financial conditions.

Findings: The findings highlighted that local councils do not spend in line with the central government’s annual financial allocation because the basis used to calculate the current financial allocation is not correct and needs to be changed. The role of the budget in the local councils’ financial management is not the same for all local councils as it depends on the management and operation of a local council. Furthermore, the budget is not based on the central government allocation but on past actual expenditure trends. In addition, the Department for Local Government does not have the necessary resources to monitor how a local council sets its budget. The findings also show that the expenditure trends of local councils are definitely different from the composition of the central government allocation. Actual expenditure differs also from the budget due to unforeseen circumstances and the varying charges for basic services, such as, refuse collection. Expenditure is also influenced by politicians and their politics, and is not simply a matter of good financial management practices.

Conclusion: It is important to revise the current formula that calculates the annual financial allocation in order to address the specific needs of the 68 Local Councils in Malta and Gozo. The executive secretary of a local council plays an essential role with regard to the operation and management of a local council, ultimately being the person responsible for what expenditure is undertaken by a local council. A proper budgeting system should be implemented, with local councils doing their utmost to spend in line with the budget set. However, politics and politicians are clearly impacting the financial position of local councils and this is very difficult to remove given that local councils are political bodies.

Value: This study provides value to the Department for Local Government when it comes to evaluating the current annual financial allocation and what needs to be done to improve both the formula - in order to arrive at the amount to be allocated - as well as what the allocation will seek to address.