LOCAL GOVERNMENT (PROCEDURES) REGULATIONS

LOCAL GOVERNMENT (PROCEDURES)

SUBSIDIARY LEGISLATION 363.12

LOCAL GOVERNMENT (PROCEDURES)

REGULATIONS

20th September, 1996

LEGAL NOTICE 180 of 1996, as amended by Legal Notices 28, 152 of

2000, 320, 323 of 2002, 319 of 2003, 403 of 2004, 328 of 2006, 425 of

2007, 267 of 2017 and 166 and 276 of 2019 and 208 of 2022.

The title of these regulations is the Local Government

(Procedures) Regulations.

Amended by

L.N. 28 of 2000.

(Regulation 2)

Substituted by

L.N. 425 of 2007.

Amended by

L.N. 267 of 2017.

L.C.P. 1/96 - Local Councils (Financial) Procedures, 1996

L.C.P. 2/96 - Local Councils (Audit) Procedures, 1996

L.C.P. 4/96 - Local Councils (Human Resources) Procedures, 1996

L.C.P. 5/96 - Local Councils (Prosecuting) Procedures, 1996

L.C.P. 6/96 - Local Councils (Bye-Laws) Procedures, 1996

L.C.P. 7/96 - Local Councils (Meetings) Procedures, 1996

L.C.P. 8/96 - Local Councils (Office) Procedures, 1996

In the exercise of their functions under the Local

Government Act, Local Councils, their Secretaries and employees

shall comply with the procedures set out in the publications listed

in the First Schedule as may be amended in accordance with the

provisions of any subsequent schedule.

Added by

L.N. 28 of 2000.

(Regulation 2)

Amended by

L.N. 152 of 2000;

L.N. 320 of 2002;

L.N. 323 of 2002;

L.N. 319 of 2003;

L.N. 403 of 2004;

L.N. 328 of 2006.

Substituted by

L.N. 425 of 2007.

Amended by

L.N. 267 of 2017;

L.N. 166 of 2019;

L.N. 208 of 2022.

The Procedures specified in the First Column of the Schedule shall have

effect subject to the amendments specified in the Second Column thereof.

FIRST COLUMN

SECOND COLUMN

PROCEDURES

EXTENT OF AMENDMENT

L.C.P. 1/96 - Local

1. P1.09 shall be amended as follows

Councils (Financial)

(a) in item e.01, for the words "€232.94" there shall

Procedures, 1996.

be substituted the words "€1,164.69"; and

(b) in item e.02, for the words "€232.94" and

"€2,329.37" there shall be substituted the words

"€1,164.69" and "€4,658.75" respectively;

(c) in item e.03 for the words "€2,329.37" there

shall be substituted the words "€4,658.75".

2. Item C.09 of P1.14 shall be substituted by the

following

c.

Any money and income received shall be deposited at

least once a month provided that the amount left at the Council’s

premises does not exceed one thousand euro (€1,000), in total,

in a given month, or unless decided otherwise by the Council

and such decision is within the parameters of the Council’s

insurance policy in place. Monies exceeding one thousand euro

(€1,000) shall be deposited on the same day that this threshold is

reached.

P1.01 shall be amended as follows

Immediately after item h.06 there shall be added the

following

"h.07 The depreciation of fixed assets is accounted

for through the month-end procedure on a monthly

basis. The rates of depreciation are established in

Appendix P1.XI.".

P1.02 shall be amended as follows

Immediately after item a.02 there shall be added the

following

"a.03 Ensuring that every payment and commitment

to pay, whether existent or in the future, is registered

as required in a cumulative and consolidated format

in terms of the established form in Appendix P1. XII,

which form shall immediately reveal and also provide

a projection of the emerging balance. When such

projected balance falls below the level of the

benchmark established in terms of regulation 4 of the

Financial Regulations, both the Council and the

Director shall be immediately informed in order to

lay the ground for the commencement of the relative

corrective procedure. A copy of this form (Appendix

P1. XII) shall accompany the minutes of every

Council meeting and shall be referred to Director.".

P1.05 shall be amended as follows

(a) Immediately after d.06 there shall be added the

following new paragraphs

"d.07 A copy of this report shall be forwarded to

the Director within fifteen days of its

presentation to the Council as specified in

the preceeding paragraph (i.e., by the 30th

July, 30th October, 30th January and 30th

April of each year).

Should the Council fail to submit such

report, the Minister shall, on the advice of

the Director, provisionally retain any

portion of the allocation of funds approved

to the Council, until the Council abides by

such obligation.

Provided that the Minister shall only retain

such funds following a period of time

prescribed in a written notice where the

Council is given the opportunity to rectify

its failure.

Provided further that the amount so

retained shall not exceed 1% of the funds

allocated to the Council during the

financial year.".

(b) Immediately after g.05, there shall be added the

following

"h.

The Council shall forward to the Director

a copy of the approved minutes of its

meetings as well as the minutes of the

Finance Committee.

Should the Council fail to submit such

minutes within three working days after

their approval, the Minister may, on the

advice of the Director, provisionally retain

any portion of the allocation of funds

approved to the Council, until the Council

abides by such obligation.

Provided that the amount so retained shall

not exceed 1% of the funds allocated to

the Council during the fmancial year.

i.

The Financial Situation Indicator of a

Council, as defined by regulation 4 of the

Financial Regulations, is calculated by

taking the total amount of current assets

(cash in bank and debtors) and deducting

from it the total amount of current

liabilities (payments/creditors falling due

in the short and long term), with the

exception

of

long-term

financial

commitments approved in writing by the

Minister in terms of the Act.

In situations where the Council has an

approved loan arrangement, the long term

outstanding loan will not be taken into

consideration, when calculating the

Financial Situation Indicator. However,

both the Council and the Director shall

ensure that that the loan repayments are in

line with the original agreement when the

loan was approved and issued.

i.01 Should a Local Council have a Financial

Situation Indicator with a favourable

balance which is less than ten per cent of

the allocation which Government would

have approved to the Local Council for

that same Local Council financial year

(i)

The Director shall issue a notice in

writing about this situation to the

Local Council. The Council shall

thereby be bound to reply in writing

so as to state how the next quarterly

financial report will be drawn up,

how the Council would improve its

financial situation and which

expenditure cuts the Council was

about to effect to achieve the ten per

cent mark;

(ii) The Council shall be bound to

appoint a Finance Committee which

would include as members, the

Mayor, another Councillor and the

Executive Secretary, and should no

person from the Council or the

Executive Secretary be a qualified

accountant, a qualified accountant

shall be appointed by the Council.

Before any decision is taken about

any expenditure, the Council shall

request the advice in writing of the

Finance Committee which would

evaluate the proposed expenditure,

having regard to the financial

situation of the Council;

(iii) Should the Council, by the second

quarterly financial report after the

Director’s letter, fail to make

provision for the ten per cent

benchmark, the Minister may, on the

advice of the Director, withhold the

release of such amount from the

allocation approved to the Local

Council which would be equal to the

difference between the actual

balance and the ten per cent

benchmark. The amount shall be

withheld for so long as in any

quarterly report made after the

withholding of such amount, the ten

per cent benchmark is achieved. On

such occurrence, the Minister shall

authorise the release of such amount

to the Council

Provided that when a Council

consistently registers a positive

result, the Minister shall remove the

application of the requirement of a

favourable balance of ten per cent as

long as the Council continues to

register a positive financial position.

The Minister may at any time

reactivate

the

ten

per

cent

requirement in such cases where the

financial result or forecasts of the

Council

would

require

such

measure.

i.02

Should a Council have a Financial

Situation Indicator with a negative balance

of less than five per cent of the funds,

which the Government would have

allocated to the Local Council for that

same Local Council financial year

(i)

The Director shall formally call

upon the Mayor and the Executive

Secretary within fifteen days from

the discovery of the negative

balance;

(ii) The Director shall request the Mayor

and the Executive Secretary to

prepare proposals regarding the

removal of the negative balance so

that the ten per cent benchmark of

favourable balance may be achieved

not later than twelve months after

such time

Provided that, should the negative

balance in the Financial Situation

Indicator be registered at a time

during the last year of the term of

the Local Council, the ten per cent

benchmark of favourable balance

shall be achieved within two months

from the date of a notice sent by the

Director to the Local Council, and

by virtue of such notice, the

provisions of item (v) shall

immediately apply;

(iii) The proposals of the Mayor and of

the Executive Secretary shall cover

the method and the source of

financing of the negative balance,

which budget votes are to be used,

and which projects would be

minimised or terminated;

(iv) Should the Director approve the

proposals of the Mayor and of the

Executive Secretary, such approved

proposals shall in themselves

supersede the allocations made in

the Council budget and every

decision previously taken by the

Council;

(v) If the Director does not approve the

proposals made by the Mayor and

the

Executive

Secretary,

the

Minister, on the advice of the

Director, shall have the power to

withhold from the allocation to the

Council an amount of money equal

to the difference between the

negative balance and the ten per cent

mark of favourable balance and to

start paying by such sum such

amounts as would be due by the

Council to third parties;

(vi) Should the Council, within a period

of twelve months, fail to achieve the

ten per cent benchmark, then there

shall apply the provisions of

paragraph i.03 of this provision,

whatever the favourable or negative

balance of the Council may be;

Provided that wherever in this paragraph it

is indicated that a rate of ten per cent in

the case of a positive balance shall apply,

for the period between 1 April, 2004, and

31 March, 2005, there shall apply a rate of

five per cent.

i.03

Should a Local Council have a Financial

Situation Indicator with a negative balance

in excess of the five per cent of the

allocation made by Government for that

same Local Council financial year

(i)

Within one month from the date of

the resulting negative balance, the

Director shall, after consultation

with the Council and its accountants

and auditors, prepare a financial

restructuring plan for the required

months or years, depending on the

magnitude of the negative balance,

which period, however, may not

exceed three years.

Should the Director incur any

expenses in the preparation of that

plan or in the required consultation

thereof, such expenses shall be

defrayed from the allocation which

Government would have made to

that Council;

(ii) The plan shall indicate the amount to

be used of the allocation to the Local

Council for the financing of the

financial restructuring plan and, in

general terms, which Council votes

shall be used for this purpose;

(iii) Prior to the implementation of the

restructuring plan the Director shall

inform the Minister about the plan,

and the Minister shall, before

confirming the plan, request and

hear the views of the Local Councils

Association;

(iv) During the restructuring period, the

Council’s

accounts

shall

be

controlled by the Director who shall

have the right to refuse to finance

any undertaking of the Council

which

adversely

affects

the

restructuring plan;

(v) The Council may not enter into any

financial undertaking without the

approval of the Director.

(vi) Any document relating to a call for

public

tenders,

and

any

documentation of the Council,

including any correspondence which

the Council may send, shall include

a statement declaring that the

Council may not enter into any

financial commitment unless it has

an agreement to do so in writing

with the Director;

(vii) Such funds as are allocated by the

Government shall be held by the

Director in the name of the Local

Council and shall be spent according

to approved procedures;

(viii) Within

the

context

of

the

restructuring plan, the Director shall

have the right to pay such amounts

as may be due by the Council to

third parties.".

Appendix p1. XI

Depreciation Rates

The depreciation rates that will be applicable are as follows

% Rate

Land

Buildings

Office Furniture and Fittings

5

Construction Works

Urban Improvements (Street Furniture)

Special Projects

Office Equipment

Motor Vehicles

Plant and Machinery

Computer Equipment

Trees

Plants

Litter Bins

Playground Furniture

Traffic signs

Road Signs

Street Mirrors

Street Lights

Appendix P1. XII

1. Consolidated Details of Income and Expenditure

QTR No.

YEAR TO DATE (YEAR)

ACCT DESCRIPTION

ACTUAL COMMITTED TOTAL BUDGET ACTUAL COMMITTED TOTAL BUDGET

No.

€

€

€

€

€

€

€

€

Income

Government

Bye-laws

Investment

General

TOTAL

Expenditure

Personal

emoluments

Operations and

maintenance

Capital

expenditure

TOTAL

Balance

Op enin g Cas h

and

Bank

Balances

Less

Future

Commitments

Add

Balance

(Surplus/

Deficit)

Av a i l a b l e

Funds

Allocation for

C o u n c i l ’s

current year

% Financial

Situation

Indicator

Notes: 1 The amounts entered in the actual column will be the figures extracted from the Sage Reports.

2 The amounts entered in the committed column will be those amounts not yet entered into Sage as Creditors or

Accruals in the case of expenditure and any accrued income or amounts due still outstanding.

3 Future Commitments will include any tenders which have been awarded which have not yet commenced or

which are partly completed. The amount committed to the project (not yet utilised) will need to be entered in

this part and details given on the projects.

Declaration

The Mayor and the Executive Secretary declare that the above statements show a true and fair view of the Council’s

position on the signing date and that all commitments have been included in these financial statements.

Mayor

Executive Secretary

Date

1.1

Details of Income

a

b

c=(a+b)

d

e

f

g=(e+f)

h

DESCRIPTION QTR No.

YEAR TO DATE (YEAR)

ACCT

ACTUAL

ACCRUED

TOTAL BUDGET ACTUAL

ACCRUED

TOTAL BUDGET

No.

€

€

€

€

€

€

€

€

Income

Government

Annual

Supplementary

Special needs

Public/

government

delegations

Others

Bye-laws

Community

services

Contravention

of bye-laws

Sponsorships

General

Investment

Bank interest

Government

securities

General

Donations

Contributions

TOTAL

1.1

Details of Expenditure

a

b

b - a

c

d

d - c

DESCRIPTION QTR No.

YEAR TO DATE (YEAR)

ACCT

ACTUAL COMMITTED TOTAL BUDGET ACTUAL COMMITTED TOTAL BUDGET

No.

€

€

€

€

€

€

€

€

Expenditure

Personal

emoluments

M a y o r ’s

allowance

Employee

salaries and

wages

Bonuses

Income

supplements

Social Security

Contributions

Allowances

Overtime

Operations and

maintenance

Utilities

Materials and

supplies

Repair

and

upkeep

Public property

Roads

and

Street

Pavements

Walkways

Signs

Road markings

Office Furniture

and Fittings

Plant

and

Equipment

2 3 6 0 / Sundry / Other

Repairs

&

Upkeep

Council

Property

Rent

National/

International

memberships

Office services

Transport

Travel

Information

services

Contractual

services

Street Lighting

Lease

of

Equipment

Insurance

Coverage

Bank Charges

Waste Disposal

Refuse

Collection

Bulky Refuse

Collection

Cleaning

Services

Road and Street

Cleaning

Clean. & Maint.

- Non-urban

Rds

Cleaning of

Public

Conveniences

Cleaning

Council

Premises

Other

Contractual

Services

Clean. & Maint.

-

Parks

&

Gardens

Clean. & Maint.

- Verges

Clean. & Maint.

- Beaches &

Coast

Clean. & Maint.

- City N.U.

Areas

Professional

Services

Training

Community and

hospitality

Local

Enforcement

Expenditure

Incidental

expenses

Capital

Expenditure

A c q u i s i t i o n of

property

Construction

Improvements

Equipment

Special

programmes

TOTAL

L.C.P. 2/96 - Local Councils (Audit) Procedures, 1996

Audit Procedures

Background Information

Local Government Act (CAP. 363) 65, 66

The Role of the Auditor General

Local Government Act (CAP. 363) 65

Appointment and Remuneration of Local Government Act (CAP. 363) 65

Local Government Auditors

Ty p e s o f A u d i t a n d R e p o r t i n g Local Government Act (CAP. 363) 65, 66

Requirements

Local Government (Audit) Regulations

3, 4, 5, 7, 8, 9,10

F i n a l i s a t i o n o f A n n u a l F i n a n c i a l Local Government (Audit) Regulations

Statements

3, 8

T h e L o c a l G o v e r nm e n t A u di t o r s ' Local Government Act (CAP. 363) 65

Report on the Financial Statements

Local Government (Audit) Regulations

3, 8

T h e L o c a l G o v e r nm e n t A u di t o r s ' Local Government Act (CAP. 363) 66

R e p o r t o n S e c u r i n g E c o n o m y, Local Government (Audit) Regulations

Efficiency and Effectiveness

9,10

Special Reports

Local Government (Audit) Regulations 7

Appointment of Experts to Assist Local Government Act (CAP. 363) 65(4)

Local Government Auditors

G u i d a n c e f o r M a y o r s a n d L o c a l Local Government (Audit) Regulations

Councils’ Executive Secretaries

6, 8

Miscellaneous

Appendices

Specimen Annual Audit Report on the

Local Council's Financial Statements

Specimen Local Government

Auditors’ Report on the Local

C o u n c i l ’s I n d i c a t o r s t o M e a s u r e

Performance

Specimen Local Government

Auditors' Report on Value for Money

Audit Procedures

Background Information

These Procedures shall be read together with the Act and with the Local

Government (Financial) Regulations, the Local Government (Audit) Regulations

and the Local Government (Financial) Procedures.

The Local Government Act provides for the decentralisation of certain aspects of

Government which can be conducted and supervised more effectively at a local

level.

The Act provides for the audit of Local Councils, entrusted to Certified Public

Accountants with a certificate to practise as auditors. The Local Government

(Audit) Regulations issued in terms of the Act prescribe the audit requirements

in accordance with the Act. These Procedures contain a specimen of the

Financial Statements which Local Councils should adhere to as found in

Appendix P2.I. In the case where such specimen is not in conformity with the

International Financial Reporting Standards (IFRS’s) which may come into force

from time to time and effecting Local Councils, the IFRS’s should prevail.

LOCAL GOVERNMENT (PROCEDURES)

The Role of the Auditor General

The Auditor General has two main roles in terms of the Act. The first will be an

administrative role concerned with the appointment and remuneration of Local

Government Auditors. The second role will be a technical one which is intended

to lend support to Local Government Auditors and to ensure that their

observations and recommendations are given serious consideration.

The technical role of the Auditor General is in some aspects comparable to that

often attributed to Audit Committees in public companies. The following points

should be noted

Local Government Auditors should develop a client relationship both with the

Local Council and with the Auditor General. They are at liberty to discuss with

the Auditor General any aspect of their audit work, and to answer any queries he

may make, either directly or through his staff.

The Auditor General will receive copies of all audited Financial Statements,

special reports, etc. He may also commission Local Government Auditors to

perform interim audits dealing with topics of concern to him. A mid-term audit

shall only be carried out if requested by the Executive Secretary..

At the same time, the Auditor General is not there to replace management. Local

Government Auditors should look at the Local Council and its management as

the primary client. Reports should always be discussed with the Local Council

and the Local Council's response should be noted in such letters.

Where the Regulations necessitate that the Local Government Auditors report

directly to the Auditor General, the Local Council should normally be informed

of the report being submitted, except in those rare circumstances, such as where

management fraud is suspected, where the Local Government Auditors may

prefer to report in confidence.

The Auditor General, too, will liaise with Local Government Auditors in a

manner which may not exclude the Department for Local Government as the

regulatory body responsible for Local Government. Department for Local

Government officials may be invited to attend any meetings between the Auditor

General and Local Government Auditors at which the affairs of Local Councils

are being discussed. Correspondence between Local Government Auditors and

the Auditor General may be copied to the Department for Local Government.

Appointment and Remuneration of Local Government Auditors

The Auditor General shall be responsible for the appointment of Local

Government Auditors and for the renewal of such engagements on an annual

basis.

It is intended that the Auditor General should attain a fair distribution of work

among Local Government Auditors, facilitate communications and

understanding between Local Government Auditors and himself, reduce overall

audit costs and promote audit consistency between Local Councils. The five year

rotation of Local Government Auditors will also serve to attain these ends. On

their part, Local Government Auditors will be expected to contribute to the

process by having all Local Councils’ audits handled by a specialist team, at

least, at manager and partner level, where audit firms are concerned.

Letters of engagement will be issued by the Auditor General. Annual audit fees

shall be agreed with the Auditor General and billed to his Office at the

conclusion of the relevant work. Any additional costs arising from specific

interim audits requested by the Auditor General (see paragraph e of section

P2.04) would also be negotiated with him and billed to his Office.

These arrangements do not preclude Local Government Auditors from providing

non-audit services to a Local Council. The cost of such services should however

be agreed with and billed to the Local Council. Executive Secretaries are to

ensure that Local Government Auditors have obtained prior approval from the

Auditor General to carry out any other non-audit services.

In the case of mid-term audits, the fee is negotiated between the Auditor General

and the Local Government Auditors and billed to the Local Council. In no case

will the fee be in excess of that charged for the financial year end audit.

Types of Audit and Reporting Requirements

The Local Government (Audit) Regulations provide for four types of audit - the

annual audit on the Financial Statements of the Local Council, mid-term audit,

interim audit, and an audit on whether the Local Council has secured economy,

efficiency and effectiveness.

Annual audits represent the recurring normal audits required to issue an opinion

on the Financial Statements of a Local Council (which are to be drawn up in the

format as shown in Appendix 2.I), and to draw up a Management Letter thereon.

Such work may be carried out entirely after the end of the financial year, or if

preferred may include a visit before the year end to spread the work required.

Such a visit is entirely at the discretion of the Local Government Auditor.

Two reports will be produced at the conclusion of the annual audit, and these

should be completed by the end of June of each year. These reports are

.01 The Local Government Auditors' report on the Financial Statements, which

report shall form part of the Annual Administrative Report presented by the

Local Council.

.02 A Management Letter which would deal with any weaknesses encountered by the

Local Government Auditors.

Both reports are amplified upon later on in these Procedures (vide para P2.06).

The second type of audit is the mid-term audit. The objective of this audit is to

serve as an independent exercise when an Executive Secretary leaves the

employment of a Local Council and another is appointed. This type of audit shall

only be carried out if requested by the Executive Secretary. This will take the same

form as the financial year end audit up to the last day of employment of the

outgoing Executive Secretary. Local Government Auditors will be requested to

confirm that the minutes of the Local Council’s meetings have been drawn up,

approved, signed, available at the Local Council’s premises and appropriately

filed. At the end of the mid-term audit, the Local Government Auditors are to

present to the Auditor General the Financial Statements covering the period from

the beginning of the year to the last day of the employment of the outgoing

Executive Secretary, and an Audit Report thereon. The Local Government

Auditors are also to draw up a Management Letter pointing out any weaknesses

encountered. The Local Government Auditors are to supervise any adjustments

and corrections that might be necessary.

The third type of audit is an interim audit which would be carried out at the

specific request of the Auditor General on a topic or topics designated by him.

Such interim audits are not expected to be frequent. They will be resorted to

when the Auditor General is made aware of circumstances, such as suspected

fraud, which are of a gravity which calls for an immediate investigation or when

follow-up audits are called for to ensure that agreed action plans are actually

implemented. Given the likely background to such interim audits Local

Government Auditors should submit their report immediately upon the

conclusion of their work. A maximum time limit of eight weeks is specified in

the Local Government (Audit) Regulations.

In the fourth type of audit the Local Government Auditors shall conduct an

annual analysis and comparisons of the Local Council’s indicators to measure

performance on whether the Local Council has made proper arrangements for

securing economy, efficiency and effectiveness for the financial year under

review. This audit will be further amplified upon later on in these Procedures

(vide para P2.07).

Finalisation of Annual Financial Statements

It is the responsibility of the Executive Secretary to draw up Financial

Statements which fairly present, in accordance with the accounting policies

applicable to them, the Local Council’s income and expenditure for the financial

year just ended, and its retained funds at the year end.

The Executive Secretary is to draw up and submit to the Auditor General the

Financial Statements signed by the Mayor and himself by not later than May 10,

or if this happens not to be a working day, the first following working day. A

copy is also to be submitted to the respective Local Government Auditor.

LOCAL GOVERNMENT (PROCEDURES)

The Financial Statements are to consist of the Statement of the Local Council

Members’ and Executive Secretary’s responsibilities, Statement of Income and

Expenditure, the Statement of Affairs, the Statement of Changes in Equity, the

Cash Flow Statement, Notes to the Financial Statements and where applicable

the Schedule of Special Needs Funds.

After the audit work is completed, if there are no adjustments to be carried out,

the Local Government Auditors will append the Audit Report on the Financial

Statements and will submit this together with the Management Letter to the

Auditor General by not later than June 30 or if this happens not to be a working

day, the first following working day.

On the other hand, if there are any adjustments to be effected, the Local

Government Auditors are to bring these to the attention of the Local Council and

return the Financial Statements so that the necessary adjustments are carried out

and approved by the Local Council, and revised Financial Statements drawn up.

Local Government Auditors will be available to attend the Local Council’s

meeting when the adjustments on the Financial Statements are discussed in order

to give any clarifications that may be requested or reply to questions asked. The

final approved Financial Statements duly signed by the Executive Secretary and

the Mayor are to be returned by the Local Council to the Local Government

Auditors who will append the Audit Report on the Financial Statements and will

submit this together with the Management Letter to the Auditor General by not

later than June 30 or if this happens not to be a working day, the first following

working day.

The Local Government Auditors' Report on the Financial Statements

In their report, Local Government Auditors are required to give an opinion on

whether the Financial Statements comply with International Financial Reporting

Standards, the Act, the Local Government (Financial) Regulations and

Procedures and the Local Government (Audit) Regulations and Procedures.

The second requirement of the annual audit is the Management Letter mentioned

in paragraph c.02 of section P2.04.

The Local Government Auditors are to forward to the Auditor General, six bound

copies of their report and the Local Council's Financial Statements drawn up as

per specimen at Appendix P2.I as well as three copies of the Management Letter

addressed to the Council.

These copies will be distributed as follows

One copy of the Audit Report and Financial Statements together with the

Management Letter to remain with the Auditor General;

One copy of above to the Local Council;

Two copies of the Audit Report and Financial Statements together with one copy

of the Management Letter to the Director (Local Government), one copy of

which is to be forwarded to the Director General (National Statistics Office);

Two copies of the Audit Report and Financial Statements to the Minister

responsible for Local Government a copy of which is to be laid on the Table of

the House of Representatives and the other copy is to be archived by the Clerk of

the House of Representatives;

The Mayor and the Executive Secretary in return are to submit the Local

Council’s response to the Director (Local Government), the Auditor General and

the Local Government Auditors by not later than August 14 or six weeks after

receipt of the Management Letter from the Auditor General, after seeking the

Local Council’s approval.

The Local Government Auditors' Report on Securing Economy, Efficiency and

Effectiveness

This section deals with the Local Government Auditors' report containing their

analysis, comments and recommendations, made as required by the Act, on

whether the Local Council has made proper arrangements for securing economy,

efficiency and effectiveness.

In the case of Local Council audits, irrespective of the approach adopted to

report on the Financial Statements themselves, Local Government Auditors are

required to make additional enquiries and tests aimed specifically at economy,

efficiency and effectiveness. This will necessitate a programme of work, to be

performed on this topic. It will also necessitate a report which should describe

the work performed and the results thereof.

The task of determining whether a Local Council has made proper arrangements

to secure economy, efficiency and effectiveness has been split into two as

follows

The annual analysis and comparison of the Local Councils' indicators to measure

performance, which is described later on in this section. This is to be submitted

by the end of June of each year together with the Audit Report, Financial

Statements and Management Letter.

A full audit on the topic, covering the subject dealt with in the following

paragraphs, which will be conducted every three years as directed by the Auditor

General. The Local Government Auditors are to submit to the Auditor General a

report on such an audit within six months from the date the audit is

commissioned by the Auditor General.

Paragraphs e through n of this section deal with the Local Government Auditor’s

duties vis-à-vis the making of proper arrangements for securing economy,

efficiency and effectiveness in Local Councils.

The Local Government Regulations and the Procedures are intended to assist

Local Councils in securing economy, efficiency and effectiveness in the

management of their affairs and to ensure that Local Councils operate within

their means.

The Regulations and Procedures serve as reference documents for value for

money audits. Local Government Auditors are not required to pass judgement on

whether a Local Council has secured economy, efficiency and effectiveness but

are to give their opinion to the Auditor General in a manner that the latter may

decide whether economy, efficiency and effectiveness has been achieved. To this

end, Local Government Auditors, are expected to make enquiries and tests on

whether a Local Council has made proper arrangements for securing economy,

efficiency and effectiveness. The emphasis is therefore the achievement of value

for money which depends on the existence of sound arrangements for the

planning, appraisal, authorisation and control of the use of resources. Value for

money advocates which is called "good management practice" includes

Proper organisational structure with adequate classification of responsibilities,

authority and accountability.

Human resources management including arrangements for review of staff

requirements, recruitment, training and direction of employees.

The existence of well defined policies and practices.

Arrangements designed to the advantage of economies of scale, particularly in

procurement of goods, works and services.

Arrangements for the proper management of all the resources of the Local

Council.

Systems of planning, budgeting and controlling income and expenditure and

capital expenditure and for the allocation of resources.

Regular monitoring of results against predetermined and quantified performance

objectives and standards.

The Local Government Auditors have no power to question Local Council policy

as such but, only the way in which decisions are taken. As a result, they prescribe

a rational model of decision-making, and will consider

Whether policy objectives have been determined and whether policy decisions

have been taken with appropriate authority.

Whether established policy aims and objectives have been clearly set out.

The extent to which policy objectives are set and decisions based on sufficient

relevant and reliable financial and other data, and with the critical underlying

assumptions made explicit.

LOCAL GOVERNMENT (PROCEDURES)

.04 Whether there are satisfactory arrangements for considering alternative options,

including the identifications, selection and evaluation of such options.

.05 Whether subsequent decisions on implementation are consistent with the

approved aims and objectives, and have been taken with the proper authority at

the appropriate (or required) level; and whether the resultant instructions to

employees accord with approved policy aims and decisions and are clearly

understood by those concerned.

.06 Whether the costs of alternative levels of service or options have been

considered and are reviewed as demands and costs change.

The Act, Regulations and Procedures provide the first benchmark against which

to gauge Local Council performance. This is because these documents specify

standard policies, systems, practices, procedures, decision making structures,

authority levels and relationships etc. which Local Councils must follow and

respect. In addition each Local Council may define its own policies, systems,

methods and time-scales to supplement the standard requirements but not

inconsistent with the said requirements.

A full value for money audit will entail an examination of whether the Act,

Regulations and Procedures have been complied with. The Local Government

Auditor’s report should include their opinion on such compliance, subject, of

course, to any exceptions they may report. Local Government Auditors are

encouraged as well to point out any shortcomings in the established Procedures

which may come to their attention.

In the interests of audit efficiency, Local Government Auditors are encouraged to

apply their professional judgement on materiality (Information is material if its

omission or misstatement could influence the economic decision of users taken

on the basis of the financial statements).

To assist them in monitoring economy, efficiency and effectiveness, Local

Councils will be provided with a set of standard indicators to measure

performance (e.g. typical refuse disposal costs per household) against which they

could measure actual performance. Executive Secretaries are required to

examine the performance indicators of their locality, compared to its indicators

in previous years, to the predetermined standard for the locality and to the

typical or average figures for all Local Councils taken together.

There will in practice be many valid reasons why performance indicators would

vary between localities. It is the responsibility of Executive Secretaries ascertain

these reasons and to ensure that any adverse variance is not the result of

inefficiency on their part.

Lo c a l Go v e r n m e n t Au d i t o r s sh o u l d e a c h y e a r di s c u s s L o c a l C o u n ci l ' s

performance indicators with the Executive Secretary to determine the causes of

any material variances from year to year, etc. Their report should contain the

comparison of p erform ance indicators which is specified in the L oc al

Government (Audit) Regulations. It should also record the Local Council's

explanations on such indicators together with any additional comments thereon

which the Local Government Auditors may wish to make.

Finally, Local Government Auditors are bound to look for evidence that Local

Councils are monitoring the quality of the services they are providing, many of

which will be delivered by contractors. Such evidence should take the form of

.01 Local Council minutes recording this monitoring;

.02 The settlement of complaints made to the Local Council, in accordance with the

Local Government (Complaints) Regulations; and

.03 The appointment of persons to verify the quality of services delivered by

contractors.

The specimen format for the reports discussed in this section may be found in

Appendices P2.II and P2.III.

Special Reports

The Local Government (Audit) Regulations provide for special reports which

would be made by Local Government Auditors if they encounter

.01 Serious control weaknesses which, if left unattended, could result in a

breakdown in accounting and control procedures; or

.02 Suspected fraud, embezzlement irregularities or abuse of power on the part of

Local Council officials and/or Local Council members; or

.03 Matters which may lead to a qualification in their Audit Report on the Financial

Statements; or

.04 Any such other matter, as in the opinion of the Auditor General requires further

review.

The issue of a special report denotes a matter of some gravity which calls for

action on the part of the Auditor General and the Minister. Special reports

should, therefore, be considered as a measure to be taken as a last resort.

Particularly on items described in paragraphs a.01 and a.02 of this section, Local

Government Auditors should discuss the problem with the Local Council with a

view to resolving the matter without having to resort to a special report.

A special report on a case of suspected fraud, embezzlement, irregularity or

abuse of power is likely to lead to a request by the Auditor General for an interim

audit to investigate the matter or for an investigation by a board appointed under

the Inquires Act.

Appointment of Experts to Assist Local Government Auditors

The Act provides for the appointment of experts by the Auditor General to assist

Local Government Auditors in the performance of their duties.

The use of such experts would primarily arise by agreement between Local

Government Auditors and the Auditor General. Examples of such uses could

include

.01 Auditor General officials assisting Local Government Auditors in a fraud

investigation; and

.02 A civil engineer being appointed to look into the quality and costs of road

maintenance works performed, as part of the audit.

In all cases such experts would be remunerated by the Auditor General.

Guidance for Mayors and Local Councils’ Executive Secretaries

In the course of their duties, Local Government Auditors would be working

mainly with the Local Council officials and/or Local Council members. In

liaising with their Local Government Auditors, Local Council officials should be

guided by the following principles

.01 In all cases, the responsibility for the institution of sound internal controls, for

the maintenance of adequate financial records and for securing economy,

efficiency and effectiveness rests with the Local Council and its employees. The

audit process assists in the attainment of these objectives, but in no way reduces

the responsibility of management;

.02 It is the Local Government Auditors' role to make enquiries and tests, for the

objectives already discussed, but it is also their role to assist through their

advice;

.03 The maintenance of a sound system of internal control entails continual

management judgement. Controls are justified when their cost is less than the

benefit they yield and the assessment of their benefit entails a judgement on the

likelihood and cost of losses which may arise if the control was omitted. Local

Government Auditors can offer advice to management on such matters, but

cannot make decisions on their behalf;

.04 T he r eports submitted by Local Government Audi tors will contain the

shortcomings noted in their work and their suggestions for improvement. Local

Government Auditors will often legitimately seek to report all their findings,

except for obviously petty ones, in order that their report contains an agenda of

all matters that are worth discussing. Local Council official and/or Local Council

members should take such reports seriously and discuss them thoroughly with

the Local Government Auditors, who will note the replies received in the final

document sent to the Auditor General;

.05 There will be cases where Local Government Auditors and Local Council

officials and/or Local Council members disagree on the practicability of

correcting a particular control weakness. The responsibility for securing

economy, efficiency and effectiveness falls upon the Council.

LOCAL GOVERNMENT (PROCEDURES)

.06 The Local Government (Audit) Regulations empower the Auditor General to

recommend to the Minister on any action that is deemed appropriate in the

circumstances.

Management Letters, and the Local Government Auditors’ reports on the

arrangements made by Local Council for securing economy, efficiency and

effectiveness shall be made available to the public.

Finally, Local Council officials and/or Council members should monitor the

quality of service received from their Local Government Auditors and should

communicate any misgivings to the Auditor General. This feedback would be

useful to the Auditor General when considering audit appointments and renewals

and the terms thereof.

Miscellaneous

The Minister or the Auditor General, may request an ad hoc audit of any Local

Council’s operations, from any other entity empowered to do so by any

legislation in force.

Appendix P2.I

P2.I Specimen Annual Audit Report on the Local Council’s Financial Statements

.................................... Local Council

Annual Audit Report

Prepared by

ABC & Co

Certified Public Accountants

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Table of Contents

Section

Page

Statement of Local Council Members’ and Executive Secretary’s Responsibilities 3

Report of the Local Government Auditor to the Auditor General

Statement of Income and Expenditure

Statement of Affairs

Statement of Changes in Equity

Cash flow statement

Schedule of Special Needs Funds

Notes to the Financial Statements

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Financial Statements for the year ended 31 March 2006

Statement of Local Council Members’ and Executive Secretary’s Responsibilities

The Local Government (Financial) Regulations require the Executive Secretary to prepare a

detailed annual administrative report which includes a statement of the Local Council’s

income and expenditure for the year and of the Council’s retained funds at the end of year. By

virtue of the same regulations it is the duty of the Local Council and the Executive Secretary

to ensure that the financial statements forming part of the report present fairly, in accordance

with the accounting policies applicable to Local Councils, the income and expenditure of the

Local Council for the year and its retained funds as at the year end, and that they comply with

the Act, the Local Council (Financial) Regulations, and the Local Council (Financial)

Procedures issued in terms of the said Act.

The Executive Secretary is responsible to maintain a continuous internal control to

ascertain that the accounting, recording and other financial operations are properly conducted

in accordance with the Local Government Act, Local Council (Financial) Regulations, and the

Local Government (Financial) Procedures. The Executive Secretary is also responsible for

safeguarding the assets of the company and hence for taking reasonable steps for the

prevention and detection of fraud and other irregularities.

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Financial Statements for the year ended 31 March 2006

Report of the Local Government Auditor to the Auditor General

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Statement of Income and Expenditure for the year ended 31 March 2006

Notes

2005/2006

2004/2005

€

€

€

Income

Funds received from central government

179,275.56

163,482.41

Income raised under Local Council Bye-Laws

361.05

-

Income raised under Local Enforcement System

760.54

14,174.24

Investment Income

5,003.49

3,717.68

General Income

11,148.38

1,395.29

211,549.03

182,769.62

Expenditure

Personal emoluments

33,803.87

33,410.20

Operations and maintenance

68,590.73

73,943.63

Administration and other expenditure

50,833.92

51,085.49

Finance Cost

2,818.54

-

(156,047.05)

(158,439.32)

Surplus for the year

55,501.98

24,330.31

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Statement of Affairs as at 31 March 2006

Notes

2005/2006

2004/2005

€

€

€

Assets

Non-current Assets

Property, plant and equipment

131,597.95

103,545.31

Current Assets

Inventories

291.17

978.34

Receivables

6,988.12

7,453.99

Cash and cash equivalents

233,475.43

99,969.72

240.754.72

108,402.05

Total assets

372,352.67

211,947

Reserves and Liabilities

Reserves

Retained funds

170,668.53

115,166.55

Non-current liabilities

Long term borrowings

43,496.39

-

Current Liabilities

Payables

149,885.86

96,780.81

Current portion of long-term borrowings

8,301.89

-

158,187.75

96,780.81

Total equity and liabilities

372,352.67

211,947.36

These financial statements were approved by the Local Council on .................... and signed

on its behalf by

Mayor

Executive Secretary

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Statement of Changes in Equity for the year ended 31 March 2006

Revaluation

Retained Funds

Total

Reserve

€

€

Balance at 31 March 2004

-

90,836.25

90,836.25

-

-

Changes in accounting policy

Restated balance

-

90,836.25

90,836.25

Changes in equity

-

Gain/(Loss) on property revaluation

-

-

Net income recognised directly in equity

-

Surplus for the period

-

24,330.31

24,330.31

Balance at 31 March 2005

-

115,166.55

115,166.55

Changes in equity

-

Gain/(Loss) on property revaluation

-

-

-

Net income recognised directly in equity

Surplus for the year

55,501.98

55,501.98

Balance at 31 March 2006

-

170,668.53

170,668.53

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Cash flow statement for the year ended 31 March 2006

2005/2006

2004/2005

€

€

€

Note

Cash flow from operating activities

Surplus for the year

55,501.98

24,330.31

Adjustments for

Depreciation

14,556.25

13,810.85

Increase / (Decrease) in Provision for Bad Debts

-

-

Interest receivable

(5,003.49)

(3,717.68)

Interest payable

2,818.54

-

(Profit) / Loss on disposal of asset

65.22

-

67,938.50

34,423.48

Increase / (Decrease) in payables

53,105.05

(7,628.70)

Decrease / (Increase) in receivables

465.87

(7,712.56)

Decrease / (Increase) in inventories

687.17

-

Cash generated from operations

122,196.60

19,082.23

Interest paid

(2,818.54)

-

119,378.06

19,082.23

Net cash from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

(43,023.53)

(25,998.14)

Proceeds from sale of equipment

349.41

-

Interest received

5,003.49

4,963.89

Net cash used in investing activities

(37,670.63) (21,034.24)

Cash flows from financing activities

Proceeds from long-term borrowings

55,206.15

-

Loan Repayments

(3,407.87)

51,798.28

-

Net cash from financing activities

Net increase/(decrease) in cash and cash

133,505.71

(1,952.01)

equivalents

Cash and cash equivalents at beginning of year

99,969.72

101,921.73

Cash and cash equivalents at end of year

233,475.43

99,969.72

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Schedule of Special Needs Funds at 31 March 2006

Funds Received and Expended

Brought

Carried

Forward

Received

Expended

Forward

€

€

€

€

-

-

Special Program 1

14,442.12

14,442.12

-

-

Special Program 2

27,952.48

27,952.48

-

-

Special Program 3

40,204.98

40,204.98

-

-

Total

82,599.58

82,599.58

Capital Creditors

Brought

Contracted

Invoices

Carried

Forward

this year

received

Forward

€

€

€

€

-

-

-

-

Special Program 1

-

-

-

-

Special Program 2

-

-

-

-

Special Program 3

-

-

-

-

Total

Commitments

Brought

Contracted

Invoices

Carried

Forward

this year

received

Forward

€

€

€

€

-

-

Special Program 1

14,442.12

14,442.12

-

-

Special Program 2

27,952.48

27,952.48

-

-

Special Program 3

40,204.98

40,204.98

-

-

Total

82,599.58

82,599.58

Appendix P2.I (continued)

....................................... Local Council

Annual Audit Report

Notes to the Financial Statements for the year ended 31 March 2006

1. General Information

.......................................... Local Council is the local authority of ............................ set up

in accordance with the Local Government Act. The office of the Local Council is situated at

2. Accounting Policies and Reporting Procedures

These financial statements have been drawn up in accordance with the accounting policies

and reporting procedures prescribed for Local Councils in the Financial Regulations issued by

the Minister of Finance in conjunction with the Minister responsible for Local Government in

terms of article 67 of the Local Government Act (Cap. 363). The financial statements are

prepared under the historical cost convention as modified to include fair values stated in the

accounting policies below. These Financial Statements are prepared in accordance to the

requirements of International Financial Reporting Standards and comply with the Local

Government Act Cap. 363, the Financial Regulations issued in terms of this Act and the Local

Councils (Financial) Procedures 1996.

The principal accounting policies and reporting procedures used by the Local Councils are

as follows

a. Revenue recognition

Revenue is recognised when there are no significant uncertainties concerning the derivation

of consideration or associated costs. Interest income is recognised in the income statement as

it accrues.

b. Local Enforcement System

........................................ Local Council forms part of ...................... Joint Committee. The

amount disclosed in the financial statements under Local Enforcement Income represents the

share of profit derived from the Joint Committee after deducting the related expenses.

c. Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation and

impairment loss to date. Depreciation is calculated on a monthly basis using the reducing

balance method at rates calculated to write off the cost less residual value of each asset over

its expected useful life as follows

%

Land

Trees

Buildings

Office Furniture and Fittings

7.5

Construction Works

Urban Improvements (Street Furniture)

Special Projects

Office Equipment

Motor Vehicles

Plant and Machinery

Computer Equipment

Plants

Litter Bins

Playground furniture

Traffic Signs

Road Signs

Street Mirrors

Street Lights

d. Government Grants

Government grants are accounted for on a systematic basis in the Income and Expenditure

Account over the periods necessary to match them with the related costs which they are

intended to compensate. If such costs have already been incurred when the grant is made, or if

there are no related cost, then the grant is accounted for when it becomes receivable.

e. Impairment of Assets

Assets that have an indefinite useful life are not subject to amortisation and are tested

annually for impairment. Assets that are subject to amortisation or depreciation are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount

may not be recoverable. An impairment loss is recognised for the amount by which the

carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the

higher of the fair value of the asset less cost to sell and the value in use. Impairment losses are

immediately recognised as an expense in the Statement of Income and Expenditure.

f. Amounts Receivable

Amounts receivable are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest rate method, less provision for impairment. A

provision for impairment of amounts receivable is established when there is objective

evidence that the Council will not be able to collect all amounts due according to the original

terms of the receivables. The amount of the provision is the difference between the carrying

amount of the asset in the present value of the estimated future cash flows, discounted at the

effective interest rate. The amount of the provision is recognised in the Statement of Income

and Expenditure.

g. Foreign Currencies

Items included in the Financial Statements are measured using the currency of the primary

economic environment in which the Local Council operates. These Financial Statements are

presented in €, which is the Council’s functional and present currency.

Transaction denominated in foreign currencies are translated into € at rates of exchange in

operation on the dates of transactions. Monetary assets and liabilities expressed in foreign

currencies are translated into Lm at the rates of exchange prevailing at the date of the

Statement of Affairs.

h. Profit and Losses

Only profits that were realised at the date of the Statement of Affairs are recognised in

these Financial Statements. All foreseeable liabilities and potential losses arising up to the

said date are accounted for even if they become apparent between the said date and the date on

which the Financial Statements are approved.

i. Cash and Equivalents

Cash and Cash Equivalents are carried in the Statement of Affairs at face value. For the

purposes of the Cash Flow Statement, cash and cash equivalents comprise cash in hand and

balances held with banks.

2005/2006

2004/2005

€

€

3. Funds received from central government

In terms of article 55 of the Local Government Act (Cap. 363)

179,275.56

163,482.41

-

In terms of article 58 of the Local Government Act (Cap. 363)

-

Other Government Income (Specify)

179,275.56

163,482.41

2005/2006

2004/2005

€

€

4. Income raised from Bye-Laws

Income raised under Local Council Bye-Laws

361.05

2005/2006

2004/2005

€

€

5. Local Enforcement Income

Share of Profit from Joint Committee/Fines and Penalties*

15,760.54

14,174.24

*Applicable only when Local Council does not form part of a Joint Committee.

2005/2006

2004/2005

€

€

6. Investment Income

-

773.35

Income received from Government Securities

Bank interest

4,230.14

3,717.68

5,003.49

3,717.68

2005/2006

2004/2005

€

€

7. General Income

-

Income from tender documents

2,329.37

-

Income from permits

1,979.97

Sponsorships

1,460.52

188.68

Contributions and donations

5,378.52

1,206.62

11,148.38

1,395.29

2005/2006

2004/2005

€

€

8. Personal Emoluments

Mayor’s allowance

4,817,14

4,171.91

Executive Secretary salary and allowances

17,645.00

17,703.24

Employees’ salaries

8,441.65

8,385.74

Social Security Contributions

2,900.07

3,149.31

33,803.87

33,410.20

2005/2006

2004/2005

€

€

9. Operations and Maintenance

Repairs and upkeep

Road and street pavements (Patching works)

6,997.44

3,610.53

Walkways

3,126.02

715.12

Street signs

172.37

2,068.48

Road markings

2,061.50

7,628.70

12,357.33

14,022.83

Contractual Services

Refuse collection (including bins on wheels)

16,356.86

17,053.34

Bulky refuse collection (including open skips)

3,857.44

2,841.84

Road and Street Cleaning (mechanical and manual)

11,982.30

14,779.87

Cleaning and Maintenance of Non-Urban Roads

861.87

3,878.41

Cleaning and Maintenance of Public Conveniences

1,164.69

1,178.66

Cleaning and Maintenance of Parks and Gardens

1,234.57

1,299.79

Cleaning and Maintenance of Verges

6,170.51

7,686.93

Cleaning and Maintenance of Beaches and Coastal Areas

9,198.70

5,147.92

Cleaning and Maintenance of country non-urban Areas

5,406.48

6,054.04

-

-

Local Enforcement Expenses**

56,233.40

59,920.80

68,590.73

73,943.63

**Applicable only when Local Council does not form part of a Joint Committee.

2005/2006

2004/2005

€

€

10. Administration and other expenditure

Utilities

3,535.99

5,380.85

Other repairs and upkeep

624.27

747.73

Rent

698.81

7,505.24

-

National and International Memberships

265.55

Office Services

3,696.72

4,691.36

-

Travel

524.11

Transport

1,737.71

764.03

Information Services

4,509.67

2,748.66

Other contractual services

2,003.26

1,467.51

Professional services

6,671.33

5,772.19

-

Training

349.41

Community and hospitality

6,044.72

8,197.06

-

Social events

204.98

-

Cultural events

4,891.68

-

Donations

454.23

-

Loss on disposal of asset

65.22

-

-

Increase in provision for bad debts

Depreciation

14,556.25

13,810.85

50,833.92

51,085.49

2005/2006

2004/2005

€

€

11. Finance Costs

-

Interest on Bank Loan

2,818.54

-

-

Interest charged by creditors

-

2,818.54

12a. Property, Plant and Equipment

Office

New

Office

Computer

Special

furniture

Street

Equip-

Motor

Equip-

Program

Asset

Property

& fittings

Signs

ment

Vehicles

ment

-mes

Total

€

€

€

€

€

€

€

€

Cost

As at 01 April

61,500.12

18,397.39 15,415.79

340.09 17,160.49

67,551.83

6,988.12

87,353.83

Additions

37,197.76

635.92

76.87

-

5,112.97

-

-

43,023.53

Disposals

-

-

-

-

-

(2,212.90)

-

(2,212.90)

As at 31

98,697.88

19,033.31 15,492.66

340.49 22,273.47

65,338.92

6,988.12 228,164.45

March 2006

Grants and

other

reimburse-

ments

As at 1 April

-

-

-

-

-

-

6,988.12

6,988.12

Additions

-

-

-

-

-

-

-

-

As at 31

-

-

-

-

-

-

6,988.12

6,988.12

March 2006

Accumulated

Depreciation

As at 1 April

20,985.32

5,900.30 15,415.79

177.03 15,199.16

19,142.79

-

76,820.41

Charge for the

684.84

971.35

76.87

61

791.99

11,998.60

-

14,556.25

year

Released on

-

-

-

-

-

(1,798.28)

-

(1,798.28)

disposal

As at 31

21,670.16

6,871.65 15,492.66

209.64 15,991.15

29,343.12

-

89,578.38

March 2006

Net

Book

Value

As at 31

77,027.72

12,161.66

-

130.44

6,282.32

35,995.81

- 131,597.95

March 2006

12b. Property, Plant and Equipment

Office

New

Office

Computer

Special

furniture

Street

Equip-

Motor

Equip-

Program

Asset

Property

& fittings

Signs

ment

Vehicles

ment

-mes

Total

€

€

€

€

€

€

€

€

Cost

As at 01 April

61,500.12

18,397.39 15,415.79

340.09 17,160.40

41,786.63

6,988.12 161,355.70

Additions

-

-

232.94

-

-

25,765.20

-

25,998.14

Disposals

-

-

-

-

-

-

-

-

As at 31

61,500.12

18,397.39 15,415.79

340.09 17,160.49

67,551.83

6,988.12 187,353.83

March 2005

Grants and

other

reimburse-

ments

As at 1 April

-

-

-

-

-

-

6,988.12

6,988.12

Additions

-

-

-

-

-

-

-

-

As at 31

-

-

-

-

-

-

6,988.12

6,988.12

March 2005

Accumulated

Depreciation

As at 1 April

20,575.36

4,887.03 15,182.86

135.10 14,709.99

7,519.22

-

63,009.55

Charge for the

409.97

1,013.28

232.94

93

489.17

11,623.57

-

13,810.85

year

Released on

-

-

-

-

-

-

-

-

disposal

As at 31

20,985.32

5,900.30 15,415.79

177.03 15,199.16

19,142.79

-

76,820.41

March 2005

Net

Book

Value

As at 31

40,514.79

12,497.09

-

163.06

1,961.33

48,409.04

-

103,545.31

March 2005

2005/2006

2004/2005

€

€

13. Inventories

Stationery

93.17

372.70

Consumables

59

326.11

Books for resale

151.41

279.52

291.17

978.34

2005/2006

2004/2005

€

€

14. Receivables

Receivables

489.17

349.41

LES debtors

6,033.08

5,264.38

Prepayments and accrued income

232.94

116.47

Other receivables

232.94

1,723.74

6,988.12

7,453.99

15. Cash and Equivalents

Cash and cash equivalents included in the cash flow statement comprise the following

amounts in the Local Council Statement of Affairs

2005/2006

2004/2005

€

€

Bank balances

-

ordinary funds

150,843.23

17,337.53

-

special needs funds

82,599.58

82,599.58

Cash in Hand

32.61

32.61

233,475.43

99,969.72

16. Long Term Borrowings

(i) Long term borrowings consist of a loan borrowed by the council with the approval of

the Minister responsible from Local Government. This amount is to be repaid by 30

June 2014. Interest is being charged at 7% per annum.

(ii) The loan repayment for the current year amounts to €8,301.89. This consists of 12

monthly instalments of €691.82.

2005/2006

2004/2005

€

€

17. Payables

Payables

49,447.94

6,179.83

Accruals

17,621.71

7,761.47

Special needs funds - unutilised

82,599.58

82,599.58

Other payables

216.63

239.93

149,885.86

96,780.81

18. Capital Commitments

2005/2006

2004/2005

€

€

(i) Details of capital commitments are as follows

Approved but not yet contracted for (ii)

14,558.58

4,658.75

Contracted for but not provided in Financial Statements (iii)

11,646.87

2,329.37

26,205.45

6,988.12

These could be analysed as follows

(ii) Approved but not yet contracted for

-

New Street Signs

2,329.37

-

Office Furniture and Fittings

2,911.72

Motor Vehicles

9,317.49

4,658.75

14,558.58

4,658.75

(iii)Contracted for but not provided in Financial Statements

Walkways

11,646.87

2,29.37

19. Contingent Liabilities

The Council has been drawn into a court case. The outcome and liability of the Council is

estimated to be €46,587.47.

Appendix P2.II

P2.II Specimen of the Local Government Auditors' Report on the Local Council’s

Indicators to Measure Performance

........................................... Local Council

Indicators to Measure Performance Audit Report - Year

Prepared by

ABC & Co

Certified Public Accountants

Appendix P2.II (continued)

.................... Local Council

Indicators to Measure Performance Audit Report - Year

Table of Contents

Section

Page

Executive Summary

1.0

Introduction

2.0

Scope

3.0

Methodology

4.0

Findings and Recommendations

4.1 General Observations

4.2 Repair and Upkeep (Works) Functions

4.2.1 Road / Street Pavements

4.2.2 Walkways

4.2.3 Signs

4.2.4 Road Markings

4.2.5 ..............................

4.3 Contractual Services Functions

4.3.1 Street Sweeping

4.3.2 Refuse Collection

4.3.3 Bulky Refuse Collection

4.3.4 Cleaning and Maintenance of Public Conveniences

4.3.5 Cleaning and Maintenance of Gardens and Verges

4.3.6 ..........................................

5.0

Conclusion

Appendices

Appendix P2.II (continued)

.................... Local Council

Indicators to Measure Performance Audit Report - Year

Executive Summary

Executive Summary

Appendix P2.II (continued)

.................... Local Council

Indicators to Measure Performance Audit Report - Year

1.0

Introduction

2.0

Scope

3.0

Methodology

4.0

Findings and Recommendations

4.1

General Observations

4.2

Repair and Upkeep (Works) Functions

4.2.x (Function)

a. Findings

Comparative

Graphs/Charts of Indicators to Measure

Performance

b. Recommendations

c. Local Council Response

d. Action Plan

e. Signatures

Local Government Auditors

Mayor

Executive Secretary

Appendix P2.II (continued)

.................... Local Council

Indicators to Measure Performance Audit Report - Year

4.3 Contractual Services Functions

4.3.x (Function)

a. Findings

Comparative

Graphs/Charts of Indicators to Measure

Performance

b. Recommendations

c. Local Council Response

d. Action Plan

e. Signatures

Local Government Auditors

Mayor

Executive Secretary

5.0

Conclusion

Appendix P2.II (continued)

.................... Local Council

Indicators to Measure Performance Audit Report - Year

Appendices

Appendix P2.III

P2.III Specimen Local Government Auditors' Report on Value for Money

........................... Local Council

Value for Money Audit Report - Year 1 to Year 3

Prepared by

ABC & Co

Certified Public Accountants

Appendix P2.III (continued)

.................... Local Council

Value for Money Audit Report - Year 1 to Year 3

Table of Contents

Section

Page

Executive Summary

1.0

Introduction

2.0

Scope

3.0

Methodology

4.0

Findings and Recommendations

4.01 Organisational Structure

4.02 Policies and Practices

4.03 Planning and Budgeting

4.04 Monitoring and Control

4.05 Decision Making

4.06 Documentation Control

4.07 Human Resources Management

4.08 Operation Management

4.09 Quality

4.10 Financial Management

4.11 Procurement and Tendering

4.12 Office Practices

4.13 Laws and Prosecution

4.14 Cost Control and Economics of Scale

4.15 Complaints Handling and Customer Service

4.16 Indicators to Measure Performance

5.0

Conclusion

Appendices

Appendix P2.III (continued)

.................... Local Council

Value for Money Audit Report - Year 1 to Year 3

Executive Summary

Executive Summary

Appendix P2.III (continued)

.................... Local Council

Value for Money Audit Report - Year 1 to Year 3

1.0

Introduction

2.0

Scope

3.0

Methodology

4.0

Findings and Recommendations

4.x

Subject etc.

4.x1 Findings

4.x2 Recommendations

a.

a.

b.

b.

c.

c.

4.x3 Local Council Response

4.x4 Action Plan

Signatures

Local Government Auditor

Mayor

Executive Secretary

5.0

Conclusion

Appendix P2.III (continued)

.................... Local Council

Value for Money Audit Report - Year 1 to Year 3

Appendices

L.C.P. 3/96 - Local 1.

In P3.03, a, for the words from "The Secretary" to

Councils (Tendering) "of the tender submitted." there shall be substituted the

Procedures, 1996.

following

"The Secretary is to ensure that bid bonds submitted

by Tenderers are in conformity with the following

table

Estimate Value of Contract

Bidbond requested

Up to €4,658.75

Nil

from €4,661.08 to €11,646.87

€465.87

from €11,649.20 to €34,940.60 €1,164.69

from €34,942.93 to €58,234.33 €2,329.37

from €58,236.66 to €16,468.67 €4,658.753

€116,471.00 and over

€5,823.43.

2. Immediately at the end of Appendix P3.V, there shall

be added the following

"BID BOND - SPECIAL CONDITIONS

This Tender must be accompanied by a valid and

original Bid Bond issued by a Maltese Bank to the

amount of ................ euro (€ .........) in the form of

the attached specimen Bid-Bond. This Bid Bond must

be valid for a period of ................ calendar months

from the date set for submission of tenders. This Bid

Bond is intended as a pledge that the Tenderer will

enter into a contract with the Local Council on the

terms stated in his Tender and will furnish a

Performance Bond (as per specimen attached to the

Tender

Documents)

covering

the

faithful

performance of the Contract and the payment of all

obligations arising hereunder. The Bid Bond shall be

forfeited if the Tenderer withdraws his tender before

the stipulated period of ................ months or if

Tenderer fails to provide the Performance Bond

within seven (7) days of the receipt of the Letter of

Acceptance.

The Local Council shall have the right to retain the

Bid Bond of Tenderers until, either (a) the Contract

has been placed and Performance Bond has been

furnished, or (b) the specified time has elapsed so

that Tenders may be withdrawn, or (c) Tenders have

been rejected.

Offers which on the closing time and date fixed for

the submission of the Tender are not accompanied by

the mandatory Bid Bond, will be disqualified.".

3. Appendix P3.IX, A (Services), clause 47 shall be

amended as follows

(a) in the third paragraph thereof, immediately after

the words "performance of the service." there

shall be added the following sentence

"Where the Local Council requires an increase

in the service which varies the Contract Sum by

more than 20%, the Local Council shall either

definitely terminate the contract awarded to the

Contractor and issue a fresh call for tenders, or

shall only issue a call for tenders for that part of

the variation, provided that if the part of

variation is less than €4,658.75 or 5% of the

financial ordinary allocation, the limitations for

direct orders or quotations shall apply."; and

(b) in the fourth paragraph thereof, the words from

"When the method variation" to the words

"performance of the service." shall be deleted.

P3. IX General Conditions of Contract shall be amended

as follows

1. In A. Services, for item 41 there shall be

substituted the following

"41. Settlement of Disputes

Any dispute, controversy or claim arising out of

or relating to this contract, or the breach,

termination or invalidity thereof, shall be settled

by arbitration in accordance with the rules of the

Malta Arbitration Centre as at present in force.

(a) The

appointing

authority

and

administrator shall be the Malta

Arbitration Centre;

(b) The number of arbitrators shall be one;

(c) The place of arbitration shall be Malta;

(d) The language to be used in the arbitral

proceedings shall be Maltese, unless

otherwise stated; and

(e) The applicable substantive law shall be

the Laws of Malta.".

2. In B. Goods, in item 28 for the words

"Notwithstanding any other agreement or condition to the

contrary in case of any dispute the Maltese Courts shall have

exclusive jurisdiction to hear and decide on the merits of the

matter in dispute." there shall be substituted the following

"Any dispute, controversy or claim arising out

of or relating to this contract, or the breach,

termination or invalidity thereof, shall be settled

by arbitration in accordance with the rules of the

Malta Arbitration Centre as at present in force.

(a) The

appointing

authority

and

administrator shall be the Malta

Arbitration Centre;

(b) The number of arbitrators shall be one;

(c) The place of arbitration shall be Malta;

LOCAL GOVERNMENT (PROCEDURES)

(d) The language to be used in the arbitral

proceedings shall be Maltese, unless

otherwise stated; and

(e) The applicable substantive law shall be

the Laws of Malta.".

3. In C. Leasing of Immovable Property, immediately

after item 20 there shall be added the following new item 21

"21. Settlement of Disputes.

Any dispute, controversy or claim arising out of

or relating to this contract, or the breach,

termination or invalidity thereof, shall be settled

by arbitration in accordance with the rules of the

Malta Arbitration Centre as at present in force.

(a) The

appointing

authority

and

administrator shall be the Malta

Arbitration Centre;

(b) The number of arbitrators shall be one;

(c) The place of arbitration shall be Malta;

(d) The language to be used in the arbitral

proceedings shall be Maltese, unless

otherwise stated; and

(e) The applicable substantive law shall be

the Laws of Malta.".

4. In D. Management of Immovable Property,

immediately after item 18 there shall be added the following

new item 19

"19. Settlement of Disputes.

Any dispute, controversy or claim arising out of

or relating to this contract, or the breach,

termination or invalidity thereof, shall be settled

by arbitration in accordance with the rules of the

Malta Arbitration Centre as at present in force.

(a) The

appointing

authority

and

administrator shall be the Malta

Arbitration Centre;

(b) The number of arbitrators shall be one;

(c) The place of arbitration shall be Malta;

(d) The language to be used in the arbitral

proceedings shall be Maltese, unless

otherwise stated; and

(e) The applicable substantive law shall be

the Laws of Malta.".