A comparative analysis of the financial situation of Gozo local councils

Abstract

Purpose: The scope of the study is to provide a comparative analysis of the financial situation of Gozo Local Councils. Design: A mixed methods research was used. Primary data was collected from three local councils, which were chosen by using maximum variation sampling strategy. Financial statements were examined via ratio, horizontal, vertical and trend analyses. The primary data collected by semi-structured interviews was analysed through thematic analysis. Participants who are individuals working in the local councils were selected by using stratified purposeful sampling. Findings: The financial health of MLC improved from 2012 to 2016 while the financial health of SLC and LLC deteriorated. MLC has the best financial health followed by LLC and SLC. Cost efficiency, due diligence and budgeting were central factors for the profitability and liquidity of the local councils. All participants highlighted the need of more revenue necessary to fulfil their functions more effectively and sustain projects. The poor liquidity in LLC and SLC resulted from excessive investment in projects. Such a weak liquidity led to deterioration in solvency. Conclusions: Additional sources of income were recommended such as EU funds and a more pro-active Central Government that provides more financial support. The stigma of bye-laws should be removed to promote flexibility that can enhance revenue generation. The ideology of New Public Management should be evaluated as it promotes autonomy which leads to additional revenue sources. Councillors should be trained to stimulate creativity and improve decision making. Value: There are limited studies that specifically focus on Gozo Local Councils. This research addresses this gap and also provides useful measures to the selected local councils that can help them improve their long term sustainability.