Sky Island is a myth or a legend to many people including the pirates form Jaya, who laugh at Luffy because he thinks that Sky Island exists.
Does the World Government know about Sky Island or is it just a myth to them?
I believe that the world government does not know of the Sky Islands, because when the Straw Hats land in Navarone, the officials do not believe Zoro, Luffy, or any of them when they say they came from the sky. Considering Navarone was a huge Marine Base, if the World government knew of the Sky Island, they would have let them know.
Edit: It's just my assumption but Enel pursued by the government and he came to this island after it was thrown out to the sky.
His bounty was at that time 500,000,000 and of course before that,
Gol D. Roger was there.
So it seems like too many coincidences have occurred there.
Apparently the government (the HQ at least) knew of the existence of this island.
But they do not want to reveal it to the public because it is so difficult and dangerous to get there, so
I guess they just chose to deny its existence.