Ministry of Finance has made it mandatory for local councils to formulate and submit their mid-term budget by August 31 each year.
The finance ministry has published guidelines for local councils to adhere to when drafting the mid-term budget with the allocated free aid, in accordance with the policies regarding council budgets. The guidelines published by the finance ministry are formulated in accordance with the state fiscal policy and the policy on drafting the council budget proposal as well as the responsibilities handed to the councils in accordance with the Decentralisation Act.
The government is required to provide free aid, or block grants, as part of the amendments brought to the Decentralisation Act in 2019. The amendments dictate that 5% of the estimated yearly state income and 40% of the revenue received from land leases should be distributed to local councils. Under the guidelines, the finance ministry is required to allocate the block grants for the local councils based on the population of the island or atoll, the land area, the distance between the administrative island and the Greater Male’ Region, and the performance score given to the council by the Local Government Authority (LGA). Additionally, the guidelines state that local councils will receive the revenue from state services provided by the council administration, and councils are required to provide at least 5% of the block grant to the women’s development committee (WDC).
The guidelines also state that public sector investment programme (PSIP) projects that cost under USD323,000 are to be overseen by the administrative atoll or island council, while Public Sector Investment Programme (PSIP) projects being conducted by state institutions that cost under USD971,000 are to be overseen by the city council.