Ministry of Finance has revealed local councils that keep adequate financial records will receive a bigger budget in 2023.
The proposed state budget for 2023 shows that the decision was made in response to local councils neglecting to pay their utility bills, which leads to the government having to assist financially struggling utility companies. The government has allocated a block grant of USD117 million for local councils in the proposed state budget for 2023, which is a 3% increase compared to the block grant distributed in 2022. 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.
The finance ministry highlighted the importance of local councils keeping records of its expenditure and other data in order to allow the government to conduct its work smoothly. The ministry, however, noted that many councils are still negligent in keeping records of their revenue and expenditure. It revealed that 134 of the 200 councils have not been consistently keeping their records this year and therefore measures will be taken to compel councils to regularly maintain their financial records. The ministry stated the measures will consist of including a fiscal performance variable in the block grant formula and monitoring local councils on how frequently they update their financial records. The monitoring results will indicate which local councils would receive a larger portion of the block grant.
Additionally, the finance ministry stated that local councils not paying their utility bills have a direct impact on the cash flow of state-owned utility companies, resulting in more government expenditure going towards providing financial assistance to the companies. The ministry revealed that 47 councils had neglected to pay their bills for over six months this year, while 13 councils have not paid their bills for 3-6 months. It added that the fiscal performance will also take into account the council’s negligence in paying their bills.