The Parliament has approved a bill proposing significant amendments to the Decentralisation Act, aimed at strengthening the financial management of local councils. The bill was passed with 51 votes in favour and eight against.
The bill on the amendments was submitted to the Parliament by Member of Parliament, Ibrahim Hussain, on behalf of the government.
The key objectives of the bill include defining the scope of business activities permitted for local authority companies established by councils under the Decentralisation Act, and reviewing policies related to the allocation of state funding for councils. The proposed amendment also aims to establish policies to be followed by councils in making important financial decisions during the last year of their term.
The proposed amendments include criteria for business activities of local authority companies established by councils. These include:
• The activity must not be an economic activity or business already carried out by private individuals in the island or islands to which the local authority company belongs.
• The activity must be essential for the infrastructural development of the island or islands.
• The investment or capital of the work must exceed USD 648,088.
The bill further states that if the business activities of the companies registered under this Act do not comply with these terms, they must be discontinued within 90 days from the date the amendment comes into force.
According to the bill, rent cannot be charged on land or buildings allocated to various parties for the provision of essential public services. Similarly, the bill states that councils will receive state funding after deducting any outstanding taxes and payments overdue for over six months, owed to the state by the council.
Additional proposed amendments state that bank accounts opened by councils must be maintained in accordance with the rules set by the Ministry of Finance and Planning. The amendment also requires councils to provide the Ministry of Finance with a statement of bank accounts upon request.
If a council is within 365 days of the end of its term, certain actions may only be taken in accordance with the regulations set by the Ministry of Finance and the Local Government Authority (LGA). These include:
• Hiring permanent or contract staff for the council or its offices.
• Leasing or granting of land, lagoons or reef areas under the jurisdiction of the council.
• Launching new development projects not already specified in the approved development plans prepared by the councils.
The bill was reviewed by the Parliament’s Decentralisation Committee and forwarded to the Parliament floor, after which a debate was tabled. Changes were brought to the bill during the committee stage based on the comments submitted when the bill was opened for public comments. However, the bill’s core provisions remained unchanged.
The bill passed with a clear majority in the Parliament.