It is the government that decides the overall sum that will be allocated for local government authorities in the national budget and the formula in the Fiscal Transfers Act will then be used to determine how much of this sum each local government organ receives.
This was recently emphasised to Stabroek News by Minister of Communities Ronald Bulkan. In recent times, persons had raised questions about the fiscal transfers to local authorities.
According to Clause 6 (1) of the Fiscal Transfers Act: “The annual subvention or fiscal transfers, from central government to local authorities shall be based primarily on a set of conditions and stipulated performance indicators so as form an aggregate sum referred to in the Schedule.”
The Act defines “sets of conditions” as “the criteria used to determine the sum of money appropriated by Parliament annually to local authorities and of which fifty percent is allocated equally among those local authorities with the remaining fifty percent being allocated to the local authorities in accordance to variables, such as population size, geographical area or stipulated performance indicators which may be changed by the Minister by regulations.”
The Act defines “stipulated performance indicators” as “the rate of collection of taxes by each local authority.”
Essentially, half of the money allocated to local authorities in the national budget will be equally divided among the three categories of local authorities (Georgetown, municipalities and neighbourhood democratic councils). The remaining 50% of the allocation will be divided among the local authorities within each category based on a formula that takes into account the size of the area, population, and percentage of revenue collected by the local authority for the preceding year.
Clause 6 (2) of the Act says that in arriving at the determination of the annual subvention from central government to local authorities, “it is acknowledged that central government has a responsibility to provide financial resources to local authorities to supplement their own revenues and in order to assist them to discharge their functions and responsibilities.” The Act says that the aggregate sum shall be identified as a line item in the national budget.
On March 18, after an absence of almost 22 years, local government elections were held with the APNU+AFC coalition winning the majority of the municipalities but the PPP/C won most of the NDCs.
In this year’s budget, $401 million has been approved for subventions to municipalities and NDCs. Bulkan had told the House that a portion will be for the nine municipalities while the remainder will support the 62 NDCs. He had said that the Fiscal Transfers Act was used in determining the level of transfers that will be made to each individual local democratic organ.
The Government Information Agency had reported that according to Bulkan, the Fiscal Transfers Act does not mandate central government to provide funding to local government organs but rather it outlines a formula for organs to access budgetary allocations.
The Act also provides for local democratic organs to raise their own funds to ensure that they can sustain themselves financially. In addition to the authorised imposition of rates on immovable property within their boundaries, Clause 3 of the Act provides for each authority to increase revenues through various measures. Clause 3(2) (a) says that with the prior written approval of the Minister responsible for Local Government, a local authority could approach donor agencies for financial and other resources in the form of grants, which may be used to fund projects or employment costs. It specifies that such approval must not be unreasonably withheld and this approval or disapproval be given within 35 days.
Additionally, local authorities can negotiate with central government for specific revenue sharing contracts; establish vehicular meters to charge for parking, establish and charge for vehicle parking facilities; embark on revenue earning economic projects; or undertake any other measure agreed to by the Minister.
The Act also provides for a local authority to enhance its revenue by a fiscal transfer to it from another local authority taking into account the mutual benefits to the local authorities.
Unless otherwise directed by the Minister, the Act says, the additional revenues shall be paid into the general revenue account of the local authority, from which account disbursements may be made in keeping with financial regulations governing such funds.
The Act also sets out conditions that have to be met in order for local authorities to be eligible for fiscal transfers. Among other stipulations, the Act requires that each local authority submit its budget estimates for the following year by November 15 of the current year, including previous as well as projected expenditure and revenue data as well as all relevant financial statements required by law.
