A look at Local Authority budgeting
After the general introduction of the National Local Government Finance Committee (NLGFC) in terms of its mandate, mission, roles, responsibilities and the policy framework in which it is operating, we will now start looking at the thematic areas that guide NLGFC’s work.
The starting point is ‘budgeting’ for Local Authority (LA) resources within the context of decentralisation.
Budgeting is a process of allocating limited resources to competing needs over a period of time to achieve stated or expected outputs.
Just like the national budget, LA budgets are formulated based on policies of the central government, including the Decentralisation Policy; the Medium Term Expenditure Framework (MTEF), the output-based approach and, most importantly, alignment to the Malawi Growth and Development Strategy (MGDS).
The LA budget is financed by central government grants, locally-generated revenue and donor funds.
Central government grants include sector funds, Constituency Development Fund (CDF), Local Development Fund (LDF) and, for cities, Infrastructure Development Fund (IDF). Locally-generated revenue comprises property rates, fees and licences, service charges and commercial ventures.
In terms of expenditure, the LA budget mainly finances recurrent expenditures as the development budget is not yet fully devolved.
Development projects are mainly financed from IDF, CDF, locally generated revenue and LDF.
Decentralisation in Malawi has entailed corresponding devolution of resources or the so-called fiscal decentralisation.
In line with this, the Government of Malawi made a number of enabling policy decisions that have gradually (over time) allowed LAs to have voted expenditures.
For example, in the 2004/5 fiscal year, district commissioners (DCs) and chief executive officers (CEOs) of local authorities were designated as controlling officers.
This move was followed, in the 2005/6 fiscal year, by the designation of LAs as distinct votes in the national budget and set the stage for more expansive devolution.
Thus, Health, Education and Agriculture Other Recurrent Transactions (ORT) budgets devolved to LAs at a total budget of K3 billion in the 2005/06.
By the 2011/12 financial year, the number of devolved sectors moved from three in 2005/06 to 14 in the 2011/12 fiscal year at a total of K16 billion under the direct control of LAs (Very soon, we will publish on this column the transfers to LAs in the 2012/13 national budget).
