Treasury will not fund incompetent councils: Report

  Wallace Ruzvidzo  Herald Reporter

Treasury will not fund provincial/metropolitan councils and local authorities whose books are either in disarray or fail to meet the expected standards under the Second Republic.

This is contained in the Cabinet-approved Inter-Governmental Fiscal Transfer System (IGFTS) Administrative Manual, which will assist in the management of fiscal transfers.

Provincial councils or local authorities, which are anticipated to underspend their allocations, will also have disbursements halted.

“The Treasury may, or on request of the ministry responsible for Local Government, stop the disbursement of an allocation to a provincial/metropolitan council or local authority, or a portion thereof, in the case of the following reasons:

  1. Provincial/metropolitan council or local authority is in a serious or persistent material breach of the Constitution, the Acts that guide urban and rural local authorities, the Act that guide provincial and metropolitan councils, the Act that guide Intergovernmental Fiscal Transfers or the Public Finance Management Act.
  2. Treasury anticipates (based on past performance) that a provincial/metropolitan council or local authority will substantially underspend on the allocation, or any programme, partially or fully funded in any fiscal year.

Provincial and metropolitan authorities will also have their allocations withheld if they do not operate procedurally.

The admnistrative manual also says the ministry responsible for Local Government may withhold the transfer of an allocation to a provincial/metropolitan council or local authority, or any portion thereof, if the local authority does not comply with any provision of the Act that guides Intergovernmental Fiscal Transfers or any Government regulatory provision.

Failure by a local authority to submit acquittal of any required reports on the utilisation of the previous transfer will also result in the withholding of funding .

Lack of explanation for significant under-expenditure on previous transfers during the prior financial year will  attract sanctions.

According to the manual, other reasons for withholding of funding include  situations where previous transfers have been used for ineligible expenditures and  failure to adhere to the provisions of the Act that guide public procurement.

Once withheld, the provincial/metropolitan authority will have the responsibility to address concerns raised to unlock further disbursements.

“In making the decision to withhold disbursement of an allocation to a provincial/metropolitan council or local authority, Treasury, through the ministry responsible for Local Government, will officially communicate the reasons for withholding the disbursement and the remedy sought.

“The ministry responsible for Local Government may also request Treasury to withhold disbursement to a provincial/metropolitan council or local authority. In making such a request, the ministry must provide to the Treasury, the reasons for withholding the disbursement.”

The manual also states that the reallocation of funds will be permitted only if there is a national disaster and emergencies stipulated under the relevant Act.

“There could arise situations where there would be need for reallocating the transfers among expenditure heads or amongst the provincial/metropolitan councils and local authorities.

“In such cases, a joint request by the ministry responsible for Local Government and the Civil Protection Unit, Treasury may approve that a conditional allocation or a portion thereof, be re-allocated to pay for the alleviation of the impact of a disaster or the reconstruction or rehabilitation of infrastructure damage caused by a disaster, provided the re-allocation is not required for immediate response or earmarked to meet contractual obligations,” reads the IGFTS.

Before requesting a re-allocation, the ministry responsible for Local Government must notify the affected provincial/metropolitan council or local authority of the proposed re-allocation and give the provincial/metropolitan council or local authority at least 14 days to provide comments and propose changes to the proposed re-allocation.

The provincial/metropolitan council or local authority must confirm that the affected funds are not committed in terms of any contractual obligation.

When making a re-allocation request, the Ministry of Local Government, must submit to the Treasury, comments and proposed changes provided by the affected provincial/metropolitan council or local authority.

If Treasury authority is granted for the re-allocation to take effect, the portion must be spent by the end of the respective financial year.

On Conditional Transfer allocations, the IGFTS stipulates that any allocation, that is not a component of the five percent of the minimum constitutional provision not spent at the end of any given financial year, reverts to the Consolidated Revenue Fund, unless the roll-over of the allocation is approved by Treasury.

“The Treasury may, at the request of the ministry responsible for Local Government, approve a rollover of a conditional transfer allocation to the following financial year if the unspent funds are committed to identifiable projects or programmes.

“The Accounting Officer for the provincial/metropolitan council or local authority must ensure that any funds that must revert to the Consolidated Revenue Fund are paid into that Fund by the last day of the Financial Year.

“In the event that the provincial/metropolitan council or local authority does not transfer the unspent funds to the Consolidated Revenue Fund, the Treasury will offset such funds that must revert to the Consolidated Revenue Fund against future advances for equitable transfer allocations for the respective entity,” reads the manual.

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