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resource development at the municipal level is required.

g. A clear delineation of tasks and responsibilities at the municipal level of the executives and elected bodies.

h. A plan for the operation and maintenance of urban infrastructure, resulting in improved maintenance of assets and improved management of service delivery is necessary.

In Andhra Pradesh the assessment of the financial capabilities of the municipalities led to the following conclusions concerning the financial situation of municipalities (APUSP, 1999 and box 2).

Box 2 Financial reforms at the local government level

a. The current accounting system does not provide a sound basis for assessing their financial capabilities. Implied reform: Improve the current single accounting system.

b. Revenue Improvement Action Plans (RIAPs) need to be prepared, indicating which revenues can be increased.

c. Expenditure Priorities Improvement Plans (ECAPs) need to be prepared, based on agreed priorities.

d. Municipalities need to be helped to access other sources of finance. Implied reform: local governments need to develop their own expertise in evaluating, appraising and prioritising their capital investment needs. Training to be provided for this purpose.

e. Municipalities should create separate cost centres for project activities to record and accumulate items of receipts and payments.

f. Municipalities should give more emphasis to cost recovery for services provided and introduce double accounting.

g. They should enforce financial discipline in project preparation and execution and in repayment by monitoring reforms and progress.

h. Municipalities should prepare an adequate loan administration.

i. They should register and value all municipal assets with a view to eventually use them as guarantees or assured cash flows.

User fees directly related to the service provided are to be preferred over general taxes. To achieve repayment people need to perceive a relation between their payment and the service concerned.  In the same way real repayment to the State or National level is better than repayment through deduction from future loans or grants. It requires the authority to raise and increase taxes and often necessitates a reform of municipal finances: to be able to pay for the activities that a city now has to undertake. Introducing reforms at the municipal level, improving the accounting standards of all Indian local governments and developing uniform financial reporting standards will take time, but are necessary to meet the increasing demand for urban infrastructure.

The necessary accounting reforms

Good governance requires a good basic accounting system and financial reporting (Van Dijk, 2000b). Local governments need budgets and to prepare them they need to take

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