All councils are required to come up with budget estimates every year. The Budget Division of the National Local Government Finance Committee Coordinates council budget formulation for councils. Every financial year is unique. However, there are some common elements of the council budget formulation process in each budgeting cycle. In this discourse, Jonathan Banda describes the council budget formulation process in order to enable stakeholders to obtain a concrete perspective of council budgeting.
According to the Local Government, Act 1998/2010 councils are expected to complete the preparation of the budget estimates three (3) months before the commencement of the new financial year. In this case by 31st December. By that date, all the government agencies are assumed to have been briefed on budget preparation guidelines for the forthcoming financial year. Councils are briefed on budgeting guidelines as some customisations are made to the budgeting templates to reflect councils’ processes. All council briefing sessions are therefore conducted by NLGFC in the month of January. All councils are represented during these regional meetings which are aimed at communicating the budgeting templates and budgeting guidelines underlying budget formulation processes.
The budget briefings set the benchmark in terms of expectations on how the councils are expected to complete all the templates as well as communicate the relevant policy directions as per the national development agenda in terms of medium to long term. This is to say in the current medium term, all councils and government agencies are expected to conform their budget to the Malawi Investment Plan I en route the long-term vision of Malawi 2063.
Similarly, the development resources for projects like Governance to Enable Service Delivery (GESD) PBG, Climate Smart Public Works Program and Social Cash Transfer Program, there are also specific guidelines which were developed in line with the financing agreement and relevant Project implementation manuals. As such, these are emphasized in order to ensure that the budgeting covers all the relevant information and to enhance the efficiency in the utilization of the resources.
NLGFC provides indicative budget ceilings to councils to commence the budgeting process. But in the absence of the indicative ceiling’s council can still commence the budgeting process using the Medium-Term Expenditure Framework Ceilings which are provided every year. Using the information provided to the council personnel representatives during the budget briefing, the councils proceed to prepare the budgets ensuring they have completed all the relevant templates provided. Constant contact is maintained between NLGFC and councils through the process as the councils get clarification on various issues as they continue preparing the budgets. This budget formulation process takes place over a certain timeline during which time council personnel undertake consultation with elected members and grassroots structures of Village Development Committees (VDCs) and Area Development Committees (ADCs).
Upon completion of the templates, the council are invited to technical Budget Review meetings where NLGFC representatives scrutinize their budgets. This process attempts to put the budgets on a litmus test to the templates and guidelines that were provided during the budget briefing sessions. As such the budgeting guidelines and templates become the basis for evaluating a council’s budget submission. During these review meetings, council are advised on various areas of the templates where corrections need to be made before they make a final submission for NLGFC to embark on the consolidation process. A submission deadline is agreed upon with councils to submit their relevant templates. Normally, the technical budget review process occurs before the communication of final budgeting ceilings y NLGFC. The councils’ final budget submission by the council to NLGFC is therefore expected to be responsive to the final ceilings which are communicated.
Before the final submission is made to NLGFC, councils are required to subject the budget to governance structures at the council, namely, Finance Committee, and the full council which is expected to approve their budget. The budget for the council comprises several documents which stakeholders need to understand. These include Program Based Budget, input sheets for both Personnel Emoluments and Other Recurrent Transactions (ORT), Cash Flows and Citizens Budget.
At this stage, the NLGFC consolidates all the budgets that councils have submitted in order to relay the same to Parliament for their noting. The main documents NLGFC consolidates are Program Based Budgets, Detailed Budget Estimates (generated from input sheets) and Cash flows. While the Detailed Budget estimates and Program Based Budget, Documents are for sharing with parliament and other stakeholders, the consolidated cash flows are for planning the financing of the various budget components to facilitate budget implementation in the forthcoming financial year.
Consolidated budget documents are eventually printed and made available to stakeholders, mostly councils. Also, important to note is the fact that councils also make cash flows which are summaries of the resources or funds they expect to get every month from the central government transfers for all the devolved sectors including development components of the budget. These resources are funded to councils from the first month of the financial year i.e., April through March of the following year. Similarly, the council also prepares their own cash flow with regard to locally generated revenue which defines how the council will implement their activities pertaining to locally generated revenue.
With all these processes completed all councils become ready to implement the budget for the forthcoming financial year. They are expected to only spend the funds which have been budgeted and approved. Councils that collect more revenue than estimated, are expected to submit to NLGFC a supplementary budget detailing how they intend to use the extra resources. Virements are allowed at relevant intervals as the councils implement the budget in order to allow councils to move resources from some budget lines where expenditure is slow to those where expenditure is faster but within a sector or budget line and not across sectors or budget lines. It is also possible for a council to spend less than what was approved in the course of the financial year due to resources that have been mobilized by the Ministry of Finance.
