The budgeting process underlying the annual financial allocation for local councils

Abstract

Purpose: The Central Government provides Local Councils with an annual financial allocation to be able to function. This study identifies and assesses the budgeting process underlying such allocation and analyses the roles of the different actors involved in such a process. Design: For this study, the mixed method research approach was adopted. Semi structured interviews were conducted with officers from the Local Government Division, Budget Affairs Division and Local Councils’ Association. Then, a questionnaire was distributed to all executives secretaries of Local Councils. Findings: The main budgeting techniques utilised by the Central Government to determine the financial allocation are incremental budgeting and top-down budgeting. Zero-based budgeting and performance-based budgeting are also used in certain situations. The role of the Local Government Division is to propose an allocation sum to the Budget Affairs Division, which has to establish the definitive sum before it is passed to Parliament for approval. Local Councils are not directly involved in the process, but their voices are transmitted through the Local Councils’ Association. Conclusion: Since the Local Councils are the closest to the citizens, they should be allowed to participate more in the determination of the funds that will be made available to them, but in a structured way, so that the Central Government does not lose control of its finances. Whilst incremental budgeting is an easy method for everyone, activity-based budgeting should be studied and considered, since Local Councils have a wide range of functions and responsibilities. Value: The study may deliver value to the Local Government Division by suggesting alternative ways on how the financial allocation can be decided. The overall aim is to better satisfy the needs of both Local Councils and citizens.