In order to enable the people to enjoy the fruits of democracy the Interim Constitution of Nepal , 2006 envisages providing opportunities to the people for their maximum participation in governance through decentralization. The Local Self-Governance Act (LSGA) was enacted to fulfill this aspiration of the Constitution. Mobilization and allocation of resources for the local development; balanced and equitable distribution of fruits of development and institutionalizing a system of accountable local bodies with requisite authority and responsibilities are the broader objectives of the Act. Among the principles and policies spelt out in section 3 of the Act, are more specifically related to the fiscal decentralization:
1. Devolution of powers, delineation of tasks and responsibilities and means and resources in order to make effective local self-governance.
2. Assigning the local bodies with the authority to collect and mobilize such means and resources to enable them to carry out the functions, duties and responsibilities entrusted.
3. Encouraging the private sector to participate in the local self-governance through the provision of basic services with a view to attain sustainable development.
Provision of Local Bodies Fiscal Commission
Among the numerous provisions related to fiscal decentralization, Section 237 of the Act has empowered Government of Nepal (GoN) to establish a Local Bodies Fiscal Commission including the representation of the association of the local bodies. The terms of reference of the Commission includes undertaking studies on the sharing of revenues as between GoN and local bodies and making recommendation on policy measures to be initiated for the improvement of taxation and accounting system of local bodies.
Fiscal decentralization has cross-sectoral dimension and is not limited to the jurisdiction of a single ministry. A separate entity capable to oversee the overall aspects of finance is required in order to address the above issues as well as to strengthen the local level financial management. It was in this context that the first Fiscal Commission had recommended the establishment of and independent and permanent Local Bodies Fiscal Commission with the representation of experts from the government, local bodies, private sector and civil societies in order to undertake overall study, research, monitoring and evaluation of the financial aspects of local bodies. Based on the recommendation of the first Commission, GON (Council of Ministers) made decision on April 5, 2002 and July 17, 2003 to constitute a permanent Local Bodies Fiscal Commission with an objective to strengthen the effective implementation of fiscal decentralization process. In order to facilitate the commission in carrying out its study and research activities along with assigned job a Secretariat of Commission namely Secretariat of Local Bodies Commission has been established within the premises of the Ministry of Federal Affairs and Local Development.
Scope of LBFC
Based on the decision of Council of Ministers on the abovementioned date, Local Bodies Fiscal Commission is assigned with the following authorities and responsibilities (ToR)
1. Coordinating the implementation of the recommendations of Local Authority Fiscal Commission, 2000 in accordance with the Decentralization Implementation Work Plan.
2. Ground work on grants policy and distribution of grant to local bodies,
3. Prepare criteria of revenue sharing policy and distribution to local bodies.
4. Prepare Minimum Conditions and Performance Measures(MCPM) of grants and revenue sharing provided to local bodies and conduct study, monitoring and evaluation of it and determine the grants to be provided to the local bodies on the basis of marks obtained.
5. Conduct capacity development programme for the expansion of financial resources of local bodies.0.5% of the amount provided to local bodies in the category of revenue sharing and development grant shall be allocated in this commission for the implementation of MCPM and conducting different programmes for enhancing revenue capacity of local bodies.
6. Identify the problems of fiscal decentralization and recommend to the government of Nepal for their resolution.
7. Coordinate between GoN and local bodies on issues related to fiscal decentralization.
8. Conducting studies on the revenue potentiality of local bodies and recommend to the government after identifying new potential sources.
9. Identify the ways of improvement in the revenue and accounting system of local bodies.
10. Monitoring and evaluation of the fiscal decentralization and thereby review on it.
11. Work as the inter-organizational coordination and secretariat for revenue sharing of local bodies.
12. Developing the criteria and policy of debt of local bodies.
13. Assist and avail local bodies with necessary suggestions for resolving fiscal problems.
14. Other issues related to fiscal decentralization.
15. In addition to the abovementioned functions, the Local Bodies Fiscal Commission is entitled to expand its terms of reference in the field of fiscal decentralization and determine the working procedures on its wishes.
As per the decision of Council of Ministers dated11th Mangsir, 2063 the composition of the Commission has slightly been modified. At present the commission is composed of following members:
|1||Honorable Minister , Ministry of Federal Affairs and Local Development||Coordinator|
|2||Honorable Vice Chairman , National Planning Commission||Deputy Coordinator|
|3||Chief Secretary , Office of Prime Minister & Council of Ministers||Member|
|4||Secretary , Ministry of Federal Affairs and Local Development||Member|
|5||Secretary , Ministry of Finance||Member|
|6||Representative from Association of District Development Committee of Nepal||Member|
|7||Representative from Municipal Association of Nepal||Member|
|8||Representative from National Association of Village Development Committees of Nepal||Member|
|9||Representative form Federation of Nepalese Chamber of Commerce and Industry||Member|
|11||Joint Secretary, Ministry of Federal Affairs and Local Development||Member Secretary|