Filenews 15 August 2021 - by Eleftheria Paizanos
Up to the last cent that municipalities have to collect, they will have to calculate it when preparing their budgets for 2022, due to the uncertainty and the consequences caused by the coronavirus pandemic. At the same time, they should focus on strengthening efforts to collect the revenues that are delayed and take the necessary measures. In the meantime, their cash flow should show a positive or zero balance so that municipalities can meet their obligations immediately, including repayments of their loans.
On the occasion of the preparation of the budgets of the Local Government Authorities for the following year, the Ministry of Finance issued a circular making strict recommendations. In particular, due to the current situation, municipalities should take into account both the cash balances and the possibility of collecting revenues. In addition, the Ministry of Finance suggests that the budgets should be governed by the principle of balanced budget, i.e. the budgeted revenues from the operation of the municipality, including the state sponsorship, should cover the budgeted expenses for its operation.
With prudence and rationality
Moreover, the Ministry of Finance calls on them to prepare the budgets wisely and rationally and to prioritise their priorities. At the same time, it suggests that the expenditure should be within their financial capabilities, while reflecting the strategic directions of the Government and ensuring that the measures and actions to be included in the budgets have the greatest possible added value. In relation to revenues, the ministry calls on municipalities, as their estimates are realistic and to take into account the current economic situation, the prospects for the course of the economy and the collection capacity of each municipality. As the ministry of finance points out, the revenue estimates should be given details of the main parameters on the basis of which the calculations were made. "Significant fluctuations should be adequately explained and it should be stated whether the change is due to legislation or the introduction of new measures," the circular adds.
Accumulated liabilities
According to the finance ministry, the accumulation of liabilities is a high fiscal risk and there should be a set timetable for their gradual repayment. Municipalities should include in an explanatory memorandum the debts of previous years as well as a timetable for their payment. Once again, the ministry makes it clear that it does not intend to grant approvals for conversions of overdravigations into loans to cover the operating costs of municipalities. Regarding the write-offs of debtors, the ministry points out that "discounts, reductions, deletions granted to citizens and included in the write-offs of debtors, should be analyzed in the explanatory memorandum as well as the criteria on the basis of which they are granted, for transparency purposes".
Only mature works of time
As far as development projects are concerned, new projects should be evaluated in order to reveal whether the project is affordable and viable, has a high added value and is in line with the policy priorities of municipalities and the Government. In next year's budget, municipalities will only have to include projects that are mature and there is the cash to be implemented. At the same time, the ministry of finance calls on municipalities to ensure that overtime expenditure is kept to a minimum, so that the level of credit remains at the same level as this year. The ministry asks the municipal secretaries to take all necessary measures, including the reallocation of staff or other structural changes, to eliminate or limit overtime to a minimum.
The Health Plans
For the employees' health care plans, these will continue to operate in parallel with the GHS, and will cover services not offered by the GHS. Following a relevant agreement, the health funds evolved into supplementary benefit funds and include only services and the degree of coverage provided by each municipality before the implementation of the Health Plan and not covered by the GHS. The plans would not provide additional health services or 100% coverage if previously the coverage was less. In addition, the plans do not cover supplements to services covered by the GHS or alternative medicines not provided by the GHS, nor cosmetic treatments. Under the agreement, the obligations of the projects can be reassessed and adjusted. In the meantime, on the issue of covering the staff of municipalities with life insurance, in cases included in the supplementary benefits, it will be discussed during the consultations on the signing of the framework agreement between the government and trade unions, which will lead to the signing of collective agreements.
Updating of actuarial studies
Regarding the pension plans of the municipalities, the ministry asks for the actuarial studies to be updated and the recommendations proposed to be implemented by the municipalities. It also suggests that actuarial deficits should not accumulate, adding that the authorities that exist should take measures to reduce them. At the same time, municipalities should go through a sieve and social and cultural events and only those that contribute to their promotion and development, as well as to the tradition of Cyprus, should take place. After all, hospitality and public relations costs, as well as the purchase of services, should be paid sparingly.
State sponsorship and recommendations to the Sewerage Boards
Next year the total amount of state sponsorship will be around €70.7 million. In fact, state sponsorship remains at the same level as in recent years. State aid for the thirty municipalities is divided into three parts. Specifically, the amount of the state grant that will be granted to them is €51.1 million. Also, at €17.5 million. amounts to the sponsorship given to them against the abolition of the business tax, while to € 2.1 million. there are the funds against the Diapilia, which were abolished more than 50 years ago. Diapilia was a form of indirect taxation, imposed by the municipal authorities on products imported into their area from other areas. In the meantime, the strict instructions of the Ministry of Finance should also be followed by the Sewerage Boards, which will be required to submit either balanced or surplus budgets, i.e. the revenues should cover the operating expenses and there should be room to cover unforeseen expenses. In fact, any positive balance can be used to finance development projects. It is worth noting that both municipalities and sewerage boards will have to submit their budgets to the Ministries of Finance and Interior by September 17th. As the finance ministry points out, the date of submission of the budgets should be strictly adhered to so that the relevant ministries have the time to examine them. Concluding, the ministry stresses that the budgets should be approved before the end of the year, to avoid the use of twelfths.
