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PROVINCIAL FINANCE COMMISSION AND FISCAL TRANSFERS
120-A. Establishment of Provincial Finance Commission: On coming
into force of this Chapter, the Governor forthwith shall constitute
a Provincial Finance Commission for Sindh hereinafter referred to as
the Finance Commission.
1[120-B. Membership: (1) The Finance Commission shall consist of ten
members, including the Chairman as under -
(a) four members shall be ex-officio, namely:
(i) the Minister for Finance of the Province, who shall be the
Chairman of the Finance Commission, and in his absence for
what-so-ever reasons, the members may elect one of the members
present to be Chairman in the manner prescribed for the duration of
his absence;
(ii) the Secretary to the Government, Local government and Rural
Development Department;
(iii) the Secretary to the Government, Finance Department (as
Member/Secretary); and
(iv) the Secretary to the Government, Planning and Development
Department;
(b) three professional members from the private sector to be
appointed in the manner stated in the Seventh Schedule; and
(c) one Zila Nazim, or Taluka or Town Nazim and one Union Nazim.
Explanation: For the purpose of this Chapter "private sector person"
means a person who is not in the Service of Pakistan or any
statutory body or any other body which is owned or controlled by the
Federal Government or the Provincial Government or a Local
Government.
(2) The Finance Department shall act as the Secretariat of the
Provincial Finance Commission.".]
1[(3) The professional members of the Finance Commission shall be
appointed by the Governor from amongst experts in economics, finance
and public administration, each possessing a postgraduate degree,
preferably a doctorate in a related subject, and having at least ten
years of practical experience in a related field.
(4) The Finance Commission may hire the services of any professional
individual or a firm for assistance on various issues related to its
functions with the approval of the Government.
(5) No proceedings or act of the Finance Commission shall be invalid
merely on the ground of existence of a vacancy other than that of a
professional member in or defect in the composition of the Finance
Commission.
(6) A professional member shall be removed in the prescribed manner.
]
2[120-C. Re-Appointment of Professional Members: A professional
member shall be eligible to be re-appointed for another term but
shall not, in any case, be eligible for appointment in the Service
of Pakistan or any Local Government for a period of relinquishment
of his office.".]
3[120-D. Functions, Duties and Powers of the Finance Commission: (1)
The functions, duties and powers of the Finance Commission shall be
to make recommendations to the Governor for -
(a) a formula for distribution of resources including -
(i) distribution between the Government and the Local Governments
out of the proceeds of the Provincial Consolidated Fund into a
Provincial Retained Amount and a Provincial Allocable Amount
respectively;
Provided that in no case shall the Provincial Allocable Amount be so
determined that it is less than the funds transferred to local
governments in the financial year 2001-2002 and the establishment
charges budgeted for the functions of Local Governments in the same
year, excluding transfers in lieu of Octroi and Zila Taxes;
Provided further that all the moneys received by the Government in
lieu of Octroi and Zila Taxes shall be added to the Provincial
Allocable Amount separately; and
(ii) distribution of the Provincial Allocable amount amongst the
District Governments, Taluka and Town Municipal Administrations and
the Union Administrations as shares;
(b) the making of grants in aid by the Government to the Local
Governments from the Provincial Retained Amount; and
(c) any other matter relating to finance for and of the Local
Government referred to the Finance Commission by the Governor, or
the Government, or by a Local Government.
(2) The recommendations shall be based on the principles of fiscal
need, fiscal capacity, fiscal effort and performance.
(3) Before finalization of the recommendations under sub-section
(1), the Finance Commission shall hold consultations with the
relevant Departments of the Government, Local Governments and, in
the discretion of the Finance Commission, with any other body or
persons and this process may carry on during the currency of an
Order made by the governor under sub-section (5) of this section.
(4) The Finance Commission shall forward the provincial
recommendations prepared under sub-section (1) to the Cabinet, which
shall provide its views within two weeks failing which the Finance
Commission shall make its recommendations to the Governor.
(5) The Finance Commission may review the recommendations on
receiving the views of the Cabinet if any, and on finalisation of
its recommendations shall forward them to the Governor.
(6) As soon as may be after receiving the recommendations of the
Finance Commission, the Governor shall by Order specify in
accordance with the recommendations of the Finance Commission under
clause (a) of sub-section (1), the Provincial Retained Amount and
the Provincial Allocable Amount, and in turn the shares inter se of
the Local Governments and that share shall be paid directly to the
Local Government concerned promptly in accordance with the laid down
procedure;
Provided that the Finance Commission may recommend an interim
formula only for financial year 2002-2003.
(7) The Governor may, by Order, also make grants in aid of the
revenues of the Local Government in need of assistance and such
grants shall be an additional charged expenditure upon the
Provincial Consolidated Fund after deduction of Provincial Allocable
Amount.
120-E Certain Institutional Processes of the Finance Commission: (1)
In every financial year, at least three months before the
finalization of the Provincial Budget the Finance Commission shall
require the Finance Department to submit a statement of estimated
revenues and expenditures of the Government for the following
financial year and shall also require a statement of the Provincial
Allocable Amount and its distribution prepared in the light of the
Order under section 120-D (6).
(2) The Finance Department shall provide the Finance Commission with
a statement of the Provincial Allocable Amount and its distribution,
prepared in accordance with the Order under section 120-D (6), on
approval of the Provincial Budget.
(3) The Finance Commission may cause any information required for
making assessment and decisions on fiscal transfers to be placed
before it from any organization or office of the Government, or
Local Government.
(4) The Finance Commission shall take all decisions by a majority of
members present and voting:
Provided that at least a majority of the professional members are
present:
Provided further that the Chairman shall have the casting vote.
(5) The Finance Commission shall present to the Government and local
governments an annual report on fiscal transfers and local
government resources.
(6) The Government shall cause a copy of the report to be laid
before the Provincial Assembly and the local governments shall cause
a copy of the report to be laid before the respective Councils.
120-F Provincial Allocable Amount and Composite Balance: (1) The
Provincial Allocable Amount reflected in the annual Budget of the
Province shall be in accordance with the Order specified in section
120-D (6).
(2) All Local Government funds in a Province, except the Union
Funds, shall form part of the Composite Balance of the Province only
for the purpose of calculating the overdraft requirements of the
province.
120-G Formula and its Application and Revision: (1) The Provincial
Allocable Amount and shares of the Local Government shall be
determined in accordance with the Order and shall be paid on the
basis of actual monthly receipts of the Government.
(2) The Order shall remain in force for a period of three years.
(3) At least six months before the expiry of the aforesaid period,
the Finance Commission shall recommend the formula for the next
period, in accordance with sub-section (1) of section 120-D, on the
basis of evaluation of impact of fiscal transfers on the Local
Governments and other relevant matters.
(4) Any evaluation similar to the objectives of sub-section (3)
above carried out by an agency other than the Finance Commission may
also be taken into consideration by the Finance Commission.
(5) In case the recommendation is not finalized before the expiry of
the Order under section 120-D, the Order in force shall continue to
serve as the department of the Provincial Allocable Amount and the
shares of the Local Governments, as the case may be, till such time
that a new Order is made.
120-H Obtaining of Data: (1) The date required for a formulation and
application of the formula shall be obtained by the Finance
Commission from the Federal, Provincial or Local Governments, and or
from any authority, corporation, body, or organization established
by or under law or which is owned or controlled by any Government or
in which any of the Governments has a controlling share or interest
or any other source.
(2) The Finance Commission may, where it deems appropriate,
institute data collection or recommend such data collection to any
agency and may also recommend to the Government to hear the cost of
such data collection.
120-I Ensuring Flow of Funds to Local Governments: The Government
and the Local Governments shall provide reports to the Finance
Commission in accordance with time frames and methodology for the
flow of funds prescribed by the Finance Commission.
120-J Certification Requirements for Fiscal Transfers: (1) The
Finance Commission in consultation with the Government shall
determine the requirements for certification of fiscal transfers.
(2) Certifications under sub-section (1) shall, inter alia, include
the following -
a) provincial Allocable amount and its calculation;
b) transfer of funds in accordance with determined shares to the
District Governments, Taluka Municipal Administrations, Town
Municipal Administrations and the Union Administrations in the
Province.
c) transfer of funds in accordance with the decisions of the Finance
Commission on references made to it from time to time; and
d) revenues and expenditures of the Government and Local
Governments.
3) In cases where the institutional processes of the Government or
the Local Governments generate data required for administration of
fiscal transfers, the Finance Commission may recommend further
requirements for certification.
4) The certification required by the Finance Commission shall be
furnished to the Finance Commission by the Government, Local
Governments, any relevant agency connected with the Government or
the Federal Government.
120-K Reference by Provincial Government or Local Government to the
Finance Commission: The Government or a Local Government may seek
redress of grievances relating to any matter connected with fiscal
transfers by the Government concerning itself or another Local
Government by making a reference to the Finance Commission alongwith
the grounds of such grievance whereupon the Finance Commission may
take a decision for the purpose of redress of grievance provided
that the decision so made shall not change the Order in force under
sub-section (6) of section 120-D or the shares of the Local
Government.
120-L Rules of Business of Finance Commission: Notwithstanding
anything to the contrary contained in section 191 of the Ordinance,
the Government shall make Rules of Business of the Finance
Commission on the letter's recommendation.
120-M Procedural Powers of the Finance Commission: Nothing contained
in this Chapter shall be construed to impose limits on the powers of
the Finance Commission under any law for the time being in force as
regards calling for any information relating to the fiscal transfer
formula and transfer of funds and shall have the same powers as are
vested in a civil court under the code of Civil Procedure, 1908 (Act
No. V of 1908).".]
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