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Ministry issues regulation for village financial administration

The Ministry of Finance has ruled that village authorities have no right to impose their budget plans independently as they are part of the state administration and subject to implementing the budget law.
Minister of Finance, Mr Somdy Douangdy signed the ministerial decision on village finances on November 11, making it clear that village authorities are required to submit their income and expenditure plans for the district authorities to consider and approve.
The policy intervention took place amid widespread public debate over the rights of village authorities to collect their service fees from residents and the spending of this money. In addition, various villages impose their service fees differently with many residents questioning whether higher authorities have authorised them.
Some villagers also claim that many village authorities collected large amounts of money from residents when they request village documents to support their birth and marriage certification and others. However, the village authorities have no mechanism to report on expenditure plans.
They also said that villagers elect village authorities and therefore the authorities should report their income and expenditure at their meetings with residents. 
According to the ministerial decision on village financial administration, which has been published on the Lao Official Gazette website since 26 November, the village chiefs or assigned persons are defined as the chief accountant.
However, the ministerial decision explains that village authorities are not defined as independent budget units or categorised as the first class of budget units. Instead, village authorities are named as basic budget units, which are explicitly established to collect revenue for district authorities as well as to ensure the village’s financial administration is within the budget law.
One of the key features of the Ministerial Decision on Village Financial Administration, is that village authorities have the right to spend their money, which they collect from providing services to residents, on their administration costs such as electricity, water and telephone bills and wages for village officials.
However, their expenditure plan shall be endorsed by higher authorities and approved by the provincial assembly.
Observers have noted the finance ministry’s decision to regulate village financial administration could help prevent the local authorities from abusing their power to collect unfair service charges as they are subject to inspection by higher authorities.
They said that some local officials spent public money without examination as there was no regulation regarding village financial administration.

By Ekaphone Phouthonesy
(Latest Update December 4, 2019)

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