Significant changes have been proposed to the Decentralisation of Administrative Areas Act, aimed at enhancing the financial oversight and accountability of local councils.

The amendment bill, submitted to Parliament by MP Ibrahim Hussain on behalf of the Government, seeks to clarify the scope of council-run businesses, refine the framework for state funding, and regulate financial decisions made by councils nearing the end of their term.

One of the key proposals outlines strict conditions under which local authority companies can engage in business activities. According to the bill, companies formed by councils may only undertake activities that:

Companies that do not meet these conditions must cease such activities within 90 days of the amendment’s enforcement.

The bill also addresses land use and taxation. Councils will be prohibited from charging rent on land or buildings allocated for essential public services. Moreover, state funding for councils will be issued only after deducting any unpaid taxes or state dues pending for over six months.

To improve transparency, all council bank accounts must be managed in accordance with regulations from the Ministry of Finance and Planning. Councils will also be required to submit bank statements upon request.

Stricter limitations are proposed for councils operating within one year of completing their term. During this period, councils will need prior approval from the Ministry of Finance and the Local Government Authority (LGA) for the following actions:

Additionally, any changes to rules and regulations under the Act, or newly introduced rules, must be published in the Government Gazette within 30 days of the bill’s enactment.

The proposed reforms underscore the Government’s push for improved financial discipline and structured governance across local councils.