What's New

Provincial Budget Screening Committee
For the first time in 2007, the NEFC was asked to become a member of the Provincial Budget Screening Committee (BSC). NEFC has been recommending Provincial and LLG Grants to Treasury for the last few years.

Cost-Capacity-Performance
In October 2007, NEFC released a report titled; Cost-Capacity-Performance. The review covered all expenditures in 2005 by Provincial Governments.

More money is a cry from many, if not all provinces. But do we need it? How do we spend the money we already have? And is it spent on basic services that are critical to the wellbeing of our people? The report seeks to answer those questions.

Part of the report was presented by the Chairman, Dr Nao Badu at the recent National Development Forum at the Parliament House in Waigani. (Click for more information)

Least Developed District Grant

The Least Developed District Grant was introduced to assist those with the lowest socio-economic conditions to improve their lives.

It was intended to only assist districts where the provincial government lacks the fiscal capacity (low internal revenue per head) to address under-development through use of its own resources.

The funds available for the LDD Grant, is less compared to the need and it is important that costs are not unnecessarily incurred on administration.

It was recommended that the grant be distributed using the Education Subsidy system. Education remains the foundation for any form of development. A basic education provides opportunity. It helps the adoption of improved health care, it makes it easier for people to pursue income earning opportunities and it provides a person more control over his/her life.

Summary of intergovernmental financial transfers to Provincial Governments in 2005

See Volume 1 of the National Government Budget (Appendix 2) for Province-by-Province details of these grants and transfers.

Transfers and grants to Provincial Governments

Transfer type	*Method to determine size of the total transfer*	*Method to determine share provided to each government*	*Size of total transfer (2005 Budget estimate, Kina millions)*	*Provinces receiving transfer*	*Restrictions on use of this resource*
Transfers of revenues
*Inland Goods and Services Tax* (transfers made by the Internal Revenue Commission)	Each Province and NCD receives 60%,individually, of the net inland GST collected there; OR Their 2003 distribution (whichever is the higher).	Derivation - where the revenue was collected.	K157m	All provinces and NCD	None
*Mining/oil royalties* (transfers made by the respective resource companies)	There are different shares of royalties transferred to Provincial Governments. These are set out in the Memorandum of Agreement for the project.	Derivation - to the Province the project is located in.	K73m	6 - Western Province, Central, SHP, Enga, EHP, NIP	None
*Dividends from equity in mining and oil projects* (transfers made by the Minerals Resource Development Company, and by Ok Tedi Sustainable Development Program in the case of Western Province)	Depends on the Provincial Government's share of the project.	Derivation - to the Province owning equity in the mining or oil project	K16m (2003 actual)	4 - Western Province, Gulf, SHP, Enga	None
Transfers of recurrent grants (transfers made by the Department of Finance)
*Staffing grants (Organic Law for permanent public servants, teachers)*	Total cost of salaries for permanent provincial public servants and teachers		K516m	All provinces	Paid directly to approved permanent public servants and teachers only
*Organic Law non-staffing recurrent*	Mandated in the Organic Law schedules	Formula (mostly equal Kina per head; land and sea area have small weightings)	K68m	All provinces	Conditional - can be used for non-staffing operational costs only
*Organic Law economic grant – Derivation Grant*	0.75% of "eligible exports" (non-mining and oil exports for which the origin can be determined)	Derivation	K12m	All provinces	Conditional - must be spent on activities that contribute to export development
Infrastructure grants and transfers
*Development budget (PIP) grants*	Budget decision of the National Government	Budget decision - grants fund the entire approved project	K14m	10 - WP, Gulf, Central, EHP, Morobe, ESP, Sandaun, ENB, Bougainville	To be spent on the approved infrastructure project only. Cash transfers are made intermittently against progress on the project
*Special Support Grant*	2% of the FOB (free on board - excluding freight and insurance costs) value of the respective mining and oil exports	Derivation - to the Province the mine is located in.	K7m	6- WP, Gulf, Central, SHP, Enga, NIP	To be spent on the approved infrastructure project only. Cash transfers are made intermittently against progress on the project
*Tax Credit Scheme (TCS)* (transfer funded by the National Government, in foregone corporate taxes)	Up to 0.75% of the value of corporate tax liabilities incurred by resource companies	Derivation - to the Province the mine is located in.	K86m	7 - WP, Gulf, SHP, Enga, Madang, Sandaun, WNB TCS is also used to fund H'lands Hwy maintenance (National Government function) in WHP, Simbu, EHP and Morobe	Expended by the resource company, mostly on approved infrastructure projects and maintenance of some Provincial Government infrastructure
TOTAL TRANSFERS AND GRANTS			K949m

News

The NEFC is at an exciting stage in developing reforms to the intergovernmental financing system that will improve basic service delivery to all Papua New Guineans. Legislation is about to be presented in Parliament and implementation with partner agencies and provincial and local-level governments will follow shortly. In anticipation of this, NEFC is putting together a team of enthusiastic and experienced professionals to drive the implementation of these significant and far-reaching reforms. Click here for vacant positions.

Summary of intergovernmental financial transfers to Provincial Governments in 2005

Transfers and grants to Provincial Governments

Transfers of recurrent grants

(transfers made by the Department of Finance)

Infrastructure grants and transfers

TOTAL TRANSFERS AND GRANTS

K949m