Chapter III. EXPENDITURE
| Date | 01 October 1956 |
| Published date | 01 October 1956 |
| DOI | http://doi.org/10.1002/j.1099-162X.1956.tb01296.x |
14
SPECIAL
SUPPLEMENT
TO
THE
JOURNAL
OF
AFRICAN
ADMINISTRATION
CHAPTER
III
EXPENDITURE
IN local government it is usual to classify expenditure first into two
broad
heads-capital
and
recurrent.
CAPITAL
EXPENDITURE
Broadly
speaking,
capital
expenditure
may
be defined as expenditure which
creates assets of
lasting
value to
the
community. Examples are
the
purchase
of land,
the
erection of buildings
and
the
construction of roads.
In
most cases it would be unfair to expect
the
whole cost of these assets
to be
met
out
of one
year's
revenue.
It
is generally more
appropriate
that
the
cost should be
spread
over a
number
of years, so
that
those who will benefit in
the
future from
the
use of
the
assets should also
make
acontribution towards
their
cost.
In
order to do
this
it is
customary
in
the
United
Kingdom for local
authorities
to raise loans from
the
central
government to
meet
capital expendi-
ture.
It
is a cardinal principle
that
these loans shall be repaid over aperiod of
years which is less
than
the
expected life of
the
assets. Thus,
the
cost of
acquiring vehicles
may
well
have
to be repaid over five or
ten
years, buildings
over
thirty
years,
and
land
over aperiod
not
exceeding
sixty
years.
The
rate
of
interest
to be
paid
on loans is fixed
at
the
time
of borrowing.
We
think
it essential
that
local authorities should only be
permitted
to raise
loans for
particular
items
of
expenditure
which
have
been specifically approved
by, or on behalf of,
the
central
goverrunent. Ageneral
authority
to local
authorities to borrow for
any
purpose would be unwise.
Payment
of
interest
and
instalments
of
the
loan should
constitute
aprior charge on
the
revenues
of
the
local
authority,
and
central
government, or
its
agent, before authorising
loans, should satisfy itself
that
the
proportion of
the
local
authority's
likely
revenue to be absorbed in loan
instalments
is
not
too high.
In
the
case of a loan for a project which, were it
met
out
of revenue, would
qualify for a government
grant,
the
government
grant
should be
paid
towards
the
annual
cost of
interest
and
repayment
of
the
loans.
RECURRENT
EXPENDITURE
This includes
the
payment
of salaries
and
wages, rents, maintenance of
buildings,
annual
instalments of loans
and
interest
thereon.
It
is
most
important
that
the
expenditure
should be properly authorised
and
adequately
controlled.
For
this
purpose
the
most
important
instrument
of
financial control is
the
annual
budget.
The
budget
should
not
only be a
document which brings together, in terms of money,
the
anticipated
activities
of
the
local council.
It
should also be
the
opportunity,
once a year, for
the
council as a whole to review all its activities. These are
the
most
important
purposes for which a
budget
is
prepared
and
it is
vital
that
well regulated
procedure should be
introduced
in
the
early life of a new council to ensure
that
the
council's finances are managed in an orderly manner.
PREPARATION
OF
ESTIMATES
Where
the
council's work has been divided
amongst
one or more committees
it
should be
the
task
of each committee to prepare, or approve, estimates for
each of
the
services coming
under
the
management
of
the
committee.
It
may
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