Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Administration in Finance (BBA-F)
Course Description
:This course provides the fundamentals of municipal finance with a special emphasis on relevancy of municipal financial management, trend in municipal finance, principles of municipal finance, municipal revenue, intergovernmental transfer, financing capital expenditure, municipal budgeting, reporting and auditing, municipal borrowing and access to capital market. Course Learning Outcomes On completion of this course the students will be able to: Find out the trend in municipal finance and understand the role of finance division in the organization of municipality of Nepal; Discuss the role and functions of local government in the economic development at local level; Discuss the internal and external sources of municipal revenue and analyze the structure of different sources of municipal revenue; Understand the inter -government transfer and issue of inter -government transfer of funds; Discuss about the capital expenditure financing modality of municipalities and practices of Nepalese local government in financing the capital expenditure; Describe the budgeting process of municipalities and financial reporting and in ternal auditing system of local government; Discuss the different types of municipal debt instrument and understand the role of TDF in financing urban infrastructure.
Course Objective
:The course aims to provide the students the fundamental understanding on the municipal finance in general and in specifically this course provides them theoretical knowledge on sources of revenue, transfer income, budgeting process and financial analysis a nd financial autonomy. The course also aims to familiarize students with current issues on local government finance in Nepal. Course Description This course provides the fundamentals of municipal finance with a special emphasis on relevancy of municipal financial management, trend in municipal finance, principles of municipal finance, municipal revenue, intergovernmental transfer, financing capital expenditure, municipal budgeting, reporting and auditing, municipal borrowing and access to capital market. Course Learning Outcomes On completion of this course the students will be able to: Find out the trend in municipal finance and understand the role of finance division in the organization of municipality of Nepal; Discuss the role and functions of local government in the economic development at local level; Discuss the internal and external sources of municipal revenue and analyze the structure of different sources of municipal revenue; Understand the inter -government transfer and issue of inter -government transfer of funds; Discuss about the capital expenditure financing modality of municipalities and practices of Nepalese local government in financing the capital expenditure; Describe the budgeting process of municipalities and financial reporting and in ternal auditing system of local government; Discuss the different types of municipal debt instrument and understand the role of TDF in financing urban infrastructure.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1. Introduction
- Concept and meaning of municipal finance
- Relevancy of municipal financial management in Nepalese contest
- Issues and challenges
- Trend in municipal finance: fiscal decentralization, emphasis on land property tax, public -private partnership, accountability in budgeting, improved financial management
- Organization and place of finance division in the organization of municipality in Nepal.
Unit 2. Principles of Municipal Finance
- Role of local government in the economy
- Types of local government in Nepal
- Major functions of local governments (rural municipalities and municipalities)
- The benefit model of local government: service with private good characteristics, service with publ ic good characteristics, services that redistribute income and services with spillovers
- Public finance principles.
Unit 3. Municipal Revenue
- Types of municipal revenues: tax and non -tax revenue
- Characteristics of a good local tax
- Property taxe s: unique characteristic of property taxes, mechanics of property taxes, property identification, assessment base, tax rates, tax collection and short coming of property taxes
- Property taxes in Nepal: base and evaluation of property and calculation of property taxes
- Personal income taxes
- Corporate income taxes
- Payroll taxes
- General consumption taxes
- Excise taxes
- vehicle taxes, Hotel occupancy taxes
- Benefit taxes
- User fees: types of users fees, principles of pricing the user fees and problems in pri cing the municipal services
- Taxes and user fees of local government of Nepal: a case of rural municipality and municipality.
Unit 4. Intergovernmental Transfer
- Concept and meaning of intergovernmental transfer
- Types of intergovernmental transfer
- Rationale for transfer: vertical fiscal imbalance, horizontal imbalance, externalities and political rationales
- Problems with transfers
- Design of transfer
- Intergovernmental transfer in Nepal.
Unit 5. Financing Capital Expenditure
- Concept of capital expenditure in municipal finance
- Financing of capital expenditures:
- funds from operating revenue, intergovernmental transfer, mobilizing private capital, municipal borrowing, development charge, tax increment financing, and land value capture tax
- Public private partnerships: concept, modalities of public private partnership, local government acts and regulation of public private partnership, and practice of public private partnership in Nepalese municipalities
- Practice of capital financing in Nepal.
Unit 6. Municipal Budgeting, Financial Reporting and Auditing
- Concept of municipal budget and budgeting
- Types of municipal budgets: operating budget and capital budget
- Steps in capital budgeting
- Stages of municipal budgetary pro cess
- Financial reporting and reporting standard
- Performance based financial analysis (comparison between budgeted and actual one) and measurement of financial autonomy
- Internal and final auditing
- Public auditing system.
Unit 7. Municipal Borrowing and Access to Capital Market
- Role of municipal borrowing
- Pooling municipal debt
- Borrowing instruments: general obligation bonds and revenue bonds
- Borrowing capacity of municipalities
- Role of Town
- Development Funds as a financial intermediary.
- Basic Book UN Habitat. Guide to Municipal Finance. Nairobi: UN Habitat.
Suggested Readings:
Farvacque-Vitkovic, C. & Kopanyi, M (editors). Municipal Finances: Handbook for Local Governments. Washington: World Bank. Town Development Funds. Municipal Finance Framework for the National Urban Development (NUDS) of Nepal. Kathmandu: TDF. Town Development Funds. Enhancing Municipal Finance in Nepal. Kathmandu: TDF. European Union. Local Finance Benchmarking: A Shared Tool for Improved Financial Management. Stengourge: Council of Europe.