Guidance Note: EITI Requirements 4.6 and 5.2
Subnational payments and transfers
|This guidance note refers to the 2019 EITI Standard.|
In some countries, extractive companies make direct payments to subnational government entities, such as regional governments, municipalities and chiefdoms. Some governments also have revenue sharing mechanisms that stipulate that a share of revenues collected by the central government is transferred to subnational government entities. While these payments may represent only a portion of revenues at the national level, they are often an important source of income for local governments. Transparency regarding these payments and transfers can be useful in holding local authorities to account.
EITI implementation has shown strong demand from local communities to increase transparency around the allocation of such revenues, to ensure that revenues contribute to sustainable local development. In several countries, EITI reporting has led to changes in the applicable regulatory framework and helped local communities demand the share of revenues they are entitled to. EITI implementation can also help local governments track, manage and disclose revenues more efficiently.
This note provides guidance to multi-stakeholder groups (MSGs) on how to report on subnational payments and transfers, offers examples from implementing countries and outlines opportunities to strengthen the use of data. It has two parts. Part 1 provides guidance on direct payments by companies to subnational entities. The EITI Standard requires that, where these are material, direct company payments to subnational government entities and the receipt of these payments are disclosed and reconciled (Requirement 4.6). Part 2 provides guidance on transfers of revenues between central and subnational levels of government. Where transfers between national and subnational government entities are mandated by a national constitution, statute or other revenue sharing mechanism, material transfers must be disclosed in the EITI Report (Requirement 5.2).