The BJP leader had earlier served as Home Minister of the State.
The State Government appointed Kothari to the post yesterday, an official release said here today.
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Retired IAS officers Dileep Raj Singh Choudhry and Malay Rai were appointed members of the Commission, it added.
The panel, which functions as a quasi-judicial independent body, is mandated to review the financial position of rural and urban local bodies in the State.
It also makes recommendations to the Governor regarding devolution of financial resources from the State Government to local bodies and suggests distribution of the shares of Panchayat Raj Instituions and municipalities on an efficient and equitable basis.