Local Government Finance Commission: Challenges/Achievements

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Download the Corporate Strategy, 2003 -2007 - Theme: Strengthening The Intergovernmental Fiscal Relations In Uganda

The Commission has developed a corporate strategy which substitutes the 2001-2004 medium term work plan. The strategy has four key priority areas, namely harmonising systems of transfers; supporting local governments to increase local revenue generation; strengthening LGFC administration; and developing and operating a communication strategy.

1 Key priority Area 1: Harmonising the Present Systems and Processes of Transferring Fiscal Resources to Local Governments

Over the past years there has been an extraordinary rate of growth in social expenditure, with expenditures on PAF programmes growing from 17 % to 34 % of the Government's budget.

Uganda's Decentralisation Policy has meant a rapid increase in resource flows to local governments and a corresponding increase in primary service provision. As PAF expenditures are tied to achievements of PEAP goals, the majority of the increase in transfer of resources has been through an increasing number of conditional grants.

There has therefore been a growth in the number and diversity of transfer mechanisms from central government and donors, which has been a matter of growing concern in both central and local governments. Many of these mechanisms are not well adapted to the decentralised framework, resulting in local governments given little power over the allocation of resources and little involvement of lower local governments in decision-making.

Major problems with management and financial accountability have arisen from the many different transfer systems. Local governments are confronted with a disproportionate bureaucratic load from multiple procedures, bank accounts and lines of reporting. Line ministries are faced with major problems in dealing with quarterly reports from a growing number of conditional grants (reaching 31 in 2002), which is intensified by the growing number of districts.

To address these problems, FDS has been developed "To strengthen the process of decentralisation in Uganda through increasing local governments' autonomy, widening local participation in decision-making and streamlining fiscal transfer modalities to local governments in order to increase the efficiency and effectiveness of local governments to achieve PEAP goals within a transparent and accountable framework".

The objective of FDS is to strengthen the decentralisation process by improve local governments' autonomy, widening local participation in decision-making and streamlining fiscal transfer modalities to local governments so that local governments' efficiency and effectiveness to achieve PEAP goals is increased within a transparent and accountable framework.

In a long-term perspective LGFC will work to ensure that the achievements of the FDS, when implemented, are maintained and expanded.

The implementation of FDS will be managed at the Government level by two committees: The Local Government Budget Committee (LGBC), chaired by LGFC that also provides secretarial support, and the Local Government Releases and Operations Committee, which will chaired by MOFPED.

LGBC is composed of representation from all key stakeholders in government both at the centre and local government level.

Functions

The negotiation and agreement of allocation formulae and grant conditions between sector ministries and local governments.
The identification of issues for inclusion in the National Budget Framework Paper from analysing of Local Government Budget Framework Papers.
Overseeing the performance of the Comprehensive Local Government Assessments.
Overseeing the coordination of Local Government Capacity Building by Donors, Central Government and Local Governments.
Overseeing the coordination of donor support to Local Governments/ Decentralisation.

The committee therefore handles the planning and budgeting aspects of fiscal decentralisation.

Objectives related to Strategic Priority Area 1:

To make LGBC fully operational and efficient in its functions

To carry out a review of sector policies and guidelines in order to identify areas where sector policies and guidelines are inconsistent with decentralisation, and provide proposals on how to alleviate these inconsistencies
To identify the role of the sector ministries with respect to local governments transfers in a new streamlined system
To ensure that the allocation of funds to local governments - and the policies, conditions and guidelines associated with those funds - promote the equitable and efficient delivery of services by local governments
To provide a forum in which local governments can formally discuss and agree on budget-related issues with the Government, and promote meaningful negotiations with local governments on the allocation of funds and policy conditions
To ensure co-ordinated, systematic and timely management of the Local Government Budget Process
To establish the revenue sharing mechanisms between Kampala City Council (KCC) and divisions of KCC with a view to recommend appropriate intervention in the financing of the city services, and convey the findings and recommendations to other urban local governments
To make an annual report on the development of the central grants system
The objectives related to key priority area 1 are:

2 Key Priority area 2: Support Local Governments to Increase Local Revenue Generation

The Local Government Finance Commission has focused on three areas of improvement in order to enhance local revenues. These are; improving co-ordination amongst central institutions; facilitating policy debate to inform the LGFC and MoLG on policy and legal improvements; and enhancing the capacities of local governments to raise more local revenues by encouraging them to implement best practices.

To facilitate the implementation of these revenue enhancement objectives, the LGFC established a Local Revenue Enhancement Co-ordinating Committee (LRECC) in April 2002. The main tasks of the LRECC are to co-ordinate and support the development of conducive decisions and policies regarding local revenue and to enhance the capacities of local governments to effectively and efficiently generate and manage sustainable local revenues.

Membership of the LRECC includes:

Local Government Finance Commission (Chair of the Committee)
United Nations Capital Development Fund (Donor representative);
Ministry of Local Government
Ministry of Local Government (PMU )
Ministry of Finance Planning and Economic Development, Decentralisation Desk;
Ministry of Finance Planning and Economic Development, Tax Policy Department;
Uganda Local Authorities Association;
Urban Authorities Association of Uganda;
Ministry of Lands, Water and Environment (Chief Government Valuer)
Kampala City Council;
Bushenyi District Local Government;
Uganda Revenue Authority
the Attorney/Solicitor General

One of the first areas that the LRECC was involved in was in approving the implementation framework for revenue enhancement and revenue sharing compiled by the LGFC.

The committee also steered the compilation of an inventory of best practices in local revenue mobilisation and generation. The work on best practices began with eight regional workshops conducted by the LGFC/LRECC in January/February in which participants discussed various best practices and constraints affecting local revenue mobilisation. To build on the results of the regional workshops, a more in-depth examination and compilation of the inventory of best practices were undertaken by Aclaim Africa Ltd . The consultant presented a final report and draft guidelines at the end of August and are being disseminated to local governments.

The LRECC is also a steering committee of a research on the impact or rural taxation on poverty. The study is being spearheaded by the EPRC and sponsored by DfID and is expected to be completed by end of October.

The committee works closely with SDU-USAID, the deregulation project and Rakai District Development Programme III, each of which is involved in some aspect of local revenue enhancement.

Objectives related to Strategic Priority Area 2:

To ensure that the Co-ordination Committee on Local Revenue Enhancement works efficiently
To improve the collection and make property taxation more efficient and effective
To improve the collection of user charges so it becomes more efficient and effective, and to promote that user charges should ensure cost recovery
To issue a consolidated inventory of "best practises" of local revenue collection
To devise ways of introducing more buoyant revenues/taxes to local governments
To ensure coherence of policies, rules and regulations of the Government within local revenue collection
To improve skills of local government staff in collecting and keeping records on local revenues collected
To enhance capacities of the community to demand for accountability of local governments
To enhance public-private partnership in tax generation and collection3 Priority Area

3: Strengthening LGFC Administration

Faced with the challenge to chair two key committees, the Commission is strengthening its administration in order to be able to effectively deliver in its work and functioning.

The areas targeted include

Preparing staff to be proactive
networking with key stakeholders and decision-makers
filling of vacancies in key personnel categories
strengthening ability to monitor progress in implementation of LGFC's recommendations
strengthening project Management capabilities of staff

Besides enhancing the capacities and competencies of the existing staff as well as attracting new staff, LGFC will develop a comprehensive Human Resource Development Policy. This is an important policy, which will spell out the ways and means of attracting quality personnel, training them, and motivating them to perform and hence retain them. It will also gives guidelines on staff relations and means of settling grievances between staff and between staff and LGFC.

Objectives related to priority area 3:

To improve collaboration with stakeholders through establishing partnerships and enhancing capabilities of networking so as turn LGFC into a more proactive and outgoing institution
To strengthen the management of LGFC, including clarification of roles of the commissioners and the Secretariat, and introduce administrative guidelines and procedures
To implement a strong organisation structure that is able to effectively and efficiently handle its tasks internally and in relation to the other stakeholders
To enhance the level of implementation of LGFC's recommendations through designing of appropriate strategies, including presentation of action and time plans for their implementation, establishing partnerships, improve networking etc.
To establish a system for assembling and managing of complete, reliable and up-to-date fiscal data on local governments
To develop and implement a human resource development policy
To offer courses in Project Management so that LGFC in future to a higher extent can implement their own studies without dependence on external consultants4 Key Priority Area

4: Development and Operationalisation of a Communication Strategy for LGFC

Presently, the Commission does not have a Communication Strategy to ensure that the stakeholders and the society at large get sufficient information about the activities of LGFC. As a partial result of this, LGFC is not optimally positioned to play its statutory role. It has, however, established a fiscal databank, which will partly contribute to effective information sharing on local government finance.

The mandate of LGFC generates need for communication with a multiplicity of stakeholders, especially the target beneficiaries, statutory bodies (e.g. ministries, Parliament and international donor organisations), local governments and the general public. This begs for developing a strategy that addresses issues of the sorting out what to communicate, when, and the choice of media to use, such as radio, TV, workshops, conferences, debates etc. Each of these would have advantages and is suitable for particular occasions and audiences. The strategy should also be able to provide a framework for measuring impact of each communication activity undertaken. Thus the need for a Communication Strategy that will facilitate LGFC in generating and sharing information with stakeholders while exercising its mandate.

The Communication Strategy will also to some extent address the internal information and communication channels within LGFC. Currently, LGFC has within four personnel levels, namely:

Political Commissioners
Senior staff (Secretary and Under Secretary)
Technical staff (Senior Economists etc.)
Administrative Support staff

Finally, LGFC is investing in more and modern technologies that promote efficiency and effectiveness. Some of these include a LAN and Internet connectivity, which provide all staff members with e-mail and Internet access.

Objectives related to priority area 4:

To orient commissioners and staff on the LGFC Communication Strategy
To develop a Media and Public Relations Policy for LGFC
To train the Commissioners, the managers and the technical staff in communication and media skills
To develop and disseminate relevant and appropriate information aimed at enhancing the stakeholders' understanding of LGFC's work and mandate
To complete and strengthen the fiscal databank
To establish and manage a website for LGFC
To establish an internal IT network