Strengthening Local Governance: Bridging the Supply and Demand-Side

Presented to: Senior Policy Workshop on Local Governance & Pro-Poor Outcomes in Africa Kigali, Rwanda 31 October – 2 November, 2006 Presented by: Sanjay Pradhan Director, PREM Public Sector Governance The World Bank Page 1

Decentralization is Global and African Phenomenon

Significant Wave of Democratization in Past Decades

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Political Decentralization and Local Elections now found in vast majority of African Countries

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If well designed, local governance can enhance responsiveness and efficiency But Fiscal and Administrative Devolution in Africa has Lagged

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Local governments typically control only very limited resources in terms of own taxes, transfer, or staff

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Roles and responsibilities unclear

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Functions duplicated by central/deconcentrated entities, often meaning that no one effectively delivers

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Highly political process, and nascent accountability mechanisms Page 2 The World Bank

Some Realties of Local Governance

Local Governments concerned that they don’t have the resources and authorities to meet expectations Local Governance Donors want to support front line investments, but unsure how to best channel money given concerns about national systems and local governments Central Governments concerned that local governments don’t have the capacity to spend the money well…or politically unpopular The World Bank Deconcentrated Central Line Agencies overlap in responsibilities, but don’t perform in a responsive manner Communities are often popular direct recipients of resources, but in themselves are not enough for sustainable and scaled up service delivery Page 3

Multiple Actors and Unclear Accountabilities Impede Local Governance

Donors Central Cross-Cutting Agencies Local Oversight Institutions Line Agencies Local Governments

Frontline Local Actors

Communities CSOs/Private Sector The World Bank Citizens

Source: Adopted from Helling, Serrano, Warren (2006)

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Conditions for effective local governance

The World Bank Central government enabling conditions

allow fiscal and administrative autonomy, adequate & predictable transfers, accountable line agencies

Local government capacity & oversight

fiscal & administrative capacity legislature & judiciary

Citizen and business engagement

open and accountable local political process, CSO-media oversight, public-private partnership

Community collective action Page 5

Central Government Enabling Conditions

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Clear definition of roles and responsibilities of local governments and deconcentrated line agencies

 E.g., basic health, education, infrastructure

Adequate financing and capacity

  Own tax base plus transfers (including donor support) Administrative capacity, without duplicative responsibilities

Top down accountabilities oriented to performance

 Incentives to encourage local governments and line agencies to deliver  Grants linked to minimum standards (e.g., public finance management) and performance  Municipal contract: policy & institutional reform in exchange for budget support  Balance local government autonomy & resources with local accountability (bottom-up/horizontal)

The World Bank Page 6

Sierra Leone: Rapid Results through Devolution

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New Local Councils were challenged to implement one Rapid Result Initiative (RRI)

 Urgent and compelling  Visible – people will notice the difference  Can be translated into real impact in 100 days

SL’s Decentralization Secretariat provided coaches MoF disbursed Local Government Development Grants four months after elections LCs did not disappoint!

 Tackled diverse development issues: water, sanitation, feeder roads, bridges, traffic, rice production, post-harvest loss.

 Total volume of Garbage in two lorry parks and two markets in Kenema Township reduced by 90% within 95 days.

 Often cheaper and faster than traditional government means

The World Bank Page 7

Local Government Capacity & Oversight

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Key Emphasis:

Robust & monitorable Public Finance Management (PFM) systems

– Public Expenditure and Financial Accountability Type (PEFA) benchmarks – Sequenced approach to building PFM capacity (e.g., Cambodia) – Strengthening demand for public finance accountability  

Adequate tax base & administrative capacity Transparency and participation in policy making and service delivery The World Bank Page 8

Trends in Public Financial Management Can be Monitored

1 0 3 2 5 4 8 7 6 Net Change in HIPC Tracking Indicators, 2001-2004 2 6 1 6 7 Decline in 3 categories Decline in 1-2 categories No change Improvement in 1-2 categories Improvement in 3 or more categories The World Bank Page 9

PEFA’s Performance Measurement Framework

Budget Realism:

Is the budget realistic, and implemented as intended in a predictable manner?

Accountability and Transparency:

Are effective external financial accountability and transparency arrangements in place?

Comprehensive, Policy-based, budget:

Does the budget capture all relevant fiscal transactions, and is the process, giving regard to government policy?

Six PFM System Aspects Control:

Is effective control and stewardship exercised in the use of public funds?

The World Bank Comprehensive Fiscal oversight:

Are the aggregate fiscal position and risks are monitored and managed?

Information:

Is adequate fiscal, revenue and expenditure information produced and disseminated to meet decision-making and management purposes?

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Improving PFM – A Platform Approach

Cambodia –

Sequence of Platforms

Enables a basis for accountability Platform 1 A credible budget delivering a reliable and predictable resource to budget managers Broad Activities

• Integration of budget (recurrent & capital budgets)  Strengthen macro and revenue  Forecasting  Streamline spending processes

The World Bank Enables focus on what is done with money Platform 2 Improved internal control and public access to key fiscal information to hold managers accountable Platform 3 Improved linkage of priorities and service targets to budget planning and implementation Broad Activities

 Re-design  Budgeting  Classification system  Initial design of FMIS for core business processes  Strengthen external audit and define internal audit function

Enables more accountability for performance management Platform 4 Integration of accountability and review processes for both finance and performance management Broad Activities

 Re-design budget cycle (e.g. MTEF)  Pilot program based budgeting & budget analysis  Further fiscal  Decentralization

Broad Activities

 Full design of FMIS  Develop IT  Management  Strategy  Initial design of asset register

Source:

See “Study of measures used to address weaknesses in Public Financial Management systems in the context of policy based support,” by Peter Brooke, at www.pefa.org

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Strengthening Demand for Public Financial Accountability

Transparent, competitive e procurement (LAC) Civil Society Oversight; transparent, competitive procurement (Slovakia) Strengthening Public Accounts Committees of Parliament (Kenya, Ghana, Zambia - AFR) Accountability, Transparency & Integrity Project (Tanzania) Participatory Budgeting, Puerto Alegra (Brazil) Strengthening Supreme Audit Institutions (Hungary) Procurement oversight by CSOs (Philippines) Strengthening Public Accounts Committees of Parliament (India) Public Expenditure Tracking & Information Campaigns (Ghana, Madagascar, Mozambique, Peru, Senegal, Tanzania, Zambia) Page 12 The World Bank

Citizen & Business Engagement

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Ensure Local Citizens have capacity to hold local governments and providers to account

– Local Budget Transparency – Participatory Budgeting (e.g., Porto Alegre, Brazil) – Public information on resource transfers for expenditure tracking (e.g., Uganda) – Citizen Score Cards (e.g., Bangalore PAC)

Counter situations of local capture

– Mandated Representation – Transparent public-private participation

Positive Peer Pressure

– Local Government Associations – Yardstick Competition

The World Bank Page 13

Empowering citizens with information can reduce leakages

Tracking Education Dollars in Uganda

Equiv. US$ per student

3.5

3.0

2.5

Public info campaign

2.0

1.5

1.0

0.5

0.0

The World Bank 1990 1991 1993 1994 1995 1999

Intended grant Actual grant received by primary school (means)

Source: Uganda Public Expenditure Tracking Surveys

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Civil society monitoring of government services can help improve the delivery of services … 100 90 80 70 60 50 40 30 20 10 0 5 41 73 Service Provision: Bangalore 94 92 85 78 73 73 67 6 47 4 42 9 25 34 34 n/a 1 16 n/a 32 96 14 32 77 The World Bank 1994 Agencies 1999 2003

Source:

Public Affairs Center, India

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Role of Donors

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Provide harmonized support for an effective system of local governance Support central government enabling conditions:

  Intergovernmental transfer system that promotes mutual accountability Adequate, predictable transfers for minimum standards & performance

Strengthen PFM systems with monitorable indicators Strengthen, not bypass, local accountability systems Help LGs deliver their mandates to citizens

 Support LGs implement their development plans & budgets, prepared and executed with active participation of citizens  Support collection & dissemination of information on promises & achievements

Promote transparency as cross-cutting imperative Jointly monitor progress using harmonized indicators, learn and adjust Page 16 The World Bank

Good Practice

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Donor Harmonization and SWAPs

– Uganda & Tanzania donor harmonization around local government support (“basket”) funds – Streamlining of conditional grants with greater emphasis on performance

Common Benchmarking

– Benchmarking of Local Government Public Financial Management Capacity in Uganda with PEFA Pilots, On-going in Tanzania

Promoting Synergies Across Sectors

– World Bank’s Indonesia Country Assistance Strategy Built Around National, Local, and Community Driven Development Platform – Multi-Donor Decentralization Support Facility • Support problem-driven analysis • Build common knowledge • Serve as clearing house for innovative experiences

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Maintaining Momentum within World Bank

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World Bank Actions in Advance of 2007 Ministers Conference

Local Governance is key part of Bank’s Broader Governance and Anti-Corruption Strategy   Africa region Local Governance Thematic Group formed Sharing experience among country teams on how to provide harmonized support to strengthen local governance  Internal reorganization will help break down institutional boundaries: merging urban, infrastructure, rural, water & sanitation, environmental and social teams into one Sustainable Development group  Proactive engagement with development partners and the proposed Secretariat on Local Governance housed in KfW  Strengthening Actionable Indicators for Decentralization with Partners – Including local government PFM performance indicators

Page 18 The World Bank

Questions and Answers

The World Bank 1818 H Street, NW Washington, D.C.

20433 USA The World Bank “Working for a World Free of Poverty” For additional information, see: http://www.worldbank.org

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