Enhancing Intergovernmental Transfers for Local Governance: Challenges and Solutions

1. Intergovernmental transfers current situation, challenges and future

2. Fiscal decentralisation, why? • LGAs play a major role in the implementation of the Mkukuta • LGAs responsible for first line service delivery at local level • Centrally collected revenue must be shared with all government levels in order for LGAs to implement their functions

3. Fiscal decentralisation, why? (2) • Intergovernmental transfers (IG) encourage councils priority setting to set their own priorities, i.e., ownership • Ownership will enhance accountability • Enhance good governance

4. Present intergovernmental transfers (1) • More than 90 % of LG resources are from 3 types of IG transfers • Formula recurrent block grants (formula based) • Introduced 04/05 • Purpose • Enhance equity (ex. Education) • enhance predictability • enhance transparency • In practice not completely formula based

5. Present intergovernmental transfers (2) 2. Sector and project grants; combining both recurrent and development • Education (PEDP) • Health (Health basket) • HIV/aids • Roads 3. Development grants: LGCDG opportunity to mainstream sector grants • D by D assessments of sector budgets

6. Challenges (1) • In reality many IG are hard to follow

7. Education flows(source: PEFAR 2007)

8. Challenges (2) • Multitude of channels • Multitude of reporting requirements • Unpredictability • Budget structure not clear on actual allocation to LGA (esp. Development grants) • Complexity leads to weak demand of accountability

9. Challenges (3) • Allocations • Determination of ceilings not strategic and transparent • Allocations to LG unsufficient to comply with functions • Allocations not respected • Only 14% of development budget allocated to LG • So one could ask: where does the money gets stuck and why? • Formula’s are not always working (holding harmless)

10. Challenges (4) • LGAs not taken seriously?: • Late issuing of budget guidelines • Councillors not in a position to properly understand the proposed budget, due to its complexity and short notice • Non respect of local planning process and budgets • Leads to differences in budgets at LGA and MoF level • Reduces transparency and accountability to the public

11. Actual disbursements • (source: www.logintanzania.net)

12. Actual disbursements • Examples: • Mtwara districts received 2,2 billion out of 4 billion for 05/06 (development) • Education transfers for development 06/07 is at 5,8% • Health basket transfers consistently delayed, 3rd plus 4th arrived only recently

13. Implications • What does this mean in regards to the Mkukuta implementation • What does this imply in terms of selection of funding modalities in support of Mkukuta • What advise does this give for the redesign of the IG transfer system

14. What to do ???? • simplify the IG system and thereby increase transparency (eg. Sectors in development grant system) • Budget process not in line with planning process; budget guidelines need to come out earlier (consequences for DPs) • Assure the actual funding flow of the budget • Assure the proper funding level of service delivery • Simplify reporting requirements

15. How • Intensive dialogue and support to GoT : • Push for the operationalisation of the WG established as result of AR 06 This group should take initiative to: • Support revision of the IG system (support to MoF and PMORALG could push this process) • Simplify the reporting requirements (both GoT and Donor requirements) • Elaborate measurable indicator for the PAF for measuring level of IG to LG level • Study optimal intergovernmental split to enhance service delivery at LG. Propose support to GoT. • During AR PRBS 07 • Follow up AR PRBS 06; • working group (never met) • Target and progress for agreed indicator • Clear ToR for the above WG plus timeline. Establish process indicator. • Dialogue to assure that service delivery and development are properly funded and protected.