The Republic of Uganda MINISTRY OF LOCAL GOVERNMENT

1. The Republic of UgandaMINISTRY OF LOCAL GOVERNMENT Discretionary Development Equalisation Grant (DDEG) Presentation of Ministry of Local Government for Regional Budget Conference for FY 2017/2018 September, 2016

2. Presentation Outline • Introduction to DDEG • Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed • DDEG Policy priorities • Key policy and administrative issues in LGs • Approved new districts and local governments • Conclusion

3. Introduction to DDEG • During the FY 2016/17, the Local Governments transfers were consolidated as a result, the number of sector conditional grants reduced, and interim grant conditions for sectoral transfers prepared. • Sector transfer were redesigned, budgetary requirements established and discretionary development transfers (Equalization grant (LGMSD, USMID,PRDP and/LRDP) were consolidated and redesigned into the discretional Development Equalization Grant (DDEG) 

4. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed Issue Response/how addressed Sub-county DDEG allocation which is approximately 65% of the combined DDEG will be used to fund investments promoting wealth creation. This is far more than the 70% of the former PRDP allocation. Division – USMID window (allocated to USMID municipalities only) has been added to the urban DDEG • A minimum of 10% of DDEG allocated to non-capital/non-infrastructure livelihoods development activities is insufficient to promote livelihoods and wealth creation as per Government Policy • Divisions participating in USMID were not allocated DDEG in 2016/17

5. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed cont. Issue Response/how addressed This amount is also a contribution to the GoU co-funding to USMID IDA specified in the PAD The allocation formula (the conflict and poverty variables) ensures that LGs under PRDP will continue to get relatively higher per capita allocations compared to those that are not covered. • USMID Municipalities are not allowed to use the DDEG for social investments • The additionality of the PRDP and LRDP may be lost.

6. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed cont. Issue Response/how addressed Both HLGs and LLGs are corporate bodies with distinct mandates. Therefore the DDEG should be directly allocated and transferred to HLGs and LLGs in both district and urban areas • Why should the DDEG be allocated directly to LLGs yet PRDP was only allocated to HLGs

7. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed cont. Issue Response/how addressed Whereas the component of the DDEG available for capacity building should be from the district share and will be coordinated by District management and support services, it is supposed to be used to address the needs of both HLG and LLGs as reflected in the comprehensive capacity building plan approved by the LG Council. • Maximum 10% of the District share of the DDEG for capacity building for higher and lower LGs is insufficient

8. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed cont. Issue Response/how addressed This is a good practice. However given the challenges LGs face to collect own revenues, they are encouraged to use locally generated revenues to co-fund/contribute to development projects rather than proposing a fixed percentage • LG should be required to co-fund the DDEG with a fixed percentage e.g. 10%.

9. DDEG Policy priorities • DDEG intends to distribute resources more equitably across LGs, so that those LGs which are less well-off are able to catch up with other areas. • To this effect, special regional programmes such as PRDP and LRDP which are intended to support areas of the country with specific development needs will use the DDEG harmonised guidelines • In doing so, the DDEG acts as the equalization grant provided for in the Constitution Article 193 • As per NDP, DDEG also builds in greater discretion for LGs to allocate resources to local needs that are within their mandate and that are consistent with the National priorities

10. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed cont. Grant Purpose Address development needs of rural areas Provide discretion to LGs to fund priorities Increase adequacy of funding whilst giving preferential treatment to LGs that are lagging behind the national average standard for a particular service Address development needs of urban areas 1. District Discretionary Development Equalisation Grant • o/w PRDP District Development • o/w PRDP Sub-county Development • o/w LRDP District Development • o/w LRDP Sub-county Development • o/w LG Grant District Development • o/w LG Grant Sub-county Development

11. Overview of the Issues raised after issuance of DDEG guidelines and How they were addressed cont. Grant Purpose Provide discretion to LGs to fund priorities Increase adequacy of funding whilst giving preferential treatment to LGs that are lagging behind the national average standard for a particular service 2. Urban Discretionary Development Equalisation Grant • o/w Municipal USMID • o/w Division – USMID • o/w Municipal – non USMID • o/w Division – non USMID

12. Key variables used in the allocation formulae

13. Overview of budget requirements Budget requirements Summary of Budget Principles and Requirements For the Rural/District DDEG Direct allocations and transfers will be made using the allocation formula described above to: Districts and Sub-counties For the Urban DDEG Direct allocations and transfers will be made using the allocation formula described above to: Municipal Councils Municipal Divisions; and Town Councils  • Allocations of DDEG between Higher and lower local governments (Vertical allocation of the DDEG)

14. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Local Governments must ensure DDEG allocations to higher and lower local governments are equal indicative allocations provided by MoFPED in all the above categories at each stage of the budget process. Note: A schedule of allocations of the DDEG to Town Councils, Municipal Divisions and Sub-Counties accompanies the IPFs for Local Governments. • Allocations of DDEG between Higher and lower local governments (Vertical allocation of the DDEG)

15. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Districts DDEG will be used to fund: Social Infrastructure (minimum 70%) focusing on: education, health and water facilities, etc.. Priority should be given to completing investments to make them fully functional as per sector service delivery standards. Administrative infrastructure including administration buildings, and retooling for both districts and LLGs – maximum 15% of DDEG • Use of the District DDEG

16. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Capacity development (maximum 10%). Used for: (i) discretionary skills development (e.g. short-term courses, exposure visits etc…) and (ii) career development for technical staff which are a requirement for confirmation or promotion Maximum 2% of the DDEG can be used to contribute to monitoring expenses • Use of the District DDEG

17. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Municipal DDEG will be used to fund: Typical urban infrastructure investments (minimum 75%): Tarmacking roads;Urban Transport - bus/car terminals;Drainage; street lights; solid waste management;Water extension and sewage management; Urban local economic infrastructure e.g. Market infrastructure, slaughter houses/abattoir; Beautification Administrative infrastructure - administration buildings, and retooling for both municipalities and divisions – maximum 15% of DDEG • Use of the Urban DDEG

18. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Capacity development (maximum 10%). Maximum 2% of the DDEG can be used to contribute to monitoring expenses Municipal Divisions DDEG will be used to fund investments promoting wealth creation and social infrastructure • Use of the Urban DDEG

19. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Town Councils DDEG will be used to fund: Typical urban infrastructure: tarmacking roads; Urban Transport (bus/car terminals); drainage; street lights; solid waste management; water extension and sewage management; urban local economic infrastructure (e.g. Market infrastructure, slaughter houses/abattoir); beautification and Wealth creation and social infrastructure: (i) non-capital/non-infrastructure livelihoods development and environment protection especially in peri-urban areas (e.g. multiplication centres, tree nurseries); and (ii) contribution to income generating activities of organized groups (Community Driven Development) (e.g. welding equipment, maize milling, carpentry workshops, ox-ploughs) • Use of the Urban DDEG

20. Overview of budget requirements cont. Budget requirements Summary of Budget Principles and Requirements Town Councils DDEG will be used to fund: Administrative infrastructure - administration buildings, and retooling – maximum 15% of DDEG Maximum 2% of the DDEG can be used to contribute to monitoring expenses • Use of the Urban DDEG

21. Summary of Budget Principles and Requirements • Social Infrastructure in education and health prioritizing completion of investments to make them fully functional as per sector service delivery standards • Non-capital/non-infrastructure livelihoods development and environment protection especially in peri-urban areas e.g. multiplication centers, tree nurseries • Contribution to income generating activities of organized groups (Community Driven Development) e.g. welding equipment, maize milling, carpentry workshops, ox-ploughs and any other value addition interventions • Maximum 2% of the DDEG can be used to contribute to monitoring expenses

22. Overview of Budget Requirements Cont... • Overall/crosscutting Development Budgeting Principles Principles for selecting Investments • The principles for selecting all LG Investments (whether funded from the DDEG, Sector Development Grants or other sources) mean that investments should be: • Within the mandate of LGs • Incorporated in the LG approved district/urban development plan, Work Plan and Budget • Investments should be in line with the Physical Plan • It must be ensured that investments are fully functional: priority given to: (i) rehabilitation of existing investments; (ii) completion/extension/construction of new investments on existing facilities; before (iii) construction of new facilities which should be done only when there are provisions for meeting recurrent cost implications. • Can be completed with the resources in the budget and made fully functional

23. Overview of Budget Requirements Cont... • Adherence to positive/negative list for investments as provided in the respective sector grant information papers. • Focus on public rather than private goods (public goods are defined as those that benefit a community not individuals) • Do not have negative environmental and social impacts – each project should undergo environmental screening and must not result in the relocation of people • Take into consideration equity issues (e.g. gender, HIV, nutrition etc.) • Are in compliance with Sector Budgeting Requirements and standards for all LG Investments • Investment service costs are costs that support the construction of investments including: project identification, design and specifications, cost estimation and preparation of Bills of Quantities; environmental and social impact assessments, development of operation and maintenance plans, engineering/ construction supervision etc.. (not for monitoring) • Investment service costs shall be provided for all infrastructure outputs (either by sector specific or discretional development equalisation grant)

24. Overview of Budget Requirements Cont... • Allocation from the DDEG will follow sector guidelines for investment servicing costs. • In sectors where limits are not specified, the investment service costs shall be capped at a maximum of 5% of the cost of infrastructure and/or investment outputs in each department budget. • The budget for all outputs to be financed by the DDEG should provide for investment service costs.

25. Key policy and administrative issues in the Local Governments that have budget implications during FY 2017/18 • Local Council Elections for Village and Parish Leaders  The Ministry spearheaded the process of amending the electoral laws to enable elections for village and parish councils. The amendments were passed by parliament; the electoral commission is in the process of preparing and holding elections for village and parish leaders. The Local governments will be informed when the elections will take place. • Induction of newly elected Councilors and other district leaders The Ministry has finalized the development of training materials and trainers have been identified. The resources for induction are still being mobilized from government and development partners. In the meantime, CAOs and TCs are called upon to carry out orientation of the Councilors using guidelines communicated by the Ministry to carryout orientation as stop gap measure as we wait for induction.

26. Key policy and administrative issues in the Local Governments that have budget implications during FY 2017/18 cont.. • Update on purchase of bicycles for the 63 remaining districts and vehicles for district officials The Ministry requested for resources from the Ministry of Finance Planning and Economic Development for the purchase of bicycles for the remaining 63 districts. After completion of the purchase and distribution of vehicles to district chairpersons Government is committed for the purchase of vehicles for use by Chairpersons of the newly created Districts and for Municipal Mayors, Speakers and the exercise will be conducted in a phased manner. • Transfer of Local Governments Accounting Officers The Ministry has been receiving many requests for transfers of CAOs and TCs. However, it should be noted that Accounting Officers are transferable after serving in Local Government for a period of 3-5 years except under certain circumstances. This ensures that accounting officers are able to implement their performance contracts and be held responsible for results and outcomes for that particular year/period.

27. Key policy and administrative issues in the Local Governments that have budget implications during FY 2017/18 cont.. • Restructuring of Local Governments Government has approved a new structure for local governments to address gaps and structural constraints. The Ministry of Public Service will soon issue implementation guidelines to Local Governments. It is hoped that budgeting for FY 2017/18 should be based on the new structure.

28. Approved new Districts and Local Governments Parliament approved the creation of the following District Local Governments in a phased manner.

29. Implications • The creation of new Local Governments means the mother Local Government will have to share its resources with the new created Local Government especially staff and vehicles. • The newly created Local government should aim at recruiting critical staff where there are low wage and salary provisions, the concerned LGs should seek approval from MoPS and MoFPED before recruitment is done.

30. KEY POLICY AND ADMINISTRATIVE ISSUES IN THE LOCAL GOVERNMENTS THAT HAVE BUDGET IMPLICATIONS DURING FY 2017/18 Cont… Operationalization of six Town Councils • The Government is aware that the six Town Councils of Buwangani, Buyinza, Rubuguri, Buheesi, Kyankwanzi and Rubanda were not operationalized in FY 2016/17 due to lack of population statistics caused by uncertainty of boundaries to determine allocation of resources. However, UBOS has been informed to provide the required statistics to ensure that these local governments are operationalized in FY 2017/18. Construction of Local Governments headquarters • The Ministry receives requests from Local governments for assistance for construction of Local government headquarters of Sub Counties, Town Councils, Division, Municipal and Districts. Government is committed to addressing these challenges in a phased manner.

31. KEY POLICY AND ADMINISTRATIVE ISSUES IN THE LOCAL GOVERNMENTS THAT HAVE BUDGET IMPLICATIONS DURING FY 2017/18 Cont… • Rates of Salaries and Allowances for Local Government Elected Leaders The matrix specified below indicates for different categories of Local leader’s salaries and allowances.

32. KEY POLICY AND ADMINISTRATIVE ISSUES IN THE LOCAL GOVERNMENTS THAT HAVE BUDGET IMPLICATIONS DURING FY 2017/18 Cont… • Local Revenue collections by LGs The Government is aware that the collections of local revenues by respective Local governments is still very low which is impacting on the service delivery to the communities. Efforts and support will be given to LGs to enhance their capacities to expend the sources of revenue, compliance and collection. (Details on this section is contained in LGFC paper)

33. Conclusion • The policy and administrative issues discussed above, have serious implications on the delivery of decentralized services. Government therefore needs to tackle the issues head on in order to realize the objectives of decentralization.

34. I THANK YOU