Strengthening Local Governance: Bridging the Supply and Demand-Side

1. Strengthening Local Governance:Bridging the Supply and Demand-Side Presented to:Senior Policy Workshop on Local Governance & Pro-Poor Outcomes in AfricaKigali, Rwanda31 October – 2 November, 2006 Presented by:Sanjay Pradhan Director, PREM Public Sector Governance The World Bank The World Bank

2. Decentralization is Global and African Phenomenon • Significant Wave of Democratization in Past Decades • Political Decentralization and Local Elections now found in vast majority of African Countries • If well designed, local governance can enhance responsiveness and efficiency • But Fiscal and Administrative Devolution in Africa has Lagged • Local governments typically control only very limited resources in terms of own taxes, transfer, or staff • Roles and responsibilities unclear • Functions duplicated by central/deconcentrated entities, often meaning that no one effectively delivers • Highly political process, and nascent accountability mechanisms

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

4. Multiple Actors and Unclear Accountabilities Impede Local Governance Donors Central Cross-Cutting Agencies Line Agencies Local Governments Local Oversight Institutions CSOs/Private Sector Frontline Local Actors Communities Citizens Source: Adopted from Helling, Serrano, Warren (2006)

5. Conditions for effective local governance 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 engagementopen and accountable local political process, CSO-media oversight, public-private partnership Community collective action

6. Central Government Enabling Conditions • 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)

7. Sierra Leone: Rapid Results through Devolution • 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

8. Local Government Capacity & Oversight • 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

9. Trends in Public Financial Management Can be Monitored Net Change in HIPC Tracking Indicators, 2001-2004 8 7 7 6 6 6 5 4 3 2 2 1 1 0 Decline in 3 Decline in 1-2 No change Improvement Improvement categories categories in 1-2 in 3 or more categories categories

10. 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? Six PFM System Aspects Comprehensive, Policy-based, budget: Does the budget capture all relevant fiscal transactions, and is the process, giving regard to government policy? Control: Is effective control and stewardship exercised in the use of public funds? 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? PEFA’s Performance Measurement Framework

11. Improving PFM – A Platform Approach Platform 4 Integration of accountability and review processes for both finance and performance management Enables more accountability for performance management Cambodia – Sequence of Platforms Enables focus on what is done with money Platform 3 Improved linkage of priorities and service targets to budget planning and implementation Broad Activities Enables a basis for accountability Platform 2 Improved internal control and public access to key fiscal information to hold managers accountable • Full design of FMIS • Develop IT • Management • Strategy • Initial design of asset register Platform 1 A credible budget delivering a reliable and predictable resource to budget managers Broad Activities • Re-design budget cycle (e.g. MTEF) • Pilot program based budgeting & budget analysis • Further fiscal • Decentralization Broad Activities • Re-design • Budgeting • Classification system • Initial design of FMIS for core business processes • Strengthen external audit and define internal audit function Broad Activities • Integration of budget (recurrent & capital budgets) • Strengthen macro and revenue • Forecasting • Streamline spending processes 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

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

13. Citizen & Business Engagement • 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

14. Empowering citizens with information can reduce leakages Tracking Education Dollars in Uganda Equiv. US$ per student 3.5 3.0 Public info campaign 2.5 2.0 1.5 1.0 0.5 0.0 1990 1991 1993 1994 1995 1999 Intended grant Actual grant received by primary school (means) Source: Uganda Public Expenditure Tracking Surveys

15. Civil society monitoring of government services can help improve the delivery of services … Service Provision: Bangalore 100 94 96 92 85 90 78 77 80 73 73 73 67 70 60 47 Percent Satisfied 50 42 41 34 34 40 32 32 25 30 16 14 20 9 6 5 10 4 1 n/a n/a 0 Police Electricity City council Telephones Public buses Water supply Land authority Public hospitals Transport authority Source: Public Affairs Center, India Agencies 1994 1999 2003

16. Role of Donors • 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

17. Good Practice • 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

18. Maintaining Momentum within World Bank 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

19. Questions and Answers The World Bank1818 H Street, NWWashington, D.C.20433 USA “Working for a World Free of Poverty”For additional information, see:http://www.worldbank.org