Page 1The World Bank

Strengthening Local Governance:Bridging the

Supply and Demand-Side

Presented by:

Sanjay Pradhan Director, PREM Public Sector Governance The World Bank

The World Bank

Presented to:

Senior Policy Workshop on Local Governance & Pro-Poor Outcomes in AfricaKigali, Rwanda31 October – 2 November, 2006

Page 2The World Bank

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

Decentralization is Global and African Phenomenon

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

Page 3The World Bank

Some Realties of Local Governance

want to support front-line investments, but unsure how to best

channel money given concerns about

national systems and local governments

Local Local GovernanceGovernance

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

concerned that they don’t have the resources and

authorities to meet expectations

are often popular direct recipients of resources, but in themselves are

not enough for sustainable and scaled-

up service delivery

Local Governments

Central Governments

Deconcentrated Central Line

Agencies

Communities

Donors

Page 4The World Bank

Multiple Actors and Unclear Accountabilities Impede Local Governance

Line Agencies

Local Governments

Communities

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

Frontline Local Actors

Central Cross-Cutting Agencies

Local Oversight Institutions

CSOs/Private Sector

Citizens

Donors

Page 5The World Bank

Citizen and business engagement open and accountable local political

process, CSO-media oversight, public-private partnership

Central government enabling conditions allow fiscal and administrative autonomy, adequate & predictable transfers, accountable line agencies

Community collective action

Conditions for effective local governance

Local government capacity & oversight fiscal & administrative capacity

legislature & judiciary

Page 6The World Bank

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)

Page 7The World Bank

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

Page 8The World Bank

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

Page 9The World Bank

Trends in Public Financial Management Can be Monitored

2

6

1

6

7

0

1

2

3

4

5

6

7

8

Decline in 3categories

Decline in 1-2categories

No change Improvementin 1-2

categories

Improvementin 3 or morecategories

Net Change in HIPC Tracking Indicators, 2001-2004

Page 10The World Bank

Comprehensive Fiscal oversight:

Are the aggregate fiscal position and risks are

monitored and managed?

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?

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

purposes?

Comprehensive, Policy-based, budget:

Does the budget capture all relevant

fiscal transactions, and is the process, giving regard to government

policy?

Comprehensive, Policy-based, budget:

Does the budget capture all relevant

fiscal transactions, and is the process, giving regard to government

policy?

Budget Realism:Is the budget realistic, and implemented as

intended in a predictable manner?

Budget Realism:Is the budget realistic, and implemented as

intended in a predictable manner?

Control:Is effective control and stewardship exercised

in the use of public funds?

Control:Is effective control and stewardship exercised

in the use of public funds?

Accountability and Transparency:

Are effective external financial accountability

and transparency arrangements in place?

Accountability and Transparency:

Are effective external financial accountability

and transparency arrangements in place?

PEFA’s Performance Measurement PEFA’s Performance Measurement FrameworkFramework

Six PFM System Aspects

Page 11The World Bank

Improving PFM – A Platform Approach

Platform 1A credible budget delivering a reliable and predictable resource to budget managers

Platform 2Improved internal control and public access to key fiscal information to hold managers accountable

Platform 3Improved linkage of priorities and service targets to budget planning and implementation

Platform 4Integration of accountability

and review processes for

both finance and

performance management

• Integration of budget (recurrent & capital budgets)

Strengthen macro and revenue

Forecasting

Streamline spending processes

Broad Activities Re-design

Budgeting

Classification system

Initial design of FMIS for core business processes

Strengthen external audit and define internal audit function

Re-design budget cycle (e.g. MTEF)

Pilot program based budgeting & budget analysis

Further fiscal

Decentralization

Full design of FMIS

Develop IT

Management

Strategy

Initial design of asset register

Enables a basis for accountability

Enables focus on what is done with

money

Enables more accountability for

performance management

Cambodia – Sequence of Platforms

Broad Activities

Broad Activities

Broad Activities

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

Page 12The World Bank

Strengthening Demand for Public Financial Accountability

Participatory Budgeting,

Puerto Alegra(Brazil)

Civil Society Oversight; transparent, competitive

procurement(Slovakia)

Strengthening Supreme Audit Institutions

(Hungary)

Public Expenditure Tracking & Information Campaigns (Ghana, Madagascar, Mozambique, Peru, Senegal, Tanzania, Zambia)

Procurement oversight by

CSOs (Philippines)

Strengthening Public Accounts Committees of

Parliament(India)

Transparent, competitive e-procurement

(LAC) Strengthening Public Accounts Committees

of Parliament (Kenya, Ghana, Zambia --

AFR)

Accountability, Transparency & Integrity

Project(Tanzania)

Page 13The World Bank

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

Page 14The World Bank

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1990 1991 1993 1994 1995

Equiv. US$ per student

Intended grant Actual grant received by primary school (means)

1999

Source: Uganda Public Expenditure Tracking Surveys

Tracking Education Dollars in Uganda

Empowering citizens with information can reduce leakages

Public info campaign

Page 15The World Bank

Civil society monitoring of government services Civil society monitoring of government services can help improve the delivery of services …can help improve the delivery of services …

Source: Public Affairs Center, India

5 6 49

25

1

14

4147

42

67

34 34

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32 32

73

94

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20

30

40

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90

100

City c

ouncil

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upply

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ospita

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uthorit

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Public b

uses

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ort au

thorit

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Agencies

Per

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fied

1994 1999 2003

Service Provision: BangaloreService Provision: Bangalore

Page 16The World Bank

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

Page 17The World Bank

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

Page 18The World Bank

Maintaining Momentum within World Bank

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

World Bank Actions in Advance of 2007 Ministers Conference

Page 19The World Bank

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