Financing Local Government

image of Financing Local Government
Decentralisation is now taking place in the public administrations of most countries of the world. A critical determinant of the effective performance of local governments is finance – their ability to both mobilise financial resources and to use those resources effectively and efficiently.

This book explores the variety of methods used to ensure that fiscal decentralisation takes place alongside administrative decentralisation. It considers the range of revenue sources available, the design systems of intergovernmental transfers between central and local government, and the kinds of rules and procedures necessary to ensure that local governments use their financial resources appropriately.

The experiences described in this book will help local government managers, and national policymakers charged with local government finance issues, to ensure that they follow good practice in their own programmes of local government reform.



Budgeting and Expenditure Management in Local Government

There are three key roles for financial planning and budgeting in local government. Firstly, policy-making involves setting expenditure priorities in line with policies and plans, and then allocating the available resources in line with those priorities. The policy-making role also involves choices about local tax rates, together with tariffs for fees and charges, so as to generate sufficient resources to meet the planned expenditure. Secondly, financial planning can be used as a management tool, to provide financial information for the managers of services and programmes, to ensure that expenditure programmes deliver value for money, and to monitor revenue and expenditure performance during the year. Thirdly, it can be a mechanism of control, through the authorisation of expenditures, prevention of abuse and fraud, and ensuring solvency by preventing fiscal deficits.


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