Serious flaws in local govt system

THE Centre for Budget Advocacy of the Integrated Social Development Centre has come out with a publication of a report by five civil society groups on 'Tracking of the District Assemblies Common Fund' which makes disturbing reading. Worse still, the findings are not surprising.

The report which focused on four Districts - Savelugu Nanton, Suhum Kraboa Coaltar, Mpohor Wasa East and Ejisu Juaben – basically found that whereas procedures for the use of DACF are largely followed, there are several problems with the administration of the Fund. These problems are related to allocation, disbursement and utilisation of the Fund. Concerns about delays in disbursements, shortages in disbursements, misuse by Metropolitan, Municipal and District Assemblies, and discrimination in the selection of projects (mainly on partisan basis) and quality of projects was all confirmed by this study. The report was compiled in April 2003 but the study covered the period from January 1999 to December 2002, covering two years of the National Democratic Congress government and the first two years of the New Patriotic Party. This in the researchers' view “gives a good basis for comparison but has the advantage of not being interpreted as targeting a particular political party.” The findings are very critical of the award of contracts to “unqualified people and the non-monitoring and proper evaluation by the District Assembly of such projects and how the Fund in general is utilised.”

The main finding was that for the four-year period of study, the Ministry of Finance never once released the full allocation to the Administrator of the Common Fund. The study found that delays in the disbursements have become a regular feature in the administration of DACF.

“There have been instances where payments into the Fund have been delayed for more than one year, resulting in the failure to disburse monies to the MMDAs in spite of the fact that the creation of the DACF and the payment of funds to the Fund is a constitutional requirement.”

District Assemblies are said to find it impossible to plan for any projects because they never know in advance how much or when to expect their allocation of the Fund.

For 1999, 2000, 2001 and 2002 the statutory amount of 5% of total tax revenue that was to go into DACF was ¢154.5 billion, ¢220.7 billion, ¢327.8 billion and ¢406.6 billion, respectively. Yet, the actual allocations to the Districts were ¢126.2 billion, ¢192.3 billion, ¢296.7 billion and ¢109.7 billion for the corresponding years.

“More worrying,” the report says, “is the fact that the government is not even able to disburse the amount that it declared as the transfer to the DACF, which suggests that there might have been some diversions to other uses.” The report stresses this point: “The late release of the Fund was identified to be a major drawback on the districts' development effort as most MMDAs depend on the Fund for development projects, poverty alleviation loans and service delivery.”

It adds, “Apart from it having the potential of unnecessarily increasing the cost of DACF projects, it also throws the budget of the Assembly out of gear and makes planning an exercise in futility.”

Despite the fact that Section 240(2)(c) of the Local Government Act, 1993 (Act 462) stipulates that each local government unit shall have a sound financial base with adequate and reliable sources of revenue, most of the 138 MMDAs have very little choice but to rely on the DACF, grants, and transfers from the central government. Indeed, DACF was set up by Article 252 of the Constitution, underlining its significance. The Constitution provides that 5% of Ghana's total revenue should be paid into the Fund for onward distribution to the MMDAs, mainly for development projects.

According to the report, the New Patriotic Party has also failed to deliver on its 2001 promise to increase the allocation of DACF from 5% to 7.5%. As the report notes, lack of reliable and timely flow of funds to the districts hamper development, especially in the less endowed ones.

Act 462 also provides for local governments to internally generate funds. But, the ISODEC report cries out that even “the ability for development projects and improved service delivery is hampered by huge leakages in the revenue collection and accounting process.”

However, there are improvements. Prior to 2001, Bolgatanga was generating ¢1.9 million a week; between 2001 and 2002, this had shot up to ¢9.2 million a week. Ahanta West, for the same period, has seen its revenue capacity of ¢400,000 a week increased to ¢2.5 million a week. Maame Drobo improved revenue collection from ¢6 million to ¢37 million a month.

Remarkable still, is the case of Kintampo, where revenue of ¢8 million in September 2002 managed to shoot up the next month to ¢22 million. The report conjectures, “One wonders where these leakages have come from and why these Assemblies could not collect these amounts at the appropriate time. It is quite tempting to blame it on lack of supervision, fraudulent practices as well as refusal of taxpayers to pay the relevant taxes.”

The researchers found that documentation on the DACF and projects undertaken with the Fund was “either not available or not easily accessible.” For example, information on projects implemented in some districts for some periods including costs of projects and dates of award of contracts was “not available or deliberately withheld from the researchers.”

“Consistent interventions and directives” from the central government is said by the report to jeopardise the attainment of objectives at the District level “as the Assemblies do not have the chance to implement their own priority projects.”

The DACF Administrator, however, disputes this. The central government, he argues, issues guidelines to ensure that the total development of the districts conforms to the set goals of the government and that this cannot be interpreted as consistent intervention.

The report says that “Political patronage was seen as a major risk factor that could jeopardise the disbursement and efficient utilisation of the District Assemblies' Common Fund at both the district and community levels.” It continues, “Unfortunately, some participants at the roundtable discussions found nothing wrong with this, arguing that people who helped the ruling party to come to power needed to be compensated.”

Local Government inspectors are responsible for the internal controls of the Assemblies' financial transactions but the Auditor-General must also audit the accounts of the Assemblies from time to time.

The report also accuses some MMDAs of not following the guidelines for the use of the Common Fund. It further states that the Regional Coordinating Councils and the central government were alleged to be issuing directives for the MMDAs to release monies for activities not directly their responsibility. “At the roundtable discussions,” the report reads, “the RCCs sought to justify this, explaining that it is a necessary part of administration and involves activities like the Farmers' Day Celebrations or visits of certain key personalities from the central government.”

Whilst in the past, there were severe delays or wide gaps between the release date by the Ministry of Finance, the transfer date by the Controller and Accountant General's Department and the payment date by the Bank of Ghana, the report says “It is heartening, however, to note that these gaps have drastically narrowed since 2001.”

Source: Financing Decentralised Development, How well does the DACF work? A pilot tracking of the District Assemblies Common Fund in four districts. Published by ISODEC (2005)