122
Jesper Steffensen
B O X 3 . 3 Main Features of Local Development Grants under the Local Government Development Program The main characteristics of local development grants under the LGDP are as follows:
They include a nonsectoral investment menu (discretionary) but incentives
to spend at least 80 percent on national priority areas and reduce investments on non-service-oriented areas. A certain percentage (15 percent) may be used for investment servicing and monitoring costs, including retooling. A transparent formula based on two criteria—population size (85 percent) and land area (15 percent)—is included. Urban authorities get a higher per capita amount because of the perceived additional costs of expenditure assignments in urban areas. The allocation system distributes grants to all layers of local governments, which ensures that grant allocations reach the lower levels. Clear minimum conditions exist as fixed requirements of eligibility to receive the grants. There is a direct link between the size of the grant allocation and the performance of local governments, measured by the use of defined and agreed transparent generic indicators of administrative performance and national (external) assessments of local government performance. This link provides strong incentives for local governments to improve their performance. A link exists between the local development grant and capacity-building grants in the sense that, if local governments fail to comply with the minmum conditions of the local development grant, they may still receive capacity-building grants to enable them to comply as soon as possible. The grants contain an incentive (through the performance measures) to enhance local governments’ own revenue-raising efforts. There is a local government cofunding requirement, which is 10 percent of the grant.
Source: Steffensen and Tidemand 2004.
Therefore, the aim is now to concentrate the disbursement of equalization grant in fewer local governments to make the grant more useful. Initiatives are under way to increase the size of the grant. A review of the equalization grant was part of the review of the allocation criteria under the FDS. Other transfers of specific interest Uganda has designed a number of unique grants. One of the most interesting is the PAF monitoring grant, which sets aside funds for local government monitoring and accountability institutions such as the LGPACs and tender
