Financial Management Capacity

128 Jesper Steffensen

The authority to make decisions on the prioritization ofoutstanding payments variously rests with the chieffinancial officer,the CAO,and the executive committee,but all local governments lacked a systematic policy and procedure for paying creditors.The study concluded that,generally, local governments did not have procedures in place for accounting for and controlling the number ofcreditors and the size ofcommitments.It noted a strong need for an appropriate system and guidelines on commitment control.

Financial Management Capacity

Local governments’financial management performance and accountability have been ofgreat concern in Uganda,especially because a very large and growing proportion ofpublic expenditures is handled at the local government level.However,compared with analyses done three to four years ago,18 there has been a significant improvement,especially in basic bookkeeping and accounting procedures.Most local governments submit their plans,budgets (Medium-Term Expenditure Frameworks),and accounts on time and have established internal as well as external control measures.Recent improvements have also been documented in the yearly assessment ofthe “minimum conditions and performance measures”under the LGDP-II (MoLG 2004).

The main reasons behind these improvements may be seen in the link between the capacity-building efforts and the incentive system in the LGDP grant allocation system,which rewards local governments that show good performance in generic administrative areas,such as financial management and good governance.But a number ofchallenges and problems still need urgent attention,particularly concerning budgeting,cash management,tender procedures,and downward accountability.Ways and means to strengthen support for capacity development and to create better links to the overall public financial management reforms are being explored (see Steffensen,Tidemand,and Ssewankambo 2004).

Building strong vertical (downward) accountability between the local councils and the citizens has been one ofthe greatest challenges in the decentralization process.A number oftechnical tools—participatory planning and budgeting guidelines,capacity building,and transparency measures— have been launched but have not yet been sufficiently internalized and applied in many local governments.This area needs continuous emphasis over a broad front in terms ofhelping local governments and civil society build capacity,creating an incentive framework for local governments to be more open and ensure access to participation,and raising awareness.