Districts fail to spend Shs2.3 trillion

By Haggai Matsiko

But they now want Shs6.6 trillion. What for?

Buyende town is not really a town. It is a collection of a few scattered buildings, has no electricity, no hospital, no commercial bank, and no fuel station.  Still, it is the main town of Buyende district, one of the newer local government areas created by the government to purportedly take services closer to the people. The government carved Buyende out of one of the older districts, Kamuli, after residents complained for years that it was costly and time consuming for them to travel 30kms for basic services.

Since local governments, under the decentralised structure, provide social services like health, education, sanitation, garbage collection, and construction of public buildings and road maintenance, it was argued that these would improve if Buyende became a district. But, five years later, nothing has changed for Buyende’s population of 300,000.

The district leaders blame their failure to improve service delivery on a deficit in their budget and, without any major businesses to tax; they have no illusions about raising that much revenue locally.

In the 2014/15 Financial Year (FY) they set a realistic target of generating just Shs292 million (Approx. US$80,000) in local revenue. That was just about 2% of the district’s Shs14.8 billion budget – expected to be raised from central government transfers and donors. But Buyende failed to raise even the little local revenue it set out to collect. It raised only Shs200 million.

Neighbouring Jinja District, home of current Uganda Local Governments Association (ULGA) President Gume Ngobi, is bigger than Buyende and has more avenues for local resources mobilisation. But it is doing no better.

In the 2014/15 FY, it had a target of Shs4.3 billion in local revenue. That was about 10% of its Shs44 billion budget. By year’s end, it had collected only Shs3.8 billion locally.

Jinja’s woes were compounded because the Shs4 billion it expected to come from the government and donors also fell-through. By year’s end, it had received only Shs12 billion and was stuck with a 12% budget deficit. Not surprisingly, when it came to budgeting for the next year, Gume Ngobi’s went into belt-tightening mode. He instituted a 24% drop in expected revenues; from Shs44 billion to Shs34 billion.

“The funds we get are not commensurate to the services that need to be delivered,” Gume Ngobi told The Independent, “We have been advocating for at least 38 percent of the budget. We have written to the President, we have written to all the concerned ministers, we have reached every level.”

Failing to spend

But Gume Ngobi does not mention another crucial but often glossed over reality of local government – the failure to put even the little money they get to good use. In the FY2014/15, for example, of the Shs12 billion it received, Jinja district had not spent up to 40% by end of year.

In a report to the Ministry of Finance, Gume Ngobi blamed the failure to spend on decision making inertia, late remittances by the government and donors, and convoluted procurement processes. The net result of these, however, is failure to provide badly needed services.

Jonas Mbabazi, a research officer at Advocates Coalition for Development and Environment (ACODE), who has researched local governments, says the central government finds it easy to deny local governments more funds because they have failed to spend.

“If you are not able to spend what you have,” Mbabazi asks, “what will happen if you are given extra?”

Even districts that appear to be doing well at local revenue collection – like Wakiso in the rich central region are floundering , but for slightly different reasons.

In the 2014/15 FY Wakiso set itself a target of collecting 12.6 billion in local revenue and ended up with Shs13 billion.  With the 4% surplus in local revenue, Wakiso was able to fund about 17% to its huge budget (by Buyende standards) of Shs79 billion. But the good news appears to end there as the district spent more than half of the entire budget, Shs 37 billion, not on service delivery, but on wages.

Wakiso has 4,762 workers, according to the 2014 Auditor General report. But it wants more as up to 1,159 positions in the district structure are vacant.  When the vacant posts are filled, the wage bill could double.

Local governments seem to be prioritising only paying salaries. Indeed, while the current budget for local governments is over Shs2.3 trillion, only Shs 350 billion is meant for development.

This means that the bulk of the money is meant to pay administrative staff leaving very little for service delivery.

Raphael Magyezi, a member of the Parliamentary Committee on Local Government, is unimpressed.

“Why do you pay staff that do not have resources to deliver services?” Magezi says.

A quick scroll through the `Know Your Budget’ portal of the Ministry of Finance, a government tool that enables the users to access budget information on how resources are allocated and utilized up to the parish level, revealed that since July 2014, almost all local governments including Wakiso and Buyende, have only used up their wages allocation. The rest of the allocations remain unabsorbed.

Wakiso Town Council was allocated Shs 100.0 million to procure a wheel loader for works sector in the year from July 2014 to June 2015, it is August but procurement has not even started.

Another Shs 665.6 million were allocated by Wakiso Town Council for maintenance of urban paved roads between July 2014 and June 2015, up to now, not a cent has been spent. The same applies to Buyende. Salaries for district and Town Council officials have been paid but funds meant for primary health care and running primary schools remain unspent.

Poor staffing

Unfortunately, in spite of the focus on salary payments, staffing constraints remain common at all levels of local government with national staffing levels stand at 56% and 57% for district and municipal councils.

80% of the filled posts are mainly by administrative and support staff. The vast majority of core technical positions pivotal for service delivery are vacant.

Magyezi says that understaffing at the local government level is inconsistent with the decentralization policy. He cited Zombo, where all staff at senior level are in acting capacity.

At the district level, there are 12 strategic posts. That is a chief administrative officer (CAO), deputy CAO, principal personnel officer (PPO), chief finance officer (CFO), district planner, internal auditor, production officer, and principal community development officer (PCDO), district health officer (DHO), principal district engineer and district education officer (DEO).

By last year, a total of 1,332 strategic staff were required but only 647 were available. At least 34 districts did not have CAOs. A good number had only CAOs; others had only a CAO and an internal auditor.

Magyezi says that on staffing, neighbours Rwanda and Kenya offer critical lessons. Rwanda, he says, slashed staff at ministry level and sent them to the local level and in Kenya more money has been sent to the local level.

Increased local taxes

Districts are not the only local governments. Structurally local governments include the district structure, which is comprised of the district, county, sub-county, parish and village and the urban authorities structure, which includes; municipalities, division, ward, and village.

As they clamour for more revenue, local governments at all these levels are intensifying revenue collection in form of taxes and fees. Their taxing of small businesses has become so unbearable that on July 29, President Yoweri Museveni had to step in with a caution. Taxing small businesses is killing them, Museveni told municipality mayors, and advised them to instead support them to grow before taxing them.

But for critics, Museveni is in fact, the problem. They blame him for the underfunding of local governments.

In the early years, there was excitement as grants from the central government, rose in nominal terms, from Shs37milion in the 1993/4 FY to over Shs244 billion in 2000/01.

But increasingly, while the transfers to local governments have increased in nominal terms, as a share of the national budget, there has been a corresponding decline.

For instance, while the Shs654.2 billion allocated to local governments in the 2002/03 FY was about 25% of the 2002/03 national budget, the Shs1.9 trillion for 2013/14, was less than 15% of the national budget.

Indeed, a 2009 study by the ministry of Finance entitled “Decentralization in Uganda- Does it improve service delivery?” noted that inadequate funding in the face of decentralisation “had limited improvements to service delivery”.

Frustrating decentralisation

But cynical observers say the underfunding is a deliberate move to keep local people dependent on the centre. According to this view, Museveni prefers to keep power and resources at the centre, so he can leverage them as patronage handouts to favoured local governments as he solicits support, especially during campaigns.

These critics claim that that partly explains why his donations to local people continue growing and his State House budget now stands at a whopping Shs 300 billion.

In effect, they say, Museveni is frustrating the decentralization policy his government introduced 23-years ago in 1992.

Critics say although the decentralization programme envisaged full devolution, the real decision-making has been clawed back by the centre which dictates its priorities through its so-called “conditional government transfers”. These are monies sent by the central government with clear and inflexible instructions on how they should be spent. There are currently about 35 conditional grants. Some of these come straight to the administrative units, others straight to the schools, hospitals and other institutions that fall under their jurisdiction.

In some cases conditional government transfers constitute over 90% of the local government’s budget. This means, in effect, local governments are reduced to implementers of central government directives.

“What we have in Uganda is not decentralization but delegation of powers,” says Douglas Singiza, a constitutional lawyer. He recently presented a paper titled “Decentralization Policy: Powers and Performance of district councils, which made this point.

Another authority on the issue, Magyezi, also told The Independent something similar.

“What you have is an empty decentralisation system,” says Magyezi.

Critics say the government’s commitment to decentralisation is almost non-existent.

They point to the recentralisation of a number of functions that had been devolved to sub-national governments, including the appointment and deployment of the Chief Administrative Officers (CAOs), Town Clerks and their deputies who are the accounting officers of the district and municipal councils, and also the procurement of items like drugs for health units.

They want the Local Government Act amended to give local governments more autonomy, especially financially.

They say local governments should get at least 38% of the national budget because they are mandated to provide 70% of services. In the FY 2014/15, the Local Government ministry was allocated Shs2.3 trillion or about 13% of the Shs17 trillion of the national budget available for appropriation by Ministries, Departments and Agencies (MDAs). Since Uganda has 112 districts, that is less than Shs20 billion per district, a very low figure.

Yet new districts and local authorities continue to be created. There are now over 1,350 sub-national governments (112 districts, 22 municipalities, 1,147 sub-counties and 69 municipal divisions). Almost none of these can raise 5% of their annual budgets.

Since local governments are demanding 38 percent, with the Shs 17 trillion budget, they wanted to get Shs6.6 trillion.

Gume Ngobi argues that local governments need this increment because they cannot get any sensible funds from the taxes they are mandated to collect.

“What do you collect when all the easier taxes to collect are collected by the central government?

Then he points at the few taxes available to local governments.

“Hotel tax?” he asks rhetorically, “How much can you get?”

Local governments get their funding from three major sources of revenue– grants, locally generated revenue and donor funding that goes to specific projects. Government grants typically constitute 85%, local revenue less than 5% and donor funds about 1%.

New money ways

Local Government Minister, Adolf Mwesige, says the solution to the problem of underfunding is increasing the budgetary allocation to local government. He is also pushing for the `magical’ 38% threshold of the national budget.

But some local government leaders are looking beyond the government for increased revenue. Dunstan Balaba, the Chief Administrative Officer (CAO) of Adjumani is among them. He says it is frustrating that through conditional grants, the central government chooses to fund specific projects, which in some cases, tend not to be the priority for local governments. He told The Independent that while the central government has priorities like energy and infrastructure, for decentralised local governments the priorities are rural water, primary education, primary health, and agriculture.

But instead of hoping that the government will change its ways, Balaba says local governments could “graduate from being just administrative units to economic units”.

For now he says that the Local Economic Development (LED) initiative, which seeks to expand income generating activities in local governments is a step in the right direction.

“Once these people make money,” Balaba says, “local governments can tax them and get money.”

Hoima District Chairman LCV, George Bangonza, pushes the idea of revenue generation even further –beyond tax revenue.

“The best solution would be to enable local governments generate revenue through businesses,” he told The Independent.

For this to be done, however, Bagonza says, the current legal framework needs to be overhauled.

Bagonza says that one of his colleagues in another district started a radio station as a revenue generating project but could not sustain it because the district salary structure could not accommodate its employees.

In fact, the legal framework does not need to be changed according to Mbabazi, who has researched local government at ACODE. He says even under the current law, local governments should be involved in money generating projects.

“In fact they (local governments) are mandated to do business and generate revenue,” Mbabazi says, “some have said that they do not have those competencies but they can do partnerships with the private sector which has those skills.”

He says to address some of these challenges, a review of Local Government Financing, carried out by the Local Government Finance Commission in October 2012 recommended property service tax, a solid waste management tax in municipal councils and a residence tax on permanent residential houses as new potential sources of revenue to local governments among others. Local governments are still finding it hard to collect Property service tax and the tax on permanent residential taxes.

As for Magyezi, there needs to be agreement on a revenue sharing formula in the law, to ensure that all is not retained at the centre.

“Sharing needs to be according to responsibility,” Magyezi says.