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Decentralization of Functions

International Conference on Governance and Accountability in

Social Sector Decentralization

Dana Weistdweist@worldbank.org

PRMPS

18 February 2004

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Decentralization: A World-Wide Phenomenon

• Underway in over 85 countries• Political and economic rationales• Varieties

– Deconcentration– Delegation– Devolution

• Great variation across countries, and across sectors within a country

• Often complicated and evolving over time

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• Who is doing what?

• How is it being financed?

Answers to these questions often determine the equity, efficiency, and accountabilities of service delivery

Key Service Delivery Questions

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• Public versus private sectors?• Which tier of the public sector?

– Central or local government production– Contracting with other governments, private sector, community

groups

• Who – determines policy?– produces and provides services?– finances? – regulates, enforces, monitors, and evaluates?

Who is Responsible for What?

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• Budget allocations

• Government transfers/grants

• Local taxes/charges/fees

• Community charges/fees

How is it Being Financed?

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• What does the intergovernmental system have to do with it?– Discrepancy between responsibility and financing: local

government responsible for providing services without resources

– Insufficient funds: weak central or local revenue mobilization– Cash flow: Central Government slow to release needed

funds – Weak budgeting: inability to forecast realistic costs– Leakage: corruption/malfeasance

Dilemma: Clinics Lack Medicine or Schools Lack Textbooks

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Positive or Negative Outcomes?• If designed well, decentralization can:

– Move decision making closer to people– Enhance efficiency and responsiveness of

service delivery– Potential tool to alleviate poverty

• But, design is complicated, since it spans fiscal, political, and administrative policies and institutions

• Design + Accountability + Capacity

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• Systematic approach that aligns – Responsibility with financing – Decentralization framework with sectoral approaches

• Responsibility/decentralization of functions: organization, planning, personnel, infrastructure, resources, regulation

• Intergovernmental finance: expenditures, revenues, intergovernmental transfers

• Consistent legal framework

Enhancing Decentralization Design

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Changing Central Roles and Functions

• Change role from “command and control” to policy guidance and facilitation– Establish government’s policy framework– Structure proper incentives for local governments– Stop delivering most public services

• Central government plays a central role – Legal and regulatory frameworks– Setting standards– Coordination mechanisms– Accurate, timely and comprehensive information– Capacity building programs

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Expenditure Responsibility

• Considerations for assigning responsibility: public goods, externalities, subsidiarity, economies of scale, public sector competition– Ultimately, no single best assignment– Ideally, services should be provided at lowest level of

government where benefits lie

• Public provision does not imply public production

• Clarity is critically important

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Local Revenue Mobilization

• Mix of local revenues needed– Striking variations in size and capacity – One size doesn’t fit all

• Local revenue mobilization strengthens accountability

• Local revenues often inadequate to carry out assigned functions

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Intergovernmental Transfers

• Rationales– Vertical imbalances – Horizontal imbalances (equalization) – Externalities (inter-jurisdictional spillovers)– Enhancing national objectives at the subnational

level – Paying for national programs implemented by

subnational governments

• Transfers should be transparent and predictable (formula-based)

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Strengthening Accountability• Do local services respond to local needs?

– Citizens have meaningful opportunities for voice (e.g., elected councils, locally appointed officers, participatory budgeting and planning, local civic forums, surveys and report cards)

– Citizens can assess performance of their leaders– Officials face incentives to respond– Civic and private partners are involved in service delivery

• Fiscal responsibilities– Local tax collections– Discretion in budget allocations

• Accountability to central government – Reporting on outcomes– Financial disclosure and reporting

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Building Capacity• Build capacity concurrently with devolving

responsibility• “Learn by doing” • Establish professional networks and other

modes for peer learning and sharing experience• Central government capacity must be

strengthened too