1. Page1 Decentralization of Functions International Conference on Governance and Accountability in Social Sector Decentralization Dana Weist dweist@worldbank.org PRMPS 18 February 2004

2. Page2 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

3. Page3 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

4. Page4 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?

5. Page5 Budget allocations Government transfers/grants Local taxes/charges/fees Community charges/fees How is it Being Financed?

6. Page6 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

7. Page7 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

8. Page8 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

9. Page9 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

10. Page10 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

11. Page11 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

12. Page12 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)

13. Page13 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

14. Page14 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