Reform of public finance systems, an area in which IPA has considerable experience in a variety of countries, is an ongoing process around the world. The resources governments need to meet their responsibilities must be raised through appropriate means, and citizens must be able to hold governments accountable for their use. To achieve these goals, reforms are often required in many aspects of fiscal operations. These include: raising resources and allocating them among levels and sectors of government and society; developing appropriate accounting, information, management and auditing systems to minimize inappropriate resource use; involving non-governmental partners in government activities; and training and equipping managers and leaders to work with new and reformed systems and procedures. Collectively, these reforms can contribute to improved governance and public sector performance.

One of the most pervasive of recent development trends is fiscal decentralization, an area in which IPA is increasingly called on to apply its unique expertise. Intergovernmental fiscal reform is a challenging and complex exercise that often requires an array of political, institutional and fiscal reforms. There are often different expectations among key actors about how far decentralization should go and how to move it forward. Pursuing too few reforms has little impact, while pursuing too many reforms too quickly can overwhelm capacity and undermine success. Many decentralization efforts in developing countries have been either too limited or too comprehensive, often based on textbook models or approaches borrowed from dissimilar countries. Poor coordination of the various actors involved and uniform treatment of local governments with very different capacities have also been major impediments to more effective decentralization.

The IPA approach to decentralization involves working with each country to tailor reforms to their particular political, institutional and cultural context, and then helping them to devise an appropriately sequenced decentralization strategy. Paul Smoke and Leonardo Romeo, who have extensive field experience in Africa, Asia and Latin America, have worked on decentralization reforms in a way that:

• focuses on building consensus among actors with divergent views of decentralization;
• differentiates among local governments, such that reforms occur in an asymmetric way that does not overburden weak local governments or hold back strong ones;
• develops appropriate means to raise, allocate, and manage public resources;
• sequences implementation in a strategic and gradual way that builds increasingly strong capacity and good performance over time;
• coordinates the roles and activities of key local and national actors;
• works on both national policy issues and concrete local organizational and operational reforms; and
• links fiscal reform to broader political and institutional changes needed to realize effective decentralization.

In short, IPA's approach to decentralization integrates various key aspects critical for effective reform, but in a way that recognizes unique realities of a particular country and initially seeks modest but tangible results that lay a base on which to broaden and deepen reforms over time.

In all of our policy and research activities on fiscal reform, IPA works closely with a variety of international development agencies, government departments, and nongovernmental institutions. This includes local partner universities, think tanks, and consulting firms familiar with local conditions, language and culture. Such broad partnerships help to improve the outcomes of fiscal reforms and lead to an increase in knowledge among all of the partners involved.

Relevant Projects:

SOUTH AFRICA LOCAL GOVERNMENT FINANCIAL REFORM PROJECT

Led by Senior Staff member Paul Smoke, IPA helped the Department of Constitutional Development in South Africa to produce a fiscal information database for local government. This project assessed local government's equitable share of nationally raised revenue, the financing of district councils, and the division of fiscal powers and functions between categories of municipalities. The results will establish the basis for recommendations for South African policy makers on the design of a system of local government finance. This project is funded by USAID. IPA's partner in the project is the Research Triangle Institute. 2000-2001.

CAMBODIA LOCAL DEVELOPMENT FUND (LDF) PROJECT

A critical aspect of public sector governance in which IPA has considerable experience is the design and implementation of frameworks to guide the process of preparing local government development budgets. IPA Senior Staff member Paul Smoke and former Senior Staff member Leonardo Romeo worked with the Cambodia Local Development Fund (LDF) to introduce decentralized and participatory development planning procedures, and to establish transparent rules and objective standards for resource allocation and project appraisal. This long-term project has achieved considerable success to date in beginning to integrate local planning processes for determining priority projects and a system of standards for project monitoring into the formal budgeting structures of local governments. The project was funded by the United Nations Capital Development Fund. 1996-2001.

UGANDA LOCAL GOVERNMENT DEVELOPMENT PROJECT

The Uganda Local Government Act of 1997 gave formal recognition to the long discussed devolution of many central government service functions to district (regional), municipal and division (ward) levels of government. The Act specifies the responsibilities and allowable sources of revenue of local government. While the Act provides a platform on which to base the structure of Kampala government, achieving the broader goals of the decentralization program requires a process to design and continuously redesign the organization and working relationships of city government. Led by Senior Staff member Paul Smoke, IPA is assisting with these reform efforts. IPA Senior Staff Ernest Leonardo advised the Kampala City Council (KCC) in the development of a Strategic Framework for Reform, an effort to assess and propose changes to the underlying organization of KCC's core functions and service departments. IPA also assisted in the evaluation, recommendation, and installation of a new computerized financial management system and provided assistance in the restructuring of municipal government's Information Technology system. IPA continues to be involved in this long-term technical assistance project as Mr. Leonardo carried out a Mid-Term Review of the Project in February 2002 to review the effectiveness of the implementation of the Project and to develop strategies for better implementation of the remaining activities under the Project. The assignment involved a critical review of the Project, including an assessment of the compatibility of the project objectives and the components designed to achieve the development objectives; the effectiveness of the project design and the implementation level so far achieved.

LOCAL INFRASTRUCTURE AND CAPACITY BUILDING PROJECT IN THE PALESTINIAN WEST BANK

IPA Senior Staff Leonardo Romeo led a team of local and regional consultants in the preparation of the "Local Infrastructure and Capacity Building Project" (LICP) in the Palestinian West Bank. The project, financed through a 5.7 million US$ grant of the Belgian Technical Cooperation (BTC), provided financial and technical assistance to selected Palestinian Village Councils, the local authorities responsible for most basic services delivery in the West Bank. The project had two components. The first one supported immediate investments in critically needed local/rural infrastructure, ranging from repair of village roads and power distribution networks, to construction of kindergartens and integrated community service centers. The second one strengthened the institutions of good local governance by piloting a financial mechanism for modest but predictable annual transfers of resources for development spending to Village Councils and the parallel extension of technically sound and participatory local planning, programming and budgeting methods. In spite of the enormous difficulties due to the ongoing conflict in the area, the LICP, approved by the BTC at the end of 2001, is currently under implementation in selected villages of the West Bank. 2001.

DECENTRALIZATION IN NICARAGUA

IPA staff evaluated the participatory multi-year municipal investment plans adopted by the Nicaraguan Social Emergency Fund and PROTIERRA, a World Bank project assisting 32 municipalities. IPA Senior Staff member Leonardo Romeo has been the leading consultant in the design of PROTIERRA's next phase, a national municipal strengthening program that will offer financial and technical assistance to municipalities, improving their ability to assume the development responsibilities devolved to them by recent legislation and helping them to prepare and implement improved development plans, multi-year investment programs and annual budgets. This project is funded by the World Bank and is on going.

FISCAL DECENTRALIZATION IN MOROCCO

Former IPA Senior Staff member Leonardo Romeo recently completed an assignment as Senior Decentralization Specialist on a project to improve current processes and practices in the decentralized management of local government in Morocco. IPA will soon place a new associate in Morocco to work on the second phase of this project. Mr. Romeo's work resulted in a diagnostic analysis of decentralization and local democracy, the design of a set of overall guidelines for local governance, and the development of a local government website. Phase II of this project will include a series of regional seminars and study tours to the US on decentralization issues and the sharing of lessons learned at an interregional conference. This project is part of the USAID sponsored Democracy & Governance Decentralization initiative and is being performed under subcontract with the Research Triangle Institute.

SOUTH AFRICA: ACCESS TO HOUSING FINANCE FOR LOWER INCOME HOUSEHOLDS

IPA Associate Nicole Barnes provided technical support to promote a program of increased access to credit for lower income and historically disadvantaged people. The activities included undertaking analytical and evaluative research, providing a range of local lending models garnered from international experience, and developing actual lending systems. IPA worked with the Urban Institute on this USAID-funded project. 2000-2001.

DECENTRALIZATION IN ERITREA

With funding from the United Nations Office of Project Services (UNOPS), IPA Senior Staff member Paul Smoke and IPA Senior Staff member Ernest Leonardo assisted Eritrea's Ministry of Local Government in identifying and assessing sources of revenue for Eritrea's urban centers. This project also provided assistance in the design of financial management systems. 1998-1999.

DECENTRALIZATION AND LOCAL AUTONOMY IN ALBANIA

A partnership between The Urban Institute and the Albanian National Committee for decentralization produced a national strategy for decentralization and local autonomy for Albania. The strategy was a shared vision backed by consensus of central and local officials, private and community groups to guide long-term changes that reach toward the principles of the Charter of Local Self-Government of the Council of Europe. IPA Associates commented on the strategic plan and worked on the implementation of the plan's intergovernmental finance elements. 2000.