Local Budgeting - ISBN: 0821369458 - World Bank Group

410 Pages·2007·1.85 MB·English

by  Anwar Shah

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PUBLIC SECTOR
GOVERNANCE AND
ACCOUNTABILITY SERIES
Improved governance is a critical element of successful development strategies.This L LOCAL
volume gives invaluable,practical guidance to policy makers and researchers alike on O
all aspects of effective budgeting—the process at the heart of good local governance.
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—Paul Boothe,Director, Institute for Public Economics, Edmonton, Alberta, Canada; and former BUDGETING
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Associate Deputy Minister of Finance of Canada, and Deputy Minister of Finance, Province of
Saskatchewan, Canada
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his book is a much-needed contribution to the disciplines of local budgeting and
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finance.I am certain it will be of great practical value to subnational governments,
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as well as a guide for their sound financial management.No local financial officer
Edited by ANWAR SHAH
should miss it. D
—Honorable Fernando Elizondo Barragan,FederalSenator; former Federal Minister of Energy, and
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Minister of Finance, State of Nuevo León, Mexico
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ISBN 0-8213-6945-8

LOCAL BUDGETING
Introduction to the Public Sector Governance and Accountability Series
Anwar Shah,Series Editor
A well-functioning public sector that delivers quality public services consistent with citizen pref-
erences and that fosters private market-led growth while managing fiscal resources prudently is
considered critical to the World Bank’s mission ofpoverty alleviation and the achievement of
the Millennium Development Goals.This important new series aims to advance those objec-
tives by disseminating conceptual guidance and lessons from practices and by facilitating
learning from each others’experiences on ideas and practices that promote responsive(by
matching public services with citizens’preferences),responsible(through efficiency and equity
in service provision without undue fiscal and social risk),and accountable(to citizens for all
actions) public governance in developing countries.
This series represents a response to several independent evaluations in recent years that
have argued that development practitioners and policy makers dealing with public sector
reforms in developing countries and,indeed,anyone with a concern for effective public gov-
ernance could benefit from a synthesis ofnewer perspectives on public sector reforms.This
series distills current wisdom and presents tools of analysis for improving the efficiency,
equity,and efficacy ofthe public sector.Leading public policy experts and practitioners have
contributed to this series.
The first 14 volumes in this series, listed below, are concerned with public sector
accountability for prudent fiscal management;efficiency,equity,and integrity in public ser-
vice provision;safeguards for the protection ofthe poor,women,minorities,and other dis-
advantaged groups;ways ofstrengthening institutional arrangements for voice,choice,and
exit;means ofensuring public financial accountability for integrity and results;methods of
evaluating public sector programs,fiscal federalism,and local finances;international prac-
tices in local governance;and a framework for responsive and accountable governance.
Fiscal Management Budgeting and Budgetary Institutions
Public Services Delivery Local Budgeting
Public Expenditure Analysis Local Public Financial Management
Local Governance in Industrial Countries Tools for Public Sector Evaluations
Local Governance in Developing Performance Accountability and
Countries Combating Corruption
Intergovernmental Fiscal Transfers: Macrofederalism and Local Finances
Principles and Practice Citizen-Centered Governance
Participatory Budgeting
PUBLIC SECTOR
GOVERNANCE AND
ACCOUNTABILITY SERIES
LOCAL BUDGETING
Edited by ANWAR SHAH
THE WORLD BANK
Washington,D.C.
©2007 The International Bank for Reconstruction and Development / The World Bank
1818 H Street,NW
Washington,DC 20433
Telephone:[phone]
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All rights reserved
1 2 3 4 10 09 08 07
This volume is a product ofthe staffofthe International Bank for Reconstruction and
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ISBN-10:0-8213-6945-8
ISBN-13:978-0-8213-6945-6
eISBN-10:0-8213-6946-6
eISBN-13:978-0-8213-6946-3
DOI:10.1596/978-0-8213-6945-6
Library ofCongress Cataloging-in-Publication Data
Local budgeting / edited by Anwar Shah.
p.cm.
ISBN-13:978-0-8213-6945-6
ISBN-10:0-8213-6945-8
ISBN-10:0-8213-6946-6 (electronic)
1. Local budgets.2. Local finance. I.Shah,Anwar.
HJ9111.L63 2007
352.4’8214–dc22
2006101261
Contents
Foreword xi
Preface xiii
Acknowledgments xv
Contributors xvii
Abbreviations and Acronyms xxi
Overview 1
Anwar Shah
Part I Fiscal Administration
CHAPTER
1
Fiscal Administration in Local Government:
An Overview 15
John L.Mikesell
Special Fiscal Advantages ofLocal Government 16
Some Disadvantages ofMore Responsible
Local Government 20
Expectations from Local Fiscal Administration 24
Core Functions ofLocal Fiscal Administration 27
The Legal and Institutional Context for
Local Fiscal Administration 36
v
vi Contents
Special Concerns for the Developing
Country Context 43
Notes 46
References 49
2
Forecasting Local Revenues and Expenditures 53
Larry Schroeder
General Forecasting Techniques 54
Revenue Forecasting 58
Expenditure Forecasts 65
Challenges Facing Local Government Forecasters in Developing
Countries 69
Conclusion 73
Notes 74
References 76
3 Local Fiscal Discipline: Fiscal Prudence, Transparency,
and Accountability 79
Alta Fölscher
Fiscal Discipline as a Value in Public Financial Management 80
Intergovernmental Context ofLocal Fiscal Discipline 85
Local Fiscal Discipline Institutions 98
Conclusion 102
References 102
4 Combating Corruption in State and Local Revenue
Administration 105
Amaresh Bagchi
Tax and Revenue Powers ofSubcentral Governments and Scope
for Corruption 107
Corruption in Revenue Administration:Driving Factors and
Suggested Remedies 113
Recommendations to Combat Corruption at
Subnational Levels 119
Concluding Observations 124
Notes 125
References 125
Contents vii
Part II Local Budgeting
5
Budget Formats: Choices and Implications 131
Irene Rubin
Scope 132
Legal Structure 139
Input Budgeting versus Output Budgeting 142
Choosing a Format 147
References 149
6 Citizen-Centric Performance Budgeting at the
Local Level 151
Anwar Shah and Chunli Shen
Motivations for the Reform ofLocal Budgeting 152
Performance Budgeting:Basic Concepts 154
Considerations in Performance Budgeting Reforms 159
Performance Budgeting in Practice 162
Critical Conditions for Successful Implementation of
Performance Budgeting 162
Citizen-Centric Performance Budgeting at the Local Level 166
Conclusion 168
Annex 6A:Review ofPerformance Budgeting in the
United States at the State Level 169
Annex 6B:Review ofPerformance Budgeting in the
United States at the County Level 172
Annex 6C:Examples ofPerformance Measurement and
Budgeting 172
References 176
7 How to Read a Local Budget and Assess Government
Performance 179
Carol W.Lewis
Questions Addressed by Budgets 180
Values in the Budget 182
How to Read a Budget 184
Overview ofBudget Documents 185
Major Technical Elements 186
viii Contents
Analytic Constraints and Benefits 194
Assessment Approaches,Tools,and Techniques 195
Internal Assessment Approach 195
External Assessment Techniques and Tools 200
Conclusion 206
Annex 7A:Selected Internet Resources for Best Budget
Practices and Innovations 206
Notes 207
References 208
8
Local Budget Process 213
Daniel R.Mullins
Intergovernmental Framework 214
Local Budget Cycle 222
Integrating Priorities,Planning,and Budgeting across Levels 233
Participatory Planning and Budgeting:Issues,Modes,
and Cautions 238
Accountability,Control,and Evaluation 241
Service Efficiency and Effectiveness 246
Conclusion 250
Annex 8A:South Africa as a Model ofIntergovernmental
Sophistication 252
Annex 8B:Estonia’s Local Budget Process 254
Annex 8C:Participatory Local Budgeting and Planning
in Uganda 262
Notes 263
References 264
9
Local Budget Execution 269
Kurt Thurmaier
Control Model ofBudget Execution:
An Accounting Emphasis 271
Budget Execution Using a Managerial Approach 285
Applications for Developing Countries 293
Conclusion 302
Notes 303
References 303