Local Government Revenue Mobilisation, Allocation and Utilisation Processes:

Transcription

1 Local Government Revenue Mobilisation, Allocation and Utilisation Processes: A case of Kitgum, Lamwo and Pader Districts Supported by USAID s Governance, Accountability,Participation and performance program, Implemented by RTI International For more Information Contact SEATINI UGANDA Plot 69 Bukoto Street. P.O.Box 3138,Kampala Uganda Tel: Fax: seatini@infocom.co.ug August, 2014

2 i TABLE OF CONTENTS Table of Contents List of Figures List of Tables Acknowledgements List of Acronyms Executive Summary i ii iii iv v vi 1.0 Introduction Study Rationale Objectives of the study Approach and Methodology Brief Description of Study Districts Limitations of the study Structure of the Report Context of the LG Revenue Mobilisation, Allocation and Utilisation Legal framework Legal provisions for specific sources of local revenues Collection of Local Revenue Management of Local Revenues Local Revenue Sharing formulae at LG councils Some challenges of the above Revenue Sharing Framework Institutional framework Issues and Challenges of the Legal frameworks Analysis of Trends in Revenue Generation and Performance Performance District Revenues Total Revenue Local Revenues Central Government Transfers Donor Funds Local Revenue Mobilisation Strategies and Challenges Strategies of Enhancing Local Revenue Mobilisation Revenue Allocation and Utilisation Sectoral Budget Allocations Utilisation of Local Revenues Accountability Mechanisms LG Accountability systems Accountability to Citizens Strategies of enhancing local revenue allocation and utilisation 35

3 ii Table Of Contents 5.0 Community Awareness, Attitudes, Participation in Local Revenue Mobilisation and Utilisation Community Awareness Community Attitude and Perception Participation in revenue mobilisation, allocation and utilisation Platforms for community participation revenue mobilisation, allocation and utilisation Strategies to enhance Community involvement Conclusion and Policy Recommendations Conclusion Policy Recommendations Central Government Local Government (LGs) Civil Society Organisations Citizens 47 References Annexes Annex 1: List of key informants Annex 2: List of FGD participants Annex 3: Key Socioeconomic Indicators (2010) Annex 4: Trends on District Revenues (Ushs 000) Annex 5: Trends in Sources of Local Revenue Annex 6: Summary of local revenues and purpose Annex 7: Performance, issues for and recommendations for improving Local revenue sources Annex 8: Trends in District Budget Allocation Annex 9: Share of Local Revenues in Districts I III III III IV VI VII VII VIII XV XVII

4 iii List of Figures Figure 2.1: Local Revenue Sharing mechanisms 8 Figure 3.1: Trends in District Revenues 16 Figure 3.2: Revenue performance by source 17 Figure 3.3a: Trends in local revenue generation in Kitgum district 18 Figure 3.3b: Trends in local revenue generation in Lamwo district 18 Figure 3.3c: Trends in local revenue generation in Pader district 18 Figure 3.4a: Trends in Sources of Local Revenue (Kitgum DLG) 19 Figure 3.4b: Trends in Sources of Local Revenue (Lamwo DLG) 19 Figure 3.4c: Trends in Sources of Local Revenue (Pader DLG) 19 Figure 3.5a: Trends in CG transfers to Kitgum DLG 21 Figure 3.5b: Trends in CG transfers to Lamwo DLG 22 Figure 3.5c: Trends in CG transfers to Pader DLG 22 Figure 3.6a: Composition of CG Grants to Kitgum DLG 22 Figure 3.6b: Composition of CG Grants to Lamwo DLG 22 Figure 3.6c: Composition of CG Grants to Pader DLG 22 Figure 4.1a: Economic composition of Kitgum DLG Budget 31 Figure 4.1b: Economic composition of Lamwo DLG Budget 31 Figure 4.1c: Economic composition of Pader DLG Budget 31 List of Tables Table 1.1: FGD Participants 3 Table 3.1: Types of Conditional Grants Transferred to Districts 21 Table 3.2: Trends in Donor funding 23 Table 4.1a: DLG Budget Allocations 30 Table 4.1b: Top District spending sectors (average) 30 Table 4.2: Share of local revenue in sector budget 32

5 iv Acknowledgements This study was produced jointly by Southern and Eastern African Trade, Information and Negotiations Institute (SEATINIUganda) and Kitgum Women Peace Initiative (KIWEPI). We extend our appreciation to the following for their contributions towards the production of this report: Mr Daniel Lukwago, Mr Johnson Gumisiriza, SEATINI Uganda and KIWEPI staff, Officials from USAIDGAPP programme, Mr Kumakech Oluba Charles (Deputy CAO Lamwo District), Mr. Omwony Stephen Lakwonyeko (Deputy CAO Kitgum), Mr Morrison Ochen (Pader District Planner). SEATINI Uganda also appreciates the different people interviewed who generated the information required for the study This report is made possible by the support of the American people through the USAIDGAPP program. The contents of this report are the sole responsibility of SEATINI Uganda and can under no circumstances be regarded as reflecting the position of USAID.

6 v List of Acronyms ACODE CAO CBOs CDA CDD CDO CFO CG CSOs DDPs DLG FDA FGDs FY GoU HLG IFMS IGG IPFs LC LED LG HT LGA LGFARs LGFC LLGs LREP LST MFPED MoLG NAADS NGO NPPAs NW O&M OBT PAC Advocates Coalition for Development and Environment Chief Administrative Officer Community Based Organisations Community Development Assistant Community Driven Development Community Development Officer Chief Finance Officer Central Government Civil Society Organisations District Development Plans District Local Government Fiscal Decentralisation Architecture Focus Group Discussions Fiscal/ Financial Year Government of Uganda Higher Local Government Integrated Finance Management System Inspectorate of Government Indicative Planning Figures Local Council Local Economic Development LG Hotel Tax Local Government Act LG Financial and Accounting Regulations Local Government Finance Commission Lower Local Governments Local Revenue Enhancement Plan Local Service Tax Ministry of Finance, Planning and Economic Development Ministry of Local Government National Agricultural Advisory Services NonGovernment Organisation National Priority Programme Areas Non Wage Operation and Maintenance Output Budgeting Tool Public Accounts Committee PAYE PDCs PHC PPP PWDs RDC S/C SEATINI TB TC TPC URA VAT WHT UBOS Pay As You Earn Parish Development Committees Primary Health Care Private Partnerships People with Disabilities Resident District Commissioner Sub County Southern & Eastern Africa Trade Information & Negotiations Institute Town Board Town Council Technical Planning Committee Uganda Revenue Authority Value Added Tax With Holding Tax Uganda Bureau of Statistics

7 vi Executive Summary The decentralisation framework adopted by government in 1993, devolved responsibilities for public services, planning and delivery to Local Governments (LGs). LGs are mandated to formulate, approve and execute their budgets and plans and to collect revenue and spend it. However, LGs face challenges in raising local revenues to support their development needs. They to a large extent depend on Central Government (CG) transfers, which are highly conditional and limit their discretionary powers. In order to effectively provide public services, LGs need to supplement the CG grants with local revenues. Unfortunately, the performance of local revenue is worrying. Local revenues have been declining since the abolition of Graduated Taxes, with local revenue contributing less than 2% of the total LG revenues. Local revenues mobilisation efforts have been constrained by low tax base; interference from politicians, poor coordination of stakeholders, inadequacy of baseline information (database) of potential tax payers, administrative weakness and poor utilisation and m anagement of collected revenues, among others. It s against this background that SEATINI Uganda, with support from RTIUSAID, conducted this study between May and August, 2014, on local government revenue mobilisation, allocation and utilisation processes with a specific focus on Kitgum, Lamwo and Pader districts. The overall objective of the study was to analyse the local government revenue mobilisation, allocation and utilisation processes in the districts of Kitgum, Lamwo and Pader. The study employed both quantitative and qualitative methods involving: a comprehensive literature and statistical review; interviews with LG officials and FGDs in five Lower Local Governments (LLGs) with general community. Legal and institutional frameworks The legal and institutional frameworks for local revenue generation, sharing and management is well articulated in the Constitution of the Republic of Uganda under Article 191 (1) and (2), Article 152, Article 194; the LGA (Ch 243) under Section 77 (1), Section 80 and Schedule V; the LGFARs 2007, Regulation 24 ; and various Statutory Instruments. However, these frameworks have challenges which limit the capacity of LGs to generate local revenues. These include among others: political pronouncements such as abolition of G/tax, and bicycle licenses; the LG Act (Chap 243) does not provide for effective mobilisation of LST; LG Rating Act 2005 does not provide for effective mobilisation of property rates; local revenue legal provisions on enforcement are very weak and even the penalties cannot be enforced; the changing policies of the Ministry of Trade, Industries and Cooperatives and that of the LGs are not yet properly aligned, thus making administration of licenses complicated. Local revenue generation Local revenue is important because it gives flexibility to LGs to fund their local priorities. Like in many LGs in Uganda, the three districts under this study face serious challenges in raising local revenues. On average, during the last FYs (2009/ /13), Kitgum, Lamwo and Pader districts raised only 1.6%, 1.1% and 1.5% respectively of total revenue from local sources. Majority of the local revenue is generated from fees and fines, taking on average nearly half of the total local revenues.

8 However, the performance of the Local Service Tax (LST) and LG Hotel Tax (LGHT), which were introduced after the abolition of Graduated tax, is very dismal. This is partly due to: districts have no control on much of what they would collect; they have almost no data on all eligible people who should pay LST; the LST threshold is too high which excludes most people; LST has no receipts and this makes compliance and enforcement challenging. Like in other LGs in Uganda, the three districts largely depend on CG transfers constituting 90.2%, 92.6%, and 91.7% for Kitgum, Lamwo and Pader, respectively. However, the largest proportion of CG transfers are conditional grants; this limits the discretionary power of LGs to allocate resources; most LGs have tended to concentrate on managing CG grants and dedicate less time and attention towards mobilisation of local revenue. As part of the requirements by the Ministry of Local Government (MoLG), the three districts had prepared the three year Local Revenue Enhancement Plans (LREPs) which were approved by the respective district councils. However, there is no evidence that the LREPs had really increased local revenue generation capacity within the three districts. The implementation of the plans is partly hindered by: low tax base; concentration of most taxes in hands of the CG; poor attitudes of citizens towards paying taxes; inadequate involvement of politicians; insufficient financial support for investments in local revenue generation; insufficient data on sources of local revenue; administrative weaknesses (such as insufficient and poorly skilled revenue staff, inadequate enforcement mechanisms, inadequate supervision and monitoring); restrictive legal requirements; and poor attitudes and methods by some government officials towards local revenue generation. Allocation and utilisation of local revenues Although the allocation of the locally generated revenue is based on district priorities and some formula which ensures that all sectors get some portion of the local revenue, however, during implementation,not all sectors get these funds. Our analysis shows that it is mainly finance, planning, statutory bodies, and internal audit that share the funds from local revenue. The LG officials interviewed noted that, these particular sectors play a vital role of a coordination function yet they have no grants from the central government. The minimal or no allocation of local revenues to service delivery sectors is partly attributable to the fact that, such sectors are largely funded by CG transfers. Accountability There are a number of agencies at LG to ensure financial accountability of both revenues and spending. These include: Chief Administrative Office, Town clerk s office, Sub County Chief office, Chief Internal Audit office, Local government Public Accounts Committee (LGPAC), the Offices of the Auditor General, MoLG Inspection unit and other agencies. However, the above institutions tend to concentrate on accountability of expenditure; less effort is put on accountability of locally generated revenues.whereas the legal provisions for sharing the locally raised revenues are well stipulated, and whereas the law further indicates the remedy for noncompliance of remittances, there is gross abuse and noncompliance on both sub counties and districts. This greatly undermines the need for both authorities to be held accountable and transparent for (and in the use) of the funds they collect locally thereby affecting service delivery. Citizens have an important role to play in ensuring accountability, but there is general apathy and the population seems disempowered to hold leaders accountable. None payment of any direct taxes is a major contributor to such attitude because citizens are devoid of entitlement and power that arises from payment of direct taxes. vii

9 viii Community awareness and perception The study found that most community members interviewed were aware of taxes, fees and charges collected by local governments. Some of them, especially those in urban centres had actually paid some of these taxes. However, majority of them are not aware of how most of the taxes are calculated or assessed. Community members interviewed said that they support the government in collecting taxes levied and fees because they anticipate public services such as education, safe water and health care. They also acknowledged that taxes somehow enhance citizen responsibility and ownership of government programmes and property. However, some respondents reported that they would hesitate to pay taxes because of: lack of information on revenue generated and utilised; lack of accountability of revenue collected; high levels of corruption and poor service delivery. Though low local revenue is partly due to low tax base which is due to weak economic activities, it was evident from the study that there are systemic weaknesses which are hindering revenue generation. Some of them include: personnel at LGs (and generally government) whose attitude towards local revenue is negative. Local revenue is considered a cash cow, since most of the revenue collected does not reach the treasury account. Most LGs officials are more concerned with managing CG and donor funds; than engaging the citizens in revenue generation. Central Government. Need to review the legal framework for local revenues including; Local Service Tax, Property rates, Royalty fees, Market Act, trade licenses and agency fees, etc; and strengthen enforcement.. Consider introduction of some form of direct taxation. This is likely to promote partici pation, ownership and responsibility of citizens.. Provide support to LGs to establish fiscal databases and strengthen revenue units.. The Ministry of Trade, Cooperatives and Industries should in consultation with key stake holders revise the rates payable for businesses as licenses.. The MoLG and LGFC need to conduct more studies on all existing and intended revenue source to ascertain their viability. Local Government (LGs) It would be prudent that LGs through their association (ULGA) strengthen their advocacy towards influencing policy direction that directly affects their local revenue performances a case in point being the development fee/levy. Need to devise mechanisms in which tax collection can be linked to quality of service delivery. Developing a database of individual taxpayers, strengthen management information systems for revenue administration and control. Need to provide more information on the amount of taxes, fees and charges collected through publication on public noticeboards to increase citizen understanding and compli ance to tax payment. Establish an independent Revenue Department/unit and strengthen its capacity to collect local revenues. Introduce Tax Payer Days and other sensitisation programmes through seminars and radio talk shows.

10 Civil Society Organisations Need to educate citizens about their rights and obligations including paying taxes for develop ment. Educate citizens to understand why they should pay taxes and what they can expect from their tax compliance or willingness to pay taxes. Enable citizens to participate in and influence the different stages of the budget process, right from formulation, legislative, implementation and evaluation. Citizens Fulfill their constitutional duty under Article 17 (1) (g) to pay taxes and influence the affairs of government (including demanding quality services) under Article 38 (1) (2). Participate in meetings called to discuss taxation, budget and other development activi ties that affect you and your community. Report all cases of misuse of public resources and corruption to relevant authorities. Fulfil their Constitutional duty under Article 17 (1) (i) to fight corruption and misuse of public resources through monitoring government programmes and reporting all cases of misuse of public resources and corruption to relevant authorities ix

11 1 1.0 Introduction 1.1 Study Rationale The decentralisation framework adapted by government in 1993, devolved responsibilities for public services, planning and delivery to LGs. The raison d'être for decentralisation was to democratise society and involve the citizens to bring about good governance; improve and bring services closer; reduce poverty and bring about sustainable development. Needless to say, from the political perspective, decentralisation has allowed citizens to elect their leaders who are directly accountable to them, thus increasing participatory democracy. On the technical side, decentralisation has achieved little in allowing citizens to participate in planning, implementation and monitoring and evaluation of the development activities in their localities. Due to reluctance of the leadership to engage their communities; poor perception by the communities that policy processes are complex and that their participation is meaningless and contribution minimal in form of taxes to the development process (Lukwago. D, 2009). Although Section 77 (1) of the LGA 1997 (Ch 243) empowers LGs to formulate, approve and execute their budgets and plans and to collect revenue and spend it, most LGs are unable to finance their budgets from locally generated revenues. LGs face challenges in raising local revenues to support their development needs. They largely depend on central government transfers which are conditional in nature (earmarked by the Central Government for provision of specific services). The conditions attached to the CG transfers limit the LG discretionary powers to allocate the funds to their particular local needs and to implement own priorities. Consequently, LGs tend to concentrate more on managing CG funds, thus dedicating less time and attention to devise means of mobilising alternative sources of revenue. Attention on management of resources has also negatively impacted on their efforts to deliver services since accountability is geared towards the funders (CG and donors), but not the beneficiaries (the local communities) (OXFAM, 2012). It is important to note that local revenues can potentially provide a sustainable source of funding for LGs to meet their development agenda. Local revenue mobilisation empowers local people to participate, own the development programmes and demand for effective delivery of services, which improves people s livelihoods. To achieve this, citizens, civil society, private sector, media and LG officials need to be mobilised around local revenue generation and their capacity to demand for accountability strengthened. Although local revenue can be used to meaningfully supplement the grant transfers from the central to Local Governments (LGs), in order to support service provision; there has been a decline in local revenue collections. The performance of local revenue is still constrained by low tax base; interference from politicians, poor coordination of stakeholders, spontaneous division of LGs, insufficient support from CG, inadequacy of baseline information (database) of potential tax payers, administrative weakness and poor utilisation and management of collected revenues, among others (SEATINI & OXFAM, 2013)

12 2 1.2 Objectives of the study The objectives of this study were to: a. Examine the context of the LG revenue mobilisation, allocation and utilisation processes. b. Analyse the trends of local revenue generation and other sources from 2011/2012 to 2013/2014 financial year. c. Analyse citizens perception, attitudes and participation in revenue mobilisation, alloca tion and utilisation processes. d. Provide recommendations on how to increase revenue at the local level in a fair, sustain able and accountable manner. 1.3 Approach and Methodology The study employed both quantitative and qualitative methods. In quantitative methods, emphasis s was put on numerical analysis of data collected from national and local government budget documents and other relevant data sources (i.e. CG releases to LGs). Trends in planned and actual performance in revenue generation and utilisation were established. The qualitative approach provided insights on perceptions, facts, feelings, and experiences of communities and their leaders in regard to their awareness, perceptions and attitudes and levels of participation in revenue mobilisation, allocation and utilisation processes in the three districts. A combination of the two methods ensured descriptive, analytical, flexible, naturalistic and interpretative perspectives describing the state of affairs both numerically and verbally. The following methods were used in undertaking the study: a) Document Review: This involved comprehensive literature and statistical review to cap ture information on legal, policy, administrative and implementation frameworks in rela tion to the process of revenue mobilisation, allocation and utilisation. Document review involved the collection and review of all relevant primary and secondary data and analytical studies from various sources. Some of the documents reviewed included: the 1995 Constitu tion of Uganda, the Local Government (Resistance Councils) Statute 1993, the LG Act 1997, Background to the Budgets, Approved revenue and expenditures, District Develop ment Plans and District Approved Budgets and work plans. List of key documents reviewed are included in the References. b) Key Informant Interviews: Interviews were held in the three districts with: a) Technical staff: Chief Administrative Officers (CAOs), District Planners, Chief Finance Officer, Rev enue Officers, and SubCounty Chiefs; and politicians: LCV Chairpersons, and members of the district executive. List of key informants is attached in Annex 1. c) Focus Group Discussions (FGDs): FGDs were organised in five Lower Local Govern ments (LLGs) with general community which included the women, youth and elderly persons. The FGDs provided insights on community awareness, perceptions and attitudes and levels of participation in revenue mobilisation, allocation and utilisation processes. Each FGD was attended by at least 10 people, who were selected by the research team with the help of local officials. The FGDs were conducted in local language which ensured active participation of all respondents. Efforts were made to capture variations among; men, women, youth, and elderly. List of participants to the FGDs is attached in Annex 2

13 3 Table 1.1: FGD Participants District Kitgum Lamwo Pader Total LLG Female Male Total Kitgum TC Namakora S/C Lamwo Padibe Town Board Pader Pader TC Pajule Town Boar Total Brief Description of Study Districts Kitgum Kitgum district is in the northern part of Uganda, bordered by Lamwo District in the North, The Republic of Southern Sudan in the North East, Kotido District in the East, Pader District in the South and Gulu District in the Northwest. Kitgum district has a total Land Area of 4,042 Km 2. The district has an estimated Population (2013) of 257,600 people (UBOS, 2013). Kitgum has 9 Subcounties, 1 Urban Council and 2 Town Boards, 53 Parishes and 464 Villages. The district is predominantly engaged in small scale agriculture, animal husbandry and produce buying and selling. Key socioeconomic indicators are presented in Annex 3 Lamwo Lamwo District was curved out of Kitgum District and became functional on 1st July Lamwo District is located in the extreme Northern part of Uganda, boarded by Lamwo Southern Sudan in the north, Kitgum District in the east and southeast, Pader District in the south, Gulu District in the southwest and Amuru District in the west. Lamwo district has a total Land Area of 5,595.8 Km 2. The district has an estimated population (2013) of 178,100 people (UBOS, 2013). Lamwo district has one county (Lamwo), 9 sub counties, 2 Town Councils (Lamwo TC and Padibe TC), 2 Town Boards (Palabek Kal and Madi Opei), 51 parishes and 327 villages. The major economic activity in the district is subsistence small scale agriculture, mainly crop production and animal husbandry. Key socioeconomic indicators are presented in Annex 3. Pader Pader district was curved out of Kitgum District and begun operations on the 14th, December Pader District is situated in the Northern part of Uganda, bordered by Kitgum District in the North, Agago district in the East, Gulu district in the West, Oyam district in the Southwest and Lira district in the South. Pader district has a total Land Area of 3,362.5 Km 2. The district has an estimated population (2013) of 243,200 people (UBOS, 2013). The District has one county; Aruu, 11 SubCounties and 1 Town Council, 52 Parishes and 608 villages. Over 90% of the population in Pader District are subsistence farmers engaged mainly in crop farming. Key socioeconomic indicators are presented in Annex Limitations of the study The limitations encountered were related to the adequacy, quality and availability of data and information, especially at sub county level, necessary for a comprehensive comparative analysis. There were difficulties in obtaining copies of the subcounty budgets. Mainly, because most of the subcounties are unable to produce enough copies and do not have computers for storing electronic copies of their budgets. Secondly, most of the subcounties did not provide accurate data over the years on their revenue mobilisation, and utilisation. Thus, the study did not analyse any LLG information. Despite the limitations, the data and information obtained provided for ample analysis of LG mobilisation, allocation and utilisation.

14 4 1.6 Structure of the Report This report is divided into six sections. Section One gives the introduction, rationale, objectives, methodology, and limitations of the study. Section Two provides the context of the LG revenue mobilisation, allocation and utilisation by reviewing the legal and institutional frameworks. Section Three analyses the trends in revenue generation and performance of local revenue, CG transfers and donor funding. It also examines the local revenue mobilisation strategies and challenges. Section Four discusses revenue allocation and utilisation by analysing the sectoral budget allocations, utilisation of local revenues, and accountability mechanisms. Section Five examines the community awareness, attitudes, participation in local revenue mobilisation and utilisation. It also looks at community participation in revenue mobilisation, allocation and utilisation. Section Six concludes and provides policy recommendations.

15 5 2.0 Context of the LG Revenue Mobilisation, Allocation and Utilisation This section explains the legal framework for local revenue sources and their management. In addition, it covers the institutional framework and respective challenges. 2.1 Legal framework The Constitution of the Republic of Uganda under Article 191 (1) and (2), empowers LGs to levy, charge, collect and appropriate fees and taxes such as rents, rates, royalties, stamp duties cess, fees on registration and licensing and any other fees and taxes that Parliament may prescribe. Section 77 (1) of the LGA (Ch 243) empowers LGs to formulate, approve and execute their budgets and plans and to collect revenue and spend it. The LG Act (Section 80 and Schedule V) elaborates on collection of revenues by LGs. The revenue that LGs may collect are in the form of fees and taxes including; royalties, rates, rents, stamp duties, registration and licensing fees, cess on produce, and others listed in Schedule V. Each source is explained in details under a specific Act and Statutory Instrument. Among the sources of local revenue devolved to LGs are: a) Local Service Tax (LST); to be collected from incomes and wealth of People in gainful employment, professionals, artisans and Businessmen/Women. b) LG Hotel Tax (LGHT); to be collected from occupants utilising the services of hotels, lodges and guesthouses. c) Property rates and land based charges like premium, building plan approval fees, land fees, etc; d) Ground rent; e) Business licences; f) User fees (include market dues, parking fees), user charges and permits; g) Royalties from electricity generation, mineral mining and exploration and protected areas; h) Cess (rate) on produce, however, this was abolished by government; i) Other departmental revenues (include forest revenues; veterinary fees, registration of births; marriages and deaths; fines; etc) always lumped as Other sources of revenue; j) Any other revenue which may be prescribed by the LG and approved by the Minister Legal provisions for specific sources of local revenues According to Article 152 of the Constitution of the Republic of Uganda, no tax shall be imposed except under the authority of an Act of Parliament. Parliament passed the enabling law in the form of the LG Act Chap 243. Section 80 of the LG Act Chap 243 allows LGs to mobilise revenue in form of fees and taxes, including rates, rents, royalties, stamp duties, Local Service Tax, Local Government Hotel Tax, registration and licensing fees and all those revenues which are specified in the fifth schedule of the LGA, Chap 243 (especially parts III and IV of the fifth schedule). Each source is explained in details under a specific Act and Statutory Instrument that includes, among others: a) The LG (Rating) Act, This Act enables LGs to collect property rates. b) The Physical Planning Act This Act enables collection of land based charges like ground rent, lease offer fees, inspection fees and others related; and ground rent premium, and property rates.

16 c) The Trade Licensing Act, 2000 d) Statutory Instrument No. 54 e) The Public Health Act, 1964 The above 2 Acts and one Instrument assist to collect licenses f) Mining Act, 2003(Section 98(1)(2) Government, LG and the owners or lawful occupiers of the land subject to mineral rights shall share royalties as follows: The tax revenue generated by Uganda Revenue Authority (URA) from minerals is shared between Central Government (80%), HLG (10%), LLG (17%) and individual land owner (3%). g) Forest and Tree Planting Act, 2003 (Sections 3964) LGs can collect the following from forest products: Licenses for cutting from outside the forest reserve. Selling Seedlings and Seedling production. Fees from timber, charcoal burning and selling; and transportation of charcoal, etc. Miscellaneous fees for activities like Ecotourism, erection of infrastructure. Public goods and environmental fees: fees got from protection of strict natural reserves, buffer protection and conservation of biodiversity. Permits for: making bricks; mining/quarrying stones; murram and sand exploitation; Grazing, etc. h) Water Act (Chap 152),( Section 87); The Act gives power to the Minister to allow LGs collect say water conservation fees. i) Uganda Wild Life Act,1996(Chap 200) According to the Uganda Wild Life Act, 1996, Cap.200 Section 69 (4), the board shall pay 20% of the park entry fees collected from a wildlife protected area to the LG of the area surround ing the wildlife protected area from which the fees were collected. j) Electricity Act,1999,Section 75(7)(8)(9) According to the Electricity Act, 1999, Section 75 (7), (8) and (9), the holder of a license for hydropower generation shall pay to the district LG in which his/her generating station (dam or reservoir) is situated, a royalty agreed upon by the licensee and the district LG, in consultation with Electricity Power Regulatory Authority (ERA). ERA regu lates and therefore,issues licenses to all those generating above 0.5MW only. Where the licensee and the district LG fail to agree upon the royalty, the authority shall determine the royalty to be paid to the district LG by the licensee. Where the generating station is situated in more than one district LG area, the royalty paid shall be shared proportionately among the district LGs. k) Traffic and Safety Act 1998: for collection of Parking fees. l) Market Act: for collection of Market dues. m) Public Finance Bill/ Act , Section 7: for collection of royalty fees from Oil and Gas. n) Registration Act CAP 309: Registration Fees for births, deaths, marriages. o) LG Act, Chap 243. Collection of Local Service Tax and LG Hotel Tax Collection of Local Revenue According to Regulation 24 of the LGFARs 2007, the authority for revenue collection is given to the council every year through the approved estimates. On approval of the estimates by the LG council, the administration may collect revenue. Therefore, council must budget for its revenues every year. LGA, Chap 243 Section 80 (2) requires each LG to draw up a comprehensive list of all its local revenue sources from which it expects to collect revenue during the financial year and to maintain data on total potential collectable revenues. 6 2 However, the bill is yet to be passed by Parliament

17 7 Section 85 of the LGA, states that in the city and municipal councils, revenue is to be collected by division councils while in the districts (rural), revenue is to be collected by subcounty councils. The town councils directly collect their revenues. The implication of all this is that the law permits collection of local revenue at the LLG level. However, the city or municipality may, with the concurrence of a division in its area of jurisdiction, collect revenue on behalf of a division [S 85 (1b)] of the LGA. The same applies to districts and subcounties [S 85 (4)] of the LGA and the revenue collected at these levels will also be subjected to the same sharing arrangement. Despite this arrangement, it should be noted that there are other levels of LGs where service delivery is undertaken as provided in the Act, such as at the district, county, village levels, etc. For this reason, there is a need to take a share of the revenue collected at the division and subcounty levels Management of Local Revenues Management of local revenues includes the following: a) Setting of rates/ amounts to be paid. Taxes are legislated upon and passed by Parliament from time to time. Other local revenues like fees, rent and permits are already provided for in the Constitution and LG Act, Chap 243. Under the same provision, there is a clause that allows a LG to identify a new source of revenue and recommend it to the Minister of LG for approval.the LGs make charging policies with guidance from the Ministry of Local Govern ment and other Ministries/ Agencies like Ministry of Trade and Cooperatives and publicise them for use by the LGs and private firms working on LGs behalf. b) Ensuring equity and fairness in fixing rates. c) Sensitisation: This is usually the first activity before introducing an approved rate. It involves holding workshops and seminars for the revenue collectors and the taxpayers and other forms of awareness campaigns on the importance of paying taxes say, radio announcements, advertising, drama, etc. d) Enumeration/ Registration: Identification and listing of tax payers/recording all sources of income for an individual tax payer, also follows. e) Assessment: Recording all income sources for each taxpayer on an assessment form and then determining the tax payable after careful consideration, especially with ability to pay. f) Tax Tribunal Committees at District and Municipality levels are put in place to settle all the grievances of the taxpayers with respect to the revenue source being assessed. g) Collection: Collection of revenue from the taxpayers follows after assessment. The taxpayers may pay at banks and or at the LG cash offices and they have to be given clear infor mation on how they should pay in. h) Enforcement: Following up tax defaulters, the regular checks on licenses, tax tickets, etc. to ensure that all those who should pay actually pay and they pay the right amount. i) Budgeting and Utilisation. j) Accountability and feedback reporting. Administration of collection also includes the following; a) Allocation of resources for collection. Resources include technical staff (could be skilled) and supportive committees like assessment committee, equipment like motorcycles, file cabinets, files, computers. b) Contract management. Hire, monitoring and supervision of the tendered sources are vital. c) Observing legal requirements like depositing funds on the LG accounts; observing sharing arrangement as per the legal provisions.

18 d) Addressing concerns/ grievances of the taxpayers during generation, mobilisation and collection process. e) Auditing the collection process. f) Ensuring that funds collected are used for the priorities as set by the LG Council Local Revenue Sharing formulae at LG councils Local revenue sharing arrangements are presented in Figure 2.1. Figure 2.1: Local Revenue Sharing mechanisms 8 District Receives 35% from subcounties City/ Municipality Receives 50% from Divisions and retains 70% i.e. making it 35% in all County Receives 3.25% Subcounties Retain and get 42.5% in all City/ MC division Retain and get 47.5% in all Town Council Retains 65% Parishes receive 3.25% Wards Receive 5% Wards Receive 10% Villages Receive 16.5% KEY: Villages Receive 12.5% Villages Receive 25% The LG Council at that level is the one legally mandated to collect local revenue and give out the rightful shares to the others including its self, to use. The Council receives a share of local revenue collected and uses it District Councils: a. Each subcounty retains sixty five percent (65%) of all the revenue it collects in its area of jurisdiction. (It can retain any higher percentage as the district may approve). The remain ing percentage is passed over to the district. b. The 65% retained by the subcounty (which now is 100%) plus what it receives from the district is in turn shared between the Subcounty and the administrative units as follows: 5% is remitted to the county council in which the subcounty is located. 5% is distributed among the parishes of the subcounty. 25% is distributed among all the villages within the subcounty. 65% is used by the subcounty itself. City and Municipal Councils: a. A city or a municipal division retains fifty percent (50%) of all the revenue it collects in its area of jurisdiction and remits fifty percent (50%) to the city or municipal Council headquarters. b. The fifty percent retained by each division (which is now 100%) plus what it receives from the city or municipal Council is in turn shared between the division and its village and parish/ward Councils as follows: 25% is distributed among its village Councils; 10% is distributed among its parish/ward Councils. 65% is used by the division itself.

19 9 For purposes of addressing inequalities in revenue bases among the divisions, a city or municipal council distributes as grants at least 30% of its total revenue collected to the divisions within its area of jurisdiction. There is a formula provided in the LG Act 1997 for distribution of the grants at the lower levels or local levels. Where a city or municipal fails to remit funds due to a division council for two consecutive months, the division council may retain the amount due to it (city or municipal). Town Councils: Each town council collects and keeps a hundred percent (100%) of the revenue for its activities. The funds are shared between the town councils and its parishes/wards and villages as follows: 25% amongst its villages; 10% amongst its parishes/wards. 65% is used by the town council. Other issues on Revenue Sharing a) For purposes of a healthy cash flow, distribution of funds among Councils and Administrative Units should be done on a quarterly basis. b) There are incidences when on prior agreement, district, city or municipality collects revenue on behalf of the Subcounty (ies) or division(s). Where this is done, the district or mu nicipality remits the 65% or 50% to the relevant Subcounty (ies) or division(s). c) The Chief Executive at the subcounty and division council must ensure that laws and rules, in particular the formula for distribution of the funds as provided in the Act and LGFARs, are followed accordingly. Nonremittance of the Revenue Collected a) In case a subcounty fails to remit 35% of the internally generated local revenue to the district, the district council may take appropriate measures to recover the revenue due to it. To do this, the district can withhold what was due to the subcounty from the district accounts to the operational accounts of the subcounty. b) In the same way, when the district council fails to remit the 65 percent, the sub county shall retain a percentage higher than 65 percent to make full recovery of the revenue due to it which is withheld by the district council. Box 3.1: Challenges of revenue sharing between subcounties and district Ascertaining the actual amount collected to determine the 35% Inadequate monitoring and supervision by the district Poor record keeping at SubCounty level Poor attitude due to conflict between the S/Cs and district Spending at sources by some S/Cs and tax collectors Poor management of revenue collected Source: Key Informant Interviews

20 Some challenges of the above Revenue Sharing Framework During the implementation of the abovementioned revenue sharing framework, a number of shortcomings have occurred, namely: a) In some cases, some LLGs have not received their share, especially where the HLG has collected some local revenues. Examples include; Yumbe subcounties and Lira MC Divi sions in early At times, the centre (MoLG and LGFC) has had to intervene and mediate the two sides. In many cases, this issue has continued to happen most especially where the LLG refuses to remit the share to the villages. To a large extent, such scenarios have increased taxpayer distrust in the way revenues are handled and subsequently lowered the morale of taxpayers to pay. b) Some relevant Acts like the Rating Act, Royalties Acts have not had sufficient provi sions to enable LGs to collect and enforce collection; this is already explained above under each of the mentioned Acts. 2.2 Institutional framework 1. Local Government Finance Commission (LGFC) Article 194 of the Constitution of the Republic of Uganda, 2006 as amended mandates the Commission,among others to: Consider and recommend to the President potential sources of revenue for the Local Governments and to advise on appropriate tax levels to be levied by the Local Governments. Mediate and advise the Minister in case a financial dispute arises between local governments. Analyse local government budgets for compliance with legal provisions. 2. Ministry of Local Government The Mandate of the Ministry of Local Government is to do the following: a) To inspect, monitor, and where necessary offer technical advice/assistance, support supervision and training to all Local Governments. b) To coordinate and advise Local Governments for purposes of harmonisation and advocacy. c) To act as a Liaison/Linkage Ministry with respect to other Central Government Minis tries and Departments, Agencies, Private Sector, Regional and International Organisations. d) To research, analyse, develop and formulate national policies on all taxes, fees, levies, rates for Local Governments. But specifically, on local revenues, the Ministry of Local Government is to: Provide legal and policy guidance in local revenue administration. Supervision and monitoring the collection of local revenues. Mentor the local government in the procedures for collection of local revenue. In practice, as it does its advisory role and provides technical support to LGs to improve collection of local revenues, the LGFC liaises a lot with key relevant institutions like MoLG; MoFPED; the Solicitor General; URA; Ministry of Trade, Industry and Cooperatives; Ministry of Justice, Uganda Registration Bureau; Auditor General; Ministry of Energy and Ministry of Animal Industry and Fisheries; Ministry of Lands and Urban Development; and Ministry of Water and Environment.

21 11 Local revenue issues are received from LGs through official communication by LGs; working reports by technical staff of LGFC and MoLG; discussion during the quarterly Local Revenue Enhancement Coordination (LRECC) meetings which are hosted and chaired by LGFC; negotiation meetings 3 ; some cases draft reports from NonGovernmental Organisations operating in LGs; and reports by some research institutions like Economic Policy Research Centre (EPRC). In a case where a potential source has been identified, LGFC studies the proposal and updates/ reviews the proposal. The output is further discussed with the MoLG and relevant institutions that hold a stake in this process. If found viable and the source is a nontax revenue, the document is submitted to the Minister for approval. But if found viable and the source is a tax revenue, then the amended document is submitted to the Minister of LG who then submits it to Parliament for onward discussion, approval and later to the President to be assented. If an issue is researched on by LGFC and a recommendation is made to review some part of or all the legislation, then these are submitted to MoLG for further action. Here, the MoLG takes it on functionally and the necessary changes are done, with involvement of LGFC and other concerned parties including LGs. In the event of an issue that requires arbitration by LGFC, the areas of interest that relate to a specific ministry are discussed with that specific ministry, further researched on and a resolution is reached before the right advice is extended to the conflicting LGs. In addition, some of such issues are brought by ULGA and UAAU to the Negotiation process which is conducted by LGFC once in August/ September/ October every year, and in a few cases a resolution has been reached by the Negotiation team. 3. Ministry of Finance, Planning and Economic Development The Mandate of MFPED is: a) To manage and control public finances in a prudent and sustainable manner. b) To ensure efficiency and effectiveness of all public spending. c) To oversee the planning of national strategic development initiatives in order to facilitate economic growth, efficiency, stability, eradication of poverty and enhancement of overall development.specifically, on local revenues, the Ministry of Finance does the following function: Provide policy guidance on taxation and financial reporting (planning, budgeting and accountability). 4. Local Governments Functions of the LG council, as per LGFAR, 2007 section 6 (1) The LG council shall perform the following functions in relation to financial Management a. To authorise public expenditure, in accordance with section 82 (1) of the Act; b. To exercise general control over public revenue of the council in accordance with the Act, these Regulations and other instructions issued by a competent authority; c. To approve all annual plans and budgets for local government expenditures; d. To approve vote on account; e. To approve supplementary estimates; f. To approve policies; g. To consider reports produced by the Local Government Public Accounts Committee(LGPACs) and recommend action where necessary. 3 Negotiation meetings between LGs and sector Ministries are conducted once a year to discuss and agree on utilisation of conditional grants, as per Article 193 of the Constitution. These are chaired and hosted by LGFC.

22 12 a) Chief executive a. Ensure implementation of all revenue mobilisation decisions taken by the council. b. Support participation in local publicity initiatives in order to mobilise revenue. c. Ensure collection targets are achieved. d. Guide the council in application of revenue legislation. b) Executive committee a. Initiate and formulate revenue policies on revenue mobilisation which must be approved by the council. b. Receive and solve problems or disputes if any on revenues forwarded by Lower Local Governments. c. Receive for consideration and appropriate action, reports on revenue mobilisation from top civil servants and council organs. d. Participate in the publicity and sensitisation of taxpayers to mobilise revenue. c) The Role of Taxpayers Under Article 17(1) (g) of the Constitution of the Republic of Uganda, (1) it is the duty of every citizen of Uganda to pay taxes. Other perceived roles as well as obligations include: a. Complying with the relevant policies on revenue mobilisation as adopted by the Council. b. Participating in revenue mobilisation sensitisation meetings. c. Cooperating with tax assessment committees by providing accurate relevant data. d. Encouraging fellow taxpayers to meet their respective tax obligations. e. Ensuring prompt payment of taxes due and payable to the local council. f. Reporting tax defaulters and tax evaders in their areas of residence, to relevant councils. 5. Uganda Local Governments Association (ULGA) and Urban Authorities Association of Uganda (UAAU) a. To represent and advocate for the constitutional rights and interests of Local Govern ments with respect to their mobilisation of their local revenues, other funding and gover nance. b. ULGA s mandate is to unite Local Governments, and provide them with Association member services, as well as a forum through which to come together and give each other support and guidance to make common positions on key issues that affect Local Governance. ULGA carries out this mandate through lobbying, advocacy and representation of Local Governments at local, national and international fora. c. Although ULGA is not an organ of Government, the role of the Association is implied and recognised by the state in a number of arrangements. These include; appointment by the President of Members onto the Local Government Finance Commis sion (LGFC) 4, active participation in Sector Negotiations on the Conditional Grants with Sector Ministries, active participation in the Decentralisation Policy Strategy Framework (DPSF) and the Local Government Sector Investment Plan (LGSIP), and through repre sentation of local governments and their interests in national for such as the Northern Uganda Social Action Fund (NUSAF) and National Agricultural Research Organisation (NARO), Public Sector Management working Group (PSMWG), Decentralisation Man agement Technical Working Group (DMTWG), among others. 4 LGFC is formed of Political Representation as Commissioners (7 in number) where one is elected by urban LGs, three by rural district LGs and three by the central government) headed by a Chairman who is chosen among the Commissioners; and an appointed technical group headed by a Commission Secretary.

23 Issues and Challenges of the Legal frameworks Some relevant legal provisions are not adequately enabling as explained below: a) The legal framework which empowers LGs to levy, charge, collect and appropriate fees and taxes in this case in their areas of jurisdiction, is undermined by the CG and some political heads who have made countless pronouncements that undermine the efforts by LGs to boost their revenue performances a case in point is the abolition of G/tax, and bicycle licenses. To make it worse, some of the new taxable sources that have been introduced for the LGs to collect like the LG hotels tax seem not to have been well researched because LGs have found it to be extremely difficult to administer. b) For example, the LG Act (Chap 243) does not provide for effective mobilisation of LST, i.e. The tax base is narrow and the threshold is still high since a good number of prospective taxpayers have been exempted from paying LST (SEATINI & OXFAM, 2013); c) The LG Rating Act 2005 does not provide for effective mobilisation of Property rates; the exemption of owneroccupied residential houses significantly affected the performance of property rates. d) The Royalties Acts. For example, royalties from hydroelectricity generation should be accorded to the host LG as indicated by section 75(7) of the Electricity Act Chap 145 of This provides that a holder of a license for hydropower generation shall pay to the district LG in which his or her generation station, including any dam or reservoir, is situated, a royalty agreed upon by the licensee and the district LG in conjunction with the authority (Elec tricity Regulatory Authority). Under this, the anomaly is that any other LG like a Municipal council or Subcounty (where it happens to host this resource) cannot legally have a share on these royalties. e) Local revenue legal provisions on enforcement are very weak and even the penalties cannot be enforced. f) The changing policies of the Ministry of Trade, Industries and Cooperative and that of the LGs are not yet properly aligned, thus making administration of licenses complicated. The rates of license levied have almost nothing to do with levels of profitability or volume of business and this is causing a big concern among the business community. The current process of acquiring a license is not yet computerised, therefore, it is still a long and tedious process but can be improved. g) The incoming policy on management of public taxi/ bus parks by Associations as prescribed by MoLG has some shortcomings which include: lack of experience in managing the revenue collections, and ensuring that the payees/ vendors receive commensurate services. These lead to disagreements and wrangles. h) The LGA Chap 243 section 80(3) provides for an agency fee to be paid to a collector who collects revenue on behalf of government, in this case, the LGs are collecting PAYEE, WHT and VAT on behalf of URA but are not getting this agency fee. This is because URA uses the Income Tax Act which does not have such a provision for paying an agency fee. i) The Policy on the collection of veterinary fees by the LG department and remitted to the Ministry is silent about sharing this revenue with the LG; according to LGA section 80(1), this is one of the revenues that should either be retained by the LG or at worst shared with the centre.

24 j) The current legislation does not enable the host LGs central forest reserves to share anything directly from such resources. Some national forest reserves are all hosted by LGs although functionally, they are managed by National Forest Authority (NFA). Some of these are in National Parks while some are just protected within a LG. The major concern is that LGs are not directly benefiting or sharing on any revenues generated from lumbering or other activities done in these forests yet the local people also contribute to the protection and sustainability of these forests. They do this through desisting from setting them on fire; avoid ing encroachment even when they lack land for agriculture. k) A shaky Fiscal Decentralisation Architecture (FDA): The set provisions in the law on funding LGs are not precise and obligation is not well articulated, including setting of conditions for grants and grant formulation plus grant adequacy; the lead institution of this process is not clear (SEATINI & OXFAM, 2013). Subsequent funding to LGs is not protected and is vulnerable. LGs used to receive over 25% of the national budget in FY2003/04 but this has drastically fallen to 15% in 2013/ ibid

25 Analysis of Trends in Revenue Generation and Performance 3.1 Performance District Revenues Total Revenue The major revenue sources for districts are mainly three: Local Revenues, Central Government (CG) transfers, and Donor / NGO funds. Over the last four FYs (2009/ /13), district annual total revenue averaged Shs 21.8 billion, Shs 13.3 billion and Shs 15.4 billion for Kitgum, Lamwo (excluding 2009/10) and Pader, respectively. The analysis shows that the districts largely depend on CG transfers (Figure 3.1). In Kitgum, on average, CG transfers constituted 90.2%, donor funding 8.2% and local revenues 1.6%. In Lamwo, on average, CG transfers constituted 92.6%, donor funding 6.4% and local revenues 1.0%. In Pader, on average, CG transfers constituted 91.7%, donor funding 6.8% and local revenues 1.5% (Details contained in Annex 4). Figure 3.1: Trends in District Revenues 35,000,000 Kitgum 25,000,000 Lamwo Shs ( 000) 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 Shs ( 000) 20,000,000 15,000,000 10,000,000 5,000,000 Budget Actual Budget Actual Budget Actual 2009/ / /12 Local Revenue C.Govt Grants Budget 2012/13 Donors Actual Budget Actual Budget Actual Budget Actual 2010/11 Local Revenue 2011/12 C.Govt Grants 2012/13 Donors 25,000,000 Pader 20,000,000 Shs ( 000) 15,000,000 10,000,000 5,000,000 Budget Actual Budget Actual Budget Actual 2009/ / /12 Local Revenue C.Govt Grants Budget Actual 2012/13 Donors Source: Author s calculations based on data from LGFC and District Budgets Figure 3.2, shows revenue performance (planned versus realised) during FY 2009/ /13. In Kitgum, average performance was 81%; local revenue, CG transfers and donor funding was at 101%, 92%, and 44%, respectively. For Lamwo, average performance was 78%; local revenue, CG transfers and donor funding was at 92%, 83%, and 48%, respectively. For Pader, average performance was 83%; local revenue, CG transfers and donor funding was at 51%, 84%, and 40%, respectively.

26 16 Figure 3.2: Revenue performance by source Kitgum Lamwo 120% 100% 80% 60% 40% 20% 0% Local Revenue C.Gov t Grants Donors 2009/ / / /13 120% 100% 80% 60% 40% 20% 0% Local Revenue C.Gov t Grants Donors 2010/ / /13 Pader 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% Local Revenue C.Gov t Grants Donors 2009/ / / /13 Source: Author s calculations based on data from LGFC and District Budget Of the three sources, donor funding tended to show high levels of volatility 6, followed by local revenues and CG transfers. The low level of volatility of CG transfers is partly attributed to the fact that districts make their budgets based on Indicative Planning Figures (IPFs) from MoFPED, and in most cases, the CG releases are consistent with the IPFs. On the other hand, donor funding is unpredictable since the districts have little control on how much they generated from donors. For local reve nue, lack of clear revenue projections makes it hard to predict how much the districts can collect in a particular financial year Local Revenues Local Revenue refers to a sum of payments made to a Local Government (LG) by individuals and organisations meant to finance service delivery and devolved expenditure functions within a LG area and within the jurisdiction of a LG as approved by an Act of Parliament. Local revenue is important because it gives flexibility to LGs to fund their local priorities. Like in many LGs in Uganda, the three districts under this study face serious challenges in raising local revenues. As shown in the Figures 3.3ac, on average during the last FYs (2009/ /13), Kitgum, Lamwo and Pader districts raised Shs million, Shs million and Shs million, respectively. On average, Kitgum had the highest share of local revenue to total revenue of 1.6%, followed by Pader at 1.5% and Lamwo at 1.1%. 6 Refers to the amount of uncertainty about the size of changes in funding.

27 17 Shs 000 Shs 000 Shs 000 Figure 3.3a: Trends in local revenue generation in Kitgum district 500, , , , , , , , ,000 Source: Author s calculations based on data from LGFC and Kitgum district budgets Figure 3.3b: Trends in local revenue generation in Lamwo district 250, , , ,000 50,000 Source: Author s calculations based on data from LGFC and Lamwo district budgets Figure 3.3c: Trends in local revenue generation in Pader district 300, , , , ,000 50, / / / /13 Average 2010/ / /13 Average 2009/ / / /13 Average 2009/ / /10 Source: Author s calculations based on data from LGFC and Pader district budgets 1.8% 1.7% 1.6% 1.6% 1.5% 1.5% 1.4% 1.4% 1.2% 1.2% 1.1% 1.1% 1.0% 1.0% 0.9% 0.9% 0.8% 1.7% 2.6% 2.4% 2.2% 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% Share of total Revenue Share of total Revenue Share of total Revenue 2011/ / / / / / / /13 Majority of the local revenue is generated from fees and fines 7, taking on average nearly half of the total local revenue; 44% in Kitgum, 32% in Lamwo and 58% in Pader. This is followed by Local Service Tax in Kitgum and Pader and Miscellaneous income in Lamwo (Figure 3.4a c and Annex 5). It should be noted that the district authorities do not follow the Government Chart of Accounts (GCOA) when entering specific revenues collected in the books of accounts; this is reflected by the fact that most of the revenues are lumped up as miscellaneous income or other revenues' such that this source seems to generate a lot yet the contents are not established. 7 These include: application fees, advertisements/bill boards, agency fees, application fees, fees from hospital private wings, registration fees (e.g. births, deaths, marriages etc), registration of Businesses, and other fees and charges.

28 18 Shs ('000) Figure 3.4a: Trends in Sources of Local Revenue (Kitgum DLG) 240, , , ,000 80,000 40, / / /12 Land Fees Sale of produced Gov't assets Fees & Fines Miscellaneous income Local Service Tax Shs ('000) Figure 3.4b: Trends in Sources of Local Revenue (Lamwo DLG) 160, , , ,000 80,000 60,000 40,000 20, / / / /13 Licences Fees & Fines Miscellaneous income Figure 3.4c: Trends in Sources of Local Revenue (Pader DLG) Shs ('000) 240, , , ,000 80,000 40, / / / /13 Pader Land Fees Licences Fees & Fines Local Service Tax Source: Author s calculations based on data from LGFC and District Budgets The performance of the Local Service Tax (LST) and LG Hotel Tax (LGHT) which were introduced after the abolition of Graduated tax is very dismal. Lamwo did not record any revenues from LST. These LGs lack sustained followups from MoLG and LGFC, on local revenue enhancement. This is due to the fact that these institutions of LGFC and MoLG are poorly funded to do this function and cover all the 111 districts, 22 Municipal councils and 174 town councils, in any given financial year. Currently, the two institutions conduct support trainings in say a third of these LGs every year. Subsequently, the country is covered in say 4 years but then followup is also necessary and cannot easily be done concurrently with the trainings, in the same period. All the three districts are experiencing challenges with collection of LST. This is partly due to: a) they (districts) have no control on much of what they would collect i.e. the LST for government employees on payroll is deducted by the MFPED and then remitted to the respective LGs. However, the MFPED at times doesn t remit the LST amount expected by the LG and provides no clear explanation. It s hoped that with the decentralisation of the payroll in 2014/15, this will be resolved; b) LGs have almost no data on all eligible people who should pay LST such as Businessmen and Women (BMBW); the Self Employed Professionals (SEP); the Self Employed Artisans (SEA). In addition, the schedule for category of the Commercial farmers is not yet passed by Parliament; c) the LST threshold is too high; which excludes most people; d) lack of technical support by MoLG and LGFC in collection of LST; e) the LST has no receipts and this makes compliance and enforcement big challenges.

29 19 the threshold for LST is too high, thus, most people are exempted. In addition, apart from the civil servants whose LST is collected from the source, it s not easy to collect the LST from other employed people in the district, due to lack of records and manpower to enforce compliance.. Official, Kitgum DLG. The LGHT seems not a viable source for the three districts because they have no single hotel to collect revenues from. Hotels are located in urban councils; the districts are apparently like mere shells. A similar situation is happening with business licenses and property related revenues which are concentrated in urban councils. The three districts project revenue from property related fees implying that this source is there, but the collection is very poor. The reasons could be because people have just emerged from recent long time insurgency and are still too poor to pay; or lack of the will of the authorities to collect such revenues. The three districts have not yet established Reserve Prices for all their local revenues. They simply project a certain amount of local revenue from various sources and try to collect what they can using archaic methods with minimum effort. For instance, the assessment of business licenses is not based on the revenue potential; authorities just levy/charge and proceed to collect. They have not yet bothered to establish the ability of the various businesses to pay. This is illustrated by the big margin between the projected and actual collection. The impact of low local revenue generation is being felt in the three districts. The LG officials noted they are hit hard in terms of running the districts to the extent that some activities of the councils cannot be carried out....the local revenue is too small that it could not run the activities of the council in FY 2012/13 Chairman LCV, Lamwo district Central Government Transfers Under Articles 176(2) (e) and 193(1) of the Constitution of Uganda, the Central Government is required to take appropriate measures to enable LG units to plan, initiate and execute policies in respect of all matters affecting the people within their jurisdictions and to provide funding to LGs in form of unconditional, conditional and equalisation grants (Article 193(24) of the Constitution). Box 3.1 provides definition of each type of grant. Box 3.1: Types of Central Government Grants to Local Governments Unconditional grant is the minimum grant that shall be paid to local Governments to run decentralised services and shall be calculated in the manner specified in the Seventh Schedule to this Constitution. Conditional grant shall consist of monies given to local governments to finance programmes agreed upon between the Government and the local governments and shall be expended only for the purposes for which it was made and in accordance with the conditions agreed upon. Equalisation grant is the money to be paid to local governments for giving subsidies or making special provisions for the least developed districts and shall be based on the degree to which a local government unit is lagging behind the national average standard for a particular service. Source: Constitution of Republic of Uganda 1995, Article 193 (2), (3) & (4).

30 20 i At the moment, there are over 45 Grant transfers to the LGs (many of the former grants have been split to make few more). Specifically, the following grants are worth noting: 2 Unconditional Grants (one for urban authorities and the other for districts) 1 Equalization Grant; and 39 specific Conditional Grants and 3 crosscutting Conditional Grants (see Table 3.1 for details by sector). Table 3.1: Types of Conditional Grants Transferred to Districts Sector/ No of Grants Details of the Grants Tertiary Inst Salary, Primary Teachers' Salary, Primary Teachers' Colleges, Sec Teachers' Salary, Education(14) UPE Capitation Grant, Sec Capital Grant NW, Health Training, School Facilities Grant, School Inspection Grant, Construction of Sec Schools, Technical and Farm Schools, National Health Service Training Colleges, Community Tertiary Inst Salary, Primary Teachers' Salary, Primary Teachers' Colleges, Sec Teachers' Salary, UPE Capitation Grant, Sec Capital Grant NW, Health Training, School Facilities Grant, School Inspection Grant, Construction of Sec Schools, Technical and Farm Schools, National Health Service Training Colleges,Community Polytechniques, and Technical InstitutesPolytechniques, and Technical Institutes Agriculture (3) Health (5) Water & Sanitation (3) Feeder Roads (1) Social Development (5) ENR (1) Non sector specific (6) Administration & Management (7) Agric Ext Wage, NAADS and Production & Marketing PHC Wage, PHC NonWage, District Hospitals, PHC NGO Hospital Nonwage, and PHC Development Urban Water O&M, Rural Water & Sanitation and Sanitation & Hygiene District & Urban Roads Functional Adult Literacy, Public Libraries Board, CDA NonWage, Women, Youth & Disability, and Special Grant for PWDs Environment & Nat Resources N/Wage District Unconditional Grant, Urban Unconditional Grant, District & Urban Equalisation Grant, LGMSD, Monitoring & Accountability Grant and Hard to Reach Allowances IFMS Operational costs, DSC C/M Salary, Boards & Commissions (PAC, DLB & CC), Start Costs, DSC Operational cost, Salary & Gratuity and LLGs ExGratia Source: MFPED Over the last four FYs (2009/ /13), the annual CG transfers to Kitgum, Lamwo and Pader averaged Shs 19.5 billion, Shs 12.2 billion and Shs 14.0 billion, respectively (Figure 3.5ac). Figure 3.5a: Trends in CG transfers to Kitgum DLG 25,000,000 20,000, % 95% Amount (Shs 000) 15,000,000 10,000,000 90% 85% 80% Percentage 5,000,000 75% 2009/ / / /13 Share of total revenue 70%

31 21 Figure 3.5b: Trends in CG transfers to Lamwo DLG Figure 3.5c: Trends in CG transfers to Pader DLG Amount (Shs 000) 20,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 96% 94% 92% 90% 88% 86% 84% 82% 80% 78% Percentage Amount (Shs 000) 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 97% 96% 95% 94% 93% 92% 91% 90% 89% 88% Percentage 2009 / / / / 13 76% 2010/ / / 13 87% Amount Share of total revenue Amount Percentage Source: Author s calculations based on data from LGFC and District Budgets The CG transfers posses a number of challenges to LGs: a. The largest proportion of CG transfers is conditional in nature (see Figure 3.6ac); biased towards the national priority programme areas (NPPA) 8, which are dictated through the Indicative Planning Figures (IPFs). This limits the discretionary power of LGs to allocate resources and ensure that the particular needs of their communities are addressed. Central Government transfers to sectors such as agriculture and natural resources are relatively low despite their critical importance to the livelihood of most households and with potential to stimulate local economic development. Figure 3.6a: Composition of CG Grants to Kitgum DLG Figure 3.6b: Composition of CG Grants to Lamwo DLG Amount (Shs 000) Amount (Shs 000) 25,000,000 20,000,000 15,000,000 10,000,000 5,000, / / / /13 Discretionary Conditional Others Local Dev't grant Figure 3.6c: Composition of CG Grants to Pader DLG 20,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, / /13 Discretionary Conditional Others Local Dev't grant Source: Author s calculations based on data from LGFC and District Budgets Amount (Shs 000) 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, / /13 Discretionary Conditional Others Local Dev't grant 8 which include Primary Education, Primary Health Care, Roads, Agriculture extension (especially NAADS) and rural water and sanitation

32 b. In most cases, the CG transfers do not stick to the original IPFs; there are budget cuts during the FY, this affects service delivery at local levels. c. Most LGs have tended to concentrate on managing these resources and dedicate less time and attention to devise means of mobilising alternative sources of revenue. Attention on management of resources has also negatively impacted on their efforts to deliver services since accountability is geared towards the central government, but not the beneficiaries (the local communities). This has had a negative impact on the citizens appreciation of government services making taxpayers resent paying anything including local revenues Donor Funds LG officials tend to concentrate on CG transfers, but pay little attention on raising local revenues Female participant, FGD in Kitgum TC. The three DLGs receive substantial amounts of donor funds. Over the last four FYs (2009/ /13), annual onbudget donor funding to Kitgum, Lamwo and Pader averaged Shs 1.93 billion, Shs billion and Shs 1.12 billion, respectively. This represents about 8.2%, 4.8% and 6.8% of the total revenue for Kitgum, Lamwo and Pader districts, respectively (Table 3.2) Table 3.2: Trends in Donor funding District 2009/ / / /13 Amount ('000) % Amount ('000) % Amount ('000) % Amount ('000) % Kitgum 1,829, , , ,532, Lamwo , , ,597, Pader 2,782, , , , Source: Author s calculations based on data from LGFC and District Budgets 22 The amount captured here is onbudget (funds that are recorded in the district budgets), however, there are substantial amount of offbudget funds (funds not recorded in the district budget) which various donors and NGOs spend in the districts. However, donor funding comes with a number of challenges which include, among others: Unpredictability: though donors often sign MoUs with the district indicating how long they will operate in the district, there is unpredictability when it comes to when the funds will be released for the agreed activities. In some cases, failure of donors to disburse funds that are recorded in the district budget disrupts implementation of programmes. Some LGs tend to concentrate much of their efforts on donor funded activities; ignoring other core LG functions. Some donor projects use LG staff for their projects thus crippling service delivery of core functions. 3.2 Local Revenue Mobilisation Strategies and Challenges The Central Government requires LGs to develop Local Revenue Enhancement Plans (LREPs), and this forms part of the annual assessment of the performance of the LG by the Ministry of Local Government (MoLG). The three districts had prepared the three year LREPs which were approved by the respective district councils.

33 23 The LREPs are developed through a consultative process involving all the key stakeholders in the district. For instance, in Kitgum district, the consultative process for the LREP (2012/132016/17) covered a very wide section of the district stakeholders as evidenced through a consultative meeting held in Kitgum District Council Hall on 24th March 2012 with Finance planning administration and production Committee and the District Technical staffs. A number of tours to the sub counties were made in a bid to assess what the returning population can do in terms of livelihood and how the District can support them grapple with their livelihood challenges (Kitgum DLG, 2012). However, there is no evidence that the LREPs had really increased local revenue generation capacity within the three districts. The implementation of the plans is partly hindered by lack of funding and poor attitude by some top district leaders who do not take local revenue generation seriously....i know we have a LREP but I have not seen its effectiveness CAO, Pader DLG. It was noted by some district officials that during the budget conference, revenue generation issues come up, but no action is taken. Districts have taken the easiest and softest approach to revenue mobilisation by entirely relying on the CG transfers and donor funds. Box 3.2: Activities geared at improving local revenues: Kitgum district Complete the construction of the new markets in Kitgum main market, Kitgum Matidi, Orom, Namokora, Lagoro sub counties. Rehabilitate the old markets in the remaining sub counties to attract more traders and consumers Public awareness campaign to explain property rates through information leaflets and radio adverts Radio mighty fire Kiti FM, peace FM and poll fm Radio Registration & valuation of properties Contract out collection of property rates Regular updating of the property valuation list Organise and run a training workshop on Local Revenue Mobilisation and Administration Registration of businesses in the district Procure a computer to maintain the revenue generation data base Carry out sensitisation and tax education meetings for the business community/ Hotel & lodge owners Sensitisation of the public on the Land Act 1998 Mount revenue collection operations in sub counties Tender out the collection of revenue from markets Charge a development levy of 2% on all contracts awarded by the district; however, this levy was declared irregular by the Auditor General, but some LGs still collect it. Prepare a physical plan for the district and zone it Carry out surveys of the planned land and service the sub county plots Source: Kitgum DLG (2012); Approved Five Years Local Revenue Enhancement Plan; 2012/132016/2017 To enhance the performance of local revenue mobilisation efforts, the CG has been assisting the LGs through the following: The MoLG has set up a local revenue enhancement grant to support districts that develop local revenue enhancement plans. MoLG inspectors regularly visit the district to give technical advice on revenue enhancement, among other issues. The capacity of top district leaders such as the CFO and CAO in local revenue mobilisation has been enhanced. The MoLG developed training manuals and guidelines for Districts to use in enhancing local revenue collections.

34 24 Box 3.3: Potential Sources of Local Revenues: Lamwo district Revenue sharing from potential Mineral exploration (i.e. rock mining) Taxes of agricultural products such as Simsim Boarder markets (at least 4 exit points to Southern Sudan) Rehabilitation of Agoro irrigation scheme; which will increase agricultural production Tourism sites such Luturu of Amin, King George, Agul forest research Changing people s attitudes towards work Source: Chairman LCV, Lamwo district Despite all these interventions, the three districts have not been able to raise any substantive revenues from local sources. There are a number of challenges districts face in generating local revenue, some of them include: a. Low tax base: most of the households are largely subsistence farmers with no formal business and enterprises that can be taxed. The abolition of Graduated tax the only direct tax paid by majority of people has made the situation worse. Up until the end the financial year 2004/05, graduated tax was the major single source of local revenue for the district....we used to depend on GTax as a major source of local revenue, but it was abolished... Ass. CAO, Kitgum DLG Under the current law, urban local councils (municipalities and town councils) do not remit any local revenues to the district; however, these have highest sources of local revenues such as business licences and fees. Thus, the districts depend on rural lower local governments (sub counties) whose local revenue sources are very low. In fact, nationally, local revenue contribution has shifted from 78% in 2008/09 for districts to 54% in 2010/11; while urban councils have improved from 22% in 2008/09 to 51% in 2010/11 (LGFC, 2012). b. Concentration of most taxes in hands of the central government: The major sources of revenues such as PAYE, income taxes, corporate taxes, VAT, WHT, etc. are controlled by the Uganda Revenue Authority (URA). The district has no powers to collect this revenue and later on share on the proceeds. In addition, the collection of LST is done by the central government, however, LGs sometimes do not realise the remittances. c. Poor attitudes of citizens towards paying taxes. There is growing resistance by citizens towards paying taxes. This is partly attributed to the fact that citizens do not see the value of paying taxes amidst poor service delivery in their communities....communities don t want to hear anything about taxation Ass CAO, Kitgum DLG. In addition, districts are also failing to show how the taxes generated are linked to the services they provide to the citizens. The current decline in services has worsened the taxpayers attitude towards any local revenue generation and thus a spiral decline in local revenue performance generally....why should we pay taxes when the subcounty can t provide services; such as good roads? Male FGD Participant; Padibe, Lamwo district.

35 25 FGD in Padibe Town Board, Lamwo district Under Articles 176(2) (e) and 193(1) of the Constitution of Uganda, the Central Government is required to take appropriate measures to enable LG units to plan, initiate and execute policies in respect of all matters affecting the people within their jurisdictions and to provide funding to LGs in form of unconditional, conditional and equalisation grants (Article 193(24) of the Constitution). Box 3.1 provides definition of each type of grant. The poor citizens attitude towards taxation is also attributable to the fact that LGs have done very minimal community sensitisation on local revenue generation. Sensitisation is only done when LGs are introducing new taxes or levies, and mainly with the business community not the entire community. The LG officials interviewed attributed the lack of community sensitisation to lack of funds to organise meetings and poor attitudes of communities towards attending meetings; they (communities) would only attend such meetings if they are assured of transport or lunch. d. Inadequate involvement of politicians some politicians, especially at LLGs are not supportive of local revenue generation efforts. They fear to annoy their voters....there is lack of coherent messages by politicians on taxation... Deputy CAO, Lamwo DLG. Some politicians think the LG has a lot of money from the CG; so there is no need to harass citizens to contribute to local revenue generation....they (politicians) pass the budget, but some discourage citizens from paying taxes Chief, Namakora S/C. Though this was mentioned by the district technocrats, the politicians we interviewed denied it. They noted that they fully support local revenue generation. For instance, the Chairman, LCV Lamwo district said:...i don t allow any politician to discourage people from paying taxes... e. Insufficient financial support for investments in local revenue generation. The districts don t provide sufficient funding for enumeration, assessment, appeals, mobilisation, setting reserve prices of each revenue source, and sensitisation of communities. f. High cost of collecting some types of local revenue: Given the high numbers of informal businesses and activities which are highly subsistence in nature, it is very costly to collect certain types of local revenues. In most cases, the cost of collection is higher than the amount collected....in some cases, the cost of printing the receipt is more than the revenue generated... CFO, Kitgum DLG Five Years Local Revenue Enhancement Plan, 2012

36 ...introduction of new local revenue sources is less feasible...since the amounts to be realised are negligible and the costs for collecting it may outstrip the actual revenues collected, and finally a big number of such new revenue sources are politically unacceptable under current circumstances where the population is still over burdened with returning home after decades of LRA insurgency Kitgum DLG; Five Years Local Revenue Enhancement Plan, g. Insufficient data on sources of local revenue. There is lack of data on employees in the private sector, types of businesses in the district, land based activities; many local hotels don t maintain books of accounts, and limited management emphasis on developing and maintaining effective data bases of potential tax payers. Some hotel proprietors keep two sets of records, one for tax purposes and the other for management purposes. This has always led to underdeclaration of guests received Accounts Assistant, Kitgum Town Council h. Administrative weaknesses Insufficient staff and poorly skilled revenue staff; none can set adequate reserve prices for local revenue sources; poor staff attitude and low morale. Some parishes do not have parish chiefs and even those with chiefs delay the assessment. Worse still, the current parish chiefs executing the collection of revenues have not been duly appointed as revenue collectors as provided in LGFAR. This implies that they cannot be legally accountable for their actions. we don t have a strong revenue department due to low staffing levels CAO, Kitgum DLG. parish chiefs are given a daily allowance of Shs 4,000 irrespective of amount of revenue collected FGD, Namakora S/C Kitgum. Inadequate enforcement mechanisms: the districts lack designated revenue enforcement officers; they depend on police, which sometimes are costly. Enforcement is difficult when dealing with agricultural produce; some traders buy from gardens and other operate during night. Lamwo is a leading producer of Sim Sim in Uganda we estimate about Shs 10 billion from buying the produce.unfortunately, the district is not benefitting in terms of revenue. Partly because, it s difficult to tax such produce for instance, we established check points during Simsim harvesting period, but didn t have manpower to manage them Deputy CAO, Lamwo DLG. LGs are required to collect LST, but they are unable to collect it from employees (especially private and nongovernment organisations) due to inadequate enforcement and compliance from employers. There is also friction between the districts and sub counties on the sharing of the LST emanating from the fact that most NGOs have operated in sub counties. private agencies and NGOs are supposed to remit their LST to the district, but some don t... partly due to poor tracking and enforcement Senior Accounts Assistant, Lamwo district. 26

37 27 Inadequate supervision and monitoring of LLGs by HLGs on revenue generation. Supervision is hurriedly done on quarterly basis. Senior District technical staff and the political wing (Finance committee) rarely go out to monitor and crosscheck on the activities of the revenue collectors. Consequently, most sub counties under declare or fail to declare how much revenue they collect. we have challenges of realising the 35% from sub counties; the rate of noncompliance is very high Chairman LCV, Lamwo DLG In Lamwo district, they have put sanctions on subcounties which do not remit the 35%. For instance, by withholding the 65% remittance from the central government and sometimes holding the subcounty chiefs personally accountable. The major challenge remains ascertaining the actual amounts collected by the S/Cs without intense supervision and monitoring. However, the S/Cs complained that the 65% has been reducing every financial year. i. Changes in business activities. For instance, the current trend of Auction markets, which are not gazetted since they keep changing locations in ungazetted places. This has made collecting taxes from such vendors very difficult. In addition, some subcounty officials have taken advantage of difficulties in estimating revenues from such markets to underdeclare the amount of revenue they collect. j. Misuse of revenue collected. Some of the top LG officials interviewed did not rule out the possibility of some of revenue collected not remitted to the treasury through spending at source. Some revenue collectors, especially Town Agents and Parish Chiefs take advantage of poor supervision and monitoring to siphon some of the money.... I can t rule out the possibility of some of the revenue collectors not declaring all the revenues, sometimes using their own receipts, under assessment of tax payers among other vices...even if we dismiss some, it s still a big challenge Deputy CAO, Lamwo DLG It was noted by some respondents that during auction market days, some of the revenue collectors and other leaders collect money from vendors using their own receipts....on auction market day, most leaders turn into revenue collectors...however, you cannot track how much they collect... Deputy CAO, Lamwo DLG k. Poor attitudes and methods by some government officials towards local revenue generation. Most LG officials are not bothered about local revenue generation; after all, they are assured of transfers fromcg. This was evident during an interview with a top LG official in Pader who said:...i know we have a LREP, but I have not seen it being implemented during the last two years. All the three districts collect very little or none from property related fees, business licensees, user charges like market dues, other fees. This is partly attributed to reluctance by the authorities to collect such revenues l. Restrictive legal requirements: For the LG to introduce new taxes, levies, and duties, it must get clearance from Ministry of Trade and Industry. However, this sometimes takes time. For instance, the three DLGs introduced a development levy of between 2%3% on all contracts (goods and services). Despite being a good source of revenue for DLGs, it was queried by the Auditor General as illegal since it had not been gazetted by the Ministry of Trade and Industry or passed by an act of Parliament.

38 In addition, some development partners contested it and it has been difficult to collect the levy because the IFMS system does not capture the levy since it is not captured in the design of the system. m. Details of challenges per revenue source are presented in Annex Strategies of Enhancing Local Revenue Mobilisation Presented below are some of the proposals for improving local revenue mobilisation: Most respondents strongly recommended the reintroduction of the G.Tax as a way of improving local revenues and increasing citizen sense of responsibility. Decentralisation of some of the taxes such as PAYE, WHT, among others or URA should share a portion of taxes remitted by the individual tax payers in the affected LGs. The district should enhance regular monitoring and supervision of lower LGs to ensure that all potential revenues are collected, recorded and submitted. LGs in collaboration with the URA need to create a comprehensive database for all the eligi ble tax payers for efficient identification, assessment and collection. The database should regularly be updated. The number of tax collectors should be increased: LGs should recruit, train and retain staff to ensure effective tax assessment, collection and enforcement of local revenue collection. The districts should introduce a system of reward and penalties for revenue collectors to induce staff to collect more revenue. 28 Box 3.4: Proposals for increasing local revenues: Lamwo district Procurement of vehicle for the finance department Conduct monthly revenue return meetings Auction markets to be taken over by the district (they will be tendered out) Levy 2% development on contracts on goods and services. Source: Deputy CAO, Lamwo district Ensure timely assessment of the various revenue sources like trading licenses and operational permits to enable tax payers prepare and honour their obligations. Collected local revenue needs to be allocated to all the sectors, but with bias to sectors with potential to generate more tax revenues, especially agriculture. This will boost value addition and higher productivity, people s incomes and more revenue generation. Sensitisation and awareness raising should go beyond the business community to include the entire community through community meetings, tax sensitisation meetings and radios. To reduce revenue losses, the LGs need to emphasise the use of financial institutions such as banks or other means such as use of mobile money when paying taxes, levies and licences. Strengthen collaboration between LGs and URA on collection of trading/ business licenses, property taxes, royalty payments and to ensure that all due remittances are returned to the affected LGs. Positive and active involvement of politicians in revenue enhancement, since politicians are directly accountable to their communities. Tax collection should be carried out early enough to coincide with harvest periods. LGs should ensure effective and efficient contract management of contracted out revenue sources. Details of proposals improving collection per revenue source are presented in Annex 6.

39 Sectoral Budget Allocations 4.0 Revenue Allocation and Utilisation Since LGs depend largely on CG transfers, their flexibility to budget is constrained by the CG conditional grants; thus the budget allocations are consistent with the CG transfer which is biased towards the national priority programme areas (NPPAs). Based on analysis of the district budget for FY 2011/ /13, five sectors (Education, Roads, Health, Administration, and Production) take the lion s share of the district s budgets; 93.2%, 90.1%, and 79.5% for Kitgum, Lamwo and Pader, respectively (Table 4.1ab and Annex 8). Table 4.1a: DLG Budget Allocations Kitgum Lamwo Pader Sector 2011/ / / / / /13 Administration incl. transfers 2,758,909 2,503, ,694 7,057,578 1,870, ,838 to LLGs Finance 199, , , , ,075 87,179 Statutory Bodies 321, , , , , ,025 Production & Marketing 1,719,648 1,762,266 1,601,564 1,195,892 1,443,216 1,147,362 Health 2,846,865 3,682,226 1,385,238 1,198,348 2,263,256 1,324,817 Education 5,826,603 10,517,335 4,798,872 3,664,305 4,936,599 4,487,543 Roads and Engineering 1,954,154 5,625,409 1,418,872 1,754,915 3,075,826 1,574,224 Water 261, , , , , ,656 Natural Resources 30, ,151 18,973 40,810 10,632 53,692 Community Based Services 164, , , ,419 2,469,521 1,692,944 Planning 91,231 71,892 34,387 57,322 26, ,103 Internal Audit 42,462 38,207 10,278 49,215 10,717 30,806 Total 16,217,297 25,837,918 11,194,025 16,333,793 16,763,648 11,853,189 Source: Author s calculations based on data from DLG Budgets Table 4.1b: Top District spending sectors (average) Kitgum Lamwo Pader Sector % Sector % Sector % Education 38.3 Education 32.7 Education 33.7 Roads & Tech. Services 16.9 Administration incl. transfers to LLGs 25.0 Roads & Tech. Services 15.8 Health 15.9 Roads & Tech. Services 10.8 Community Based Services 14.5 Administration incl Production 11.7 Health 12.3 transfers to LLGs Production 8.7 Health 9.9 Production 9.1 Source: Author s calculations based on data from LGFC and District Budgets A further analysis shows that districts spending is largely recurrent in nature, with more than half total spending on recurrent activities (wage and nonwage). Average recurrent spending during the four FYs, was 59.0%, 50.0% and 59.6% for Kitgum, Lamwo and Pader, respectively (Figure 4.1ac). It should be noted that all donor funding is categorised as development spending; which increases the proportion on development spending. However, it should be noted that development spending is not just for capital spending (e.g. building new facilities, repairs to existing physical assets).the district s development spending is heavily oriented towards nonwage recurrent expenditures such as transport rather than capital expenditures. The low level of capital spending has negative implications on infrastructure development which is critical to local economic development and local revenue generation.

40 30 Figure 4.1a: Economic composition of Kitgum DLG Budget 25,000,000 Amount (Shs 000) 20,000,000 15,000,000 10,000,000 5,000, / / / /13 Recurrent wages Recurrent Non wages Devt GoU Devt Donor Source: Author s calculations based on data from Kitgum DLG Budgets Figure 4.1b: Economic composition of Lamwo DLG Budget 18,000, ,000 14,000,000 Amount (Shs 000) 12,000,000 10,000, ,000 6,000,000 4,000,000 2,000, / / /13 Recurrent wages Recurrent Non wages Devt GoU Devt Donor Source: Author s calculations based on data from Lamwo DLG Budgets Figure 4.1c: Economic composition of Pader DLG Budget 25,000,000 20,000,000 Amount (Shs 000) 15,000,000 10,000,000 5,000, / / / /13 Recurrent wages Recurrent Non wages Devt GoU Devt Donor Source: Author s calculations based on data from Pader DLG Budgets

41 Utilisation of Local Revenues Local revenues provide the most discretionary source of financing which avails LGs the opportunity to allocate their own priority activities without reference to the centre. This enables LGs to exercise their devolved powers and enhances their autonomy in decision making.the allocation of the locally generated revenue is based on district priorities and some formula (see Box 4.1) is employed to ensure that all sectors get some portion of the local revenue. However, during implementation, not all sectors get these funds. Consequently, the budget lines funded through local revenue cannot be operationalised effectively hence poor service delivery. Box 4.1: Kitgum DLG Local Revenue Allocation formula Finance 21%; Administration 20%; Council and statutory bodies 16%; Planning 10%; Production 7%; Education 5%; Health 5%; Works 4%; Health 4%; Community Based Services 4%; Natural Resources 4%. Source: District Planner It should be noted that most of the LGs officials interviewed were not sure how the local revenue funds are allocated to different sectors. They claimed it is Chief Finance Officers (CFOs) who usually do the allocations. Some of the CFOs interviewed noted that they consider the funding requirement of council and cofunding (mainly for NAADS, FAL, and LGSMD) requirements. Our analysis shows that it is mainly finance, planning, statutory bodies, and internal audit that share the funds from local revenues (Table 4.2 and Annex 9). The LG official interviewed noted that, these particular sectors play a vital role of a coordination function yet they have no grant from the central government. Besides, most of the LG running costs cannot be easily allocated funds (such as unfunded mandates like security, national functions) to any sector are loaded onto either administration or finance. Statutory bodies largely consist of councillors or members appointed by the Council have to operate and have due influence in the discretionary funds. Table 4.2: Share of local revenue in sector budget Kitgum Lamwo Pader 2011/ / / / / /13 Finance 19.6% 18.7% 23.4% 23.4% 9.1% 33.4% Planning 16.8% 10.3% 0.0% 7.2% 12.0% 8.1% Internal Audit 12.7% 23.9% 25.6% 5.8% 24.2% 22.4% Statutory Bodies 22.7% 9.0% 7.6% 8.9% 7.6% 5.6% Administration 0.5% 3.3% 2.9% 1.0% 4.2% 3.4% Natural Resources 24.9% 2.4% 0.0% 0.0% 7.3% 2.8% Production 0.5% 0.8% 0.4% 0.8% 0.1% 0.2% Health 0.3% 0.5% 0.0% 0.0% 0.1% 0.1% Education 0.2% 0.1% 0.0% 0.0% 0.1% 0.0% Roads 0.2% 0.1% 0.0% 0.0% 0.2% 0.3% Water 0.2% 0.5% 0.0% 0.0% 0.1% 0.3% Community Based Services 8.0% 6.1% 0.0% 7.2% 0.2% 0.1% Source: Author s calculations based on data from LGFC and District Budgets The minimal or no allocation of local revenues to service delivery sectors is partly attributable to the fact that, such sectors are largely funded by CG transfers and that local generated revenues are meant to provide the decentralised functions such as running the district councils (see Box 4.2)

42 32 Box 4.2: Some of the uses of local revenue: Meeting Council sitting expenses. Council Committee sittings. Office operational expenses at the various levels of local governments & Administrative Units. Supervision and Monitoring of local government projects/investments and other priority activities. Repair and maintenance of local government facilities and infrastructure. Cofunding of donor funded projects in Local governments. Supplementing salaries and wages Other local development programmes 4.3 Accountability Mechanisms LG Accountability systems There are a number of agencies at LG to ensure financial accountability of both revenues and spending. These include: a. Chief Administrative Officer (CAO); supposed to supervise, monitor and coordinate the activities of the district and lower council s employees and departments and ensure account ability and transparency in the management and delivery of the council s services. Section 39 (2) of the LG Finance and accountability regulations, the CAO shall ensure that revenue collect ed by the higher LG is remitted to LLGs. b. Town clerk; responsible for the expending of the council s funds and becomes the accounting officer of the relevant council. c. Sub County Chief; with the duty to collect and account for the local government s revenue within his or her area of jurisdiction. Section 39 (1) of the LG Finance and accountability regula tions, the Chief has to ensure that higher LG s share of revenue collected is remitted promptly. d. Chief Internal Auditor; prepares quarterly audit reports and submits them to the council giving a copy to the local government public accounts committee. e. Local government Public Accounts Committee (LGPAC); examines the reports of the Auditor General, chief internal auditor and any reports of commissions of inquiry. f. Auditor General; audits the accounts of every local government council and administrative unit. The Auditor General gives the report of the audited accounts to Parliament; the Minister responsible for finance; the local government public accounts committee; the Local Government Finance Commission; the Inspector General of Government; and the resident district commissioner, among others. g. MoLG Inspection unit and other agencies; to inspect books of accounts, records, stores and any other documents. However, the above institutions tend to concentrate on accountability of expenditure; less effort is put on accountability of locally generated revenues. This is evidenced by the fact that, the information on local revenue sources provided in the district approved budgets is scanty and sometimes missing. Some accurate information on local revenue is provided in the district final accounts; however, such information is not properly reflected in the district budget performance reports and not fully publically available.

43 33 Section 60 (1) of the LG Finance and accountability regulations, each Administrative Unit shall keep (b) a revenue register and (2), each parish or ward and village council shall maintain registers of all tax payers and business units and make returns to the subcounty council or the division council as the case may be. However, judging from the scantiness of information on each of the revenue sources (discussed in Section 3), above, it s plausible to say that this requirement is not met by the three districts. The centralisation of the appointment and short tenure of the Chief Administrative Officer (CAO) weakens accountability of local revenue partly because the CAO is not fully focused on the mobilisation and management of local revenue, but rather, accounting for the CG grants. Whereas the legal provisions for sharing the locally raised revenues are well stipulated, and whereas the law further indicates the remedy for noncompliance of remittances, there is gross abuse and noncompliance on both the LLGs (sub counties) and HLGs (Districts). This greatly undermines the need for both authorities to be held accountable and transparent for (and in the use) of the funds they collect locally thereby affecting service delivery. It should be noted that Government developed the Uganda Public Financial Management Strategy ( ) which gives guidance on matters of budget credibility, improved budget control and compliance to rules and regulations. If effectively implemented, it could go a long way in increasing support from the tax payers in generating revenues, allocation and utilisation Accountability to Citizens It is generally assumed that increased local revenue promotes local democracy, more public accountability, arouses more citizen interest in how services are delivered and increases the capacity of local councillors to serve their communities in accordance with their preferences. It is through locally generated revenues that the local population, who are the contributors, can generally derive the right to demand for accountability and services. Locally generated revenues should promote ownership and sustainability of programmes and services, a basic tenet of decentralisation. Public accountability is a key indicator in government s responsiveness towards good governance. However, it is important to assess the situation through which citizens could be effective in seeking such public accountability, especially given the fact that government is not likely to initiate it on its own. Though local governments are obliged to inform or be accountable to their citizens on how they allocate and utilise the taxes they collect from citizens, however, public accountability is very limited since most FGD participants felt that government officials are corrupt and very inefficient To build trust, information to the public is crucial (Rothstein, 2000). Citizens access to and right to information is often seen as a necessary condition to achieve accountable, transparent and participatory governance and peoplecentred development (Jenkins & Goetz, 1999). Information to the public on tax revenues collected, budget allocations and how to report misuse of tax revenues and corruption are, however, in scarce supply, according to the most FGD participants. Citizens have an important role to play in ensuring accountability, but there is general apathy and the population seems disempowered to hold leaders accountable. They do not realise the leverage they hold over policy makers and politicians, and on service providers. None payment of any direct taxes is a major contributor to such attitude because citizens are devoid of entitlement and power that arises from payment of direct taxes (ACODE, 2012).

44 The overdependence on nondiscretionary central government transfers is affecting their discretion powers and their horizontal accountability (accountability to local citizens). While efforts to increase local participation in the budgeting process at the lower levels of government were better synchronised and integrated with the national budget planning process as part of the Fiscal Decentralisation Strategy (FDS), the substantially reduced discretion of LGs over expenditures and lower funding levels constrained participation (World Bank, 2014). There are a number of challenges on the accountability mechanisms at LG levels in regards to local revenue generation, which include: 34 Minimal council interest in local revenue issues: The district council is responsible for hold ing the technical staff accountable. The council approves the budgets and work plans each finan cial year and also discusses the budget performance reports. However, the discussion tends to be biased towards spending, rather than revenue generation. All revenue generated by the district (including local revenues) are declared to the council and discussed in general terms....the council sets targets on local revenue collection...but we rarely hold the technical officers accountable when targets are not met Chairman, LCV, Kitgum DLG. The effectiveness of the council is constrained by the fact that most elected leaders (especially councillors) lack the requisite capacity to perform their duties. For instance, the revenue performance information is currently presented in the Output Budgeting Tool (OBT), which seems to be too technical to many politicians....the district council is not involved in the accountability of local revenues...we use our internal systems (internal audit) Senior Accounts Assistant, Lamwo DLG. Inadequate information on local revenue generated: Most LGs tend to provide very scanty infor mation on the amount of local revenue generated by sources. Since LGs don t publish budget performance reports, the only source of credible information on local revenues are the final accounts, but such documents are not publically available. LGs submit the final accounts to the central government line ministries and agencies such as MoLG and LGFC, to comply with the accountability requirements. In addition, most LG staff (such as Chief Administrative Offic ers CAOs, Town Clerks and their deputies) are appointed and deployed by the CG and thus are more responsive to CG demands. This only promotes upward accountability. Limited access to information on local revenue. Though the access to information act, 2005, requires public officials to provide information in their possession to any citizen who asks for it at no cost, it s not the case at LG levels. During the FGDs, community members noted that it was almost impossible to access any information from LG officials. The research team also experienced challenges accessing information on local revenues, especially that from LLGs....it s hard to obtain any information from those people (LG officials)...they ask you to explain why you want it, and even if you give a genuine reason (like I would like to know how you are using our funds), they will not provide it...they can dodge you until you give up. Male FGD participant, Pader Town Council

45 35 Some LGs tend to display information (though displayed inside their offices) on transfers from the central government; however, they don t display any information on local revenues (amount collected and how it was utilised). To make matters worse, most citizens are not aware of this information, do not know how to use it, feel insufficiently empowered to use it, or feel nervous about the consequences of using it. This was evident during the FGDs when commu nities said that they saw the information on the noticeboards of the sub counties, but did not know what to do with it. Minimal discussion on revenue generation during the planning and budgeting process: The planning and budgeting process tends to concentrate on spending; how to allocate the funds (mainly received from the CG). Little or no discussion is made on ways of generating reve nues to fund the planned activities....we have not engaged communities on revenue generation during the planning process District Planner, Kitgum, DLG. 4.4 Strategies of enhancing local revenue allocation and utilisation Presented below are some of the proposals for improving local revenue mobilisation: There is need for collaborative efforts between the LLGs and HLGs towards better strategies to boost local revenues at all levels based on wellarticulated challenges, experiences and good practices. The district council needs to develop strong interest in local revenue generations by setting targets and ensuring that such targets are met. LGs need to ensure that the participatory planning processes incorporate issues on revenue generation strategies. The districts should provide visible services to the citizens from the collected revenues so as to improve on compliance in tax payment. To increase transparency and accountability, all the amount of revenue collected by source should be displayed on public noticeboards, for the citizens to know how much they are contributing to the running of the LG. Though some efforts have been made with support from USAID GAPP programme in Kitgum, the LGs should ensure that the district final accounts and audit reports are publically accessible. LGs should print serialised books of accounts intended to improve tracking of revenue and accountability by officials at the LLGs

46 5.0 Community Awareness, Attitudes, Participation in Local Revenue Mobilisation and Utilisation In this section, we discuss the levels of community awareness, perceptions and attitudes and participation in revenue mobilisation, allocation and utilisation processes in the three districts. We also examine the platforms that are available for participation and awareness on domestic resource mobilisation processes. 5.1 Community Awareness Citizen s awareness of taxation has an impact on tax compliance and demand for effective service delivery in any given country (SEATINI, 2013). The study assessed the level of citizen awareness of local taxes, fees and charges. Through the Focus Group Discussions (FGDs), most respondents were aware of taxes, fees and charges collected by local governments such as : market dues, business/hawker/trading licenses, development levy, business registration, ground / plot rent, dam revenue (in Namakora), rent / hire of public buildings, local service tax, group registration fees, occupation permits. Citizen tax awareness has a direct impact on tax compliance and tax revenues. Most respondents are aware of direct taxes, fees and charges since they directly affect them. Over 60%, especially those in urban centres (Pader TC, Kitgum TC, Padibe Town Boards, and Pajule Town Boards), had actually paid some of these taxes. Direct taxation is most likely to have more impact on citizen engagement with their government, since they directly contribute to the tax revenues (SEATINI, 2013). Despite the fact that some respondents reported to have paid certain taxes, majority of them are not aware of how most of the taxes are calculated or assessed. Most of the respondents noted that they pay taxes because they anticipate public services such as education, safe water and health care. According to the respondents, some of the most serious problems hampering local revenue generation through tax collection in their districts include: Low tax base; most people are peasants. Poor methods of tax collection. Corruption; some revenues collected are not remitted to the LG treasury. Tax collectors are not well paid; they siphon some of the revenue collected. Lack of information; people get to know about taxes during tax assessment. Tendering: some of the tendered don t submit all the revenues to the LGs. Tax avoidance; some people relocate to places (especially rural areas) where taxes are low. The procedure used in tax assessment is not clear to most tax payers. The low level of local revenue generation is affecting service delivery at community level. The LLGs are not able to provide services needed by the community. the challenge of service delivery in the district is due to low levels of local revenues Female participant, FGD in Kitgum TC. 5.2 Community Attitude and Perception Citizen s attitude and perception can help to identify perceived weaknesses of the local revenue generation efforts, and enable tax authorities to focus attention on improving local revenues. 36

47 37 Respondents said that they support the government in collecting taxes, levied and fees for the following reasons: a) Citizen s perception of local taxes is related to service delivery. Revenues help government to run and provide services like education, health, water, roads, provision of electricity, among others. They also help government to subsidise provision of essential services for those who cannot afford them such as health care, education etc. if we don t pay taxes, how will the town board provide services? Male participant, FGD in Padibe, TB, Lamwo Some respondents noted that taxation increases government visibility in the community....government functions are felt at the community level because of taxation Elderly Man; FGD, Namakora S/C, Kitgum b) Certain taxes help to influence behaviour of people such as reduction in consumption of harmful goods like alcohol (waragi). They also tame other behaviours such as children dropping out of school in fear of paying taxes such as Graduated tax (eligible for any person above 18 years who is not a student)....due to the absence of G.Tax, there are high rates of school drop outs; since they know they will not be required to pay Woman participant; FGD, Namakora S/C, Kitgum FGD in Namakora Sub County, Kitgum district c) Direct taxes somehow enhance citizen responsibility and ownership of government programmes and property. For instance, the abolition of GTax (the only form of direct tax) which was abolished, partly due to its high administrative costs, however, it would encourage the citizenry to be more responsible and demand accountability. Taxes, especially direct taxes, may make people to work harder since they have to meet their tax obligations. when men used to pay G.Tax, they were more serious and hardworking but nowadays, men don t want to work; they are always roaming towns Female participant; FGD in Padibe TB, Lamwo district

48 ...in the olden days, chiefs used to collect G.Tax; if you did not pay, your property / assets (such as chicken, goats etc) would be confiscated... this made people work harder to pay this tax before being apprehended; this is not the case nowadays Elderly Woman, FGD, Namakora S/C, Kitgum. Tax compliance is positively related to perceptions about the government, in particular, the capacity and effectiveness of LGs in providing services (implicitly the trustworthiness of the local authorities) (Fjeldstad, OH et al, 2013). Some of respondents reported that they would hesitate to pay taxes because of the following reasons: 38 (a) Lack of information on taxes (amounts collected) and utilised. The LGs don t disseminate any information on how much they collect and how the money is utilised. This creates suspicion among the citizens that maybe their tax revenues are not properly utilised....we are not informed on how much is collected and how it s utilised Female participant, FGD in Kitgum TC. (b) There is no accountability on how much is collected and utilised. They noted that some time back, they (LG officials) used to inform them (communities) how much they collected, but they stopped. They are not sure whether their tax revenues are put to right use. we are not confident on how our taxes are utilised...look at this town council headquarters, do they look like a town council headquarters? Where do these people put all the money they collect from the town council? Male participant, Pader TC. FGD in Pader Town Council, Pader district (c) High levels of corruption: Most of the revenues are stolen by some government officials and minimal action is taken on the culprits. They were aware of the national corruption scandals such as the stealing of the PRDP funds meant for the people of northern Uganda; where actions taken were a mockery to the people of northern Uganda....the misuse of our taxes, hurts us, and discourages us from paying taxes Male Participant, FGD in Padibe, TB.

49 39 It s important to note that reliance on locallygenerated tax revenue is consistently associated with lower corruption, higher public goods provision, and better institutional development (Martin, 2013). (d) Poor service delivery: Taxes don t benefit them, since government has failed to use the money collected to provide basic services. This implies that public service provision is poor and the citizens who are the taxpayers are unhappy. Studies 9 have shown that this has a big effect on the willingness of the taxpayer to pay any more tax because he does not see or get services any more. why should we pay taxes, when results are not seen at community level services are very poor; see the sorrystate of our roads and health services in our community; they are appalling Male Youth FGD participant in Padibe TB, Lamwo (e) Double taxation. Those in urban centres and engaged in business complained that they pay 2% development levy on contracts, in addition to WHT. However, they don t get any proof (receipts); so they cannot deduct such expenses when filing URA taxes. This is affecting their businesses. In addition, due to low tax base in the villages, all the taxes are concentrated on tax payers in urban centres. they (LGs) don t give us receipts when they deduct the development levy and WHT so, we can t offset such expenses when filing annual URA returns...this is affecting our businesses Female participant; FGD in Pader TC. They further noted that due to inability to collect direct taxes, such as G.Tax, government is taxing them highly through indirect taxes on sugar, salt etc....because of limited direct taxes, government is taxing us highly on essential commodities such as sugar Female Participant; FGD, Namakora S/C, Kitgum. 5.3 Participation in revenue mobilisation, allocation and utilisation The decentralisation framework provides an opportunity for citizens to participate and influence their own governance including planning and budgeting. This leads to better utilisation of resources and ensures value for money through enhanced participation of citizens and promotion of greater transparency and accountability. Among the ways of ensuring accountability is through involving citizens in revenue mobilisation, allocation and utilisation. When citizens are aware of how revenues are mobilised, allocated, and spent, they are in a better position to hold their leaders accountable and demand effective delivery of services. Despite the benefits associated with citizen participation in revenue generation, allocation and utilisation, this study found out that there is negligible community participation in the three districts. During the FGDs, community members noted that they are not engaged in revenue generation issues but rather only on spending. They think these meetings are not meant for them....those meetings are for councillors, parish chiefs, and subcounty officials...how are we supposed to participate...who are we? Elderly Woman, FGD in Kitgum Town Council 9 LGFC (2012), Review of Local Government Financing, Management and Accountability for Decentralised Services

50 40 FGD in Kitgum Town Council, Kitgum district There are numerous challenges associated with community participation in revenue mobilisation, allocation and utilisation. Some of them include: a) Inadequate funds and human resources by LGs to engage communities. LGs officials inter viewed noted that community sensitisation is too costly for them, given the resource constraints they face....community sensitisation is too costly against the revenue that can be generated Ass. CAO, Kitgum DLG b) Apathy from the community. Most community people don t want to attend meetings called by LG officials unless they are assured of lunch or transport. As an official noted: Communities don t like attending our meetings; even when you are discussing important issues like planning...unless they are assured of money at the end of the meeting LG official in Kitgum district. Some of the LG officials interviewed blame this on NGOs that have a tendency of providing transport funds and lunch when they meet communities. However, during the FGDs, the communities attributed their lack of attendance of LG meetings to the reluctance of the officials to address their issues as well as selective invitation. One participant said:...those people (LG officials) come with their predetermined agendas... they don t listen to us...they will not give you a chance to talk if they know you are going to question their work... Male Youth; FGD, Pajule TB, Pader

51 41 FGD in Kitgum Town Council, Kitgum district c) Ineffective LLG structures to facilitate effective community participation: Most of the PDCs and the LC1 Councils are weak, disoriented and demotivated to perform their duties. Some of the members of these structures have been there for a very long time and have not invested any new mechanisms to encourage community participation....currently, planning is not participatory at all...when people are involved in planning, they will be able to demand for better service delivery RDC, Kitgum, DLG d) Inadequate feedback mechanisms to communities: Despite the existence of structures, the processes and systems for feedback have not been institutionalised and are largely subjected to the influence, goodwill and proactiveness of the office bearers. Without feedback, community involvement in revenue mobilisation, allocation and utilisation will remain minimal. 5.4 Platforms for community participation revenue mobilisation, allocation and utilisation There are several platforms (formal and informal) that citizens can engage in revenue mobilisation, allocation and utilisation. Formal platforms include: LG councils (district and sub county), planning meetings (at village and parish levels), budget meetings (such as budget conferences), and local revenue meetings. Informal platforms included; citizen barazas, media (radios), and religious gatherings, among others. However, during the FGDs it was found that communities have not effectively used any of these platforms, especially the formal ones. They noted that they are not platforms where they can participate in revenue mobilisation, allocation and utilisation...there is no platform where communities are informed on how much is collected and utilised Male Participants, Padibe TB, Lamwo district There are a number of challenges of each of the platforms: LG Council meetings: According to the LG technical staff, information on revenue is communi cated to the councils. It is expected that the councillors will transmit the information to the entire community; however, this is not happening.