Report No. Report No. ACS4421 Republic of Uganda ACS4421 Service Delivery with More Districts in Uganda Public Disclosure Authorized Fiscal Challenges and Opportunities for Reforms Public Expenditure Review June 2013 AFTP5 AFRICA Republic of Uganda Public Disclosure Authorized Service Delivery with More Districts in Uganda with More Delivery Service Public Disclosure Authorized Document of the World Bank Public Disclosure Authorized Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected]. ii CURRENCY AND EQUIVALENT UNITS (as of May 30, 2013) Currency Unit: Ugandan Shilling (U Sh) US$ = U Sh 2,597 Vice President : Makhtar Diop Country Director : Philippe Dongier Sector Director : Marcelo Giugale Sector Manager : Albert Zeufack Task Leader : Anton Dobronogov iii ABBREVIATIONS AND ACRONYMS CAO Chief Administrative Officer CAS Commission on Administrative Structure CBMS Community-Based Management Systems DSC District Service Commission DTB District Tender Board DUCAR District Urban and Community Access Roads DWSDCG District Water and Sanitation Development Conditional Grant FDS fiscal decentralization strategy GDP gross domestic product HHSIP Health Sector Strategy and Investment Plan HSSP I Health Sector Strategic Plan LC local council LC1 village council LC2 parish council LC3 sub-county council LC4 county council LG local government LGFC Local Governance Finance Commission LST local services tax MAAIF Ministry of Agriculture Animal Industry and Fisheries MCBG Municipal Capacity-Building Grant MDB Municipal Demarcation Board MDG Municipal Development Grant MDGs Millennium Development Goals MoES Ministry of Education and Sports MoFPED Ministry of Finance Planning and Economic Development MoH Ministry of Health MoLG Ministry of Local Government MoPS Ministry of Public Service MoWE Ministry of Water and Environment MP Member of Parliament MTEF Medium-Term Expenditure Framework NAADS National Agricultural Advisor Services NDP National Development Plan NGO non-governmental organization NMS National Medical Stores NPA National Planning Authority NRA National Resistance Army iv NRM National Resistance Movement NSDS National Service Delivery Survey NWSC National Water and Sewerage Corporation OPM Office of the Prime Minister OSR own-source revenue PAF Poverty Action Fund PETS Public Expenditure Tracking Surveys PFM public financial management PHC Primary Health Care PMA Plan to Modernize Agriculture PRSP Poverty Reduction Strategy Paper PSC Public Service Commission RC Resistance Council RDC Resident District Commissioner RG regional government RGB Regional Governments Bill RING Resiliency in Northern Ghana SWAp Sector-Wide Approach TC town clerk UAAU Urban Authorities Association of Uganda UBOS Uganda Bureau of Statistics ULGA Uganda Local Governments Association UNPS Uganda National Panel Survey UNRA Uganda National Roads Authority URF Uganda Road Fund USAID US Agency for International Development v ACKNOWLEDGEMENTS This report was prepared jointly with the Government of Uganda and the team is most grateful to its government counterparts for this fruitful collaboration. A Steering Committee chaired by the Permanent Secretary—Secretary of Treasury Keith Muhakinizi (MoFPED) guided the team. Portions of the report are based on comments regarding the study and policy proposals prepared by the Ministry of Local Government (MoLG), which were requested in December 2012 by Hon. Adolf Mwesige, Minister of Local Government, and drafted in discussions with Patrick Mutabwire, Acting PS, MoLG. The OPM team, led by Albert Byamugisha, offered useful advice and support throughout the preparation of the report. The team would also like to thank Lawrence Banyoya, (Secretary, Local Governance Finance Commission - LGFC) for his useful guidance, as well as Kenneth Mugambe, Abdul Muwanika, and Winnie Mukisa for their cooperation. The report was prepared by a team including Anton Dobronogov (Task Team Leader, AFTP5), Roland White, Martin Onyach-Olaa, Victor Ocaya (AFTU1), Sukhdeep Brar, Innocent Mulindwa (AFTEE), Peter Okwero (AFTHE), Samuel Mutono (TWIAF), Rasit Pertev (AFTA3), Liv Bjornestad (AFTP5), Melville McMillan, Paul Smoke, and Thomas Gole (consultants). Peer reviewers were Serdar Yilmaz (AFTP4) and Monali Chowdhurie-Aziz (WBIOG). Helpful guidance and comments were received from Philippe Dongier, Moustapha Ndiaye, Sajjad Shah, Albert Zeufack, Jacques Morisset, Shanta Devarajan, Anand Rajaram, Chiara Bronchi, Barbara Magezi, Stuti Khemani, Dan Mwanje, Willy Karagura, Jakob Fredensborg Rasmussen, Audrey Sacks, Dominic Haazen, Waly Wane, and Obert Pimhidzai. Lydie Ahodehou and Clare Busyngie provided administrative support to the team. vi Table of Contents I. Introduction........................................................................................................................................... 1 II. The Evolution of Local Governance, Decentralization, and Service Delivery in Uganda ...................3 A. The Rise of Decentralization, Sub-national Governance, and Local Service Delivery ....................3 B. The Current State of Decentralization .............................................................................................. 7 C. The Drivers behind the Post-Decentralization Evolution of the Local Government System .........10 III. Expenditures and Revenues of the Local Governments in the Context of National Public Finance 13 A. Government from a National Perspective....................................................................................... 13 B. Local Governments......................................................................................................................... 22 C. District Core Services: Fiscal Impacts of Changing Transfers and Shifting Responsibilities ........30 IV. Fiscal impacts of the increase in the number of districts ................................................................ 37 A. Ugandan Local Government in an International Context ............................................................... 38 B. Assessing the Fiscal Impacts of Redistricting in Uganda ............................................................... 41 1. What Happens When a New District Is Established? ................................................................. 42 2. Indicators of the Costs of New Districts: UBOS and BOOST data............................................ 42 3. Indicators of the Costs of New Districts: Old and New Districts ................................................... 49 4. Expenditures Associated with the Creation of New Districts........................................................ 54 5. Economies of Scale vs. Similarity of Preferences ......................................................................... 59 V. Value-for-money in service delivery: determinants and challenges ................................................... 62 A. Unequal Spending, Unequal Outcomes .......................................................................................... 62 B. Assessing Value-for-Money in District Spending .......................................................................... 66 C. Investigating the Determinants of Value-For-Money ..................................................................... 72 VI. Policy implications.......................................................................................................................... 76 A. Institutional proposals..................................................................................................................... 77 B. Fiscal proposals............................................................................................................................... 83 References........................................................................................................................................... 87 Annex 1. District Core Services: A Sectoral Analysis....................................................................... 95 Annex 2. Estimation of Fiscal Impacts of New District Creation....................................................