India : Synthesis Study of Public Financial Management and Accountability in Urban Local Bodies

Abstract

This study assesses the current state of
 Public Financial Management and Accountability (PFMA)
 systems in Indian urban local bodies. It identifies,
 analyzes, and documents good practices, focusing on their
 existing context, success factors, and replicability. It is
 important to mention that urban governance in India is a
 state subject and there are vast differences in the levels
 of reform that have achieved in different states. For the
 purpose of comparison, this study has developed good
 practice benchmarks in each PFMA area and used those to
 compare practices across Urban Local body (ULB)s. The study
 analyzes linkages between the legislative, budgeting,
 implementation, reporting, and oversight process in urban
 local bodies. Benchmarks and indicators have been developed
 for each strategic area. Analysis of policy, practice, and
 progress in each strategic area has also been conducted.
 This study synthesizes existing literature on PFMA in urban
 local bodies, identifies key PFMA areas where focused
 attention was required, and suggests ways forward. The main
 objectives are: 1) To describe the current PFMA environment
 in urban local bodies in India and identify replicable good
 practices; 2) To use the Public Expenditure and Financial
 Accountability (PEFA) benchmarks in developing good practice
 in each PFMA activity and to develop indicators for
 assessing PFMA in Indian urban local bodies; 3) To identify
 challenges and suggest priorities for improving the PFMA
 environment in Indian urban local bodies so as to feed into
 Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
 This study does not focus on the financial performance or on
 quality of expenditure in terms of specific aspects of
 efficiency or effectiveness of spending by urban local
 bodies. It does not cover intergovernmental relations either
 in any level of detail except to the extent that such
 relations impact PFMA performance. It is important to
 mention that this study does not attempt to develop a
 scoring system for indicators and therefore does not rate
 relative performance among urban local bodies. It does
 however suggest as a key recommendation that states could
 adopt a scoring system or a "PFMA Report Card" for
 the urban local bodies as a means of comparison of PFMA
 performance to build a demand for better governed ULBs.