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Service Delivery with More Districts in Uganda : Fiscal Challenges and Opportunities for ReformsUgandan decentralization efforts of the 1990s represented an unusually authentic and powerful local government reform, compared to similar efforts pursued in many other low-income countries. However, over time the changing interests of the central agencies, dissatisfaction with service outcomes, and the overall dynamics of the country's governance resulted in the adoption of a number of re-centralizing policies. The objective of this report is to take stock of the fiscal and institutional arrangements for service delivery by local governments in the context of district proliferation and in view of recent trends in national public finance, as well as to identify policy options that could facilitate improved service delivery. The report finds that, while district proliferation has not had any major effect on public finances so far, it may have serious adverse effects in the future if the institutional structures and funding mechanisms of district governments are not adjusted to the new realities. Its effect on public expenditure has been rather small since an increasing number of positions in district governments remain vacant, and because a recent bout of inflation has eroded their wage bills. Furthermore, at present the average population of a district is roughly equivalent to that of similar jurisdictions in other countries. The report concludes with a number of institutional and fiscal proposals designed to reduce this risk and to improve value-for-money in service delivery more generally. If Uganda manages to use district proliferation as an opportunity to implement these changes, the resulting fiscal savings and improvements in value-for-money would make it much easier to cover the costs of that process.
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Autonomy with Equity and Accountability : Toward a More Transparent, Objective, Predictable and Simpler (TOPS) System of Central Financing of Provincial-Local Expenditures in IndonesiaDuring the past decade, Indonesia has
 transformed itself from centralized governance to
 decentralized local governance. Local governments were given
 extensive expenditure responsibilities while keeping the tax
 system centralized. To finance decentralized
 provincial-local expenditures, Indonesia implemented a new
 system of intergovernmental finance. This paper provides a
 review of the equity and efficiency implications of the
 current system of central-provincial-local transfers. It
 finds that the system of intergovernmental finance
 represents one of the most complex systems ever implemented
 by any government in the world. The system is primarily
 focused on a gap-filling approach to provincial-local
 finance to ensure revenue adequacy and local autonomy but
 without accountability to local residents for service
 delivery performance. This is done through a great degree of
 academic rigor using highly complex procedures. The
 complexity leads to a lack of transparency, inequity and
 uncertainty in allocation as well as creating incentives for
 jurisdictional fragmentation and reducing own-tax effort.
 Simpler alternatives are available that have the potential
 to address equity objectives while also enhancing efficiency
 and citizen-based accountability. Such alternatives would
 represent a move away from complex gap filling and special
 allocation approaches to simple, output based transfers to
 finance operating expenditures. These would be complemented
 by capital grants to deal with infrastructure deficiencies,
 and fiscal capacity equalization as a residual program with
 an explicit standard to ensure that all local jurisdictions
 have adequate means to deliver reasonably comparable levels
 of public services at reasonably comparable levels of tax
 burdens across the country. The paper argues that such an
 alternative system of intergoveernmental finance would
 preserve autonomy, while enhancing equity, simplicity,
 objectivity, transparency and accountability.
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Croatia : Fiscal (De)centralization and Public Service DeliveryThis report discusses the contours of a
 possible strategic direction, the necessary basic
 institutional set up for implementation, and key reform
 policy options to be tackled in order to complete the
 foundations of the decentralization reform initiated in
 2001. Croatia is still a highly centralized country in terms
 of decision making on public service financing and delivery,
 as compared to most of the new European Union members. One
 indicator is that the sub-national Government's budget
 still corresponds to five percent of GDP, while in the newly
 accessed countries it was about eight percent on average in
 their immediate pre-accession phase. The Government of
 Croatia is conscious about the critical importance of
 improving citizens' voice, transparency and
 accountability on public affairs, especially on matters of
 local interest, in order to increase efficiency on public
 service delivery and rapidly converge to European Union
 standards on a sustainable basis. The Government started its
 decentralization reforms in July 2001, although they have
 not yet adequately implemented them to make the reform
 process sustainable.